Exhibit 10.1

 

 

 

CREDIT AND SECURITY AGREEMENT

by and among

NOVATEL WIRELESS, INC.,

and

ENFORA, INC.,

as Borrowers,

and

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Lender

Dated as of October 31, 2014

 

 

 

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TABLE OF CONTENTS

 

              PAGE   1.  

DEFINITIONS AND CONSTRUCTION

     1      1.1    Definitions, Code Terms, Accounting Terms and Construction   
  1    2.  

LOANS AND TERMS OF PAYMENT

     1      2.1    Revolving Loan Advances      1      2.2    [Reserved]      1
     2.3    Borrowing Procedures      1      2.4    Payments; Prepayments      2
     2.5    Clearance Charge      3      2.6    Interest Rates: Rates, Payments,
and Calculations      3      2.7    Designated Account      4      2.8   
Maintenance of Loan Account; Statements of Obligations      4      2.9   
Maturity Termination Dates      4      2.10    Effect of Maturity      4     
2.11    Termination or Reduction by Borrowers      5      2.12    Fees      5   
  2.13    Letters of Credit      5      2.14    Illegality; Impracticability;
Increased Costs      8      2.15    Capital Requirements      8      2.16   
Extent of Each Borrower’s Liability, Contribution      9      2.17    Novatel
Wireless, Inc. as Agent for Borrowers      9    3.  

SECURITY INTEREST

     10      3.1    Grant of Security Interest      10      3.2    Borrowers
Remain Liable      10      3.3    Assignment of Insurance      10      3.4   
Financing Statements      10    4.  

CONDITIONS

     10      4.1    Conditions Precedent to the Initial Extension of Credit     
10      4.2    Conditions Precedent to all Extensions of Credit      11      4.3
   Conditions Subsequent      11    5.  

REPRESENTATIONS AND WARRANTIES

     11    6.  

AFFIRMATIVE COVENANTS

     11      6.1    Financial Statements, Reports, Certificates      11      6.2
   Collateral Reporting      11      6.3    Existence      11      6.4   
Maintenance of Properties      12      6.5    Taxes      12      6.6   
Insurance      12      6.7    Inspections, Exams, Collateral Exams and
Appraisals      12   

 

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  6.8    Account Verification      12      6.9    Compliance with Laws      13
     6.10    Environmental      13      6.11    Disclosure Updates      13     
6.12    Collateral Covenants      14      6.13    Material Contracts      17   
  6.14    Location of Inventory, Equipment and Books      17      6.15   
Further Assurances      17      6.16    Formation of Subsidiaries      18    7.
 

NEGATIVE COVENANTS

     18      7.1    Indebtedness      18      7.2    Liens      18      7.3   
Restrictions on Fundamental Changes      18      7.4    Disposal of Assets     
19      7.5    Change Name      19      7.6    Nature of Business      19     
7.7    Prepayments and Amendments      19      7.8    Change of Control      20
     7.9    Restricted Junior Payments      20      7.10    Accounting Methods
     20      7.11    Investments; Controlled Investments      20      7.12   
Transactions with Affiliates      20      7.13    Use of Proceeds      21     
7.14    Limitation on Issuance of Stock      21      7.15    Consignments     
21      7.16    Inventory and Equipment with Bailees      21    8.  

FINANCIAL COVENANTS

     21    9.  

EVENTS OF DEFAULT

     22    10.  

RIGHTS AND REMEDIES

     24      10.1    Rights and Remedies      24      10.2    Additional Rights
and Remedies      25      10.3    Lender Appointed Attorney in Fact      26     
10.4    Remedies Cumulative      26      10.5    Crediting of Payments and
Proceeds      26      10.6    Marshaling      27      10.7    License      27   
  10.8    Disposition of Pledged Interests by Lender      27      10.9    Voting
and Other Rights in Respect of Pledged Interests      27    11.  

WAIVERS; INDEMNIFICATION

     27      11.1    Demand; Protest; etc      27   

 

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  11.2    The Lender’s Liability for Collateral      27      11.3   
Indemnification      28    12.  

NOTICES

     28    13.  

CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER; ARBITRATION; WAIVER OF DAMAGES

     29    14.  

ASSIGNMENTS; SUCCESSORS

     32    15.  

AMENDMENTS; WAIVERS

     32    16.  

TAXES

     32    17.  

GENERAL PROVISIONS

     33      17.1    Effectiveness      33      17.2    Section Headings      34
     17.3    Interpretation      34      17.4    Severability of Provisions     
34      17.5    Debtor-Creditor Relationship      34      17.6    Counterparts;
Electronic Execution      34      17.7    Revival and Reinstatement of
Obligations      34      17.8    Confidentiality      34      17.9    Lender
Expenses      35      17.10    Setoff      35      17.11    Survival      35   
  17.12    Patriot Act      35      17.13    Integration      35      17.14   
Bank Product Providers      35      17.15    Judgment Currency      36   

 

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EXHIBITS AND SCHEDULES

 

Schedule 1.1

   Definitions

Schedule 2.12

   Fees

Schedule 6.1

   Financial Statement, Reports, Certificates

Schedule 6.2

   Collateral Reporting

Exhibit A

   Form of Compliance Certificate

Exhibit B

   Conditions Precedent

Exhibit C

   Conditions Subsequent

Exhibit D

   Representations and Warranties

Exhibit E

   Information Certificate

Exhibit F

   Form of Pledged Interests Addendum

Schedule A-1

   Collection Account

Schedule A-2

   Authorized Person

Schedule D-1

   Designated Account

Schedule P-1

   Permitted Investments

Schedule P-2

   Permitted Liens

Schedule R

   Acceptable Jurisdictions for Eligible Foreign Account Debtors

 

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CREDIT AND SECURITY AGREEMENT

THIS CREDIT AND SECURITY AGREEMENT (this “Agreement”), is entered into as of
October 31, 2014, by and among WELLS FARGO BANK, NATIONAL ASSOCIATION
(“Lender”), NOVATEL WIRELESS, INC., a Delaware corporation (“Novatel Wireless,
Inc.”), ENFORA, INC., a Delaware corporation (“Enfora, Inc.”, and together with
Novatel Wireless, Inc. and any other Person that joins this Agreement as a
Borrower in accordance with the terms hereof, are referred to hereinafter each
individually as a “Borrower”, and individually and collectively, jointly and
severally, as the “Borrowers”), and any Person that joins this Agreement from
time to time as a Guarantor in accordance with the terms hereof (each
individually a “Guarantor”, and collectively, jointly and severally, as the
“Guarantors”).

WHEREAS, the Borrowers have requested that Lender make available for the
purposes specified in this Agreement a revolving credit and letter of credit
facility; and

WHEREAS, Lender is willing to make available to the Borrowers such revolving
credit and letter of credit facility upon the terms and subject to the
conditions set forth herein.

NOW THEREFORE, in consideration of the mutual agreements herein contained and
other good and valuable consideration, the sufficiency and receipt of which are
hereby acknowledged, the parties hereto agree as follows:

1. DEFINITIONS AND CONSTRUCTION.

1.1 Definitions, Code Terms, Accounting Terms and Construction. Capitalized
terms used in this Agreement shall have the meanings specified therefor on
Schedule 1.1. Additionally, matters of (i) interpretation of terms defined in
the Code, (ii) interpretation of accounting terms and (iii) construction are set
forth in Schedule 1.1.

2. LOANS AND TERMS OF PAYMENT.

2.1 Revolving Loan Advances.

(a) Subject to the terms and conditions of this Agreement, and during the term
of this Agreement, Lender agrees to make revolving loans (“Advances”) to
Borrowers in an amount at any one time outstanding not to exceed 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) 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 and unpaid thereon, shall be due and payable on
the Termination Date. Lender has no obligation to make an Advance at any time
following the occurrence and during the continuation of a Default or an Event of
Default.

(c) If at any time the Maximum Revolver Amount is less than the amount of the
Borrowing Base, the amount of Advances available under Section 2.1(a) above
shall be reduced by any Reserves established by Lender with respect to amounts
that may be payable by any Borrower to third parties.

2.2 [Reserved].

2.3 Borrowing Procedures.

(a) Procedure for Borrowing. Provided Lender has not separately agreed that
Borrowers may use the Loan Management Service, each Borrowing shall be made by a
written request by an Authorized Person delivered to Lender. Such written
request must be received by Lender no later than 9:00 a.m. (Pacific 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. At Lender’s election, in lieu of delivering the above-described written
request, any Authorized Person may give Lender telephonic notice of such request
by the required time. Lender is authorized to make the Advances, and to issue
the Letters of Credit, under this Agreement based upon telephonic or other
instructions received from anyone purporting to be an Authorized Person.

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(b) Making of Loans. Promptly after receipt of a request for a Borrowing
pursuant to Section 2.3(a), Lender shall make the proceeds thereof available to
Borrowers on the applicable Funding Date by transferring immediately available
funds equal to such amount to the Designated Account; provided, however, that,
Lender shall not have the obligation to make any Advance if (1) one (1) or more
of the applicable conditions precedent set forth in Section 4 will not be
satisfied on the requested Funding Date for the applicable Borrowing unless such
condition has been waived by Lender, or (2) the requested Borrowing would exceed
the Availability on such Funding Date.

(c) Loan Management Service. If Lender has separately agreed that Borrowers may
use the Loan Management Service, Borrowers shall not request and Lender shall no
longer honor a request for an Advance made in accordance with Section 2.3(a) and
all Advances will instead be initiated by Lender and credited to the Designated
Account as Advances as of the end of each Business Day in an amount sufficient
to maintain an agreed upon ledger balance in the Designated Account, subject
only to Availability as provided in Section 2.1. If Lender terminates Borrowers’
access to the Loan Management Service, Borrowers may continue to request
Advances as provided in Section 2.3(a), subject to the other terms and
conditions of this Agreement. Lender shall have no obligation to make an Advance
through the Loan Management Service after the occurrence of a Default or an
Event of Default, or in an amount in excess of Availability, and may terminate
the Loan Management Service at any time in its sole discretion.

(d) Protective Advances. Lender may make an Advance for any reason at any time
in its Permitted Discretion, without Borrowers’ compliance with any of the
conditions of this Agreement, and (i) disburse the proceeds directly to third
Persons in order to protect Lender’s interest in the Collateral or to perform
any obligation of Borrowers under this Agreement or otherwise to enhance the
likelihood of repayment of the Obligations, or (ii) apply the proceeds to
outstanding Obligations then due and payable (such Advance, a “Protective
Advance”).

2.4 Payments; Prepayments.

(a) Payments by Borrowers. Except as otherwise expressly provided herein, all
payments with respect to the Obligations made by (or for the benefit of) the
Borrowers shall be made as directed by Lender or as otherwise specified in the
applicable Cash Management Documents.

(b) Payments by Account Debtors. Other than during any period described in the
next sentence, Borrowers shall deposit all payments from Account Debtors,
insurance proceeds, and any other collections into the Collection Account, and,
so long as no Event of Default is existing, such funds shall be transferred from
the Collection Account to, and be maintained in, any other Deposit Accounts
maintained with Lender or that are subject to Control Agreements as directed by
Borrowers from time to time; provided that during the Cash Management Transition
Period Borrowers may deposit such payments, insurance proceeds, and other
collections in the accounts maintained by Borrowers with Bank of America so long
as Borrowers continue to comply with the terms set forth in Section 6.12(j). At
any time that Liquidity is less than $15,000,000 for five or more consecutive
Business Days (and continuing thereafter until such time as Liquidity is equal
to or greater than $15,000,000 for not less than 60 consecutive days) or during
the existence of an Event of Default, (i) Borrowers shall instruct all Account
Debtors to thereafter make payments directly to the Collection Account (by wire
transfer, ACH, or other means as Lender may direct from time to time), (ii) if
any Borrower receives a payment of the Proceeds of Collateral directly, such
Borrower will promptly deposit the payment or Proceeds into the Collection
Account and any funds maintained in any Deposit Account by Borrower shall be
promptly transferred to the Collection Account, (iii) until so deposited, such
Borrower will hold all such payments and Proceeds in trust for Lender without
commingling with other funds or property, and (iv) any collected and immediately
available funds received in the Collection Account shall be applied by Lender to
the outstanding Obligations (unless Lender is restricted or prohibited from
doing so as a matter of law).

(c) Crediting Payments. For purposes of calculating Availability and the accrual
of interest on outstanding Obligations, unless otherwise provided in the
applicable Cash Management Documents or as otherwise agreed between Borrowers
and Lender, each payment shall be applied to the Obligations (i) on the same
Business Day as such payment is made if such payment is received on or prior to
11:00 a.m. Pacific time, or (ii) as of the first Business Day following the
Business Day of receipt of such payment if such payment is received after 11:00
a.m. Pacific time; provided that no such payment shall be deemed received by
Lender until such payment consists of (or becomes) immediately available funds.
Any payment received by Lender that is not a transfer of immediately available
funds shall be considered provisional until the item or items representing such
payment have been finally paid under applicable law. Should any payment item not
be honored when presented for payment, then Borrowers shall be deemed not to
have made such payment, and that portion of Borrowers’ outstanding Obligations
corresponding to the amount of such dishonored payment item shall be deemed to
bear interest as if the dishonored payment item had never been received by
Lender. Each reduction in outstanding Advances resulting from the application of
such payment to the outstanding Advances shall be accompanied by an equal
reduction in the amount of outstanding Accounts.

 

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(d) Application of Payments. Other than Collections and other Proceeds of
Collateral that may be deposited or transferred to one or more Deposit Accounts
in accordance with Section 2.4(b) above, all Collections and all Proceeds of
Collateral received by Lender which Lender is required to apply to the
Obligations in accordance with Section 2.4(b), shall be applied to reduce the
outstanding Obligations in such manner as Lender shall determine in its
discretion (except to the extent restricted or prohibited by applicable law).
After payment in full in cash of all Obligations, any remaining balance shall be
transferred to the Designated Account or otherwise to such other Person entitled
thereto under applicable law. Amounts collected by Lender from a Loan Party in
relation to or for the account of Bank Product Obligations shall be remitted to
the applicable Bank Product Provider.

(e) [Intentionally Omitted.]

(f) Mandatory Prepayments. If, at any time, the Revolver Usage exceeds (A) the
Borrowing Base or (B) the Maximum Revolver Amount, less Reserves (in accordance
with Section 2.1(c)) at such time (such excess amount, the “Overadvance
Amount”), then Borrowers shall immediately upon demand, pay the Obligations in
an aggregate amount equal to the Overadvance Amount. If payment in full of the
outstanding revolving loans is insufficient to eliminate the Overadvance Amount
and Letter of Credit Usage continues to exceed the Borrowing Base, Borrowers
shall maintain Letter of Credit Collateralization of the outstanding Letter of
Credit Usage. Lender shall not be obligated to provide any Advances during any
period that an Overadvance Amount is outstanding.

2.5 Clearance Charge. [Reserved].

2.6 Interest Rates: Rates, Payments, and Calculations.

(a) Interest Rates. Except as provided in Section 2.6(b), the principal amount
of all Obligations (except for undrawn Letters of Credit and Bank Products) 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 the Interest
Rate plus the Applicable Margin.

(b) Default Rate. Upon the occurrence and during the continuation of an Event of
Default and at any time following the Termination Date, at the discretion of
Lender,

(i) the principal amount of all Obligations (except for undrawn Letters of
Credit and Bank Products) 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
thereunder, and

(ii) the Letter of Credit fee provided for in Section 2.12 or Schedule 2.12
shall be increased by 2 percentage points above the per annum rate otherwise
applicable hereunder.

For avoidance of doubt, Lender may assess the Default Rate commencing on the
date of the occurrence of an Event of Default irrespective of the date of
reporting or declaration of such Event of Default.

(c) Payment. Except to the extent provided to the contrary in Section 2.12, all
interest, all Letter of Credit fees, all other fees payable hereunder or under
any of the other Loan Documents, all costs and expenses payable hereunder or
under any of the other Loan Documents, and all Lender Expenses shall be due and
payable, in arrears, on the first day of each month. Each Borrower hereby
authorizes Lender, from time to time without prior notice to Borrowers, to
charge all interest, Letter of Credit fees, and all other fees payable hereunder
or under any of the other Loan Documents (in each case, as and when due and
payable), all costs and expenses payable hereunder or under any of the other
Loan Documents (in each case, as and when accrued or incurred), all Lender
Expenses (as and when accrued or incurred), and all fees and costs provided for
in Section 2.12 (as and when accrued or incurred), and all other payment
obligations as and when due and payable under any Loan Document or any Bank
Product Agreement (including any amounts due and payable to any Bank Product
Provider in respect of Bank Products that the Borrowers have not otherwise made
payment of or provided for) to the Loan Account, which amounts shall thereupon
constitute Advances hereunder and, shall accrue interest at the rate then
applicable to Advances. Any interest, fees, costs, expenses, Lender Expenses, or
other amounts payable hereunder or under any other Loan Document or under any
Bank Product Agreement that are charged to the Loan Account shall thereafter
constitute Advances hereunder and shall accrue interest at the rate then
applicable to Advances.

(d) Computation. All interest and fees chargeable under the Loan Documents shall
be computed on the basis of a 360 day year, in each case, for the actual number
of days elapsed in the period during which the interest or fees accrue. In the
event the Interest Rate is changed from time to time hereafter, the rates of
interest hereunder based upon the Interest Rate automatically and immediately
shall be increased or decreased by an amount equal to such change in the
Interest Rate.

 

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(e) 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 Lender, 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, as of the date of this
Agreement, Borrowers are and shall be liable only for the payment of such
maximum amount as is 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 Designated Account. Borrowers agree to establish and maintain one or more
Designated Accounts, each in the name of a single Borrower, for the purpose of
receiving the proceeds of the Advances requested by Borrowers and made by Lender
hereunder. Unless otherwise agreed by Lender and Borrowers, any Advance
requested by Borrowers and made by Lender hereunder shall be made to the
applicable Designated Account.

2.8 Maintenance of Loan Account; Statements of Obligations. Lender shall
maintain an account on its books in the name of Borrowers (the “Loan Account”)
in which will be recorded all Advances made by Lender to Borrowers or for
Borrowers’ account, the Letters of Credit issued or arranged by Lender for
Borrowers’ account, and all other payment Obligations hereunder or under the
other Loan Documents and to the extent payment is charged to the Loan Account,
for payments under Bank Product Agreements, including accrued interest, fees and
expenses, and Lender Expenses. In accordance with Section 2.4 and Section 2.5,
the Loan Account will be credited with all payments received by Lender from
Borrowers or for Borrowers’ account. All monthly statements delivered by Lender
to the Borrowers regarding the Loan Account, including with respect to
principal, interest, fees, and including an itemization of all charges and
expenses constituting Lender Expenses owing, shall be subject to subsequent
adjustment by Lender but shall, absent manifest error, be conclusively presumed
to be correct and accurate and constitute an account stated between Borrowers
and Lender unless, within 30 days after receipt thereof by Borrowers, Borrowers
shall deliver to Lender written objection thereto describing the error or errors
contained in any such statements.

2.9 Maturity Termination Dates. Lender’s obligations under this Agreement shall
continue in full force and effect for a term ending on the earliest of
(i) October 31, 2019 (the “Maturity Date”) or (ii) the date Borrowers terminate
the Revolving Credit Facility, or (iii) the date the Revolving Credit Facility
terminates pursuant to Sections 10.1 and 10.2 following an Event of Default (the
earliest of these dates, the “Termination Date”). The foregoing notwithstanding,
Lender 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. Each Borrower jointly and severally promises to pay the
Obligations (including principal, interest, fees, costs, and expenses, including
Lender Expenses) in full on the Termination Date (other than the Hedge
Obligations, which shall be paid in accordance with the applicable Hedge
Agreement).

2.10 Effect of Maturity. On the Termination Date, all obligations of Lender to
provide additional credit hereunder shall automatically be terminated and all of
the Obligations (other than Hedge Obligations which shall be terminated in
accordance with the applicable Hedge Agreement) shall immediately become due and
payable without notice or demand and Borrowers shall immediately repay all of
the Obligations in full. No termination of the obligations of Lender (other than
cash payment in full of the Obligations and termination of the obligations of
Lender to provide additional credit hereunder) shall relieve or discharge any
Loan Party of its duties, obligations, or covenants hereunder or under any other
Loan Document and Lender’s Liens in the Collateral shall continue to secure the
Obligations and shall remain in effect until all Obligations have been paid in
full in cash and Lender’s obligations to provide additional credit hereunder
shall have been terminated. Provided that there are no suits, actions,
proceedings or claims pending or threatened against any Indemnified Person under
this Agreement with respect to any Indemnified Liabilities, Lender shall, at
Borrowers’ expense, release or terminate any filings or other agreements that
perfect the Lender’s Liens in the Collateral, upon Lender’s receipt of each of
the following, in form and content satisfactory to Lender: (i) cash payment in
full of all Obligations (including Hedge Obligations subject, however, to the
next sentence) and completed performance by Borrowers with respect to their
other obligations under this Agreement (including Letter of Credit
Collateralization with respect to all outstanding Letter of Credit Usage),
(ii) evidence that any obligation of Lender to make Advances to any Borrower or
provide any further credit to any Borrower has been terminated, (iii) a general
release of all claims against Lender and its Affiliates by each Borrower and
each Loan Party relating to Lender’s performance and obligations under the Loan
Documents, and (iv) an agreement by each Borrower, each Guarantor, and any new
lender to any Borrower to indemnify Lender and its Affiliates for any payments
received by Lender or its Affiliates that are applied to the Obligations as a
final payoff that may subsequently be returned or otherwise not paid for any
reason. With respect to any outstanding Hedge Obligations which are not so paid
in full, the Bank Product Provider may require Borrowers to cash collateralize
the then existing Hedge Obligations in an amount acceptable to Lender prior to
releasing or terminating any filings or other agreements that perfect the
Lender’s Liens in the Collateral.

 

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2.11 Termination or Reduction by Borrowers.

(a) Borrowers may terminate the Credit Facility or reduce the Maximum Revolver
Amount at any time prior to the Maturity Date, if they (i) deliver a notice to
Lender of their intentions at least 30 days prior to the proposed action,
(ii) pay to Lender the applicable termination fee or reduction fee set forth in
Schedule 2.12, and (iii) pay the Obligations (other than the outstanding Hedge
Obligations, which shall be paid in accordance with the applicable Hedge
Agreement) in full or down to the reduced Maximum Revolver Amount. Any reduction
in the Maximum Revolver Amount shall be in multiples of $1,000,000, with a
minimum reduction of at least $1,000,000. Each such termination, reduction or
prepayment shall be irrevocable. Once reduced, the Maximum Revolver Amount may
not be increased.

(b) The applicable termination fee and reduction fee set forth in Schedule 2.12
shall be presumed to be the amount of damages sustained by Lender as a result of
an early termination or reduction, as applicable and each Borrower agrees that
it is reasonable under the circumstances currently existing (including the
borrowings that are reasonably expected by Borrowers hereunder and the interest,
fees and other charges that are reasonably expected to be received by Lender
hereunder). The early termination fee and reduction fee, as applicable, provided
for in Schedule 2.12 shall be deemed included in the Obligations.

2.12 Fees. Borrowers shall pay to Lender the fees set forth on Schedule 2.12
attached hereto.

2.13 Letters of Credit.

(a) Subject to the terms and conditions of this Agreement, upon the request of a
Borrower made in accordance herewith, Lender agrees to issue a requested Letter
of Credit for the account of such Borrower. By submitting a request to Lender
for the issuance of a Letter of Credit, such Borrower shall be deemed to have
requested that Lender issue the requested Letter of Credit. Each request for the
issuance of a Letter of Credit, or the amendment, renewal, or extension of any
outstanding Letter of Credit, shall be irrevocable and shall be made in writing
by an Authorized Person and delivered to Lender via telefacsimile, or other
electronic method of transmission reasonably acceptable to Lender and reasonably
in advance of the requested date of issuance, amendment, renewal, or extension.
Each such request shall be in form and substance reasonably satisfactory to
Lender, and (i) shall specify (A) the amount of such Letter of Credit, (B) the
date of issuance, amendment, renewal, or extension of such Letter of Credit,
(C) the proposed expiration date of such Letter of Credit, (D) the name and
address of the beneficiary of the Letter of Credit, and (E) such other
information (including, the conditions to drawing, and, in the case of an
amendment, renewal, or extension, identification of the Letter of Credit to be
so amended, renewed, or extended) as shall be necessary to prepare, amend,
renew, or extend such Letter of Credit, and (ii) shall be accompanied by such
Letter of Credit Agreements as Lender may request or require, to the extent that
such requests or requirements are consistent with the Letter of Credit
Agreements that Lender generally requests for Letters of Credit in similar
circumstances. Lender’s records of the content of any such request will be
conclusive.

(b) Lender shall have no obligation to issue, amend, renew or extend a Letter of
Credit if, after giving effect to the requested issuance, amendment, renewal, or
extension, the Letter of Credit Usage would exceed the least of: (i) the
Borrowing Base at such time less the outstanding amount of Advances at such
time, (ii) the Maximum Revolver Amount less the outstanding amount of Advances,
less Reserves (in accordance with Section 2.1(c) at such time), or
(iii) $3,000,000.

(c) Lender shall have no obligation to issue a Letter of Credit if (i) any
order, judgment, or decree of any Governmental Authority or arbitrator shall, by
its terms, purport to enjoin or restrain Lender from issuing such Letter of
Credit or any law applicable to Lender or any request or directive (whether or
not having the force of law) from any Governmental Authority with jurisdiction
over Lender shall prohibit or request that Lender refrain from the issuance of
letters of credit generally or such Letter of Credit in particular, or (ii) the
issuance of such Letter of Credit would violate one or more policies of Lender
applicable to letters of credit generally.

(d) Each Letter of Credit shall be in form and substance reasonably acceptable
to Lender, including the requirement that the amounts payable thereunder must be
payable in Dollars, and shall expire on a date no more than 12 months after the
date of issuance or last renewal of such Letter of Credit, which date shall be
no later than the Maturity Date. If Lender makes a payment under a Letter of
Credit, Borrowers shall pay the Lender an amount equal to the applicable Letter
of Credit Disbursement on the Business Day such Letter of Credit Disbursement is
made and, in the absence of such payment, the amount of the Letter of Credit
Disbursement immediately and automatically shall be deemed to be an Advance
hereunder (notwithstanding any failure to satisfy any condition precedent set
forth in Section 4 or this Section 2.13) and, initially, shall bear interest at
the rate then applicable to Advances. If a Letter of Credit Disbursement is
deemed to be an Advance hereunder, Borrowers’ obligation to pay the amount of
such Letter of Credit Disbursement to Lender shall be automatically converted
into an obligation to pay Lender such resulting Advance.

 

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(e) Each Borrower agrees to indemnify, defend and hold harmless Lender
(including its branches, Affiliates, and correspondents) and each such Person’s
respective directors, officers, employees, attorneys and agents (each, a “Letter
of Credit Related Person”) (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), which may be incurred by
or awarded against any such Letter of Credit Related Person (other than Excluded
Taxes) (the “Letter of Credit Indemnified Costs”), and which arise out of or in
connection with, or as a result of: (i) any Letter of Credit or any pre-advice
of its issuance; (ii) any transfer, sale, delivery, surrender or endorsement of
any Drawing Document at any time(s) held by any such Letter of Credit Related
Person in connection with any Letter of Credit; (iii) any action or proceeding
arising out of, or in connection with, any Letter of Credit (whether
administrative, judicial or in connection with arbitration), including any
action or proceeding to compel or restrain any presentation or payment under any
Letter of Credit, or for the wrongful dishonor of, or honoring a presentation
under, any Letter of Credit; (iv) any independent undertakings issued by the
beneficiary of any Letter of Credit; (v) any unauthorized instruction or request
made to Lender in connection with any Letter of Credit or requested Letter of
Credit or error in computer or electronic transmission; (vi) an adviser,
confirmer or other nominated person seeking to be reimbursed, indemnified or
compensated; (vii) any third party seeking to enforce the rights of an
applicant, beneficiary, nominated person, transferee, assignee of Letter of
Credit proceeds or holder of an instrument or document; (viii) the fraud,
forgery or illegal action of parties other than the Letter of Credit Related
Person; (ix) Lender’s performance of the obligations of a confirming institution
or entity that wrongfully dishonors a confirmation; or (x) the acts or
omissions, whether rightful or wrongful, of any present or future de jure or de
facto governmental or regulatory authority or cause or event beyond the control
of the Letter of Credit Related Person; in each case, including that resulting
from the Letter of Credit Related Person’s own negligence; provided, however,
that such indemnity shall not be available to any Letter of Credit Related
Person claiming indemnification under clauses (i) through (x) above to the
extent that such Letter of Credit Indemnified Costs may be finally determined in
a final, non-appealable judgment of a court of competent jurisdiction to have
resulted directly from the gross negligence or willful misconduct of the Letter
of Credit Related Person claiming indemnity. Borrowers hereby agree to pay the
Letter of Credit Related Person claiming indemnity on demand from time to time
all amounts owing under this Section 2.13(e). If and to the extent that the
obligations of Borrowers under this Section 2.13(e) are unenforceable for any
reason, Borrowers agree to make the maximum contribution to the Letter of Credit
Indemnified Costs permissible under applicable law. This indemnification
provision shall survive termination of this Agreement and all Letters of Credit.

(f) The liability of Lender (or any other Letter of Credit Related Person)
under, in connection with or arising out of any Letter of Credit (or
pre-advice), regardless of the form or legal grounds of the action or
proceeding, shall be limited to direct damages suffered by Borrowers that are
caused directly by Lender’s gross negligence or willful misconduct in
(i) honoring a presentation under a Letter of Credit that on its face does not
at least substantially comply with the terms and conditions of such Letter of
Credit, (ii) failing to honor a presentation under a Letter of Credit that
strictly complies with the terms and conditions of such Letter of Credit or
(iii) retaining Drawing Documents presented under a Letter of Credit. Lender
shall be deemed to have acted with due diligence and reasonable care if Lender’s
conduct is in accordance with Standard Letter of Credit Practice or in
accordance with this Agreement. Borrowers’ aggregate remedies against Lender and
any Letter of Credit Related Person for wrongfully honoring a presentation under
any Letter of Credit or wrongfully retaining honored Drawing Documents shall in
no event exceed the aggregate amount paid by Borrowers to Lender in respect of
the honored presentation in connection with such Letter of Credit under
Section 2.13(d), plus interest at the rate then applicable to Advances
hereunder. Borrowers shall take action to avoid and mitigate the amount of any
damages claimed against Lender or any other Letter of Credit Related Person,
including by enforcing its rights against the beneficiaries of the Letters of
Credit. Any claim by Borrowers under or in connection with any Letter of Credit
shall be reduced by an amount equal to the sum of (x) the amount (if any) saved
by Borrowers as a result of the breach or alleged wrongful conduct complained
of; and (y) the amount (if any) of the loss that would have been avoided had
Borrowers taken all reasonable steps to mitigate any loss, and in case of a
claim of wrongful dishonor, by specifically and timely authorizing Lender to
effect a cure.

(g) Borrowers are responsible for preparing or approving the final text of the
Letter of Credit as issued by Lender, irrespective of any assistance Lender may
provide such as drafting or recommending text or by Lender’s use or refusal to
use text submitted by Borrowers. Borrowers are solely responsible for the
suitability of the Letter of Credit for Borrowers’ purposes. With respect to any
Letter of Credit containing an “automatic amendment” to extend the expiration
date of such Letter of Credit, Lender, in its sole and absolute discretion, may
give notice of nonrenewal of such Letter of Credit and, if Borrowers do not at
any time want such Letter of Credit to be renewed, Borrowers will so notify
Lender at least 15 calendar days before Lender is required to notify the
beneficiary of such Letter of Credit or any advising bank of such nonrenewal
pursuant to the terms of such Letter of Credit.

 

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(h) Borrowers’ reimbursement and payment obligations under this Section 2.13 are
absolute, unconditional and irrevocable and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances
whatsoever, including: (i) any lack of validity, enforceability or legal effect
of any Letter of Credit or this Agreement or any term or provision therein or
herein; (ii) payment against presentation of any draft, demand or claim for
payment under any Drawing Document that does not comply in whole or in part with
the terms of the applicable Letter of Credit or which proves to be fraudulent,
forged or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, or which is signed, issued or presented by a Person
or a transferee of such Person purporting to be a successor or transferee of the
beneficiary of such Letter of Credit; (iii) Lender or any of its branches or
Affiliates being the beneficiary of any Letter of Credit; (iv) Lender or any
correspondent honoring a drawing against a Drawing Document up to the amount
available under any Letter of Credit even if such Drawing Document claims an
amount in excess of the amount available under the Letter of Credit; (v) the
existence of any claim, set-off, defense or other right that any Borrower or any
of its Subsidiaries may have at any time against any beneficiary, any assignee
of proceeds, Lender or any other Person; (vi) any other event, circumstance or
conduct whatsoever, whether or not similar to any of the foregoing that might,
but for this Section 2.13(h), constitute a legal or equitable defense to or
discharge of, or provide a right of set-off against, any Borrower’s or any of
its Subsidiaries’ reimbursement and other payment obligations and liabilities,
arising under, or in connection with, any Letter of Credit, whether against
Lender, the beneficiary or any other Person; or (vii) the fact that any Default
or Event of Default shall have occurred and be continuing; provided, however,
that subject to Section 2.13(f) above, the foregoing shall not release Lender
from such liability to Borrowers as may be finally determined in a final,
non-appealable judgment of a court of competent jurisdiction against Lender
following reimbursement or payment of the obligations and liabilities, including
reimbursement and other payment obligations, of Borrowers to Lender arising
under, or in connection with, this Section 2.13 or any Letter of Credit.

(i) Without limiting any other provision of this Agreement, Lender and each
other Letter of Credit Related Person (if applicable) shall not be responsible
to Borrowers for, and Lender’s rights and remedies against Borrowers and the
obligation of Borrowers to reimburse Lender for each drawing under each Letter
of Credit shall not be impaired by: (i) honor of a presentation under any Letter
of Credit that on its face substantially complies with the terms and conditions
of such Letter of Credit, even if the Letter of Credit requires strict
compliance by the beneficiary; (ii) honor of a presentation of any Drawing
Document that appears on its face to have been signed, presented or issued
(A) by any purported successor or transferee of any beneficiary or other Person
required to sign, present or issue such Drawing Document or (B) under a new name
of the beneficiary; (iii) acceptance as a draft of any written or electronic
demand or request for payment under a Letter of Credit, even if nonnegotiable or
not in the form of a draft or notwithstanding any requirement that such draft,
demand or request bear any or adequate reference to the Letter of Credit;
(iv) the identity or authority of any presenter or signer of any Drawing
Document or the form, accuracy, genuineness or legal effect of any Drawing
Document (other than Lender’s determination that such Drawing Document appears
on its face substantially to comply with the terms and conditions of the Letter
of Credit); (v) acting upon any instruction or request relative to a Letter of
Credit or requested Letter of Credit that Lender in good faith believes to have
been given by a Person authorized to give such instruction or request; (vi) any
errors, omissions, interruptions or delays in transmission or delivery of any
message, advice or document (regardless of how sent or transmitted) or for
errors in interpretation of technical terms or in translation or any delay in
giving or failing to give notice to Borrowers; (vii) any acts, omissions or
fraud by, or the insolvency of, any beneficiary, any nominated person or entity
or any other Person or any breach of contract between any beneficiary and any
Borrower or any of the parties to the underlying transaction to which the Letter
of Credit relates; (viii) assertion or waiver of any provision of the ISP or UCP
600 that primarily benefits an issuer of a letter of credit, including any
requirement that any Drawing Document be presented to it at a particular hour or
place; (ix) payment to any paying or negotiating bank (designated or permitted
by the terms of the applicable Letter of Credit) claiming that it rightfully
honored or is entitled to reimbursement or indemnity under Standard Letter of
Credit Practice applicable to it; (x) acting or failing to act as required or
permitted under Standard Letter of Credit Practice applicable to where Lender
has issued, confirmed, advised or negotiated such Letter of Credit, as the case
may be; (xi) honor of a presentation after the expiration date of any Letter of
Credit notwithstanding that a presentation was made prior to such expiration
date and dishonored by Lender if subsequently Lender or any court or other
finder of fact determines such presentation should have been honored;
(xii) dishonor of any presentation that does not strictly comply or that is
fraudulent, forged or otherwise not entitled to honor; or (xiii) honor of a
presentation that is subsequently determined by Lender to have been made in
violation of international, federal, state or local restrictions on the
transaction of business with certain prohibited Persons.

(j) Each Borrower acknowledges and agrees that any and all fees, charges, costs,
or commissions in effect from time to time imposed by, and any and all expenses
incurred by, Lender, or by any adviser, confirming institution or entity or
other nominated Person relating to Letters of Credit, at the time of issuance of
any Letter of Credit and upon the occurrence of any other activity with respect
to any Letter of Credit (including transfers, assignment of proceeds,
amendments, drawings, renewals or cancellations), shall be non-refundable Lender
Expenses for purposes of this Agreement and shall be reimbursable promptly by
Borrowers to Lender.

(k) 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 Lender 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 Board of Governors 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 or caused to be issued
hereunder or hereby, or (ii) there shall be imposed on Lender any other
condition regarding any Letter of Credit, and the result of the foregoing is to
increase, directly or indirectly, the cost to Lender of issuing, making,
participating in, or maintaining any Letter of Credit or to reduce the amount
receivable in respect thereof, then, and in any such case, Lender may, at any
time within a reasonable period after the additional cost is incurred or the
amount received is reduced, notify Borrowers, and Borrowers shall pay within 30
days after demand therefor, such amounts as Lender may specify to be necessary
to compensate Lender 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 Advances hereunder; provided, that
(A) Borrowers shall not be required to provide any compensation pursuant to this
Section 2.13(k) for any such amounts incurred more than 180 days prior to the
date on which the demand for payment of such amounts is first made to Borrowers,
and (B) if an event or circumstance giving rise to such amounts is retroactive,
then the 180-day period referred to above shall be extended to include the
period of retroactive effect thereof. The determination by Lender of any amount
due pursuant to this Section 2.13(k), 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.

(l) Unless otherwise expressly agreed by Lender and Borrowers, when a Letter of
Credit is issued, (i) the rules of the ISP and UCP 600 shall apply to each
standby Letter of Credit, and (ii) the rules of UCP 600 shall apply to each
commercial Letter of Credit.

(m) In the event of a direct conflict between the provisions of this
Section 2.13 and any provision contained in any Letter of Credit Agreement, 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 2.13 shall control and
govern.

2.14 Illegality; Impracticability; Increased Costs. In the event that (i) any
change in market conditions or any law, regulation, treaty, or directive, or any
change therein or in the interpretation or application thereof (in each case,
other than with respect to Excluded Taxes), in each case occurring after the
date hereof (and in each case other than with respect to Taxes governed by
Section 16), make it unlawful or impractical for Lender to fund or maintain
extensions of credit with interest based upon Daily Three Month LIBOR or to
continue such funding or maintaining, or to determine or charge interest rates
based upon Daily Three Month LIBOR, (ii) Lender determines that by reasons
affecting the London Interbank Eurodollar market, adequate and reasonable means
do not exist for ascertaining Daily Three Month LIBOR, or (iii) Lender
determines that the interest rate based on the Daily Three Month LIBOR will not
adequately and fairly reflect the cost to Lender of maintaining or funding
Advances at the interest rate based upon Daily Three Month LIBOR, Lender shall
give notice of such changed circumstances to Borrowers and (i) interest on the
principal amount of such extensions of credit thereafter shall accrue interest
at a rate equal to the Prime Rate plus the Applicable Margin, and (ii) Borrowers
shall not be entitled to elect Daily Three Month LIBOR until Lender determines
that it would no longer be unlawful or impractical to do so or that such
increased costs would no longer be applicable.

2.15 Capital Requirements. If, after the date hereof, Lender determines that
(i) the adoption of or change in any law, rule, regulation or guideline
regarding capital or reserve requirements for lenders, banks or bank holding
companies, or any change in the interpretation, implementation, or application
thereof by any Governmental Authority charged with the administration thereof
(in each case, other than with respect to Excluded Taxes), including those
changes resulting from the enactment of the Dodd-Frank Wall Street Reform and
Consumer Protection Act and Basel III, regardless of the date enacted, adopted
or issued, or (ii) compliance by 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 Lender’s or such holding company’s capital as a consequence of
Lender’s loan 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 Lender to be
material, then Lender may notify Borrowers thereof. Following receipt of such
notice, Borrowers agree to pay Lender on demand the amount of such reduction on
return of capital as and when such reduction is determined, payable within 30
days after presentation by Lender of a statement of the amount and setting forth
in reasonable detail Lender’s calculation thereof and the assumptions upon which
such calculation was based (which statement shall be deemed true and correct
absent manifest error). In determining such amount, Lender may use any
reasonable averaging and attribution methods. Failure or delay on the part of
Lender to demand compensation pursuant to this Section shall not constitute a
waiver of Lender’s right to demand such compensation; provided that Borrowers
shall not be required to compensate Lender pursuant to this Section for any
reductions in return incurred more than 180 days prior to the date that Lender
notifies Borrowers of such law, rule, regulation or guideline giving rise to
such reductions and of Lender’s intention to claim compensation therefor;
provided further that if such claim arises by reason of the adoption of or
change in any law, rule, regulation or guideline that is retroactive, then the
180-day period referred to above shall be extended to include the period of
retroactive effect thereof.

 

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2.16 Extent of Each Borrower’s Liability, Contribution.

(a) Joint and Several Liability. Each Borrower agrees that it is jointly and
severally liable for, and absolutely and unconditionally guarantees to Lender
the prompt payment and performance of, all Obligations under this Agreement and
all agreements under the Loan Documents. Each Borrower agrees that its guaranty
obligations hereunder constitute a continuing guaranty of payment and not of
collection, that such obligations shall not be discharged until cash payment in
full of the Obligations, and that such obligations are absolute and
unconditional, irrespective of (i) the genuineness, validity, regularity,
enforceability, subordination or any future modification of, or change in, any
Obligations or Loan Document, or any other document, instrument or agreement to
which any Borrower is or may become a party or be bound; (ii) the absence of any
action to enforce this Agreement (including this Section) or any other Loan
Document, or any waiver, consent or indulgence of any kind by Lender with
respect thereto; (iii) the existence, value or condition of, or failure to
perfect any of Lender’s Liens or to preserve rights against, any security or
guaranty for the Obligations or any action, or the absence of any action, by
Lender in respect thereof (including the release of any security or guaranty);
(iv) the insolvency of any Borrower; (v) any election by Lender in an Insolvency
Proceeding for the application of Section 1111(b)(2) of the Bankruptcy Code;
(vi) any borrowing or grant of a Lien by any other Borrower, as
debtor-in-possession under Section 364 of the Bankruptcy Code or otherwise;
(vii) the disallowance of any claims of Lender against any Borrower for the
repayment of any Obligations under Section 502 of the Bankruptcy Code or
otherwise; or (viii) any other action or circumstances that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
except cash payment in full of all Obligations.

(b) Contribution. 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 Lender 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 Lender hereunder
or under any of the Bank Product Agreements 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.

(c) No Limitation on Liability. Nothing contained in this Section 2.16 shall
limit the liability of any Borrower to pay extensions of credit made directly or
indirectly to that Borrower (including revolving loans advanced to any other
Borrower and then re-loaned or otherwise transferred to, or for the benefit of,
such Borrower), Obligations relating to Letters of Credit issued to support such
Borrower’s business, and all accrued interest, fees, expenses and other related
Obligations with respect thereto, for which such Borrower shall be primarily
liable for all purposes hereunder. Lender shall have the right, at any time in
its discretion, to condition an extension of credit hereunder upon a separate
calculation of borrowing availability for each Borrower and to restrict the
disbursement and use of such extensions of credit to such Borrower.

2.17 Novatel Wireless, Inc. as Agent for Borrowers. Each Borrower hereby
irrevocably appoints Novatel Wireless, Inc. 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 Lender 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 and each Guarantor hereby irrevocably appoints and
authorizes the Administrative Borrower (a) to provide Lender with all notices
with respect to Advances, Letters of Credit and other extensions of credit
obtained for the benefit of any Borrower or Guarantor and all other notices and
instructions under this Agreement, and (b) to take such action as the
Administrative Borrower deems appropriate on its behalf to obtain Advances,
Letters of Credit and other extensions 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
in a combined fashion, as more fully set forth herein, is done solely as an
accommodation to Borrowers and Guarantors in order to utilize the collective
borrowing powers of Borrowers and Guarantors in the most efficient and
economical manner and at their request, and that Lender shall not incur
liability to any Borrower or any Guarantor as a result hereof. Each Borrower and
Guarantor 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 and Guarantor is dependent on the
continued successful performance of the integrated group. To induce Lender to do
so, and in consideration thereof, each Borrower and Guarantor hereby jointly and
severally agrees to indemnify Lender and hold Lender harmless against any and
all liability, expense, loss or claim of damage or injury, made against Lender
by any Borrower, any Guarantor or by any third party whosoever, arising from or
incurred by reason of (a) the handling of the Loan Account and Collateral of
Borrowers or Guarantors as herein provided, or (b) Lender’s relying on any
instructions of the Administrative Borrower, except that Borrowers and
Guarantors will have no liability to Lender under this Section 2.17 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 Lender.

 

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3. SECURITY INTEREST.

3.1 Grant of Security Interest. Each Borrower and each Guarantor hereby
unconditionally grants, assigns, and pledges to Lender for the benefit of Lender
and each Bank Product Provider, to secure payment and performance of the
Obligations, a continuing security interest in and Lien on (hereinafter referred
to as the “Security Interest”) all of such Borrower’s and such Guarantor’s
right, title, and interest in and to the Collateral, as security for the payment
and performance of all Obligations. Following request by Lender, each Borrower
and each Guarantor shall grant Lender a Lien and security interest in all
Commercial Tort Claims that it may have against any Person. The Security
Interest created hereby secures the payment and performance of the Obligations,
whether now existing or arising hereafter. Without limiting the generality of
the foregoing, this Agreement secures the payment of all amounts which
constitute part of the Obligations and would be owed by any Borrower or any
Guarantor to Lender or any other Bank Product Provider, but for the fact that
they are unenforceable or not allowable (in whole or in part) as a claim in an
Insolvency Proceeding involving any Borrower due to the existence of such
Insolvency Proceeding.

3.2 Borrowers Remain Liable. Anything herein to the contrary notwithstanding,
(a) each Loan Party shall remain liable under the contracts and agreements
included in the Collateral, including the Pledged Operating Agreements and the
Pledged Partnership Agreements, to perform all of the duties and obligations
thereunder to the same extent as if this Agreement had not been executed,
(b) the exercise by Lender of any of the rights hereunder shall not release any
Loan Party from any of its duties or obligations under such contracts and
agreements included in the Collateral, and (c) Lender shall not have any
obligation or liability under such contracts and agreements included in the
Collateral by reason of this Agreement, nor shall Lender be obligated to perform
any of the obligations or duties of any Loan Party thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder. Until an
Event of Default shall occur, except as otherwise provided in this Agreement or
any other Loan Document, the Loan Parties shall have the right to possession and
enjoyment of the Collateral for the purpose of conducting the ordinary course of
their respective businesses, subject to and upon the terms hereof and of this
Agreement and the other Loan Documents. Without limiting the generality of the
foregoing, it is the intention of the parties hereto that record and beneficial
ownership of the Pledged Interests, including all voting, consensual, dividend,
and distribution rights, shall remain in the Loan Parties until (i) the
occurrence and continuance of an Event of Default and (ii) Lender has notified
Loan Parties of Lender’s election to exercise such rights with respect to the
Pledged Interests pursuant to Section 10.

3.3 Assignment of Insurance. As additional security for the Obligations, each
Borrower and each Guarantor hereby assigns to Lender for the benefit of Lender
and each Bank Product Provider all rights of such Borrower and such Guarantor
under every policy of insurance covering the Collateral and all other assets and
property of each Borrower and each Guarantor (including, without limitation
business interruption insurance and proceeds thereof) and all business records
and other documents relating to it, and all monies (including proceeds and
refunds) that may be payable under any policy, and each Borrower and each
Guarantor hereby directs the issuer of each policy to pay all such monies
directly and solely to Lender. At any time, after an Event of Default shall have
occurred and is continuing, Lender may (but need not), in Lender’s or any
Borrower’s or any Guarantor’s name, execute and deliver proofs of claim, receive
payment of proceeds and endorse checks and other instruments representing
payment of the policy of insurance, and adjust, litigate, compromise or release
claims against the issuer of any policy. Any monies received under any insurance
policy assigned to Lender, other than liability insurance policies, or received
as payment of any award or compensation for condemnation or taking by eminent
domain shall be paid to Lender and during the existence of an Event of Default,
as determined by Lender in its sole discretion, either be applied to prepayment
of the Obligations or disbursed to Borrowers under payment terms reasonably
satisfactory to Lender for application to the cost of repairs, replacements, or
restorations of the affected Collateral which shall be effected with reasonable
promptness and shall be of a value at least equal to the value of the items or
property destroyed. So long as no Event of Default is existing, such proceeds of
insurance (other than liability insurance) and any such awards or compensation
for condemnation or taking by eminent domain shall be deposited into the
Collection Account (and, when so deposited, such proceeds shall be handled in
accordance with Section 2.4).

3.4 Financing Statements. Each Borrower and each Guarantor authorizes Lender to
file financing statements describing Collateral to perfect Lender’s and each
Bank Product Provider’s Security Interest in the Collateral, and Lender may
describe the Collateral as “all personal property” or “all assets” or describe
specific items of Collateral including without limitation any Commercial Tort
Claims. All financing statements filed before the date of this Agreement to
perfect the Security Interest were authorized by such Borrower and each
Guarantor and are hereby ratified.

4. CONDITIONS.

4.1 Conditions Precedent to the Initial Extension of Credit. The obligation of
Lender to make the initial extension of credit provided for hereunder is subject
to the fulfillment, to the satisfaction of Lender, of each of the conditions
precedent set forth on Exhibit B.

 

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4.2 Conditions Precedent to all Extensions of Credit. The obligation of Lender
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 of each Borrower and each other Loan
Party or its Subsidiaries 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, in which case such representations
and warranties shall continue to be true and correct as of such earlier date);
and

(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.

Any request for an extension of credit shall be deemed to be a representation by
each Borrower and each other Loan Party that the statements set forth in this
Section 4.2 are correct as of the time of such request and if such extension of
credit is a request for an Advance or a Letter of Credit, sufficient
Availability exists for such Advance or Letter of Credit pursuant to
Section 2.1(a) and Section 2.13.

4.3 Conditions Subsequent. The obligation of Lender to continue to make Advances
(or otherwise extend credit hereunder) is subject to the fulfillment, on or
before the date applicable thereto, of the conditions subsequent set forth on
Exhibit C (the failure by any Borrower or any other Loan Party to so perform or
cause to be performed such conditions subsequent as and when required by the
terms thereof, shall constitute an Event of Default).

5. REPRESENTATIONS AND WARRANTIES.

In order to induce Lender to enter into this Agreement, each Borrower and each
Guarantor makes the representations and warranties to Lender set forth on
Exhibit D. Each of such representations and warranties shall be true, correct,
and complete, 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), as of the Closing
Date, and shall be true, correct, and complete, 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), 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 in which case such representations
and warranties shall continue to be true and correct as of such earlier date)
and such representations and warranties shall survive the execution and delivery
of this Agreement.

6. AFFIRMATIVE COVENANTS.

Each Borrower and each other Loan Party covenants and agrees that, until
termination of all of the commitments of Lender hereunder to provide any further
extensions of credit and payment in full of the Obligations, each Borrower and
each other Loan Party shall, and shall cause their respective Subsidiaries to,
comply with each of the following:

6.1 Financial Statements, Reports, Certificates. Deliver to Lender copies of
each of the financial statements, reports, and other items set forth on Schedule
6.1 no later than the times specified therein. In addition, each Borrower agrees
that no Subsidiary of a Borrower will have a fiscal year different from that of
Borrowers. Each Borrower agrees to maintain a system of accounting that enables
such Borrower to produce financial statements in accordance with GAAP. Each Loan
Party shall also (a) keep a reporting system that shows all additions, sales,
claims, returns, and allowances with respect to the sales of such Loan Party and
its Subsidiaries, and (b) maintain its billing systems/practices substantially
as in effect as of the Closing Date and shall only make material modifications
following prior notice to Lender.

6.2 Collateral Reporting. Provide Lender with each of the reports set forth on
Schedule 6.2 at the times specified therein. In addition, each Borrower and, if
requested by Lender, each Guarantor (or any specific Guarantor requested by
Lender) agrees to use commercially reasonable efforts in cooperation with Lender
to facilitate and implement a system of electronic collateral reporting in order
to provide electronic reporting of each of the items set forth on such Schedule
(including, if requested by Lender, the use of Lender’s Commercial Electronic
Office (CEO© portal)).

6.3 Existence. Except as otherwise permitted under Section 7.3 or Section 7.4,
at all times maintain and preserve in full force and effect (a) its existence
(including being in good standing in its jurisdiction of organization) and
(b) all rights and franchises, licenses and permits material to its business;
provided, however, that no Loan Party nor any of its Subsidiaries shall be
required to preserve any such right or franchise, licenses or permits if such
Person’s board of directors (or similar governing body) shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
such Person, and that the loss thereof is not disadvantageous in any material
respect to such Person or to the Lender; provided that Borrowers deliver at
least ten (10) days prior written notice to Lender of the election of such Loan
Party or such Subsidiary not to preserve any such material right or franchise,
license or permit.

 

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6.4 Maintenance of Properties. Maintain and preserve all of its assets that are
necessary in the conduct of its business in good working order and condition,
ordinary wear, tear and casualty excepted and Permitted Dispositions excepted
(and except where the failure to so maintain and preserve such assets could not
reasonably be expected to result in a Material Adverse Change), and comply with
the material provisions of all material leases to which it is a party as lessee,
so as to prevent the loss or forfeiture thereof, unless such provisions are the
subject of a Permitted Protest.

6.5 Taxes.

(a) Cause all material assessments and taxes imposed, levied, or assessed
against any Loan Party or its Subsidiaries, or any of their respective assets or
in respect of any of its income, businesses, or franchises 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 and so long as, in the case of an assessment or tax that has
or may become a Lien against any of the Collateral, (i) such contest proceedings
conclusively operate to stay the sale of any portion of the Collateral to
satisfy such assessment or tax, and (ii) any such other Lien is at all times
subordinate to Lender’s Liens.

(b) Make timely payment or deposit of all tax payments and withholding taxes
required of it and 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 Lender with proof reasonably satisfactory
to Lender indicating that such Loan Party and its Subsidiaries have made such
payments or deposits.

6.6 Insurance. At Borrowers’ expense, maintain insurance with respect to the
assets of each Loan Party and each of its Subsidiaries wherever located,
covering liabilities, losses or damages as are customarily insured against by
other Persons engaged in the same or similar businesses. Borrowers also shall
maintain, with respect to each Loan Party and each of its Subsidiaries, general
liability insurance, flood insurance for Collateral located in a flood plain,
product liability insurance, director’s and officer’s liability insurance,
fiduciary liability insurance, and employment practices liability insurance, as
well as insurance against larceny, embezzlement, and criminal misappropriation.
All such policies of insurance shall be with financially sound and reputable
insurance companies reasonably acceptable to Lender and in such amounts as is
carried generally in accordance with sound business practice by companies in
similar businesses similarly situated and located and in any event in amount,
adequacy and scope reasonably satisfactory to Lender. All property insurance
policies covering the Collateral are to be made payable to Lender for the
benefit of Lender, as its interests may appear, in case of loss, pursuant to a
lender loss payable endorsement acceptable to Lender and are to contain such
other provisions as Lender may reasonably require to fully protect the Lender’s
interest in the Collateral and to any payments to be made under such policies.
Such evidence of property and general liability insurance shall be delivered to
Lender, with the lender loss payable endorsements (but only in respect of
Collateral) and additional insured endorsements (with respect to general
liability coverage) in favor of Lender and shall provide for not less than 30
days (10 days in the case of non-payment) prior written notice to Lender of the
exercise of any right of cancellation. If Borrowers fail to maintain such
insurance, Lender may arrange for such insurance, but at Borrowers’ expense and
without any responsibility on Lender’s part for obtaining the insurance, the
solvency of the insurance companies, the adequacy of the coverage, or the
collection of claims. Borrowers shall give Lender prompt notice of any loss
exceeding $250,000 covered by their casualty or business interruption insurance.
Upon the occurrence and during the continuation of an Event of Default, Lender
shall have the sole right to (i) file claims under any property and general
liability insurance policies in respect of the Collateral, to receive and give
acquittance for any payments that may be payable thereunder, (ii) to execute any
and all endorsements, receipts, releases, assignments, reassignments or other
documents that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies, and (iii) apply any
net proceeds of insurance received by Lender to the Obligations in any order
selected by Lender. So long as no Event of Default is existing, proceeds of
insurance shall be deposited into the Collection Account (and, when so
deposited, such proceeds shall be handled in accordance with Section 2.4).

6.7 Inspections, Exams, Collateral Exams and Appraisals. Permit Lender and each
of Lender’s duly authorized representatives to visit any of its properties and
inspect any of its assets or books and records, to conduct inspections, exams
and appraisals of the Collateral, 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 Lender may designate and, so long as no Default or Event of
Default exists, with reasonable prior notice to Borrowers or Guarantors as
applicable.

6.8 Account Verification. Permit Lender, in Lender’s name or in the name of a
nominee of Lender, to verify the validity, amount or any other matter relating
to any Account, by mail, telephone, facsimile transmission or otherwise.
Further, at the request of Lender, Borrowers and Guarantors shall send requests
for verification of Accounts or send notices of assignment of Accounts to
Account Debtors and other obligors.

 

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6.9 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.

6.10 Environmental.

(a) Keep any property either owned or operated by any Borrower or any other Loan
Party or its Subsidiaries free of any material Environmental Liens or post bonds
or other financial assurances satisfactory to Lender and in an amount sufficient
to satisfy the obligations or liability evidenced by such Environmental Liens;

(b) Comply, in all material respects, with Environmental Laws and provide to
Lender documentation of such compliance which Lender reasonably requests;

(c) Promptly notify Lender of any release of which any Borrower or any other
Loan Party has knowledge of a Hazardous Material in any reportable quantity from
or onto property owned or operated by any Loan Party or any of its Subsidiaries
and take any Remedial Actions required to abate said release or otherwise to
come into compliance, in all material respects, with applicable Environmental
Law; and

(d) Promptly, but in any event within 3 Business Days of its receipt thereof,
provide Lender with written notice of any of the following: (i) notice that an
Environmental Lien has been filed against any of the real or personal property
of any Loan Party or its Subsidiaries, (ii) commencement of any Environmental
Action or written notice that an Environmental Action will be filed against any
Loan Party or any of its Subsidiaries, and (iii) written notice of a violation,
citation, or other administrative order from a Governmental Authority.

6.11 Disclosure Updates.

(a) Promptly and in no event later than 3 Business Days after obtaining
knowledge thereof or after the occurrence thereof, whichever is earlier, notify
Lender:

(i) if any written information, exhibit, or report furnished to Lender
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 materially misleading in light of the circumstances in which made.
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;

(ii) of all actions, suits, or proceedings brought by or against any Loan Party
or any of its Subsidiaries before any court or Governmental Authority which
reasonably could be expected to result in a Material Adverse Change, provided
that, in any event, such notification shall not be later than 3 days after
service of process with respect thereto on any Loan Party or any of its
Subsidiaries;

(iii) of (i) any disputes or claims by any Borrower’s customers exceeding
$100,000 individually or $250,000 in the aggregate; or (ii) Goods returned to or
recovered by any Borrower or Guarantor outside of the ordinary course of
business, with a fair market value exceeding individually or in the aggregate,
$500,000;

(iv) of any material loss or damage to any Collateral or any substantial adverse
change in the Collateral;

(v) of a violation of any law, rule or regulation, the non-compliance with which
reasonably could be expected to result in a Material Adverse Change; or

(vi) of the occurrence of any ERISA Event that occurs with respect to a Pension
Plan or Multiemployer Plan which has resulted or could reasonably be expected to
result in liability of any Loan Party under Title IV of ERISA to the Pension
Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of
$250,000.

(b) Promptly and in no event later than 3 Business Days after obtaining
knowledge thereof or after the occurrence thereof, notify Lender of any event or
condition which constitutes a Default or an Event of Default and provide a
statement of the action that such Loan Party proposes to take with respect to
such Default or Event of Default.

 

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(c) Upon the reasonable request of Lender, each Loan Party shall deliver to
Lender any other materials, reports, records or information reasonably requested
relating to the operations, business affairs, financial condition of any Loan
Party or its Subsidiaries or the Collateral.

6.12 Collateral Covenants.

(a) Possession of Collateral. In the event that any Collateral, including
Proceeds, is evidenced by or consists of Negotiable Collateral, Investment
Related Property, or Chattel Paper, in each case, having an aggregate value or
face amount of $250,000 or more for all such Negotiable Collateral, Investment
Related Property, or Chattel Paper, the Loan Parties shall promptly (and in any
event within 3 Business Days after receipt thereof), notify Lender thereof, and
if and to the extent that perfection or priority of Lender’s Liens is dependent
on or enhanced by possession, the applicable Loan Party, promptly (and in any
event within 3 Business Days) after request by Lender, shall execute such other
documents and instruments as shall be requested by Lender or, if applicable,
endorse and deliver physical possession of such Negotiable Collateral,
Investment Related Property, or Chattel Paper to Lender, together with such
undated powers (or other relevant document of assignment or transfer acceptable
to Lender) endorsed in blank as shall be requested by Lender, and shall do such
other acts or things deemed necessary or desirable by Lender to enhance, perfect
and protect Lender’s Liens therein.

(b) Chattel Paper.

(i) Promptly (and in any event within 3 Business Days) after request by Lender,
each Loan Party shall take all steps reasonably necessary to grant Lender
control of all electronic Chattel Paper of any Loan Party in accordance with the
Code and all “transferable records” as that term is defined in Section 16 of the
Uniform Electronic Transaction Act and Section 201 of the federal Electronic
Signatures in Global and National Commerce Act as in effect in any relevant
jurisdiction, to the extent that the individual or aggregate value or face
amount of such electronic Chattel Paper equals or exceeds $250,000; and

(ii) If any Loan Party retains possession of any Chattel Paper or instruments
(which retention of possession shall be subject to the extent permitted hereby),
promptly upon the request of Lender, such Chattel Paper and instruments shall be
marked with the following legend: “This writing and the obligations evidenced or
secured hereby are subject to the Security Interest of Wells Fargo Bank,
National Association, as Lender”.

(c) Control Agreements.

(i) Except to the extent otherwise provided in Section 7.11, each Loan Party
shall obtain a Control Agreement, from each bank (other than Lender) maintaining
a Deposit Account for such Loan Party;

(ii) Except to the extent otherwise provided in Section 7.11, each Loan Party
shall obtain a Control Agreement, from each issuer of uncertificated securities,
securities intermediary, or commodities intermediary issuing or holding any
financial assets or commodities to or for any Loan Party; and

(iii) Except to the extent otherwise provided in Section 7.11, each Loan Party
shall cause Lender to obtain “control”, as such term is defined in the Code,
with respect to all of such Loan Party’s investment property.

(d) Letter-of-Credit Rights. If the Loan Parties (or any of them) are or become
the beneficiary of letters of credit having a face amount or value of $250,000
or more in the aggregate, then the applicable Loan Party or Loan Parties shall
promptly (and in any event within 3 Business Days after becoming a beneficiary),
notify Lender thereof and, promptly (and in any event within 3 Business Days)
after request by Lender, enter into a tri-party agreement with Lender and the
issuer or confirming bank with respect to letter-of-credit rights assigning such
letter-of-credit rights to Lender and directing all payments thereunder to the
Collection Account unless otherwise directed by Lender, all in form and
substance satisfactory to Lender.

(e) Commercial Tort Claims. If the Loan Parties (or any of them) obtain
Commercial Tort Claims having a value, or involving an asserted claim, in the
amount of $250,000 or more in the aggregate for all Commercial Tort Claims, then
(x) the applicable Loan Party or Loan Parties shall notify Lender in the next
Compliance Certificate that is required to be delivered to Lender upon incurring
or otherwise obtaining such Commercial Tort Claims, and (y) if requested by
Lender, promptly (and in any event within 3 Business Days) after request by
Lender, amend Schedule 5.6(d) to the Information Certificate to describe such
Commercial Tort Claims in a manner that reasonably identifies such Commercial
Tort Claims and which is otherwise reasonably satisfactory to Lender, and hereby
authorizes the filing of additional financing statements or amendments to
existing financing statements describing such Commercial Tort Claims, and agrees
to do such other acts or things deemed necessary or desirable by Lender to give
Lender a first priority, perfected security interest in any such Commercial Tort
Claim, which Commercial Tort Claim shall not be subject to any other Liens.

 

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(f) Government Contracts. Other than Accounts and Chattel Paper the aggregate
value of which does not at any one time exceed $250,000, if any Account or
Chattel Paper of any Loan Party arises out of a contract or contracts with the
United States of America or any State or any department, agency, or
instrumentality thereof, Loan Parties shall promptly (and in any event within 3
Business Days of the creation thereof) notify Lender thereof and, promptly (and
in any event within 3 Business Days) after request by Lender, execute any
instruments or take any steps reasonably required by Lender in order that all
moneys due or to become due under such contract or contracts shall be assigned
to Lender, for the benefit of Lender and each Bank Product Provider, and shall
provide written notice thereof under the Assignment of Claims Act or other
applicable law.

(g) Intellectual Property.

(i) Upon the request of Lender, in order to facilitate filings with the PTO and
the United States Copyright Office, each Loan Party shall execute and deliver to
Lender one or more Copyright Security Agreements or Patent and Trademark
Security Agreements to further evidence Lender’s Lien on such Loan Party’s
Collateral consisting of Patents, Trademarks, or Copyrights, and the General
Intangibles of such Loan Party relating thereto or represented thereby;

(ii) Each Loan Party shall have the duty, with respect to Intellectual Property
that is necessary in the conduct of such Loan Party’s business or where the
failure to do the following would likely result in a Material Adverse Change, to
protect and diligently enforce and defend at such Loan Party’s expense its
Intellectual Property, including if requested by Lender, (A) to diligently
enforce and defend, including promptly suing for infringement, misappropriation,
or dilution and to recover any and all damages for such infringement,
misappropriation, or dilution, and filing for opposition, interference, and
cancellation against conflicting Intellectual Property rights of any Person,
(B) to prosecute diligently any trademark application or service mark
application that is part of the Trademarks pending as of the date hereof or
hereafter, (C) to prosecute diligently any patent application that is part of
the Patents pending as of the date hereof or hereafter, (D) to take all
reasonable and necessary action to preserve and maintain all of such Loan
Party’s Trademarks, Patents, Copyrights, Intellectual Property Licenses, and its
rights therein, including paying all maintenance fees and filing of applications
for renewal, affidavits of use, and affidavits of noncontestability, and (E) to
require all employees, consultants, and contractors of each Loan Party who were
involved in the creation or development of such Intellectual Property to sign
agreements containing assignment to such Loan Party of Intellectual Property
rights created or developed and obligations of confidentiality; provided that,
notwithstanding the foregoing, Borrowers may engage in Permitted Dispositions
from time to time. No Loan Party shall abandon any Intellectual Property or
Intellectual Property License that is necessary in the conduct of such Loan
Party’s business. Each Loan Party shall take the steps described in this
Section 6.12(g)(ii) with respect to all new or acquired Intellectual Property to
which it or any of its Subsidiaries is now or later becomes entitled that is
necessary in the conduct of such Loan Party’s or Subsidiary’s business;

(iii) Each Loan Party acknowledges and agrees that Lender shall have no duties
with respect to any Intellectual Property or Intellectual Property Licenses of
any Loan Party. Without limiting the generality of this Section 6.12(g)(iii),
each Loan Party acknowledges and agrees that Lender shall not be under any
obligation to take any steps necessary to preserve rights in the Collateral
consisting of Intellectual Property or Intellectual Property Licenses against
any other Person, but Lender may do so at its option from and after the
occurrence and during the continuance of an Event of Default, and all expenses
incurred in connection therewith (including reasonable fees and expenses of
attorneys and other professionals) shall be for the sole account of such Loan
Party and shall be chargeable to the Loan Account;

(iv) Each Loan Party shall promptly file an application with the United States
Copyright Office for any Copyright that has not been registered with the United
States Copyright Office if such Copyright is necessary in connection with the
conduct of such Loan Party’s business. Any expenses incurred in connection with
the foregoing shall be borne by the Loan Parties; and

(v) No Loan Party shall enter into any material Intellectual Property License to
receive any license or rights in any Intellectual Property of any other Person
unless such Loan Party has used commercially reasonable efforts to permit the
assignment of or grant of a Lien in such Intellectual Property License (and all
rights of such Loan Party thereunder) to Lender (and any transferees of Lender).

(h) Investment Related Property.

(i) Upon the occurrence and during the continuance of an Event of Default,
following the request of Lender, all sums of money and property paid or
distributed in respect of the Investment Related Property that are received by
any Loan Party shall be held by such Loan Party in trust for the benefit of
Lender segregated from such Loan Party’s other property, and such Loan Party
shall deliver it promptly to Lender in the exact form received; and

 

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(ii) Each Loan Party shall cooperate with Lender in obtaining all necessary
approvals and making all necessary filings under federal, state, local, or
foreign law to effect the perfection of the Security Interest on the Investment
Related Property or to effect any sale or transfer thereof.

(i) Real Property; Fixtures. Upon the acquisition by any Loan Party of any fee
interest in Real Property with a fair market value in excess of $500,000, such
Loan Party will promptly (and in any event within 3 Business Days of
acquisition) notify Lender of the acquisition of such Real Property and will
grant to Lender a first priority Mortgage on each fee interest in Real Property
now or hereafter owned by such Loan Party, which Real Property shall not be
subject to any other Liens except Permitted Liens, and shall deliver such other
documentation and opinions, in form and substance satisfactory to Lender, in
connection with the grant of such Mortgage as Lender shall request in its
Permitted Discretion, including appraisals, title insurance policies and
endorsements, surveys, financing statements, fixture filings, flood insurance,
flood insurance certifications and environmental audits and such Loan Party
shall pay all recording costs, mortgage registration taxes, intangible taxes and
other fees and costs (including reasonable attorneys fees and expenses) incurred
in connection therewith. All such appraisals, title insurance policies and
endorsements, environmental audits and surveys shall be prepared or issued by
parties reasonably acceptable to Lender. To the extent permitted by applicable
law, all of the Collateral shall remain personal property regardless of the
manner of its attachment or affixation to real property.

(j) Cash Management Transition Period.

(i) Within 90 days (or such longer period permitted by Lender in Lender’s sole
discretion) following the Closing Date (the “Cash Management Transition
Period”), each Borrower shall establish and maintain at Lender all Cash
Management Services, including all deposit accounts; provided that Borrower may
continue to maintain deposit accounts at other banks for purposes of holding
foreign currency deposits so long as the aggregate Dollar Equivalent of funds in
such other accounts shall not exceed $2,000,000 at any time. Such Cash
Management Services maintained by each Loan Party shall be of a type and on
terms reasonably satisfactory to Lender;

(ii) During the Cash Management Transition Period each Loan Party shall maintain
Cash Management Services of a type and on terms reasonably satisfactory to
Lender at one or more of the banks set forth on Schedule 5.15 to the Information
Certificate, and shall (A) take reasonable steps to ensure that all of the
Account Debtors of each Loan Party forward payment of the amounts owed by them
directly to such banks, and (B) 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 a Loan Party or to a Subsidiary of a Loan Party) into a bank
account of such Loan Party at one of such banks; and

(iii) During the Cash Management Transition Period, Borrowers shall arrange for
all cash held in any of the Borrowers’ accounts maintained at Bank of America,
other than the Excluded BofA Funds (defined below), to be transferred to the
Collection Account no less frequently than 3 times each calendar week. “Excluded
BofA Funds” means the following funds held or maintained by Borrowers in their
Bank of America accounts: (A) any funds held in an operating account to cover
any checks drawn on such account for the purpose of payment Borrowers’ costs and
expenses; (B) any funds held in a payroll or similar account to the extent
necessary to cover payroll or similar liabilities of the Borrowers; and (C) any
funds held in a foreign currency account for purposes of covering expenses owing
to foreign Persons by Borrowers, provided that the aggregate Dollar Equivalent
of funds under this clause (C) shall not exceed $2,000,000 at any time.

(k) Motor Vehicles. Promptly (and in any event within 3 Business Days) after
(i) the value of all motor vehicles owned by Loan Parties exceeds $250,000 in
the aggregate or (ii) notice from Lender after the occurrence of a Default or an
Event of Default, each Loan Party shall deliver to Lender an original
certificate of title for each such motor vehicle together with a signed motor
vehicle title application naming Lender as first lien holder with respect to
such motor vehicle and will cause such title certificates to be filed (with the
Lender’s Lien noted thereon) in the appropriate state motor vehicle filing
office.

(l) Deposit Accounts. At any time that Liquidity is less than $15,000,000 for
five or more consecutive Business Days (and continuing thereafter until such
time as Liquidity is equal to or greater than $15,000,000 for not less than 60
consecutive days) or during the existence of an Event of Default, unless Lender
agrees otherwise in writing (in Lender’s sole discretion), each Loan Party
agrees not to withdraw any funds from any Deposit Account pledged to Lender
pursuant to this Agreement except for (x) any Deposit Accounts identified on
Schedule 5.15 to the Information Certificate which are specifically and
exclusively used for payroll, payroll taxes and other employee wage and benefit
payments to or for employees of any Borrower or any Loan Party or any of their
respective Subsidiaries, (y) so long as Lender has not commenced the exercise of
any rights or remedies as a result of the occurrence of any Event of Default,
the Designated Account, and (z) Borrowers may continue to comply with their
obligations to transfer funds from their Bank of America accounts to the Lender
accounts in accordance with Section 6.12(j)(iii).

 

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(m) Pledged Interests.

(i) If any Loan Party shall acquire, obtain, receive or become entitled to
receive any Pledged Interests after the Closing Date, it shall promptly (and in
any event within 3 Business Days of acquiring or obtaining such Collateral)
deliver to Lender a duly executed Pledged Interests Addendum identifying such
Pledged Interests;

(ii) Each Loan Party shall promptly deliver to Lender a copy of each material
notice or other material communication received by it in respect of any Pledged
Interests;

(iii) No Loan Party shall make or consent to any amendment or other modification
or waiver with respect to any Pledged Interests, Pledged Operating Agreement, or
Pledged Partnership Agreement, or enter into any agreement or permit to exist
any restriction with respect to any Pledged Interests if the same is prohibited
pursuant to the Loan Documents; and

(iv) As to all limited liability company or partnership interests issued under
any Pledged Operating Agreement or Pledged Partnership Agreement, each Loan
Party hereby covenants that the Pledged Interests issued pursuant to such
agreement (A) are not and shall not be dealt in or traded on securities
exchanges or in securities markets, (B) do not and will not constitute
investment company securities, and (C) are not and will not be held by such Loan
Party in a securities account. In addition, none of the Pledged Operating
Agreements, the Pledged Partnership Agreements, or any other agreements
governing any of the Pledged Interests issued under any Pledged Operating
Agreement or Pledged Partnership Agreement, provide or shall provide that such
Pledged Interests are securities governed by Section 8 of the Uniform Commercial
Code as in effect in any relevant jurisdiction.

(n) Pledged Notes. Loan Parties (i) without the prior written consent of Lender,
will not (A) waive or release any obligation of any Person that is obligated
under any of the Pledged Notes in excess of $250,000, (B) take or omit to take
any action or knowingly suffer or permit any action to be omitted or taken, the
taking or omission of which would result in any right of offset against sums
payable under the Pledged Notes, or (C) other than Permitted Dispositions,
assign or surrender their rights and interests under any of the Pledged Notes or
terminate, cancel, modify, change, supplement or amend the Pledged Notes in
excess of $250,000, and (ii) shall provide to Lender copies of all material
written notices (including notices of default) given or received with respect to
the Pledged Notes promptly after giving or receiving such notice.

6.13 Material Contracts. Contemporaneously with the delivery of each Compliance
Certificate pursuant to Section 6.1, provide Lender with copies of (a) each
Material Contract entered into since the delivery of the previous Compliance
Certificate, and (b) each material amendment or modification of any Material
Contract entered into since the delivery of the previous Compliance Certificate.
Borrowers shall maintain all Material Contracts in full force and effect and
shall not default in the payment or performance of any material obligations
thereunder.

6.14 Location of Inventory, Equipment and Books. Keep the Inventory and
Equipment (other than vehicles and Equipment out for repair) and Books of each
Loan Party and each of its Subsidiaries only at the locations identified on
Schedule 5.29 to the Information Certificate and keep the chief executive office
of each Loan Party and each of its Subsidiaries only at the locations identified
on Schedule 5.6(b) to the Information Certificate; provided, however, that
Borrowers may amend Schedule 5.29 to the Information Certificate so long as such
amendment occurs by written notice to Lender not less than 10 days prior to the
date on which such Inventory, Equipment or Books are moved to such new location,
and so long as, at the time of such written notification, the applicable
Borrower provides Lender a Collateral Access Agreement with respect thereto if
such location is such Person’s chief executive office.

6.15 Further Assurances.

(a) At any time upon the reasonable request of Lender, execute or deliver to
Lender 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 (the “Additional Documents”)
that Lender may reasonably request and in form and substance reasonably
satisfactory to Lender, to create, perfect, and continue perfection or to better
perfect Lender’s Liens in all of the assets of each Loan Party (whether now
owned or hereafter arising or acquired, tangible or intangible, real or
personal), to create and perfect Liens in favor of Lender in any Real Property
acquired in fee simple by any Loan Party after the Closing Date with a fair
market value in excess of $500,000, and in order to fully consummate all of the
transactions contemplated hereby and under the other Loan Documents; provided
that the foregoing shall not apply to any Loan Party that is a CFC. To the
maximum extent permitted by applicable law, if a Borrower or any other Loan
Party refuses or fails to execute or deliver any reasonably requested Additional
Documents within a reasonable period of time, not to exceed 30 days following
the request to do so, such Borrower and such other Loan Party hereby authorizes
Lender to execute any such Additional Documents in the applicable Loan Party’s
name, as applicable, and authorizes Lender to file such executed Additional
Documents in any appropriate filing office. In furtherance and not in limitation
of the foregoing, each Loan Party shall take such actions as Lender

 

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may reasonably request from time to time to ensure that the Obligations are
guaranteed by the Guarantors and are secured by substantially all of the assets
of each Borrower and each other Loan Party and all of the outstanding capital
Stock of each Loan Party (other than the Stock of Novatel Wireless, Inc.).
Notwithstanding the foregoing, and so long as no Event of Default has occurred
and continuing, the Loan Parties shall have no obligation to provide any
Additional Documents with respect to any patents, trademarks, or copyrights now
or hereafter owned by the Loan Parties that in each case are registered outside
of the United States.

(b) Each Borrower and each other Loan Party authorizes the filing by Lender of
financing or continuation statements, or amendments thereto, and such Loan Party
will execute and deliver to Lender such other instruments or notices, as Lender
may reasonably request, in order to perfect and preserve the Security Interest
granted or purported to be granted hereby.

(c) Each Borrower and each other Loan Party authorizes Lender at any time and
from time to time to file, transmit, or communicate, as applicable, financing
statements and amendments (i) describing the Collateral as “all personal
property of debtor” or “all assets of debtor” or words of similar effect,
(ii) describing the Collateral as being of equal or lesser scope or with greater
detail, or (iii) that contain any information required by Part 5 of Article 9 of
the Code for the sufficiency or filing office acceptance of such financing
statement. Each Borrower and each other Loan Party also hereby ratifies any and
all financing statements or amendments previously filed by Lender in any
jurisdiction.

(d) Each Borrower and each other Loan Party acknowledges that no Loan Party is
authorized to file any financing statement or amendment or termination statement
with respect to any financing statement filed in connection with this Agreement
without the prior written consent of Lender, subject to such Loan Party’s rights
under Section 9-509(d)(2) of the Code.

6.16 Formation of Subsidiaries. At the time that any Loan Party forms any direct
or indirect Subsidiary or acquires any direct or indirect Subsidiary after the
Closing Date, such Loan Party shall (a) within 10 days after such formation or
acquisition and the capitalization of such Subsidiary in excess of $25,000 (or
such later date as permitted by Lender in its sole discretion) cause any such
new Subsidiary to provide to Lender a joinder to this Agreement or a Guaranty
(as determined by Lender), together with such other security documents
(including mortgages with respect to any Real Property owned in fee simple by
such new Subsidiary with a fair market value of at least $500,000), as well as
appropriate financing statements (and with respect to all property subject to a
mortgage, fixture filings), all in form and substance reasonably satisfactory to
Lender (including being sufficient to grant Lender a first priority Lien
(subject to Permitted Liens) in and to the assets of such newly formed or
acquired Subsidiary); provided that the Guaranty and such other security
documents shall not be required to be provided to Lender with respect to any
Subsidiary of Borrower that is a CFC or a Subsidiary of a CFC, (b) within 10
days after such formation or acquisition (or such later date as permitted by
Lender in its sole discretion) provide to Lender a pledge agreement and
appropriate certificates and powers or financing statements, pledging all of the
direct or beneficial ownership interest in such new Subsidiary reasonably
satisfactory to Lender; provided that only 65% of the total outstanding voting
Stock of any first tier Subsidiary of a Borrower that is a CFC (and none of the
Stock of any Subsidiary of such CFC) shall be required to be pledged, and
(c) within 10 days after such formation or acquisition (or such later date as
permitted by Lender in its sole discretion) provide to Lender all other
documentation, including one or more opinions of counsel reasonably satisfactory
to Lender, 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 Real Property
owned in fee and subject to a mortgage). Any document, agreement, or instrument
executed or issued pursuant to this Section 6.16 shall be a Loan Document.

7. NEGATIVE COVENANTS.

Each Borrower and each Loan Party covenants and agrees that, until termination
of all of the commitments of Lender hereunder to provide any further extensions
of credit and payment in full of the Obligations, no Borrower and no other Loan
Party will do, nor will any Borrower or any other Loan party permit any of its
Subsidiaries to do any of the following:

7.1 Indebtedness. Create, incur, assume, suffer to exist, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except for Permitted Indebtedness.

7.2 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.

7.3 Restrictions on Fundamental Changes.

(a) Other than in order to consummate a Permitted Acquisition, enter into any
merger, consolidation, reorganization, or recapitalization, or reclassify its
Stock, except for (i) any merger, consolidation, reorganization, between Loan
Parties, provided that a Borrower must be the surviving entity of any such
merger, consolidation, reorganization to which it is a party, and (ii) any
merger, consolidation, reorganization, between Subsidiaries of a Borrower that
are not Loan Parties.

 

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(b) Liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), except for (i) the liquidation or dissolution of non-operating
Subsidiaries of any Borrower with nominal assets and nominal liabilities,
(ii) the liquidation or dissolution of a Loan Party (other than a Borrower) or
any of its wholly-owned Subsidiaries so long as all of the assets (including any
interest in any Stock) of such liquidating or dissolving Loan Party or
Subsidiary are transferred to a Loan Party that is not liquidating or
dissolving, or (iii) the liquidation or dissolution of a Subsidiary of a
Borrower that is not a Loan Party so long as all of the assets of such
liquidating or dissolving Subsidiary are transferred to a Subsidiary of a
Borrower that is not liquidating or dissolving.

(c) Suspend or cease operation of a substantial portion of its or their
business, except as permitted pursuant to Sections 7.3(a) or (b) above or in
connection with the transactions permitted pursuant to Section 7.4.

(d) Other than in order to consummate a Permitted Acquisition, form or acquire
any direct or indirect Subsidiary.

7.4 Disposal of Assets. Other than Permitted Dispositions or transactions
expressly permitted by Sections 7.3 or 7.12, sell, assign (by operation of law
or otherwise) or otherwise dispose of, or grant any option with respect to, any
of the Collateral or any other asset except as expressly permitted by this
Agreement. Lender shall not be deemed to have consented to any sale or other
disposition of any of the Collateral or any other asset except as expressly
permitted in this Agreement or the other Loan Documents.

7.5 Change Name. Unless Borrowers give Lender prior written notice, change the
name, organizational identification number, state of organization,
organizational identity or “location” for purposes of Section 9-307 of the Code
of any Loan Party.

7.6 Nature of Business. Make any change in the nature of its or their business
as conducted on the date of this Agreement or acquire any properties or assets
that are not reasonably related to the conduct of such business activities;
provided, however, that the foregoing shall not prevent any Borrower or any
other Loan Party or any of its Subsidiaries from engaging in any business that
is reasonably related or ancillary to its business.

7.7 Prepayments and Amendments.

(a) Except in connection with Refinancing Indebtedness permitted by Section 7.1,

(i) optionally prepay, redeem, defease, purchase, or otherwise acquire any
Indebtedness of any Loan Party or any of its Subsidiaries, other than (A) the
Obligations in accordance with this Agreement or a Bank Product Agreement, and
(B) Permitted Intercompany Advances, or

(ii) make any payment on account of Indebtedness that has been contractually
subordinated in right of payment to the Obligations if such payment is not
permitted at such time under the subordination terms and conditions; or

(b) Directly or indirectly, amend, modify, or change any of the terms or
provisions of:

(i) any agreement, instrument, document, indenture, or other writing evidencing
or concerning Permitted Indebtedness other than (A) the Obligations in
accordance with this Agreement or a Bank Product Agreement, or (B) Permitted
Intercompany Advances;

(ii) any Material Contract except to the extent that such amendment,
modification, or change could not, individually or in the aggregate, reasonably
be expected to be materially adverse to the interests of Lender; provided that
if such Person allows such Material Contract to lapse it shall not be deemed a
violation of this provision; or

(iii) the Governing Documents of any Loan Party or any of its Subsidiaries if
the effect thereof, either individually or in the aggregate, could reasonably be
expected to be materially adverse to the interests of Lender; or

(c) Pay in cash any indebtedness owing by Borrowers to Novatel Wireless
Technologies, Ltd.

 

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7.8 Change of Control. Cause, permit, or suffer, directly or indirectly, any
Change of Control.

7.9 Restricted Junior Payments. Make any Restricted Junior Payment, other than
the following:

(a) Payment of dividends with respect to Novatel Wireless, Inc.’s Permitted
Preferred Stock (each, a “Preferred Stock Dividend”) subject to the following
terms and conditions with respect each Preferred Stock Dividend: (i) no Event of
Default shall be existing on the date of declaration of any Preferred Stock
Dividend; (ii) Borrowers’ Excess Availability, for the 30-day period immediately
prior to the date that any Preferred Stock Dividend is declared and on the date
of such declaration, in each case after giving effect to the amount of such
Preferred Stock Dividend, is not less than $10,000,000; (iii) Borrowers shall
remain in compliance with the financial covenants set forth in Section 8, after
giving effect to any such Preferred Stock Dividend; (iv) Preferred Stock
Dividends shall be declared and paid no more frequently than once per fiscal
quarter; (v) all such Preferred Stock Dividends shall be paid in accordance with
the Certificate of Designation applicable to the Permitted Preferred Stock;
(vi) Borrowers shall provide Lender with notice of each such Preferred Stock
Dividend promptly after both the declaration and payment of each such Preferred
Stock Dividend; and (vii) Lender may establish a Reserve for the amount of each
Preferred Stock Dividend from the date of the declaration of each Preferred
Stock Dividend and maintain such Reserve until the Preferred Stock Dividend is
paid;

(b) Cash payments in lieu of issuing fractional shares in connection with the
exercise of warrants, options, or other securities convertible into or
exchangeable for Stock in an amount not to exceed $250,000 in the aggregate in
any fiscal year;

(c) Payments to redeem or otherwise acquire existing Stock of the Borrowers so
long as the any consideration used to make such payments is derived solely from
the issuance of new Stock (other than Prohibited Preferred Stock) by the
Borrowers after the Closing Date; and

(d) Any Subsidiary of Borrowers (including Enfora, Inc.) may make a declaration
or payment of any dividend or make a payment or distribution on account of Stock
issued by such Subsidiary pro rata to the holders of such Subsidiary’s Stock.

7.10 Accounting Methods. Modify or change its fiscal year or its method of
accounting (other than as may be required to conform to GAAP).

7.11 Investments; Controlled Investments.

(a) 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.

(b) Other than (i) an aggregate amount of not more than $50,000 at any one time,
in the case of each Borrower and each other Loan Party, (ii) amounts deposited
into Deposit Accounts identified on Schedule 5.15 to the Information Certificate
which are specially and exclusively used for payroll, payroll taxes and other
employee wage and benefit payments to or for the employees of any Borrower or
any Loan Party or its Subsidiaries, (iii) an aggregate Dollar Equivalent of not
more than $2,000,000 at any time maintained in foreign currency accounts,
(iv) funds maintained in deposit accounts with Bank of America during the Cash
Management Transition Period (but subject to the other terms and conditions of
this Agreement), and (v) cash and Cash Equivalents maintained at UBS or Royal
Bank of Scotland in one or more securities accounts during the 15-Business Day
period after the Closing Date, make, acquire, or permit to exist Permitted
Investments consisting of cash, Cash Equivalents, or amounts credited to Deposit
Accounts or Securities Accounts unless such Borrower and such other Loan Party,
as applicable, and the applicable bank (or as permitted solely pursuant to
Section 6.12(j), Section 4.3 and Exhibit C, or securities intermediary have
entered into Control Agreements with Lender governing such Permitted Investments
in order to perfect (and further establish) Lender’s Liens in such Permitted
Investments. Except as provided in Section 6.12(j) and this Section 7.11,
Borrowers and such Loan Parties shall not establish or maintain any Deposit
Account or Securities Account with a banking institution other than Lender.

7.12 Transactions with Affiliates. Directly or indirectly enter into or permit
to exist any transaction with any Affiliate of any Borrower, any other Loan
Party or any of their Subsidiaries except for:

(a) transactions contemplated by the Loan Documents or transactions (other than
the payment of management, consulting, monitoring, or advisory fees) with any
Affiliates of any Borrower or any Loan Party in the ordinary course of business
of such Borrower or Loan Party, consistent with past practices and undertaken in
good faith, upon fair and reasonable terms and no less favorable than would be
obtained in a comparable arm’s length transaction with a non-Affiliate;

 

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(b) so long as it has been approved by a Loan Party’s board of directors (or
comparable governing body) in accordance with applicable law, any customary
indemnities provided for the benefit of officers and directors (or comparable
managers) of such Loan Party;

(c) so long as it has been approved by a Loan Party’s board of directors (or
comparable governing body) in accordance with applicable law, the payment of
reasonable compensation, severance, or employee benefit arrangements to
employees, officers, and directors of a Loan Party and its Subsidiaries in the
ordinary course of business and consistent with industry practice; and

(d) transactions permitted by Section 7.1, Section 7.3, Section 7.4, Section 7.9
or Section 7.11, or any Permitted Intercompany Advance.

7.13 Use of Proceeds. Use the proceeds of any loan made hereunder for any
purpose other than (a) on the Closing Date, (i) to repay in full, the
outstanding principal, accrued interest, and accrued fees and expenses owing to
Existing Creditor, and (ii) to pay fees, costs, and expenses, including Lender
Expenses, incurred in connection with this Agreement, the other Loan Documents,
and the transactions contemplated hereby and thereby, and (b) on the Closing
Date and thereafter, consistent with the terms and conditions hereof, for
general corporate and working capital purposes (provided that no part of the
proceeds of the loans made to Borrowers will be used to purchase or carry any
such Margin Stock or to extend credit to others for the purpose of purchasing or
carrying any such Margin Stock or for any purpose that violates the provisions
of Regulation T, U or X of the Board of Governors of the Federal Reserve
System).

7.14 Limitation on Issuance of Stock. Except for the issuance or sale of common
stock or Permitted Preferred Stock by a Borrower or other Loan Party, issue or
sell or enter into any agreement or arrangement for the issuance and sale of any
of their Stock.

7.15 Consignments. Consign any of its Inventory or sell any of its Inventory on
bill and hold, sale or return, sale on approval, or other conditional terms of
sale, except as set forth on Schedule 7.15 to the Information Certificate.

7.16 Inventory and Equipment with Bailees. Store the Inventory or Equipment of
any Loan Party or any of its Subsidiaries at any time now or hereafter with a
bailee, warehouseman, or similar party, except as set forth on Schedule 7.16 to
the Information Certificate or otherwise in the ordinary course of business
(provided that Borrowers promptly provide written notice to Lender of any new
location).

8. FINANCIAL COVENANTS.

Each Borrower covenants and agrees that, until termination of all obligations of
Lender to provide extensions of credit hereunder and payment in full of the
Obligations, Borrowers will comply with each of the following financial
covenants:

(a) Minimum EBITDA. Achieve EBITDA, measured on a month-end basis, of at least
the required amount set forth in the following table for the applicable test
date and measurement period set forth opposite thereto (numbers appearing
between “< >” are negative):

 

Minimum Required EBITDA

  

Test Date and Measurement Period

$<426,250>   

November 30, 2014, for the period

October 1, 2014 through November 30, 2014

$792,000   

December 31, 2014 for the period

October 1, 2014 through December 31, 2014

$406,500   

January 31, 2015, for the period

October 1, 2014 through January 31, 2015

$139,500   

February 28, 2015, for the period

October 1, 2014 through February 28, 2015

$1,021,500   

March 31, 2015, for the period

October 1, 2014 through March 31, 2015

 

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$952,500

  

April 30, 2015, for the period

October 1, 2014 through April 30, 2015

$1,017,750

  

May 31, 2015, for the period

October 1, 2014 through May 31, 2015

$2,354,250

  

June 30, 2015, for the period

October 1, 2014 through June 30, 2015

$2,124,000

  

July 31, 2015, for the period

October 1, 2014 through July 31, 2015

$2,059,500

  

August 31, 2015, for the period

October 1, 2014 through August 31, 2015

$3,255,000

  

September 30, 2015, for the period

October 1, 2014 through September 30, 2015

$3,595,500

  

October 31, 2015, for the period

November 1, 2014 through October 31, 2015

$4,044,000

  

November 30, 2015, for the period

December 1, 2014 through November 30, 2015

$4,830,750

   December 31, 2015, for the twelve-month period ending December 31, 2015, and
the last day of each calendar month thereafter, in each case for the
twelve-month period ending on each such date

Notwithstanding the existence of the foregoing minimum EBITDA covenant, such
covenant shall not be tested by Lender so long as (i) Borrowers maintain
Liquidity of not less than $15,000,000 at all times, and (ii) no Event of
Default shall have occurred under this Agreement. If at any time Borrowers shall
fail to maintain Liquidity of at least $15,000,000 or in the event any Event of
Default shall have occurred, the foregoing minimum EBITDA covenant shall be
tested for the most recent test date occurring prior to the earlier of the date
that the Borrowers have failed to maintain Liquidity of at least $15,000,000 or
the occurrence of an Event of Default and shall continue to be tested until
Borrowers have attained Liquidity of at least $15,000,000 for a period of 60
consecutive days thereafter and no Event of Default exists (and, thereafter, if
the Borrowers fail to maintain such minimum Liquidity of $15,000,000 at any time
or an Event of Default occurs, the EBITDA covenant shall again be tested in
accordance with the foregoing). Borrowers shall report to Lender their EBITDA
and Liquidity each month (with such reporting provided with the Compliance
Certificate), regardless of whether the EBITDA is subject to being tested.

(b) Capital Expenditures. Borrowers shall not make or incur Capital Expenditures
in any fiscal year in an amount greater than $5,000,000 per fiscal year.

9. 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:

9.1 If any Borrower fails to pay when due and payable, or when declared due and
payable, all or any portion of the Obligations consisting of principal,
interest, fees, charges or other amounts due Lender or any Bank Product
Provider, reimbursement of Lender Expenses, or other amounts 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);

9.2 If any Loan Party or any of its Subsidiaries:

(a) fails to perform or observe any covenant or other agreement contained in any
of (i) Sections 4.3, 6.1, 6.2, 6.5(a) (solely with respect to F.I.C.A.,
F.U.T.A., federal income taxes and any other taxes or assessments the
non-payment of which may result in a Lien having priority over Lender’s Liens),
6.5(b), 6.6, 6.7 (solely if any Loan Party or any of its Subsidiaries refuses to
allow Lender or its representatives or agents to visit its properties, inspect
its assets or books or records, examine and make copies of its books and
records, or discuss its affairs, finances, and accounts with its officers and
employees), 6.8, 6.11, 6.12, 6.13 or 6.14, (ii) Section 7 or (iii) Section 8;

 

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(b) fails to perform or observe any covenant or other agreement contained in any
of Sections 6.3, 6.4, 6.5(a) (other than F.I.C.A., F.U.T.A., federal income
taxes and any other taxes or assessments the non-payment of which may result in
a Lien having priority over Lender’s Liens), 6.7 (other than if any Loan Party
or any of its Subsidiaries refuses to allow Lender or its representatives or
agents to visit its properties, inspect its assets or books or records, examine
and make copies of its books or records or disclose it affairs, finances and
accounts with its officers and employees), 6.9, 6.10, and 6.15 and such failure
continues for a period of 15 days after the earlier of (i) the date on which
such failure shall first become known to or should have been known by any
officer of any Loan Party or (ii) the date on which written notice thereof is
given to any Loan Party by Lender; 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 unable to be cured or is the subject of
another provision of this Section 9 (in which event such other provision of this
Section 9 shall govern), and such failure continues for a period of 30 days
after the earlier of (i) the date on which such failure shall first become known
to or should have been known by any officer of any Loan Party or (ii) the date
on which written notice thereof is given to any Loan Party by Lender;

9.3 If (i) one or more judgments, orders, or awards for the payment of money in
an amount in excess of $250,000 in any one case or in excess of $500,000 in the
aggregate, (except to the extent fully covered (other than to the extent of
customary deductibles) by insurance pursuant to which the insurer has not denied
coverage) is entered or filed against a Loan Party or any of its Subsidiaries,
or with respect to any of their respective assets, and either (a) there is a
period of 30 consecutive days at any time after the entry of any such judgment,
order, or award during which (1) the same is not discharged, satisfied, vacated,
or bonded pending appeal, or (2) a stay of enforcement thereof is not in effect,
or (b) enforcement proceedings are commenced upon such judgment, order, or
award;

9.4 If an Insolvency Proceeding is commenced by a Loan Party or any of its
Subsidiaries;

9.5 If an Insolvency Proceeding is commenced against a Loan Party or any of its
Subsidiaries and any of the following events occur: (a) such Loan Party or such
Subsidiary 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, such Loan Party or its Subsidiary, or (e) an order
for relief shall have been issued or entered therein; provided that Lender shall
have no obligation to provide any extension of credit to Borrowers during such
60 calendar day period specified in clause (c);

9.6 If any Loan Party or any of its Subsidiaries is enjoined, restrained, or in
any way prevented by court order from continuing to conduct all or any material
part of the business affairs of such Loan Party and its Subsidiaries, taken as a
whole;

9.7 If there is (a) a default in one or more agreements to which a Loan Party or
any of its Subsidiaries is a party with one or more third Persons relative to
the Indebtedness of such Loan Party or such Subsidiary involving an aggregate
amount of $250,000 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,
irrespective of whether exercised, to accelerate the maturity of such Loan
Party’s or its Subsidiary’s obligations thereunder, or (b) a default in or an
involuntary early termination of one or more Hedge Agreements to which a Loan
Party or any of its Subsidiaries is a party; provided that if such default is
cured or waived and such third party has no right to exercise any rights or
remedies in connection therewith, there shall be no Event of Default hereunder;

9.8 If any warranty, representation, certificate, statement, or Record made
herein or in any other Loan Document or delivered in writing to 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;

9.9 If the obligation of any Guarantor under its Guaranty or any other Loan
Document to which any Guarantor is a party is limited or terminated by operation
of law or by such Guarantor (other than in accordance with the terms of this
Agreement), or if any Guarantor fails to perform any obligation under its
Guaranty or under any such Loan Document, or repudiates or revokes or purports
to repudiate or revoke any obligation under its Guaranty, or under any such Loan
Document, or any Guarantor ceases to exist for any reason;

 

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9.10 If this 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 (to
the extent required hereby) and, except to the extent of Permitted Liens which
are permitted purchase money Liens or the interests of lessors under Capital
Leases, first priority Lien on the Collateral covered thereby, except (a) as a
result of a disposition of the applicable Collateral in a transaction permitted
under this Agreement, or (b) with respect to Collateral the aggregate value of
which, for all such Collateral, does not exceed at any time, $100,000;

9.11 If any event or circumstance occurs that Lender believes (exercised in the
Permitted Discretion of Lender in good faith) may impair the prospect of payment
of all or part of the Obligations, or any Loan Party’s ability to perform any of
its material obligations under any of the Loan Documents, or any other document
or agreement described in or related to this Agreement, or there occurs any
Material Adverse Change;

9.12 If any event or circumstance shall occur which, in the Permitted Discretion
of Lender exercised in good faith, would be reasonably likely to cause Lender to
suspect that any Loan Party has engaged in fraudulent activity with respect to
the Collateral or other matters;

9.13 The indictment of any director or the Chief Executive Officer, the Chief
Operating Officer, the Chief Financial Officer, the Treasurer, the Vice
President of Accounting, or the Controller of the Borrowers for a felony offence
under state or federal law, and such director or officer has not resigned or has
not been terminated from Borrowers within 30 days from the date of the
indictment;

9.14 If any Loan Party fails to pay any indebtedness or obligation owed to
Lender or its Affiliates which is unrelated to the Credit Facility or this
Agreement as it becomes due and payable or the occurrence of any default or
event of default under any agreement between any Loan Party and Lender or its
Affiliates unrelated to the Loan Documents;

9.15 The validity or enforceability of any Loan Document shall at any time for
any reason be declared to be null and void, or a proceeding shall be commenced
by a Loan Party or any of its Subsidiaries, or by any Governmental Authority
having jurisdiction over a Loan Party or any of its Subsidiaries, seeking to
establish the invalidity or unenforceability thereof, or a Loan Party shall deny
that such Loan Party has any liability or obligation purported to be created
under any Loan Document; or

9.16 An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan
which has resulted or could reasonably be expected to result in liability of any
Loan Party under Title IV of ERISA to the Pension Plan, Multiemployer Plan or
the PBGC in an aggregate amount in excess of $250,000, or (ii) any Loan Party or
any ERISA Affiliate fails to pay when due, after the expiration of any
applicable grace period, any installment payment with respect to its withdrawal
liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate
amount in excess of $250,000.

10. RIGHTS AND REMEDIES.

10.1 Rights and Remedies. Upon the occurrence and during the continuation of an
Event of Default, Lender may, in addition to any other rights or remedies
provided for hereunder or under any other Loan Document or by applicable law, do
any one or more of the following:

(a) declare the Obligations (other than the Hedge Obligations, which may be
accelerated in accordance with the terms of the applicable Hedge Agreement),
whether evidenced by this Agreement or by any of the other Loan Documents
immediately due and payable, whereupon the same shall become and be immediately
due and payable and Borrowers shall be obligated to repay all of such
Obligations in full, without presentment, demand, protest, or further notice or
other requirements of any kind, all of which are hereby expressly waived by each
Borrower and each other Loan Party;

(b) declare the funding obligations of Lender under this Agreement terminated,
whereupon such funding obligations shall immediately be terminated together with
any obligation of Lender hereunder to make Advances, extend any other credit
hereunder or issue Letters of Credit;

(c) give notice to an Account Debtor or other Person obligated to pay an
Account, a General Intangible, Negotiable Collateral, or other amount due,
notice that the Account, General Intangible, Negotiable Collateral or other
amount due has been assigned to Lender for security and must be paid directly to
Lender and Lender may collect the Accounts, General Intangible and Negotiable
Collateral of each Borrower and each other Loan Party directly, and any
collection costs and expenses shall constitute part of the Obligations under the
Loan Documents;

(d) in Lender’s name or in each Loan Party’s name, as such Loan Party’s agent
and attorney-in-fact, notify the United States Postal Service to change the
address for delivery of mail to any address designated by Lender, otherwise
intercept mail, and receive, open and dispose of such Loan Party’s mail,
applying all Collateral as permitted under this Agreement and holding all other
mail for such Loan Party’s account or forwarding such mail to such Loan Party’s
last known address;

 

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(e) without notice to or consent from any Loan Party or any of its Subsidiaries,
and without any obligation to pay rent or other compensation, take exclusive
possession of all locations where any Loan Party or any of its Subsidiaries
conduct its business or has any rights of possession and use the locations to
store, process, manufacture, sell, use, and liquidate or otherwise dispose of
items that are Collateral, and for any other incidental purposes deemed
appropriate by Lender in good faith; and

(f) exercise in respect of the Collateral, in addition to other rights and
remedies provided for herein, in the other Loan Documents, or otherwise
available to it, all the rights and remedies of a secured party on default under
the Code or any other applicable law.

10.2 Additional Rights and Remedies. Without limiting the generality of the
foregoing, each Borrower and each Guarantor expressly agrees that upon the
occurrence and during the continuation of an Event of Default:

(a) Lender, without demand of performance or other demand, advertisement or
notice of any kind (except a notice specified below of time and place of public
or private sale) to or upon any Borrower, any other Loan Party or any other
Person (all and each of which demands, advertisements and notices are hereby
expressly waived to the maximum extent permitted by the Code or any other
applicable law), may take immediate possession of all or any portion of the
Collateral and (i) require Loan Parties to, and each Borrower and each other
Loan Party hereby agrees that it will at its own expense and upon request of
Lender forthwith, assemble all or part of the Collateral as directed by Lender
and make it available to Lender at one or more locations designated by Lender
where such Borrower or other Loan Party conducts business, and (ii) without
notice except as specified below, sell the Collateral or any part thereof in one
or more parcels at public or private sale, at any of Lender’s or Loan Party’s
offices or elsewhere, for cash, on credit, and upon such other terms as Lender
may deem commercially reasonable. Each Borrower and each other Loan Party agrees
that, to the extent notice of sale shall be required by law, at least 10 days
notice to such Borrower or such other Loan Party of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification and such notice shall constitute a reasonable
“authenticated notification of disposition” within the meaning of Section 9-611
of the Code. Lender shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. Lender may adjourn any public or
private sale from time to time, and such sale may be made at the time and place
to which it was so adjourned. Each Borrower and each other Loan Party agrees
that the internet shall constitute a “place” for purposes of Section 9-610(b) of
the Code. Each Borrower and each other Loan Party agrees that any sale of
Collateral to a licensor pursuant to the terms of a license agreement between
such licensor and such Borrower or such other Loan Party is sufficient to
constitute a commercially reasonable sale (including as to method, terms,
manner, and time) within the meaning of Section 9-610 of the Code;

(b) Lender may, in addition to other rights and remedies provided for herein, in
the other Loan Documents, or otherwise available to it under applicable law and
without the requirement of notice to or upon any Loan Party or any other Person
(which notice is hereby expressly waived to the maximum extent permitted by the
Code or any other applicable law), (i) with respect to any Loan Party’s Deposit
Accounts in which Lender’s Liens are perfected by control under Section 9-104 of
the Code, instruct the bank maintaining such Deposit Account for the applicable
Loan Party to pay the balance of such Deposit Account to or for the benefit of
Lender, and (ii) with respect to any Loan Party’s Securities Accounts in which
Lender’s Liens are perfected by control under Section 9-106 of the Code,
instruct the securities intermediary maintaining such Securities Account for the
applicable Loan Party to (A) transfer any cash in such Securities Account to or
for the benefit of Lender, or (B) liquidate any financial assets in such
Securities Account that are customarily sold on a recognized market and transfer
the cash proceeds thereof to or for the benefit of Lender;

(c) any cash held by Lender as Collateral and all cash proceeds received by
Lender in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral shall be applied against the Obligations in the
order set forth in Section 10.5. In the event the proceeds of Collateral are
insufficient to satisfy all of the Obligations in full, each Borrower and each
other Loan Party shall remain jointly and severally liable for any such
deficiency; and

(d) the Obligations arise out of a commercial transaction, and that if an Event
of Default shall occur Lender shall have the right to an immediate writ of
possession without notice of a hearing. Lender shall have the right to the
appointment of a receiver for each Loan Party or for the properties and assets
of each Loan Party, and each Borrower and each other Loan Party hereby consents
to such rights and such appointment and hereby waives any objection such
Borrower or such Loan Party may have thereto or the right to have a bond or
other security posted by Lender.

Notwithstanding the foregoing or anything to the contrary contained in
Section 10.1, upon the occurrence of any Default or Event of Default described
in Section 9.4 or Section 9.5, in addition to the remedies set forth above,
without any notice to any Borrower or any other Person or any act by Lender, all
obligations of Lender to provide any further extensions of credit hereunder
shall

 

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automatically terminate and the Obligations (other than the Hedge Obligations),
shall automatically and immediately become due and payable and each Borrower
shall be obligated to repay all of such Obligations in full, without
presentment, demand, protest, or notice of any kind, all of which are expressly
waived by each Borrower.

10.3 Lender Appointed Attorney in Fact. Each Borrower and each other Loan Party
hereby irrevocably appoints Lender its attorney-in-fact, with full authority in
the place and stead of such Borrower and such Loan Party and in the name of such
Borrower or such Loan Party or otherwise, at such time as an Event of Default
has occurred and is continuing, to take any action and to execute any instrument
which Lender may reasonably deem necessary or advisable to accomplish the
purposes of this Agreement, including:

(a) to ask, demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in connection
with the Accounts or any other Collateral of such Borrower or such other Loan
Party;

(b) to receive, indorse, and collect any drafts or other instruments, documents,
Negotiable Collateral or Chattel Paper;

(c) to file any claims or take any action or institute any proceedings which
Lender may deem necessary or desirable for the collection of any of the
Collateral of such Borrower or such other Loan Party or otherwise to enforce the
rights of Lender with respect to any of the Collateral;

(d) to repair, alter, or supply Goods, if any, necessary to fulfill in whole or
in part the purchase order of any Person obligated to Borrower or such other
Loan Party in respect of any Account of such Borrower or such other Loan Party;

(e) to use any Intellectual Property or Intellectual Property Licenses of such
Borrower or such other Loan Party including but not limited to any labels,
Patents, Trademarks, trade names, URLs, domain names, industrial designs,
Copyrights, or advertising matter, in preparing for sale, advertising for sale,
or selling Inventory or other Collateral and to collect any amounts due under
Accounts, contracts or Negotiable Collateral of such Borrower or such other Loan
Party;

(f) to take exclusive possession of all locations where each Borrower or other
Loan Party conducts its business or has rights of possession, without notice to
or consent of any Borrower or any Loan Party and to use such locations to store,
process, manufacture, sell, use, and liquidate or otherwise dispose of items
that are Collateral, without obligation to pay rent or other compensation for
the possession or use of any location;

(g) Lender shall have the right, but shall not be obligated, to bring suit in
its own name or in the applicable Loan Party’s name, to enforce the Intellectual
Property and Intellectual Property Licenses and, if Lender shall commence any
such suit, the appropriate Borrower or such other Loan Party shall, at the
request of Lender, do any and all lawful acts and execute any and all proper
documents reasonably required by Lender in aid of such enforcement; and

(h) to the extent permitted by law, such Borrower and each other Loan Party
hereby ratifies all that such attorney-in-fact shall lawfully do or cause to be
done by virtue hereof. This power of attorney is coupled with an interest and
shall be irrevocable until all commitments of Lender under this Agreement to
provide extensions of credit are terminated and all Obligations have been paid
in full in cash.

10.4 Remedies Cumulative. The rights and remedies of Lender under this
Agreement, the other Loan Documents, and all other agreements shall be
cumulative. Lender shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by Lender
of one right or remedy shall be deemed an election, and no waiver by Lender of
any Default or Event of Default shall be deemed a continuing waiver. No delay by
Lender shall constitute a waiver, election, or acquiescence by it.

10.5 Crediting of Payments and Proceeds. In the event that the Obligations have
been accelerated pursuant to Section 10.1 or the Lender has exercised any remedy
set forth in this Agreement or any other Loan Document, all payments received by
Lender upon the Obligations and all net proceeds from the enforcement of the
Obligations shall be applied to the Obligations in such manner as Lender shall
determine in its discretion and, thereafter, to Borrowers (to be wired to the
Designated Account) or such other Person entitled thereto under applicable law.
For greater certainty, the acceleration of the Obligations under this Agreement
shall in no way affect, terminate or accelerate the Hedge Obligations (which are
governed by the terms of the applicable Hedge Agreement).

 

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10.6 Marshaling. Lender shall not be required to marshal any present or future
collateral security (including but not limited to the Collateral) for, or other
assurances of payment of, the Obligations or any of them or to resort to such
collateral security or other assurances of payment in any particular order, and
all of its rights and remedies under this Agreement and under the other Loan
Documents and in respect of such collateral security and other assurances of
payment shall be cumulative and in addition to all other rights and remedies,
however existing or arising. To the extent that it lawfully may, each Borrower
and each other Loan Party hereby agrees that it will not invoke any law relating
to the marshaling of collateral which might cause delay in or impede the
enforcement of Lender’s rights and remedies under this Agreement or under any
other Loan Document or instrument creating or evidencing any of the Obligations
or under which any of the Obligations is outstanding or by which any of the
Obligations is secured or payment thereof is otherwise assured, and, to the
extent that it lawfully may, each Borrower hereby irrevocably waives the
benefits of all such laws.

10.7 License. Each Borrower and each other Loan Party hereby grants to Lender a
non-exclusive, worldwide and royalty-free license to use or otherwise exploit
all Intellectual Property rights of such Borrower and such Loan Party for the
purpose of: (a) completing the manufacture of any in-process materials following
any Event of Default so that such materials become saleable Inventory, all in
accordance with the same quality standards previously adopted by such Borrower
or such other Loan Party for its own manufacturing; and (b) selling, leasing or
otherwise disposing of any or all Collateral following any Event of Default.

10.8 Disposition of Pledged Interests by Lender. None of the Pledged Interests
existing as of the date of this Agreement are, and none of the Pledged Interests
hereafter acquired on the date of acquisition thereof will be, registered or
qualified under the various federal or state securities laws of the United
States and disposition thereof after an Event of Default may be restricted to
one or more private (instead of public) sales in view of the lack of such
registration. Each Loan Party understands that in connection with such
disposition, Lender may approach only a restricted number of potential
purchasers and further understands that a sale under such circumstances may
yield a lower price for the Pledged Interests than if the Pledged Interests were
registered and qualified pursuant to federal and state securities laws and sold
on the open market. Each Loan Party, therefore, agrees that: (a) if Lender
shall, pursuant to the terms of this Agreement, sell or cause the Pledged
Interests or any portion thereof to be sold at a private sale, Lender shall have
the right to rely upon the advice and opinion of any nationally recognized
brokerage or investment firm (but shall not be obligated to seek such advice and
the failure to do so shall not be considered in determining the commercial
reasonableness of such action) as to the best manner in which to offer the
Pledged Interest or any portion thereof for sale and as to the best price
reasonably obtainable at the private sale thereof; and (b) such reliance shall
be conclusive evidence that Lender has handled the disposition in a commercially
reasonable manner.

10.9 Voting and Other Rights in Respect of Pledged Interests. Upon the
occurrence and during the continuation of an Event of Default, (i) Lender may,
at its option, and with two (2) Business Days prior notice to such Borrower or
such other Loan Party, and in addition to all rights and remedies available to
Lender under any other agreement, at law, in equity, or otherwise, exercise all
voting rights, or any other ownership or consensual rights (including any
dividend or distribution rights) in respect of the Pledged Interests owned by
any Borrower or any other Loan Party, but under no circumstances is Lender
obligated by the terms of this Agreement to exercise such rights, and (ii) if
Lender duly exercises its right to vote any of such Pledged Interests, each
Borrower and each other Loan Party hereby appoints Lender, such Borrower’s and
such Loan Party’s true and lawful attorney-in-fact and IRREVOCABLE PROXY to vote
such Pledged Interests in any manner Lender deems advisable for or against all
matters submitted or which may be submitted to a vote of shareholders, partners
or members, as the case may be. The power-of-attorney and proxy granted hereby
is coupled with an interest and shall be irrevocable.

For so long as such Borrower or such other Loan Party shall have the right to
vote the Pledged Interests owned by it, such Borrower and such other Loan Party
covenants and agrees that it will not, without the prior written consent of
Lender, vote or take any consensual action with respect to such Pledged
Interests which would materially adversely affect the rights of Lender or the
value of the Pledged Interests.

11. WAIVERS; INDEMNIFICATION.

11.1 Demand; Protest; etc. Each Borrower and each other Loan Party waives
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 Lender on which such Borrower or such other Loan Party may
in any way be liable.

11.2 The Lender’s Liability for Collateral. Each Borrower and each other Loan
Party hereby agrees that: (a) so long as Lender complies with its obligations,
if any, under the Code, Lender 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 each Borrower
and such other Loan Parties.

 

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11.3 Indemnification. Each Borrower and each other Loan Party shall pay,
indemnify, defend, and hold the Lender-Related Persons (each, an “Indemnified
Person”) harmless (to the fullest extent permitted by applicable 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 and delivery, enforcement, performance, or
administration (including any restructuring, forbearance or workout with respect
hereto) of this Agreement, any of the other Loan Documents, any Bank Product
Agreement or the transactions contemplated hereby or thereby or the monitoring
of compliance by each Borrower and each other Loan Party and each of its
Subsidiaries 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, (c) in
connection with the custody, preservation, use or operation of, or, upon an
Event of Default, the sale of, collection from, or other realization upon, any
of the Collateral in accordance with this Agreement and the other Loan
Documents, (d) with respect to the failure by any Borrower or any other Loan
Party to perform or observe any of the provisions hereof or any other Loan
Document, (e) in connection with the exercise or enforcement of any of the
rights of Lender hereunder or under any other Loan Document, and (f) 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
any Borrower or any other Loan Party or any Subsidiary of a Borrower or any
other Loan Party or any Environmental Actions, Environmental Liabilities or
Remedial Actions related in any way to any such assets or properties of such
Loan Party or any of its Subsidiaries (each and all of the foregoing, the
“Indemnified Liabilities”). The foregoing to the contrary notwithstanding, no
Borrower or any other Loan Party shall have any obligation to any Indemnified
Person under this Section 11.3 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 or its
officers, directors, employees, or attorneys. 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 a Borrower or any other Loan
Party was required to indemnify the Indemnified Person receiving such payment,
the Indemnified Person making such payment is entitled to be indemnified and
reimbursed by such Borrower or such other Loan Party 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 OF SUCH INDEMNIFIED
PERSON OR OF ANY OTHER PERSON.

12. NOTICES.

Unless otherwise provided in this Agreement, all notices or demands 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
certified mail (postage prepaid, return receipt requested), overnight courier,
electronic mail (at such email addresses as a party may designate in accordance
herewith), or telefacsimile. In the case of notices or demands to Borrowers, any
other Loan Party or Lender, as the case may be, they shall be sent to the
respective address set forth below:

 

If to Borrowers or

  

any other Loan Party:

   NOVATEL WIRELESS, INC.    9645 Scranton Road, Suite 205    San Diego,
California 92121    Attn: Chief Financial Officer    Fax No.: 858.812.3402   
Email: mnewman@nvtl.com

with courtesy copies to

  

(which shall not constitute

  

Notice for purposes of this

  

Section 12):

   Paul Hastings LLP    4747 Executive Drive, Twelfth Floor    San Diego, CA
92121    Attn: Teri O’Brien, Esq.    Fax No.: 858.458.3131    Email:
teriobrien@paulhastings.com

 

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If to Lender:

   WELLS FARGO BANK, NATIONAL ASSOCIATION    2450 Colorado Avenue, Suite 3000W
   Santa Monica, California 90404    Attn: Relationship Manager – Novatel
Wireless, Inc.    Fax No.: 877.720.4155    Email: robin.vanmeter@wellsfargo.com

with courtesy copies to

  

(which shall not constitute

  

Notice for purposes of this

  

Section 12)

      Morgan, Lewis & Bockius LLP    300 S. Grand Avenue, Suite 2200    Los
Angeles, CA 90071    Attn: J. Michael Jack    Fax No.: 213.612.2501    Email:
jmjack@morganlewis.com

Any party hereto may change the address at which it is to receive notices
hereunder, by notice in writing in the foregoing manner given to the other
parties. All notices or demands sent in accordance with this Section 12 shall be
deemed received on the earlier of the date of actual receipt or 3 Business Days
after the deposit thereof in the mail; provided, that (a) notices sent by
overnight courier service shall be deemed to have been given when received,
(b) notices by facsimile shall be deemed to have been given when sent and
receipt confirmed (except that, if not given during normal business hours for
the recipient, shall be deemed to have been given at the opening of business on
the next Business Day for the recipient) and (c) notices by electronic mail
shall be deemed received upon the sender’s receipt of an acknowledgment from the
intended recipient (such as by the “return receipt requested” function, as
available, return email or other written acknowledgment). Any notice given by
Lender to any Borrower as provided in this Section 12 shall be deemed sufficient
notice as to all Loan Parties, regardless of whether each Loan Party is sent a
separate copy of such notice or whether each Loan Party is specifically
identified in such notice.

13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER; ARBITRATION; WAIVER OF DAMAGES.

(a) GOVERNING LAW. 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 AS WELL AS ALL CLAIMS, CONTROVERSIES OR DISPUTES ARISING UNDER OR
RELATED TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE DETERMINED
UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.

(b) VENUE. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE TRIED AND
LITIGATED IN THE STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL
COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA; PROVIDED,
HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER
PROPERTY MAY BE BROUGHT, AT LENDER’S OPTION, IN THE COURTS OF ANY JURISDICTION
WHERE LENDER ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER
PROPERTY MAY BE FOUND. EACH LOAN PARTY AND LENDER 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 13(b).

(c) ARBITRATION. THE PARTIES HERETO AGREE, UPON DEMAND BY ANY PARTY, WHETHER
MADE BEFORE THE INSTITUTION OF A JUDICIAL PROCEEDING OR NOT MORE THAN 60 DAYS
AFTER SERVICE OF A COMPLAINT, THIRD PARTY COMPLAINT, CROSS-CLAIM, COUNTERCLAIM
OR ANY ANSWER THERETO OR ANY AMENDMENT TO ANY OF THE ABOVE TO SUBMIT TO BINDING
ARBITRATION ALL CLAIMS, DISPUTES AND CONTROVERSIES BETWEEN OR AMONG THEM (AND
THEIR RESPECTIVE EMPLOYEES, OFFICERS, DIRECTORS, ATTORNEYS, AND OTHER AGENTS),
WHETHER IN TORT, CONTRACT OR OTHERWISE ARISING OUT OF OR RELATING TO IN ANY WAY
(I) ANY CREDIT SUBJECT HERETO, OR ANY OF THE LOAN DOCUMENTS, AND THEIR
NEGOTIATION, EXECUTION, COLLATERALIZATION, ADMINISTRATION, REPAYMENT,
MODIFICATION, EXTENSION, SUBSTITUTION, FORMATION, INDUCEMENT, ENFORCEMENT,
DEFAULT OR TERMINATION; OR (II) REQUESTS FOR ADDITIONAL CREDIT.

 

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(d) GOVERNING RULES. ANY ARBITRATION PROCEEDING WILL (I) PROCEED IN A LOCATION
IN LOS ANGELES, CALIFORNIA SELECTED BY THE AMERICAN ARBITRATION ASSOCIATION
(“AAA”); (II) BE GOVERNED BY THE FEDERAL ARBITRATION ACT (TITLE 9 OF THE UNITED
STATES CODE), NOTWITHSTANDING ANY CONFLICTING CHOICE OF LAW PROVISION IN ANY OF
THE DOCUMENTS BETWEEN THE PARTIES; AND (III) BE CONDUCTED BY THE AAA, OR SUCH
OTHER ADMINISTRATOR AS THE PARTIES SHALL MUTUALLY AGREE UPON, IN ACCORDANCE WITH
THE AAA’S COMMERCIAL DISPUTE RESOLUTION PROCEDURES, UNLESS THE CLAIM OR
COUNTERCLAIM IS AT LEAST $1,000,000.00 EXCLUSIVE OF CLAIMED INTEREST,
ARBITRATION FEES AND COSTS IN WHICH CASE THE ARBITRATION SHALL BE CONDUCTED IN
ACCORDANCE WITH THE AAA’S OPTIONAL PROCEDURES FOR LARGE, COMPLEX COMMERCIAL
DISPUTES (THE COMMERCIAL DISPUTE RESOLUTION PROCEDURES OR THE OPTIONAL
PROCEDURES FOR LARGE, COMPLEX COMMERCIAL DISPUTES TO BE REFERRED TO HEREIN, AS
APPLICABLE, AS THE “RULES”). IF THERE IS ANY INCONSISTENCY BETWEEN THE TERMS
HEREOF AND THE RULES, THE TERMS AND PROCEDURES SET FORTH HEREIN SHALL CONTROL.
ANY PARTY WHO FAILS OR REFUSES TO SUBMIT TO ARBITRATION FOLLOWING A DEMAND BY
ANY OTHER PARTY SHALL BEAR ALL COSTS AND EXPENSES INCURRED BY SUCH OTHER PARTY
IN COMPELLING ARBITRATION OF ANY DISPUTE.

(e) NO WAIVER OF PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. THE
ARBITRATION REQUIREMENT DOES NOT LIMIT THE RIGHT OF ANY PARTY BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING TO (I) FORECLOSE AGAINST REAL
OR PERSONAL PROPERTY COLLATERAL; (II) EXERCISE SELF-HELP REMEDIES RELATING TO
COLLATERAL OR PROCEEDS OF COLLATERAL SUCH AS SETOFF OR REPOSSESSION; OR (III)
OBTAIN PROVISIONAL OR ANCILLARY REMEDIES SUCH AS REPLEVIN, WRIT OF POSSESSION,
INJUNCTIVE RELIEF, ATTACHMENT, GARNISHMENT OR THE APPOINTMENT OF A RECEIVER.
THIS EXCLUSION DOES NOT CONSTITUTE A WAIVER OF THE RIGHT OR OBLIGATION OF ANY
PARTY TO SUBMIT ANY DISPUTE TO ARBITRATION OR REFERENCE HEREUNDER, INCLUDING
THOSE ARISING FROM THE EXERCISE OF THE ACTIONS DETAILED IN SECTIONS (I), (II)
AND (III) OF THIS PARAGRAPH.

(f) ARBITRATOR QUALIFICATIONS AND POWERS. ANY ARBITRATION PROCEEDING IN WHICH
THE AMOUNT IN CONTROVERSY IS $5,000,000.00 OR LESS WILL BE DECIDED BY A SINGLE
ARBITRATOR SELECTED ACCORDING TO THE RULES, AND WHO SHALL NOT RENDER AN AWARD OF
GREATER THAN $5,000,000.00. ANY DISPUTE IN WHICH THE AMOUNT IN CONTROVERSY
EXCEEDS $5,000,000.00 SHALL BE DECIDED BY MAJORITY VOTE OF A PANEL OF THREE
ARBITRATORS; PROVIDED HOWEVER, THAT ALL THREE ARBITRATORS MUST ACTIVELY
PARTICIPATE IN ALL HEARINGS AND DELIBERATIONS, EXCEPT THAT A SINGLE ARBITRATOR
MAY DECIDE PRE-HEARING DISCOVERY DISPUTES. THE ARBITRATOR(S) WILL BE A NEUTRAL
ATTORNEY LICENSED IN THE STATE OF CALIFORNIA OR A NEUTRAL RETIRED JUDGE OF THE
STATE OR FEDERAL JUDICIARY OF CALIFORNIA, IN EITHER CASE WITH A MINIMUM OF TEN
YEARS EXPERIENCE IN THE SUBSTANTIVE LAW APPLICABLE TO THE SUBJECT MATTER OF THE
DISPUTE TO BE ARBITRATED. THE ARBITRATOR(S) WILL DETERMINE WHETHER OR NOT AN
ISSUE IS ARBITRATABLE AND WILL GIVE EFFECT TO THE STATUTES OF LIMITATION OR
REPOSE IN DETERMINING ANY CLAIM. IN ANY ARBITRATION PROCEEDING THE ARBITRATOR(S)
WILL DECIDE (BY DOCUMENTS ONLY OR WITH A HEARING AT THE ARBITRATOR’S DISCRETION)
ANY PRE-HEARING MOTIONS WHICH ARE SIMILAR TO MOTIONS TO DISMISS FOR FAILURE TO
STATE A CLAIM OR MOTIONS FOR SUMMARY ADJUDICATION. THE ARBITRATOR(S) SHALL
RESOLVE ALL DISPUTES IN ACCORDANCE WITH THE SUBSTANTIVE LAW OF CALIFORNIA AND
MAY GRANT ANY REMEDY OR RELIEF THAT A COURT OF SUCH STATE COULD ORDER OR GRANT
WITHIN THE SCOPE HEREOF AND SUCH ANCILLARY RELIEF AS IS NECESSARY TO MAKE
EFFECTIVE ANY AWARD. THE ARBITRATOR(S) SHALL ALSO HAVE THE POWER TO AWARD
RECOVERY OF ALL COSTS AND FEES, TO IMPOSE SANCTIONS AND TO TAKE SUCH OTHER
ACTION AS THE ARBITRATOR(S) DEEMS NECESSARY TO THE SAME EXTENT A JUDGE COULD
PURSUANT TO THE FEDERAL RULES OF CIVIL PROCEDURE, THE CALIFORNIA RULES OF CIVIL
PROCEDURE OR OTHER APPLICABLE LAW. JUDGMENT UPON THE AWARD RENDERED BY THE
ARBITRATOR(S) MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. THE INSTITUTION
AND MAINTENANCE OF AN ACTION FOR JUDICIAL RELIEF OR PURSUIT OF A PROVISIONAL OR
ANCILLARY REMEDY SHALL NOT CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE PLAINTIFF, TO SUBMIT THE CONTROVERSY OR CLAIM TO ARBITRATION IF
ANY OTHER PARTY CONTESTS SUCH ACTION FOR JUDICIAL RELIEF.

(g) DISCOVERY. IN ANY ARBITRATION PROCEEDING, DISCOVERY WILL BE PERMITTED IN
ACCORDANCE WITH THE RULES. ALL DISCOVERY SHALL BE EXPRESSLY LIMITED TO MATTERS
DIRECTLY RELEVANT TO THE DISPUTE BEING ARBITRATED AND MUST BE COMPLETED NO LATER
THAN 20

 

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DAYS BEFORE THE HEARING DATE. ANY REQUESTS FOR AN EXTENSION OF THE DISCOVERY
PERIODS, OR ANY DISCOVERY DISPUTES, WILL BE SUBJECT TO FINAL DETERMINATION BY
THE ARBITRATOR(S) UPON A SHOWING THAT THE REQUEST FOR DISCOVERY IS ESSENTIAL FOR
THE PARTY’S PRESENTATION AND THAT NO ALTERNATIVE MEANS FOR OBTAINING INFORMATION
IS AVAILABLE.

(h) CLASS PROCEEDINGS AND CONSOLIDATIONS. NO PARTY HERETO SHALL BE ENTITLED TO
JOIN OR CONSOLIDATE DISPUTES BY OR AGAINST OTHERS IN ANY ARBITRATION, EXCEPT
PARTIES WHO HAVE EXECUTED ANY LOAN DOCUMENT, OR TO INCLUDE IN ANY ARBITRATION
ANY DISPUTE AS A REPRESENTATIVE OR MEMBER OF A CLASS, OR TO ACT IN ANY
ARBITRATION IN THE INTEREST OF THE GENERAL PUBLIC OR IN A PRIVATE ATTORNEY
GENERAL CAPACITY.

(i) PAYMENT OF ARBITRATION COSTS AND FEES. THE ARBITRATOR(S) SHALL AWARD ALL
COSTS AND EXPENSES OF THE ARBITRATION PROCEEDING.

(j) REAL PROPERTY COLLATERAL; JUDICIAL REFERENCE. NOTWITHSTANDING ANYTHING
HEREIN TO THE CONTRARY, NO DISPUTE SHALL BE SUBMITTED TO ARBITRATION IF THE
DISPUTE CONCERNS INDEBTEDNESS SECURED DIRECTLY OR INDIRECTLY, IN WHOLE OR IN
PART, BY ANY REAL PROPERTY UNLESS (I) THE HOLDER OF THE MORTGAGE, LIEN OR
SECURITY INTEREST SPECIFICALLY ELECTS IN WRITING TO PROCEED WITH THE
ARBITRATION, OR (II) ALL PARTIES TO THE ARBITRATION WAIVE ANY RIGHTS OR BENEFITS
THAT MIGHT ACCRUE TO THEM BY VIRTUE OF THE SINGLE ACTION RULE STATUTE OF
CALIFORNIA, THEREBY AGREEING THAT ALL INDEBTEDNESS AND OBLIGATIONS OF THE
PARTIES, AND ALL MORTGAGES, LIENS AND SECURITY INTERESTS SECURING SUCH
INDEBTEDNESS AND OBLIGATIONS, SHALL REMAIN FULLY VALID AND ENFORCEABLE. IF ANY
SUCH DISPUTE IS NOT SUBMITTED TO ARBITRATION, THE DISPUTE SHALL BE REFERRED TO A
REFEREE IN ACCORDANCE WITH CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638 ET
SEQ., AND THIS GENERAL REFERENCE AGREEMENT IS INTENDED TO BE SPECIFICALLY
ENFORCEABLE IN ACCORDANCE WITH SAID SECTION 638. A REFEREE WITH THE
QUALIFICATIONS REQUIRED HEREIN FOR ARBITRATORS SHALL BE SELECTED PURSUANT TO THE
AAA’S SELECTION PROCEDURES. JUDGMENT UPON THE DECISION RENDERED BY A REFEREE
SHALL BE ENTERED IN THE COURT IN WHICH SUCH PROCEEDING WAS COMMENCED IN
ACCORDANCE WITH CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 644 AND 645.

(k) MISCELLANEOUS. TO THE MAXIMUM EXTENT PRACTICABLE, THE AAA, THE ARBITRATOR(S)
AND THE PARTIES SHALL TAKE ALL ACTION REQUIRED TO CONCLUDE ANY ARBITRATION
PROCEEDING WITHIN 180 DAYS OF THE FILING OF THE DISPUTE WITH THE AAA. NO
ARBITRATOR(S) OR OTHER PARTY TO AN ARBITRATION PROCEEDING MAY DISCLOSE THE
EXISTENCE, CONTENT OR RESULTS THEREOF, EXCEPT FOR DISCLOSURES OF INFORMATION BY
A PARTY REQUIRED IN CONNECTION WITH FINANCIAL REPORTING IN THE ORDINARY COURSE
OF ITS BUSINESS OR BY APPLICABLE LAW OR REGULATION. IF MORE THAN ONE AGREEMENT
FOR ARBITRATION BY OR BETWEEN THE PARTIES POTENTIALLY APPLIES TO A DISPUTE, THE
ARBITRATION PROVISION MOST DIRECTLY RELATED TO THE LOAN DOCUMENTS OR THE SUBJECT
MATTER OF THE DISPUTE SHALL CONTROL. THIS ARBITRATION PROVISION SHALL SURVIVE
TERMINATION, AMENDMENT OR EXPIRATION OF ANY OF THE LOAN DOCUMENTS OR ANY
RELATIONSHIP BETWEEN THE PARTIES.

(l) WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY ACKNOWLEDGE THAT BY AGREEING
TO BINDING ARBITRATION THEY HAVE IRREVOCABLY WAIVED THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF
ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT
DELIVERED IN CONNECTION HEREWITH, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR
THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. THIS PROVISION IS
A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.

(m) WAIVER OF SPECIAL AND OTHER DAMAGES. NO CLAIM MAY BE MADE BY ANY LOAN PARTY
AGAINST THE LENDER, OR ANY AFFILIATE OF LENDER OR ANY DIRECTOR, OFFICER,
EMPLOYEE, COUNSEL, REPRESENTATIVE, AGENT, OR ATTORNEY-IN-FACT OF ANY OF THEM FOR
ANY SPECIAL, INDIRECT, CONSEQUENTIAL, OR PUNITIVE DAMAGES IN RESPECT OF ANY
CLAIM FOR BREACH OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR
RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION THEREWITH, AND
EACH LOAN PARTY HEREBY WAIVES, RELEASES, AND AGREES NOT TO SUE UPON ANY CLAIM
FOR SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED
TO EXIST IN ITS FAVOR.

 

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14. ASSIGNMENTS; SUCCESSORS. This Agreement shall bind and inure to the benefit
of the respective successors and assigns of each of the parties; provided,
however, that no Borrower or any other Loan Party may assign this Agreement or
any rights or duties hereunder without Lender’s prior written consent and any
prohibited assignment shall be absolutely void ab initio. No consent to
assignment by the Lender shall release any Borrower or any other Loan Party from
its Obligations unless expressly agreed by Lender in Lender’s sole discretion.
Lender may assign this Agreement and the other Loan Documents in whole or in
part and its rights and duties hereunder or grant participations in the
Obligations hereunder and thereunder and no consent or approval by any Borrower
or any other Loan Party is required in connection with any such assignment or
participation; provided that if Lender assigns all of its rights and duties
hereunder to a Person that is not an Affiliate of Lender and if no Event of
Default is existing at the time of such assignment, Borrowers shall have the
right to terminate the Credit Facility and repay the Obligations in full without
having to pay the termination fee described on Schedule 2.12 if Borrowers
arrange for such termination and repayment of the Obligations in full (and
satisfy all other obligations under this Agreement in connection with such a
termination, including, but not limited to, providing Lender with Letter of
Credit Collateralization, if applicable) no later than 90 days after receipt by
Borrowers of notice of such assignment.

15. AMENDMENTS; WAIVERS. No amendment or modification of this Agreement or any
other Loan Document or any other document or agreement described in or related
to this Agreement shall be effective unless it has been agreed to by Lender in a
writing that specifically states that it is intended to amend or modify specific
Loan Documents, or any other document or agreement described in or related to
this Agreement. No failure by Lender to exercise any right, remedy, or option
under this Agreement or any other Loan Document, or delay by Lender in
exercising the same, will operate as a waiver thereof. No waiver by Lender will
be effective unless it is in writing, and then only to the extent specifically
stated. No waiver by Lender on any occasion shall affect or diminish Lender’s
rights thereafter to require strict performance by Borrowers or any other Loan
Party of any provision of this Agreement. Lender’s rights under this Agreement
and the other Loan Documents will be cumulative and not exclusive of any other
right or remedy that Lender may have.

16. TAXES.

(a) All payments made by any Borrower or any other Loan Party 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, unless
required by applicable law, and in the event any deduction or withholding of
Taxes is required, each Borrower shall comply with the next sentence of this
Section 16(a). If any Taxes are so levied or imposed, each Borrower and each
other Loan Party (without duplication) 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 16(a) after withholding or deduction for or
on account of any Taxes, will not be less than the amount provided for herein or
therein; provided, however, that Borrowers or Loan Parties shall not be required
to increase any such amounts if the increase in such amount payable results from
Lender’s willful misconduct or gross negligence (as finally determined by a
court of competent jurisdiction). Each Borrower and each other Loan Party will
furnish to Lender as promptly as possible after the date the payment of any Tax
is due pursuant to applicable law, certified copies of tax receipts evidencing
such payment by such Borrower, a copy of the return reporting such payment or
other evidence of such payment reasonably satisfactory to Lender.

(b) Each Borrower agrees to pay any present or future stamp, value added or
documentary taxes or any other excise or property taxes, charges, or similar
levies that arise from any payment made hereunder or from the execution,
delivery, performance, recordation, or filing of, or otherwise with respect to
this Agreement or any other Loan Document, other than any such taxes, charges or
levies that are imposed with respect to an assignment.

(c) Status of Lenders. (i) Any Lender that is entitled to an exemption from or
reduction of withholding Tax with respect to payments made under any Loan
Document shall deliver to the Borrowers, at the time or times reasonably
requested by the Borrowers, such properly completed and executed documentation
reasonably requested by the Borrowers as will permit such payments to be made
without withholding or at a reduced rate of withholding. In addition, any
Lender, if reasonably requested by the Borrowers, shall deliver such other
documentation prescribed by applicable law or reasonably requested by the
Borrowers as will enable the Borrowers to determine whether or not such Lender
is subject to backup withholding or information reporting requirements.
Notwithstanding anything to the contrary in the preceding two sentences, the
completion, execution and submission of such documentation (other than such
documentation set forth in Section 16(c)(ii)(A), (ii)(B) and (ii)(D) below)
shall not be required if in the Lender’s reasonable judgment such completion,
execution or submission would subject such Lender to any material unreimbursed
cost or expense or would materially prejudice the legal or commercial position
of such Lender.

(ii) Without limiting the generality of the foregoing,

(A) any Lender that is a United States person as defined in Section 7701(a)(30)
of the IRC (a “U.S. Person”) shall deliver to the Borrowers on or prior to the
date on which such Lender becomes a Lender under this Agreement (and from time
to time thereafter upon the reasonable request of the Borrowers), executed
originals of IRS Form W-9 certifying that such Lender is exempt from U.S.
federal backup withholding tax;

 

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(B) any Lender that is resident or organized under the laws of a jurisdiction
other than the United States, any state thereof or the District of Columbia (a
“Foreign Lender”) shall, to the extent it is legally entitled to do so, deliver
to the Borrowers (in such number of copies as shall be requested by the
recipient) on or prior to the date on which such Foreign Lender becomes a Lender
under this Agreement (and from time to time thereafter upon the reasonable
request of the Borrowers), whichever of the following is applicable:

(i) in the case of a Foreign Lender claiming the benefits of an income tax
treaty to which the United States is a party (x) with respect to payments of
interest under any Loan Document, executed originals of IRS Form W-8BEN
establishing an exemption from, or reduction of, U.S. federal withholding Tax
pursuant to the “interest” article of such tax treaty and (y) with respect to
any other applicable payments under any Loan Document, IRS Form W-8BEN
establishing an exemption from, or reduction of, U.S. federal withholding Tax
pursuant to the “business profits” or “other income” article of such tax treaty;

(ii) executed originals of IRS Form W-8ECI;

(iii) in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under Section 881(c) of the IRC, (x) a certificate in form
reasonably satisfactory to Borrowers to the effect that such Foreign Lender is
not a “bank” within the meaning of Section 881(c)(3)(A) of the IRC, a “10
percent shareholder” of the Borrowers within the meaning of Section 881(c)(3)(B)
of the IRC, or a “controlled foreign corporation” described in
Section 881(c)(3)(C) of the IRC (a “U.S. Tax Compliance Certificate”) and
(y) executed originals of IRS Form W-8BEN; or

(iv) to the extent a Foreign Lender is not the beneficial owner, executed
originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, a
certificate in form reasonably satisfactory to Borrowers, IRS Form W-9, and/or
other certification documents from each beneficial owner, as applicable;

(C) any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to the Borrowers (in such number of copies as shall be requested by the
recipient) on or prior to the date on which such Foreign Lender becomes a Lender
under this Agreement (and from time to time thereafter upon the reasonable
request of the Borrowers), executed originals of any other form prescribed by
applicable law as a basis for claiming exemption from or a reduction in U.S.
federal withholding Tax, duly completed, together with such supplementary
documentation as may be prescribed by applicable law to permit the Borrowers to
determine the withholding or deduction required to be made; and

(D) if a payment made to a Lender under any Loan Document would be subject to
U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to
comply with the applicable reporting requirements of FATCA (including those
contained in Section 1471(b) or 1472(b) of the IRC, as applicable), such Lender
shall deliver to the Borrowers at the time or times prescribed by law and at
such time or times reasonably requested by the Borrowers such documentation
prescribed by applicable law (including as prescribed by
Section 1471(b)(3)(C)(i) of the IRC) and such additional documentation
reasonably requested by the Borrowers as may be necessary for the Borrowers to
comply with their obligations under FATCA and to determine that such Lender has
complied with such Lender’s obligations under FATCA or to determine the amount
to deduct and withhold from such payment. Solely for purposes of this clause
(D), “FATCA” shall include any amendments made to FATCA after the date of this
Agreement.

Each Lender agrees that if any form or certification it previously delivered
expires or becomes obsolete or inaccurate in any respect, it shall update such
form or certification or promptly notify the Borrowers in writing of its legal
inability to do so.

17. GENERAL PROVISIONS.

17.1 Effectiveness. This Agreement shall be binding and deemed effective when
executed by each Borrower, each other Loan Party and Lender.

 

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17.2 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.

17.3 Interpretation. Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed against the Lender or any Loan Party, 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.

17.4 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.

17.5 Debtor-Creditor Relationship. The relationship between the Lender, on the
one hand, and the Loan Parties, on the other hand, is solely that of creditor
and debtor. Lender shall not have (and shall not be deemed to have) any
fiduciary relationship or duty to any Loan Party arising out of or in connection
with the Loan Documents or the transactions contemplated thereby, and there is
no agency or joint venture relationship between Lender, on the one hand, and the
Loan Parties, on the other hand, by virtue of any Loan Document or any
transaction contemplated therein.

17.6 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.

17.7 Revival and Reinstatement of Obligations. If the incurrence or payment of
the Obligations by any Borrower or any other Loan Party or the transfer to
Lender of any property should for any reason subsequently be asserted, or
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 Lender
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 Lender is required or
elects to repay or restore, and as to all reasonable costs, expenses, and
attorneys fees of Lender related thereto, the liability of such Borrower or such
other Loan Party automatically shall be revived, reinstated, and restored and
shall exist as though such Voidable Transfer had never been made and all of
Lender’s Liens in the Collateral shall be automatically reinstated without
further action.

17.8 Confidentiality.

(a) Lender agrees that material, non-public information regarding the Loan
Parties and their Subsidiaries, their operations, assets, and existing and
contemplated business plans (“Confidential Information”) shall be treated by
Lender in a confidential manner, and shall not be disclosed by Lender to Persons
who are not parties to this Agreement, except: (i) to attorneys for and other
advisors, accountants, auditors, and consultants to Lender and to employees,
directors and officers of Lender (the Persons in this clause (i), “Lender
Representatives”) on a “need to know” basis in connection with this Agreement
and the transactions contemplated hereby and on a confidential basis, (ii) to
Subsidiaries and Affiliates of Lender, provided that any such Subsidiary or
Affiliate shall have agreed to receive such information hereunder subject to the
terms of this Section 17.8, (iii) as may be required by regulatory authorities,
(iv) as may be required by statute, decision, or judicial or administrative
order, rule, or regulation; provided that (x) prior to any disclosure under this
clause (iv), the disclosing party agrees to provide Borrowers with prior notice
thereof, to the extent that it is practicable to do so and to the extent that
the disclosing party is permitted to provide such prior notice to Borrowers
pursuant to the terms of the applicable statute, decision, or judicial or
administrative order, rule, or regulation and (y) any disclosure under this
clause (iv) shall be limited to the portion of the Confidential Information as
may be required by such statute, decision, or judicial or administrative order,
rule, or regulation, (v) as may be agreed to in advance in writing by Borrowers,
(vi) as requested or required by any Governmental Authority pursuant to any
subpoena or other legal process, provided, that, (x) prior to any disclosure
under this clause (vi) the disclosing party agrees to provide Borrowers with
prior written notice thereof, to the extent that it is practicable to do so and
to the extent that the disclosing party is permitted to provide such prior
written notice to Borrowers pursuant to the terms of the subpoena or other legal
process and (y) any disclosure under this clause (vi) shall be limited to the
portion of the Confidential Information as may be required by such Governmental
Authority pursuant to such subpoena or other legal process, (vii) as to any such
information that is or becomes generally available to the public (other than as
a result of prohibited disclosure by Lender or Lender Representatives),
(viii) in connection with any assignment, participation or pledge of any
Lender’s interest under this Agreement, provided that prior to receipt of
Confidential Information any such assignee, participant, or pledgee shall have
agreed in writing to receive such Confidential Information hereunder subject to
the terms of this Section 17.8, (ix) in connection with

 

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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; and
(x) in connection with, and to the extent reasonably necessary for, the exercise
of any secured creditor remedy under this Agreement or under any other Loan
Document.

(b) Anything in this Agreement to the contrary notwithstanding, subject to
Borrowers’ prior written consent (not be unreasonably withheld or delayed)
Lender may use the name, logos, and other insignia of the Loan Parties and the
Maximum Revolver Amount provided hereunder in any “tombstone” or comparable
advertising, on its website or in other marketing materials of Lender.

17.9 Lender Expenses. Each Borrower and each other Loan Party agrees to pay the
Lender Expenses on the earlier of (a) the first day of the month following the
date on which such Lender Expenses were first incurred, or (b) the date on which
demand therefor is made by Lender and each Borrower and each other Loan Party
agrees that its obligations contained in this Section 17.9 shall survive payment
or satisfaction in full of all other Obligations.

17.10 Setoff. Lender may at any time, in its sole discretion and without demand
or notice to anyone, setoff any liability owed to any Borrower or any Guarantor
by Lender against any of the Obligations, whether or not due.

17.11 Survival. All representations and warranties made by the Loan Parties in
the Loan Documents and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of the Loan Documents and the making of any
loans and issuance of any Letters of Credit, regardless of any investigation
made by any such other party or on its behalf and notwithstanding that Lender
may have had notice or knowledge of any Default or Event of Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as any of the Obligations is
outstanding and unpaid or any Letter of Credit is outstanding and so long as the
obligation of Lender to provide extensions of credit hereunder has not expired
or been terminated.

17.12 Patriot Act. Lender hereby notifies the Loan Parties that pursuant to the
requirements of the Patriot Act, it is required to obtain, verify and record
information that identifies each Loan Party, which information includes the name
and address of each Loan Party and other information that will allow such Lender
to identify each Loan Party in accordance with the Patriot Act. In addition, if
Lender is required by law or regulation or internal policies to do so, it shall
have the right to periodically conduct (a) Patriot Act searches, OFAC/PEP
searches, and customary individual background checks for the Loan Parties, and
(b) OFAC/PEP searches and customary individual background checks of the Loan
Parties’ senior management and key principals (including, without limitation,
Persons holding, directly or indirectly, 20% or more of the Stock of any Loan
Party), and each Borrower and each other Loan Party agrees to cooperate in
respect of the conduct of such searches and further agrees that the reasonable
costs and charges for such searches shall constitute Lender Expenses hereunder
and be for the account of Borrowers.

17.13 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. The foregoing to
the contrary notwithstanding, all Bank Product Agreements, if any, are
independent agreements governed by the written provisions of such Bank Product
Agreements, which will remain in full force and effect, unaffected by any
repayment, prepayments, acceleration, reduction, increase, or change in the
terms of any credit extended hereunder, except as otherwise expressly provided
in such Bank Product Agreement.

17.14 Bank Product Providers. Each Bank Product Provider shall be deemed a third
party beneficiary hereof and of the provisions of the other Loan Documents for
purposes of any reference in a Loan Document to the parties for whom Lender is
acting. Lender hereby agrees to act as agent for such Bank Product Providers
and, by virtue of entering into a Bank Product Agreement, the applicable Bank
Product Provider shall be automatically deemed to have appointed Lender as its
agent and to have accepted the benefits of the Loan Documents; it being
understood and agreed that the rights and benefits of each Bank Product Provider
under the Loan Documents consist exclusively of such Bank Product Provider’s
being a beneficiary of the Liens and security interests (and, if applicable,
guarantees) granted to Lender and the right to share in and receive payments and
collections of the Collateral and payments from Lender from amounts charged to
the Loan Account or that are otherwise collected from the Loan Parties for the
account of a Bank Product Provider as more fully set forth herein and in the
other Loan Documents. In addition, each Bank Product Provider, by virtue of
entering into a Bank Product Agreement, shall be automatically deemed to have
agreed that Lender shall have the right, but shall have no obligation, to
establish, maintain, relax, or release Reserves in respect of the Bank Product
Obligations and that if Reserves are established there is no obligation on the
part of Lender to determine or ensure whether the amount of any such Reserve is
appropriate or not. Notwithstanding anything to the contrary in this Agreement
or any other Loan Document, no Bank Product Provider (other than Lender in its
capacity as lender hereunder) shall have any voting or approval rights hereunder
solely by virtue of its status as the provider or holder of such agreements or
products or the Obligations owing thereunder, nor shall the consent of any such
provider or holder be required for any matter hereunder or under any of the
other Loan Documents, including as to any matter relating to the Collateral or
the release of Collateral or any other Loan Party.

 

35

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17.15 Judgment Currency. If, for the purposes of obtaining judgment in any
court, it is necessary to convert a sum due hereunder or any other Loan Document
in one currency into another currency, the rate of exchange used shall be that
at which in accordance with normal banking procedures Lender could purchase the
first currency with such other currency on the Business Day preceding that on
which final judgment is given. The obligation of each Borrower in respect of any
such sum due from it to Lender hereunder or under the other Loan Documents
shall, notwithstanding any judgment in a currency (the “Judgment Currency”)
other than that in which such sum is denominated in accordance with the
applicable provisions of this Agreement (the “Agreement Currency”), be
discharged only to the extent that on the Business Day following receipt by
Lender of any sum adjudged to be so due in the Judgment Currency, Lender may in
accordance with normal banking procedures purchase the Agreement Currency with
the Judgment Currency. If the amount of the Agreement Currency so purchased is
less than the sum originally due to Lender from any Borrower in the Agreement
Currency, such Borrower agrees, as a separate obligation and notwithstanding any
such judgment, to indemnify Lender against such loss. If the amount of the
Agreement Currency so purchased is greater than the sum originally due to Lender
in such currency, Lender agrees to return the amount of any excess to such
Borrower (or to any other Person who may be entitled thereto under applicable
law).

[Signature pages to follow]

 

36

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

 

BORROWERS:    

NOVATEL WIRELESS, INC.,

a Delaware corporation

  By:  

/s/ Michael Newman

  Name:  

Michael Newman

  Title:  

Chief Financial Officer

  Federal Employer Identification No.: 86-0824673   Organizational
Identification No.: 2614230  

ENFORA, INC.,

a Delaware corporation

  By:  

/s/ Michael Newman

  Name:  

Michael Newman

  Title:  

Chief Financial Officer

  Federal Employer Identification No.: 20-5611675   Organizational
Identification No.: 2986258   [signatures continued on next page]

 

[Signature page 1]

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LENDER:     WELLS FARGO BANK, NATIONAL ASSOCIATION   By:  

/s/ James Campbell

  Name:  

James Campbell

  Title: Authorized Signatory

 

[Signature page 2]

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Schedule 1.1

a. Definitions. As used in this Agreement, the following terms shall have the
following definitions:

“Account” means an account (as that term is defined in Article 9 of the Code).

“Account Debtor” means an account debtor (as that term is defined in the Code).

“Acquired Indebtedness” means Indebtedness of a Person whose assets or Stock is
acquired by any Borrower or any of its Subsidiaries in a Permitted Acquisition;
provided, however, that such Indebtedness (a) is either Purchase Money
Indebtedness or a Capital Lease with respect to Equipment or mortgage financing
with respect to Real Property, (b) was in existence prior to the date of such
Permitted Acquisition, and (c) was not incurred in connection with, or in
contemplation of, such Permitted Acquisition.

“Acquisition” means (a) the purchase or other acquisition by a Person or its
Subsidiaries of all or substantially all of the assets of (or any division or
business line of) any other Person, or (b) the purchase or other acquisition
(whether by means of a merger, consolidation, or otherwise) by a Person or its
Subsidiaries of all or substantially all of the Stock of any other Person.

“Additional Documents” has the meaning specified therefor in Section 6.15.

“Administrative Borrower” shall mean Novatel Wireless, Inc. in its capacity as
Administrative Borrower on behalf of itself and the other Borrowers pursuant to
Section 2.17, hereof and its successors and assigns in such capacity.

“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 7.12: (a) any Person which owns directly or indirectly 10% or more of
the Stock having ordinary voting power for the election of the board of
directors or equivalent 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.

“Agreement” means the Credit and Security Agreement to which this Schedule 1.1
is attached.

“Agreement Currency” has the meaning specified thereof in Section 17.15.

“Applicable Margin” means, with respect to interest accruing on the outstanding
Advances and other Obligations, the following applicable rate per annum:

 

Level

   Liquidity    When Interest Rate is based
on Daily Three Month
LIBOR    When Interest Rate is based
on the Prime Rate I    Less than $15,000,000    3.0%    1.0% II   
Greater than or equal to
$15,000,000    2.50%    0.50%

The interest rate level shall be based on the Borrowers’ Liquidity as determined
on the last day of each calendar month, and such determination shall apply to
each day of the immediately following calendar month. Borrowers shall provide
such information to Lender regarding Borrowers’ Liquidity as Lender may request
from time to time in order for Lender to determine the applicable interest rate
level from time to time. In the event that the information regarding such
Liquidity contained in any certificate or information delivered pursuant to the
foregoing requirements is shown to be inaccurate, and such inaccuracy, if
corrected, would result in a higher Applicable Margin, then (A) Borrowers shall
promptly deliver to Lender a correct certificate or information

 

Schedule 1.1

Page 1

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setting forth the correct calculation of Borrowers’ Liquidity for each such
effected period, (B) the Applicable Margin shall be adjusted to reflect the
correct Liquidity, retroactive to the date that the Applicable Margin was
previously reduced, and (C) Borrowers shall promptly (and in no event later than
one Business Day after demand) deliver to Lender full payment in respect of the
accrued additional interest as a result of such increased Applicable Margin for
the applicable period.

“Authorized Person” means any one of the individuals identified on Schedule A-2,
as such schedule is updated from time to time by written notice from Borrowers
to Lender.

“Availability” means, as of any date of determination, the amount that Borrowers
are entitled to borrow as Advances under Section 2.1 (after giving effect to all
then outstanding Obligations).

“Bank Product” means any one or more of the following financial products or
accommodations extended to a Loan Party or any of its Subsidiaries by a Bank
Product Provider: (a) commercial credit cards, (b) commercial credit card
processing services, (c) debit cards, (d) stored value cards, (e) purchase cards
(including so-called “procurement cards” or “P-cards”), (f) Cash Management
Services, or (g) transactions under Hedge Agreements.

“Bank Product Agreements” means those agreements entered into from time to time
by a Loan Party or any of its Subsidiaries with a Bank Product Provider in
connection with the obtaining of any of the Bank Products, including all Cash
Management Documents.

“Bank Product Collateralization” means providing cash collateral (pursuant to
documentation reasonably satisfactory to Lender) to be held by Lender for the
benefit of the Bank Product Provider in an amount determined by Lender as
sufficient to satisfy the reasonably estimated credit exposure with respect to
the then existing Bank Product Obligations (other than Hedge Obligations).

“Bank Product Obligations” means (a) all obligations, indebtedness, liabilities,
reimbursement obligations, fees, or expenses owing by a Loan Party or any of its
Subsidiaries to Lender or another Bank Product Provider pursuant to or evidenced
by a Bank Product Agreement and irrespective of whether for the payment of
money, whether direct or indirect, absolute or contingent, liquidated or
unliquidated, determined or undetermined, voluntary or involuntary, due, not due
or to become due, incurred in the past or now existing or hereafter arising,
however arising and (b) all Hedge Obligations.

“Bank Product Provider” means Lender or any of its Affiliates that provide Bank
Products to a Loan Party or any of its Subsidiaries.

“Bank Product Reserve Amount” means, as of any date of determination, the Dollar
amount of reserves that Lender has determined it is necessary or appropriate to
establish (based upon Lender’s reasonable determination of the credit and
operating risk exposure to the Loan Parties or any of their Subsidiaries in
respect of Bank Product Obligations) 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.

“Benefit Plan” means a “defined benefit plan” (as defined in Section 3(35) of
ERISA) subject to Title IV of ERISA for which any Borrower or any of its
Subsidiaries or ERISA Affiliates has been an “employer” (as defined in
Section 3(5) of ERISA) within the past six years.

“Board of Directors” means the board of directors (or comparable managers) of a
Borrower or any other Loan Party or any committee thereof duly authorized to act
on behalf of the board of directors (or comparable managers).

“Books” means books and records (including a Borrower’s or any other Loan
Party’s Records indicating, summarizing, or evidencing such Borrower’s or such
other Loan Party’s assets (including the Collateral) or liabilities, such
Borrower’s or such other Loan Party’s Records relating to such Borrower’s or
such other Loan Party’s business operations or financial condition, or such
Borrower’s or such other Loan Party’s Goods or General Intangibles related to
such information).

“Borrowers” means (i) Novatel Wireless, Inc., a Delaware corporation,
(ii) Enfora, Inc., a Delaware corporation, and (iii) any other Person that joins
this Agreement as a Borrower (with the consent and agreement of Lender), jointly
and severally.

“Borrowing” means a borrowing consisting of Advances (i) requested by Borrowers,
(ii) made automatically pursuant to Section 2.3(c) without the request of
Borrowers, (iii) made by Lender pursuant to Section 2.6(c), or (iv) a Protective
Advance.

 

Schedule 1.1

Page 2

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“Borrowing Base” means, as of any date of determination, the result of:

(a) 85% of the amount of Eligible Accounts owned by the Borrowers, plus

(b) the lower of:

(i) $7,000,000; or

(ii) without duplication of clause (a) above, 85% of the amount of Eligible
Foreign Accounts, minus

(c) the aggregate amount of Reserves, if any, established by Lender.

“Borrowing Base Certificate” means a form of borrowing base certificate in form
and substance acceptable to Lender.

“Business Day” means any day that is not a Saturday, Sunday, or other day on
which banks are authorized or required to close pursuant to the rules and
regulations of the Federal Reserve System.

“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 or fully guaranteed by any state of the United States
or any political subdivision of any such state or any public instrumentality
thereof maturing within 1 year from the date of acquisition thereof and 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, time deposits, overnight bank
deposits 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 any state thereof or the District of Columbia or any United States
branch of a foreign bank having 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 full
amount maintained with any such other bank is insured by the Federal Deposit
Insurance Corporation, (f) repurchase obligations of any commercial bank
satisfying the requirements of clause (d) of this definition or recognized
securities dealer having combined capital and surplus of not less than
$250,000,000, having a term of not more than seven days, with respect to
securities satisfying the criteria in clauses (a) or (d) above, (g) debt
securities with maturities of six months or less from the date of acquisition
backed by standby letters of credit issued by any commercial bank satisfying the
criteria described in clause (d) above, and (h) Investments in money market
funds substantially all of whose assets are invested in the types of assets
described in clauses (a) through (g) above.

“Cash Management Documents” means the agreements governing each of the Cash
Management Services of Lender utilized by a Borrower or a Guarantor, which
agreements shall currently include the Master Agreement for Treasury Management
Services or other applicable treasury management services agreement, the
“Acceptance of Services”, the “Service Description” governing each such treasury
management service used by a Borrower or a Guarantor, and all replacement or
successor agreements which govern such Cash Management Services of Lender.

“Cash Management Services” means any cash management or related services
including treasury, depository, return items, overdraft, controlled
disbursement, merchant stored value cards, e-payables services, electronic funds
transfer, interstate depository network, automatic clearing house transfer
(including the Automated Clearing House processing of electronic funds transfers
through the direct Federal Reserve Fedline system) and other cash management
arrangements.

“Cash Management Transition Period” has the meaning specified in
Section 6.12(j)(i).

 

Schedule 1.1

Page 3

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“CFC” means a controlled foreign corporation (as that term is defined in the
IRC).

“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
50%, or more, of the Stock of a Borrower having the right to vote for the
election of members of the Board of Directors, or (b) Novatel Wireless, Inc.
fails to own and control, directly or indirectly, 100% of the Stock of each
other Loan Party.

“Chattel Paper” means chattel paper (as that term is defined in the Code), and
includes tangible chattel paper and electronic chattel paper.

“Closing Date” means the date of the making of the initial Advance (or other
extension of credit) under this Agreement.

“Code” means the California Uniform Commercial Code, as in effect from time to
time; provided, however, that in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection, priority, or
remedies with respect to Lender’s Lien on any Collateral is governed by the
Uniform Commercial Code as enacted and in effect in a jurisdiction other than
the State of California, the term “Code” shall mean the Uniform Commercial Code
as enacted and in effect in such other jurisdiction solely for purposes of the
provisions thereof relating to such attachment, perfection, priority, or
remedies. To the extent that defined terms set forth herein shall have different
meanings under different Articles under the Uniform Commercial Code, the meaning
assigned to such defined term under Article 9 of the Uniform Commercial Code
shall control.

“Collateral” means all of each Borrower’s and each other Loan Party’s now owned
or hereafter acquired:

(a) Accounts;

(b) Books;

(c) Chattel Paper;

(d) Deposit Accounts;

(e) Goods, including Equipment and Fixtures;

(f) General Intangibles, including, without limitation, Intellectual Property
and Intellectual Property Licenses;

(g) Inventory;

(h) Investment Related Property;

(i) Negotiable Collateral;

(j) Supporting Obligations;

(k) Commercial Tort Claims;

(l) money, Cash Equivalents, or other assets of such Loan Party that now or
hereafter come into the possession, custody, or control of Lender (or its agent
or designee); and

(m) all of the proceeds (as such term is defined in the Code) and products,
whether tangible or intangible, of any of the foregoing, including proceeds of
insurance or Commercial Tort Claims covering or relating to any or all of the
foregoing, and any and all Accounts, Books, Chattel Paper, Deposit Accounts,
Equipment, Fixtures, General Intangibles (including, without limitation,
Intellectual Property and Intellectual Property Licenses), Inventory, Investment
Related Property, Negotiable Collateral, Supporting Obligations, money, or other
tangible or intangible property resulting from the sale, lease, license,
exchange, collection, or other disposition of any of the foregoing, the proceeds
of any award in condemnation with respect to any of the foregoing, any rebates
or refunds, whether for taxes or otherwise, and all proceeds of any such
proceeds, or any portion thereof or interest therein, and the proceeds thereof,
and all proceeds of any loss of, damage to, or destruction of the above, whether
insured or not insured, and, to the extent not otherwise included, any
indemnity, warranty, or guaranty payable by

 

Schedule 1.1

Page 4

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reason of loss or damage to, or otherwise with respect to any of the foregoing
(collectively, the “Proceeds”). Without limiting the generality of the
foregoing, the term “Proceeds” includes whatever is receivable or received when
Investment Related Property or proceeds are sold, exchanged, collected, or
otherwise disposed of, whether such disposition is voluntary or involuntary, and
includes proceeds of any indemnity or guaranty payable to such Loan Party or
Lender from time to time with respect to any of the Investment Related Property.

All Real Property Collateral and other non-Code Collateral such as life
insurance policies shall be deemed to be included as part of the Collateral.

Notwithstanding anything contained in this Agreement to the contrary, the term
“Collateral” shall not include: (i) voting Stock of any CFC, solely to the
extent that such Stock represents more than 65% of the outstanding voting Stock
of such CFC; or (ii) any rights or interest in any contract, lease, permit,
license, or license agreement covering real or personal property of any Borrower
if under the terms of such contract, lease, permit, license, or license
agreement, or applicable law with respect thereto, the grant of a security
interest or lien therein is prohibited as a matter of law or under the terms of
such contract, lease, permit, license, or license agreement and such prohibition
or restriction has not been waived or the consent of the other party to such
contract, lease, permit, license, or license agreement has not been obtained
(provided, that, (A) the foregoing exclusions of this clause (ii) shall in no
way be construed (1) to apply to the extent that any described prohibition or
restriction is unenforceable under Section 9-406, 9-407, 9-408, or 9-409 of the
Code or other applicable law, or (2) to apply to the extent that any consent or
waiver has been obtained that would permit Lender’s security interest or lien
notwithstanding the prohibition or restriction on the pledge of such contract,
lease, permit, license, or license agreement and (B) the foregoing exclusions of
clauses (i) and (ii) shall in no way be construed to limit, impair, or otherwise
affect any of Lender’s continuing security interests in and liens upon any
rights or interests of any Borrower in or to (1) monies due or to become due
under or in connection with any described contract, lease, permit, license,
license agreement, or Stock (including any Accounts or Stock), or (2) any
proceeds from the sale, license, lease, or other dispositions of any such
contract, lease, permit, license, license agreement, or Stock); (iii) any United
States intent-to-use trademark applications to the extent that, and solely
during the period in which, the grant of a security interest therein would
impair the validity or enforceability of such intent-to-use trademark
applications under applicable federal law, provided that upon submission and
acceptance by the PTO of an amendment to allege use pursuant to 15 U.S.C.
Section 1060(a) (or any successor provision), such intent-to-use trademark
application shall be considered Collateral; or (iv) the Patents and related
rights that have been (or will be) sold to SIS under the SIS Agreement. For sake
of clarity, any Patents and related rights that SIS decides not to purchase
under the SIS Agreement shall then constitute Collateral at the time that SIS
declines to so purchase any such asset.

“Collateral Access Agreement” means a landlord waiver, bailee letter, or
acknowledgement agreement of any lessor in possession of, having a Lien upon, or
having rights or interests in the Books, Equipment, Accounts or Inventory of any
Loan Party or any of its Subsidiaries, in each case, in favor of Lender with
respect to the Collateral at the location where each Borrower maintains its
chief executive office and in form and substance reasonably satisfactory to
Lender.

“Collection Account” means the Deposit Account identified on Schedule A-1.

“Collections” means all cash, checks, notes, instruments, and other items of
payment (including insurance Proceeds, cash Proceeds of asset sales, rental
Proceeds, and tax refunds).

“Commercial Tort Claims” means commercial tort claims (as that term is defined
in the Code), and includes those commercial tort claims listed on Schedule
5.6(d) to the Information Certificate.

“Compliance Certificate” means a certificate substantially in the form of
Exhibit A delivered by the chief financial officer of Administrative Borrower to
Lender.

“Confidential Information” has the meaning specified therefor in Section 17.8.

“Control Agreement” means a control agreement, in form and substance reasonably
satisfactory to Lender, executed and delivered by a Loan Party, Lender, and the
applicable securities intermediary (with respect to a Securities Account) or
bank (with respect to a Deposit Account) or issuer (with respect to
uncertificated securities).

“Copyrights” means any and all rights in any works of authorship, including
(i) copyrights and moral rights, (ii) copyright registrations and recordings
thereof and all applications in connection therewith including those listed on
Schedule 5.26(b) to the Information Certificate, (iii) income, license fees,
royalties, damages, and payments now and hereafter due or payable under and with
respect thereto, including payments under all licenses entered into in
connection therewith and damages and payments for past, present, or future
infringements thereof, (iv) the right to sue for past, present, and future
infringements thereof, and (v) all of each Borrower’s and each other Loan
Party’s rights corresponding thereto throughout the world.

 

Schedule 1.1

Page 5

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“Copyright Security Agreement” means each Copyright Security Agreement executed
and delivered by a Borrower or another Loan Party and Lender, in form and
substance acceptable to Lender.

“Credit Facility” means the Revolving Credit Facility.

“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.

“Daily Three Month LIBOR” means, for any day the rate per annum for United
States dollar deposits determined by Lender for the purpose of calculating the
effective Interest Rate for loans that reference Daily Three Month LIBOR as the
Inter-Bank Market Offered Rate in effect from time to time for the 3 month
delivery of funds in amounts approximately equal to the principal amount of such
loans. Borrowers understand and agree that Lender may base its determination of
the Inter-Bank Market Offered Rate upon such offers or other market indicators
of the Inter-Bank Market as Lender in its discretion deems appropriate,
including but not limited to the rate offered for U.S. dollar deposits on the
London Inter-Bank Market. When interest is determined in relation to Daily Three
Month LIBOR, each change in the interest rate shall become effective each
Business Day that Lender determines that Daily Three Month LIBOR has changed.

“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.

“Deposit Account” means any deposit account (as that term is defined in the
Code).

“Designated Account” means the operating Deposit Account of the Administrative
Borrower maintained with Lender identified on Schedule D-1.

“Dilution” means, as of any date of determination, for any period selected by
Lender from time to time, a percentage that is the result of dividing the Dollar
amount of (a) bad debt write-downs, discounts, advertising allowances, credits,
deductions, or other dilutive items as determined by Lender with respect to
Borrowers’ Accounts, by (b) Borrowers’ billings with respect to Accounts.

“Dilution Reserve” means, as of any date of determination, the difference
between (i) the dollar amount of Eligible Accounts calculated at the stated
advance rate against Eligible Accounts set forth in the definition of Borrowing
Base and (ii) the dollar amount of Eligible Accounts calculated by reducing the
stated advance rate against Eligible Accounts set forth in the definition of
Borrowing Base by 1 percentage point for each percentage point by which Dilution
is in excess of 5%.

“Dollar Equivalent” of any amount means, at the time of determination thereof,
(a) if such amount is expressed in Dollars, such amount and (b) if such amount
is denominated in any other currency, the equivalent of such amount in Dollars
as determined by the Lender using any method of determination it reasonably
deems appropriate.

“Dollars” or “$” means United States dollars.

“Drawing Document” means any Letter of Credit or other document presented for
purposes of drawing under any Letter of Credit.

“EBITDA” means, with respect to any relevant measurement period, the sum of:

(a) Borrowers’ and their Subsidiaries’ consolidated net earnings (or loss),

minus

(b) Without duplication, the sum of the following amounts for such period to the
extent included in determining consolidated net earnings (or loss) for such
period:

(i) any extraordinary, unusual, or non-recurring gains,

(ii) interest income,

(iii) any software development costs to the extent capitalized during such
period;

 

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(iv) exchange, translation, or performance gains relating to any hedging
transactions or foreign currency fluctuations,

(v) any gain from the revaluation of warrants, including the warrant issued by
Novatel Wireless, Inc. to HC2 Holdings Inc.; and

(vi) income arising by reason of the application of FAS 141R,

plus

(c) Without duplication, the sum of the following amounts for such period to the
extent included in determining consolidated net earnings (or loss) for such
period:

(i) any extraordinary, unusual, or non-recurring non-cash losses,

(ii) interest expense,

(iii) tax expense based on income, profits or capital, including federal,
foreign, state, franchise and similar taxes (and for the avoidance of doubt,
specifically excluding any sales taxes or any other taxes held in trust for a
Governmental Authority),

(iv) depreciation and amortization for such period,

(v) with respect to any Permitted Acquisitions after the Closing Date:
(1) purchase accounting adjustments, including, without limitation, a dollar for
dollar adjustment for that portion of revenue that would have been recorded in
the relevant period had the balance of deferred revenue (unearned income)
recorded on the closing balance sheet and before application of purchase
accounting not been adjusted downward to fair value to be recorded on the
opening balance sheet in accordance with GAAP purchase accounting rules; and
(2) non-cash adjustments in accordance with GAAP purchase accounting rules under
FASB Statement No. 141 and EITF Issue No. 01-3, in the event that such an
adjustment is required by Borrowers’ independent auditors, in each case, as
determined in accordance with GAAP,

(vi) transactions costs incurred in connection with a Permitted Acquisition, but
not to exceed $1,000,000 in the aggregate during any such period,

(vii) non-cash fees, costs, charges and expenses in respect of Earn-Outs
incurred in connection with any Permitted Acquisition to the extent permitted to
be incurred under this Agreement that are required by the application of FAS
141R to be and are expensed by Borrowers and their Subsidiaries,

(viii) any loss from the revaluing of warrants, including the Warrant issued to
HC2 Holdings Inc.,

(ix) non-cash compensation expense (including deferred non-cash compensation
expense), or other non-cash expenses or charges, arising from the sale or
issuance of Stock, the granting of stock options, and the granting of stock
appreciation rights and similar arrangements (including any repricing,
amendment, modification, substitution, or change of any such Stock, stock
option, stock appreciation rights, or similar arrangements) minus the amount of
any such expenses or charges when paid in cash to the extent not deducted in the
computation of net earnings (or loss),

(x) non-cash restructuring charges and other restructuring charges incurred
prior to the Closing Date,

(xi) non-cash exchange, translation, or performance losses relating to any
hedging transactions or foreign currency fluctuations,

 

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(xii) non-cash losses on sales of fixed assets or write-downs of fixed or
intangible assets (including, but not limited to, the write-down of intangible
assets relating to any settlement agreement of any litigation),

(xiii) fees, costs, and expenses actually incurred in connection with the
entering into the Loan Documents prior to 90 days after the Closing Date,

(xiv) expenses arising from losses incurred from patent suits or litigation
incurred during such period in an amount not to exceed $1,000,000 in any 12
consecutive month period, and

(xv) costs and expenses actually incurred in respect of: (a) severance, in
connection with the dismissal of employees, (b) closing of facilities, and
(c) other related expenses, in each case resulting from the restructuring and
integration of business operations in an aggregate amount, for all of clauses
(a), (b), and (c), not to exceed (1) $500,000 during the term of this Agreement
(for costs and expenses other than those arising from the severance of Peter V.
Leparulo), and (2) $2,000,000 for costs and expenses arising from the severance
of Peter V. Leparulo;

in each case, determined on a consolidated basis in accordance with GAAP.

For the purposes of calculating EBITDA for any relevant measurement period
(each, a “Reference Period”), if at any time during such Reference Period (and
after the Closing Date), Borrowers or any of their Subsidiaries shall have made
a Permitted Acquisition, EBITDA for such Reference Period shall be calculated
after giving pro forma effect thereto (without duplication and including pro
forma adjustments arising out of events which are directly attributable to such
Permitted Acquisition, are factually supportable, and are expected to have a
continuing impact, in each case to be mutually and reasonably agreed upon by
Borrowers and Lender) or in such other manner reasonably acceptable to Lender as
if any such Permitted Acquisition or adjustment occurred on the first day of
such Reference Period.

“Eligible Accounts” means those Accounts created by each Borrower in the
ordinary course of its business, that arise out of such Loan Party’s 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 Lender in Lender’s Permitted Discretion. In determining the amount to
be included, Eligible Accounts shall be calculated net of customer deposits,
credits and unapplied cash. Eligible Accounts shall not include the following:

(a) Accounts that the Account Debtor has failed to pay within 60 days of
original due date, not to exceed 90 days from original invoice date;

(b) Accounts with payment terms of more than 30 days;

(c) Accounts owed by an Account Debtor (or its Affiliates) where 25% or more of
all Accounts owed by that Account Debtor (or its Affiliates) are deemed
ineligible under clauses (a) or (b) above or clauses (i) or (s) below;

(d) Accounts with respect to which the Account Debtor is an Affiliate, agent or
equity owner of such Borrower or an employee or agent of such Borrower or any
Affiliate of such Borrower;

(e) 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, or
any other terms by reason of which the payment by the Account Debtor may be
conditional or contingent;

(f) Accounts that are not payable in Dollars, or Accounts not invoiced from the
United States;

(g) Accounts with respect to which the Account Debtor (x) does not maintain its
chief executive office in the United States, Canada (excluding the Province of
Quebec, unless other approved by Lender in Lender’s sole discretion), or the
United Kingdom, or (y) is not organized under the laws of the United States or
any state thereof, Canada (excluding the Province of Quebec, unless other
approved by Lender in Lender’s sole discretion), or the United Kingdom, or
(z) 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;

(h) 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 such Borrower has
complied, to the reasonable satisfaction of Lender, with the Assignment of
Claims Act, 31 USC §3727), or (ii) any state of the United States;

 

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(i) Accounts with respect to which the Account Debtor is a creditor of such
Borrower, has or has asserted a right of setoff, or has disputed its obligation
to pay all or any portion of the Account, but only to the extent of such claim,
right of setoff, or dispute;

(j) That portion of Accounts which reflect a reasonable reserve for warranty
claims or returns or amounts which are owed to account debtors, including those
for rebates, allowances, co-op advertising, new store allowances or other
deductions;

(k) Accounts owing by a single Account Debtor or group of Affiliated Account
Debtors (other than Verizon Wireless and its Affiliates (collectively,
“Verizon”)) whose total obligations owing to Borrower exceed fifteen percent
(15%) of the aggregate amount of all otherwise Eligible Accounts and such
Accounts owing by Verizon which exceed fifty percent (50%) percent of the
aggregate amount of all otherwise Eligible Accounts (but the portion of the
Accounts not in excess of the foregoing applicable percentages may be deemed
Eligible Accounts), such percentages being subject to reduction if the
creditworthiness of such Account Debtor deteriorates;

(l) 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
such Borrower has received notice of an imminent Insolvency Proceeding or a
material impairment of the financial condition of such Account Debtor;

(m) Accounts, the collection of which, Lender, in its Permitted Discretion,
believes to be doubtful by reason of the Account Debtor’s financial condition;

(n) Accounts representing credit card sales, “C.O.D.” sales, or royalties;

(o) Accounts that are not subject to a valid and perfected first priority Lien
in favor of Lender or that are subject to any other Lien, unless such other Lien
is a Permitted Lien and the holder of such Permitted Lien has entered into an
intercreditor agreement with Lender reasonably acceptable to Lender;

(p) Accounts that consist of progress billings (such that the obligation of the
Account Debtors with respect to such Accounts is conditioned upon such
Borrower’s satisfactory completion of any further performance under the
agreement giving rise thereto) or retainage invoices;

(q) Accounts with respect to which the Account Debtor is a Sanctioned Person or
Sanctioned Entity;

(r) that portion of Accounts which represent finance charges, service charges,
sales taxes or excise taxes;

(s) that portion of Accounts which has been restructured, extended, amended or
otherwise modified;

(t) bill and hold invoices, except those with respect to which Lender shall have
received an agreement in writing from the Account Debtor, in form and substance
satisfactory to Lender, confirming the unconditional obligation of the Account
Debtor to take the Goods related thereto and pay such invoice, so long as such
Accounts satisfy all other criteria for Eligible Accounts hereunder;

(u) Accounts which have not been invoiced, or Accounts arising from Goods sold
but not delivered to and accepted by the Account Party;

(v) Accounts for which the assignment thereof are restricted or prohibited by
the terms of such Account or by law except to the extent such restriction or
prohibition does not prevent the collection thereof by any Borrower or affect or
impair the validity or perfection of the Lender’s Liens therein;

(w) Accounts acquired in connection with a Permitted Acquisition, until the
completion of an examination of such Accounts, in each case, reasonably
satisfactory to Lender (which examination may be conducted prior to the closing
of such Permitted Acquisition);

(x) Accounts not supported by purchase orders; and

(y) Accounts or that portion of Accounts otherwise deemed ineligible by Lender
in its Permitted Discretion.

 

Schedule 1.1

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Any Accounts which are not Eligible Accounts shall nonetheless constitute
Collateral.

“Eligible Foreign Account Debtor” means each Foreign Account Debtor which is
located in, and organized under the laws of, any jurisdiction set forth in
Schedule R and which Foreign Account Debtor has been approved by the Lender, in
its sole discretion, as an “Eligible Foreign Account Debtor”. Notwithstanding
the foregoing, the Lender may at any time (and from time to time), in its sole
discretion, rescind a Foreign Account Debtor’s status as an “Eligible Foreign
Account Debtor” upon notice to the Administrative Borrower, whereupon such
Account Debtor shall cease to be an “Eligible Foreign Account Debtor” hereunder
and all Accounts due from such Account Debtor shall cease to constitute Eligible
Foreign Accounts (if any) for purposes hereof, in each case effective on the
date that is ten days after notification from Lender to Borrowers of the
rescission of such status as an Eligible Foreign Account Debtor; provided
further that during such ten day period, (i) Lender shall not be required to
make any additional Advances or issue any additional Letters of Credit if such
an Advance or Letter of Credit would result in an Overadvance Amount (calculated
as though the Foreign Account Debtor’s status as an Eligible Foreign Account
Debtor had already become effective), and (ii) the amount of Advances and Letter
of Credit Usage, on an aggregate basis, shall not exceed the aggregate amount of
Advances and Letter of Credit Usage that existed immediately prior to such
rescission (unless otherwise permitted by Lender in Lender’s sole discretion).

“Eligible Foreign Accounts” means (without duplication of any Eligible Account)
Eligible Accounts of Borrowers due from Eligible Foreign Account Debtors, which
Accounts (a) are invoiced and collected in the United States (by the Borrowers),
(b) qualify as Eligible Accounts (except solely as a result of the application
of the exclusionary criteria contained in clause (g) of the definition of
Eligible Accounts), and (c) satisfy one or more of the following criteria:
(i) the Account is supported by an irrevocable letter of credit reasonably
satisfactory to Lender (as to form, substance, and issuer or domestic confirming
bank) that has been delivered to Lender and is directly drawable by Lender,
(ii) the Account Debtor has a credit rating from S&P of not less than “BBB-”,
(iii) the Account Debtor is a wholly-owned subsidiary of Person (other than a
natural person) organized under and domiciled in the United States that Lender
has deemed to be credit-worthy, or (iv) the Account Debtor is an Eligible
Foreign Account Debtor that Lender has deemed to be credit-worthy;

“Environmental Action” means any written complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgment, letter, or other written communication from any
Governmental Authority, or any third party involving violations of Environmental
Laws or releases of Hazardous Materials (a) from any assets, properties, or
businesses of any Loan Party, any Subsidiary of a Loan Party, 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
any Loan Party, any Subsidiary of a Loan Party, 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 any
Loan Party or any of its Subsidiaries, 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, 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 any Loan Party or
its Subsidiaries 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
employees of any Loan Party or its Subsidiaries 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 any Loan Party or any of its Subsidiaries

 

Schedule 1.1

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is a member under IRC Section 414(m), or (d) solely for purposes of Section 302
of ERISA and Section 412 and 430 of the IRC, any Person subject to ERISA that is
a party to an arrangement with any Loan Party or any of its Subsidiaries and
whose employees are aggregated with the employees of a Loan Party or its
Subsidiaries under IRC Section 414(o).

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan;
(b) the withdrawal of any Loan Party or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which such entity was a
“substantial employer” as defined in Section 4001(a)(2) of ERISA or a cessation
of operations that is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by any Loan Party or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Pension Plan amendment as a termination under Section 4041 or
4041A of ERISA; (e) the institution by the PBGC of proceedings to terminate a
Pension Plan; (f) any event or condition which constitutes grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan; (g) the determination that any Pension Plan is
considered an at-risk plan or a plan in endangered or critical status within the
meaning of Sections 430, 431 and 432 of the IRC or Sections 303, 304 and 305 of
ERISA; or (h) the imposition of any liability under Title IV of ERISA, other
than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon
any Loan Party or any ERISA Affiliate.

“Event of Default” has the meaning specified therefor in Section 9.

“Excess Availability” means, as of any date of determination, the amount equal
to Availability minus the aggregate amount, if any, of all trade payables and
other obligations each Borrower and its Subsidiaries aged in excess of 60 days
beyond their terms as of the end of the immediately preceding month, and all
book overdrafts and fees of each Borrower and its Subsidiaries, in each case as
determined by Lender in its Permitted Discretion.

“Exchange Act” means the Securities Exchange Act of 1934, as in effect from time
to time.

“Existing Creditor” means Robbins Geller Rudman & Dowd LLP.

“Excluded Taxes” has the meaning specified therefor in the definition of
“Taxes”.

“FATCA” means Sections 1471 through 1474 of the IRC, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with), any current or future
regulations or official interpretations thereof, any agreements entered into
pursuant to Section 1471(b)(1) of the IRC and any intergovernmental agreements
entered into in connection with the foregoing (together with any law
implementing such agreements).

“Fixtures” means fixtures (as that term is defined in the Code).

“Foreign Account Debtor” means an Account Debtor which (x) does not maintain its
chief executive office in the United States, or (y) is not organized under the
laws of the United States or any state, province or territory thereof.

“Foreign Lender” has the meaning specified therefor in Section 16.

“Funding Date” means the date on which a Borrowing occurs.

“GAAP” means generally accepted accounting principles as in effect from time to
time in the United States, consistently applied; provided, however, that all
calculations relative to liabilities shall be made without giving effect to
Statement of Financial Accounting Standards No. 159.

“General Intangibles” means general intangibles (as that term is defined in the
Code), and includes payment intangibles, contract rights, rights to payment,
rights under Hedge Agreements (including the right to receive payment on account
of the termination (voluntarily or involuntarily) of any such Hedge Agreements),
rights arising under common law, statutes, or regulations, choses or things in
action, goodwill, Intellectual Property, Intellectual Property Licenses,
purchase orders, customer lists, monies due or recoverable from pension funds,
route lists, rights to payment and other rights under any royalty or licensing
agreements, including Intellectual Property Licenses, infringement claims,
pension plan refunds, pension plan refund claims, insurance premium rebates, tax
refunds, and tax refund claims, interests in a partnership or limited liability
company which do not constitute a security under Article 8 of the Code, and any
other personal property other than Commercial Tort Claims, money, Accounts,
Chattel Paper, Deposit Accounts, Goods, Investment Related Property, Negotiable
Collateral, and oil, gas, or other minerals before extraction.

 

Schedule 1.1

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“Goods” means goods (as that term is defined in the Code).

“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 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 the Persons that become guarantors after the Closing Date
pursuant to Section 6, and each of them is a “Guarantor”.

“Guaranty” means any guaranty agreement delivered at any time by a Guarantor in
favor of Lender, and all of such guaranties are, collectively, the “Guaranties”.

“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.

“Hedge Agreement” means a “swap agreement” as that term is defined in
Section 101(53B) (A) of the Bankruptcy Code.

“Hedge Obligations” means any and all obligations or liabilities, whether direct
or indirect, absolute or contingent, liquidated or unliquidated, determined or
undetermined, voluntary or involuntary, due, not due or to become due, incurred
in the past or now existing or hereafter arising, however arising of any Loan
Party or any of its Subsidiaries arising under, owing pursuant to, or existing
in respect of Hedge Agreements entered into with Lender or another Bank Product
Provider.

“Indebtedness” as to any Person means, without duplication, (a) all obligations
of such Person for borrowed money, (b) all obligations of such Person evidenced
by bonds, debentures, notes, or other similar instruments and all reimbursement
or other obligations in respect of letters of credit, bankers acceptances, or
other financial products, (c) all obligations of such Person as a lessee under
Capital Leases, (d) all obligations or liabilities of others secured by a Lien
on any asset of such Person, irrespective of whether such obligation or
liability is assumed, (e) all obligations of such Person 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 of such Person owing under Hedge Agreements (which amount
shall be calculated based on the amount that would be payable by such Person if
the Hedge Agreement were terminated on the date of determination), (g) any
Prohibited Preferred Stock of such Person, and (h) any obligation of such Person
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 (g) above. For purposes of this definition, (i) the amount of any
Indebtedness represented by a guaranty or other similar instrument shall be the
lesser of the principal amount of the obligations guaranteed and still
outstanding and the maximum amount for which the guaranteeing Person may be
liable pursuant to the terms of the instrument embodying such Indebtedness, and
(ii) the amount of any Indebtedness described in clause (d) above shall be the
lower of the amount of the obligation and the fair market value of the assets of
such Person securing such obligation.

“Indemnified Liabilities” has the meaning specified therefor in Section 11.3.

“Indemnified Person” has the meaning specified therefor in Section 11.3.

“Information Certificate” means the Information Certificate completed and
executed by the Loan Parties attached hereto as Exhibit E.

“Insolvency Proceeding” means any proceeding commenced by or against any Person
under any provision of the Bankruptcy Code or under any other state, federal, or
foreign bankruptcy or insolvency law, assignments for the benefit of creditors,
receiverships, formal or informal moratoria, compositions, extensions generally
with creditors, or proceedings seeking reorganization, arrangement, or other
similar relief.

 

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“Intellectual Property” means any and all Patents, Copyrights, Trademarks, trade
secrets, know-how, inventions (whether or not patentable), algorithms, software
programs (including source code and object code), processes, product designs,
industrial designs, blueprints, drawings, data, customer lists, URLs and domain
names, specifications, documentations, reports, catalogs, literature, and any
other forms of technology or proprietary information of any kind, including all
rights therein and all applications for registration or registrations thereof.

“Intellectual Property Licenses” means, with respect to any Person (the
“Specified Party”), (i) any licenses or other similar rights provided to the
Specified Party in or with respect to Intellectual Property owned or controlled
by any other Person, and (ii) any licenses or other similar rights provided to
any other Person in or with respect to Intellectual Property owned or controlled
by the Specified Party, in each case, including (A) any software license
agreements (other than license agreements for commercially available
off-the-shelf software that is generally available to the public which have been
licensed to the Specified Party pursuant to end-user licenses), (B) the license
agreements listed on Schedule 5.26(b) to the Information Certificate, and
(C) the right to use any of the licenses or other similar rights described in
this definition in connection with the enforcement of the Lender’s rights under
the Loan Documents.

“Intercompany Subordination Agreement” means an intercompany subordination
agreement, executed and delivered by a Borrower, each of its Subsidiaries, each
of the other Loan Parties, and Lender, the form and substance of which is
reasonably satisfactory to Lender.

“Interest Expense” means, for any period, the aggregate of the interest expense
of Novatel Wireless, Inc. and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.

“Interest Rate” means an interest rate equal to Daily Three Month LIBOR, which
interest rate shall change whenever Daily Three Month LIBOR changes.

“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, capital contributions (excluding (a) commission, travel, and similar
advances to officers and employees of such Person made in the ordinary course of
business not to exceed $500,000 in the aggregate during any fiscal year of
Borrowers, and (b) bona fide Accounts arising in the ordinary course of
business), or 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.

“Investment Related Property” means (i) any and all investment property (as that
term is defined in the Code), and (ii) any and all of the following (regardless
of whether classified as investment property under the Code): all Pledged
Interests, Pledged Operating Agreements, and Pledged Partnership Agreements.

“IRC” means the Internal Revenue Code of 1986, as in effect from time to time.

“ISP” means, with respect to any Letter of Credit, the International Standby
Practices 1998 (International Chamber of Commerce Publication No. 590) and any
subsequent revision thereof adopted by the International Chamber of Commerce on
the date such Letter of Credit is issued.

“Judgment Currency” has the meaning specified thereof in Section 17.15.

“Lender” has the meaning specified therefor in the preamble to this Agreement
and its successors and assigns.

“Lender Expenses” means all (a) reasonable costs or expenses (including taxes
and insurance premiums) required to be paid by any Loan Party under any of the
Loan Documents that are paid, advanced, or incurred by Lender, (b) reasonable
out-of-pocket fees or charges paid or incurred by Lender in connection with
Lender’s transactions with any Loan Party or any of its Subsidiaries under any
of the Loan Documents, including, fees or charges for photocopying,
notarization, couriers and messengers, telecommunication, public record searches
(including tax lien, judgment lien, litigation, bankruptcy and Code searches and
including searches with the patent and trademark office, the copyright office,
or the department of motor vehicles), filing, recording, publication, appraisal
(including periodic collateral appraisals or business valuations to the extent
of the fees and charges (and up to the amount of any limitation contained in
this Agreement), real estate surveys, real estate title insurance policies and
endorsements, and environmental audits, (c) Lender’s customary fees and charges
(as adjusted from time to time) with respect to the disbursement of funds (or
the receipt of funds) to or for the account of Borrowers (whether by wire

 

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transfer or otherwise), together with any out of pocket costs and expenses
incurred in connection therewith, (d) out-of-pocket charges paid or incurred by
Lender resulting from the dishonor of checks payable by or to any Loan Party,
(e) reasonable out-of-pocket costs and expenses paid or incurred by Lender to
correct any default or enforce any provision of the Loan Documents, or during
the continuance of an 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) fees and expenses to initiate electronic
reporting by Borrowers to Lender, (g) reasonable out-of-pocket examination fees
and expenses (including reasonable travel, meals, and lodging) of Lender related
to any inspections, audits, examinations, or appraisals to the extent of the
fees and charges (and up to the amount of any limitation) contained in this
Agreement, (h) reasonable out-of-pocket costs and expenses of third party claims
or any other suit paid or incurred by Lender in enforcing or defending the Loan
Documents or in connection with the transactions contemplated by the Loan
Documents or Lender’s relationship with any Loan Party, (i) Lender’s reasonable
costs and expenses (including reasonable attorneys fees) incurred in advising,
structuring, drafting, reviewing, administering (including reasonable travel,
meals, and lodging), or amending the Loan Documents, (j) Lender’s reasonable
costs and expenses (including reasonable attorneys, accountants, consultants,
and other advisors fees and expenses) incurred in terminating, enforcing
(including reasonable attorneys, accountants, consultants, and other advisors
fees and expenses incurred in connection with a “workout,” a “restructuring,” or
an Insolvency Proceeding concerning any Loan Party or any of its Subsidiaries 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, and (k) charges, fees, costs and
expenses for amendments, renewals, extensions, transfers, or drawings from time
to time imposed by Lender in respect of Letters of Credit and out-of-pocket
charges, fees, costs and expenses paid or incurred by Lender in connection with
the issuance, amendment, renewal, extension, or transfer of, or drawing under,
any Letter of Credit or any demand for payment thereunder.

“Lender Representatives” has the meaning specified therefor in Section 17.8(a).

“Lender-Related Persons” means Lender, together with its Affiliates (including
in their capacity as a Bank Product Provider) officers, directors, employees,
attorneys, and agents.

“Lender’s Liens” mean the Liens granted by Borrowers and the other Loan Parties
to Lender for its benefit and for the benefit of any Bank Product Provider under
the Loan Documents.

“Letter of Credit” means a letter of credit (as that term is defined in the
Code) issued by Lender.

“Letter of Credit Agreements” means a Letter of Credit Application, together
with any and all related letter of credit agreements pursuant to which Lender
agrees to issue, amend, or extend a Letter of Credit, or pursuant to which
Borrowers agree to reimburse Lender for all Letter of Credit Disbursements, each
such application and related agreement to be in the form specified by Lender
from time to time.

“Letter of Credit Application” means an application requesting Lender to issue,
amend, or extend a Letter of Credit, each such application to be in the form
specified by Lender from time to time.

“Letter of Credit Collateralization” means either (a) providing cash collateral
(pursuant to documentation reasonably satisfactory to Lender, including
provisions that specify that the Letter of Credit fee and all usage charges set
forth in this Agreement and the Letter of Credit Agreements will continue to
accrue while the Letters of Credit are outstanding) to be held by Lender for the
benefit of Lender in an amount equal to 105% of the then existing Letter of
Credit Usage, (b) delivering to Lender the original of each Letter of Credit,
together with documentation executed by all beneficiaries under each Letter of
Credit in form and substance acceptable to Lender terminating all of such
beneficiaries’ rights under such Letters of Credit, or (c) providing Lender with
a standby letter of credit, in form and substance reasonably satisfactory to
Lender, from a commercial bank acceptable to Lender (in its sole discretion) in
an amount equal to 105% of the then existing Letter of Credit Usage (it being
understood that the Letter of Credit fee and all usage charges set forth in this
Agreement will continue to accrue while the Letters of Credit are outstanding
and that any such fees that accrue must be an amount that can be drawn under any
such standby letter of credit).

“Letter of Credit Disbursement” means a payment made by Lender pursuant to a
Letter of Credit.

“Letter of Credit Indemnified Costs” has the meaning specified therefor in
Section 2.13(e) of this Agreement.

“Letter of Credit Related Person” has the meaning specified therefor in
Section 2.13(e) of this Agreement.

“Letter of Credit Usage” means, as of any date of determination, the sum of
(i) the aggregate undrawn amount of all outstanding Letters of Credit, and
(ii) the aggregate amount of outstanding reimbursement obligations with respect
to Letters of Credit which remain unreimbursed or which have not been paid
through an Advance under the Revolving Credit Facility.

 

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“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.

“Liquidity” means, as of any date of determination, the sum of (i) Excess
Availability, plus (ii) Qualified Cash; provided that the amount included in
this clause (ii) in order to calculate Liquidity shall in no event exceed more
than 50% of the Liquidity as of any date of determination.

“Loan Account” has the meaning specified therefor in Section 2.8.

“Loan Documents” means this Agreement, any Borrowing Base Certificate, the
Control Agreements, the Cash Management Documents, the Copyright Security
Agreement (if any), the Guaranty, any Intercompany Subordination Agreement, the
Letters of Credit, the Mortgages, the Patent and Trademark Security Agreement,
any note or notes executed by any Borrower in connection with this Agreement and
payable to Lender, any Letter of Credit Applications and other Letter of Credit
Agreements entered into by any Borrower in connection with this Agreement, and
any other instrument or agreement entered into, now or in the future, by any
Loan Party or any of its Subsidiaries and Lender in connection with this
Agreement, but specifically excluding all Hedge Agreements.

“Loan Management Service” means Lender’s proprietary automated loan management
program currently known as “Loan Manager” and any successor service or product
of Lender which performs similar services.

“Loan Parties” means collectively, each Borrower and each Guarantor and each of
them is a “Loan Party”.

“Margin Stock” as defined in Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.

“Material Adverse Change” means (a) a material adverse change in the business,
prospects, operations, results of operations, assets, liabilities or condition
(financial or otherwise) of the Loan Parties taken as a whole or the Loan
Parties and their Subsidiaries taken as a whole, (b) a material impairment of
the ability of any Loan Party or any of its Subsidiaries to perform its
obligations under the Loan Documents to which it is a party or of the Lender’s
ability to enforce the Obligations or realize upon the Collateral, or (c) a
material impairment of the enforceability or priority of Lender’s Liens with
respect to the Collateral as a result of an action or failure to act on the part
of any Loan Party or its Subsidiaries.

“Material Contract” means, with respect to any Person, (i) each written contract
or agreement to which such Person or any of its Subsidiaries is a party
obligating the payment of aggregate consideration payable to or by such Person
or such Subsidiary of $1,000,000 or more (other than purchase orders in the
ordinary course of the business of such Person or such Subsidiary) in any fiscal
year, and (ii) all other contracts or agreements, the loss of which could
reasonably be expected to result in a Material Adverse Change.

“Maturity Date” has the meaning specified therefor in Section 2.9.

“Maximum Revolver Amount” means $25,000,000, decreased by permanent reductions
in such amount made in accordance with Section 2.11.

“Moody’s” has the meaning specified therefor in the definition of Cash
Equivalents.

“Mortgages” means, individually and collectively, one or more mortgages, deeds
of trust, or deeds to secure debt, executed and delivered by a Loan Party in
favor of Lender, in form and substance reasonably satisfactory to Lender, that
encumber the Real Property Collateral.

“Multiemployer Plan” means any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate
makes or is obligated to make contributions, or during the preceding five plan
years, has made or been obligated to make contributions.

 

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“Negotiable Collateral” means letters of credit, letter-of-credit rights,
instruments, promissory notes, drafts and documents (as each such term is
defined in the Code).

“Obligations” means (a) all loans (including the 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), reimbursement or
indemnification obligations with respect to Letters of Credit (irrespective of
whether contingent), premiums, liabilities (including all amounts charged to the
Loan Account pursuant to this Agreement), obligations (including indemnification
obligations), fees, Lender 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), guaranties, and all covenants and duties of any other kind and
description owing by any Loan Party pursuant to or evidenced by this Agreement
or any of the other Loan Documents and irrespective of whether for the payment
of money, whether direct or indirect, absolute or contingent, liquidated or
unliquidated, determined or undetermined, voluntary or involuntary, due, not due
or to become due, sole, joint, several or joint and several, incurred in the
past or now existing or hereafter arising, however arising, and including all
interest not paid when due, and all other expenses or other amounts that any
Borrower or any other Loan Party is 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 this 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.

“OFAC” means The Office of Foreign Assets Control of the U.S. Department of the
Treasury.

“Overadvance Amount” has the meaning specified therefor in Section 2.4(f).

“Pass-Through Tax Liabilities” means the amount of state and federal income tax
paid or to be paid by the owner of any Stock in a Borrower on taxable income
earned by a Borrower and attributable to such owner of Stock as a result of such
Borrower’s “pass-through” tax status, assuming the highest marginal income tax
rate for federal and state (for the state or states in which any owner of Stock
is liable for income taxes with respect to such income) income tax purposes,
after taking into account any deduction for state income taxes in calculating
the federal income tax liability and all other deductions, credits, deferrals
and other reductions available to such owners of Stock from or through such
Borrower.

“Patents” means patents and patent applications, including (i) the patents and
patent applications listed on Schedule 5.26(b) to the Information Certificate,
(ii) all continuations, divisionals, continuations-in-part, re-examinations,
reissues, and renewals thereof and improvements thereon, (iii) all income,
royalties, damages and payments now and hereafter due or payable under and with
respect thereto, including payments under all licenses entered into in
connection therewith and damages and payments for past, present, or future
infringements thereof, (iv) the right to sue for past, present, and future
infringements thereof, and (v) all of each Loan Party’s rights corresponding
thereto throughout the world.

“Patent and Trademark Security Agreement” means each Patent and Trademark
Security Agreement executed and delivered by the applicable Loan Party in favor
of Lender, in form and substance acceptable to Lender.

“Patriot Act” has the meaning specified therefor in Section 5.18 of Exhibit D to
this Agreement.

“PBGC” means the Pension Benefit Guaranty Corporation.

“Pension Plan” means a pension plan (as defined in Section 3(2) of ERISA)
maintained for employees of any Borrower or any of its Subsidiaries or any ERISA
Affiliate and covered by Title IV of ERISA.

“Permitted Acquisition” means any Acquisition so long as:

(a) no Default or Event of Default shall have occurred and be continuing or
would result from the consummation of the proposed Acquisition and the proposed
Acquisition is consensual;

(b) no Indebtedness will be incurred, assumed, or would exist with respect to
any Borrower or its Subsidiaries as a result of such Acquisition, other than
Indebtedness permitted under clauses (c), (k), (m), (n), (l), or (q) of the
definition of Permitted Indebtedness and no Liens will be incurred, assumed, or
would exist with respect to the assets of any Borrower or its Subsidiaries as a
result of such Acquisition other than Permitted Liens;

(c) Borrowers have provided Lender with written confirmation, supported by
reasonably detailed calculations, that on a pro forma basis (including pro forma
adjustments arising out of events which are directly attributable to such
proposed Acquisition, are factually supportable, and are expected to have a
continuing impact, in each case, determined as if

 

Schedule 1.1

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the combination had been accomplished at the beginning of the relevant period;
such eliminations and inclusions to be mutually and reasonably agreed upon by
Borrowers and Lender) created by adding the historical combined financial
statements of Borrowers (including the combined financial statements of any
other Person or assets that were the subject of a prior Permitted Acquisition
during the relevant period) to the historical consolidated financial statements
of the Person to be acquired (or the historical financial statements related to
the assets to be acquired) pursuant to the proposed Acquisition, each Borrower
and its Subsidiaries (i) would have been in compliance with the financial
covenants in Section 8 of the Agreement for the 4 fiscal quarter period ended
immediately prior to the proposed date of consummation of such proposed
Acquisition, and (ii) are projected to be in compliance with the financial
covenants in Section 8 for the 4 fiscal quarter period ended one year after the
proposed date of consummation of such proposed Acquisition; provided that
Borrowers shall not be required to comply with this clause (c) for any Permitted
Acquisition(s) that individually, or in the aggregate during any twelve-month
period, involve total purchase consideration (including deferred payment
obligations) of less than $2,000,000;

(d) Borrowers have provided Lender with their due diligence package relative to
the proposed Acquisition, including forecasted balance sheets, profit and loss
statements, and cash flow statements of the Person or assets to be acquired, all
prepared on a basis consistent with such Person’s (or assets’) historical
financial statements, together with appropriate supporting details and a
statement of underlying assumptions for the 1 year period following the date of
the proposed Acquisition, on a quarter by quarter basis), in form and substance
(including as to scope and underlying assumptions) reasonably satisfactory to
Lender;

(e) Borrowers shall have Excess Availability in an amount equal to or greater
than $10,000,000 on a pro-forma basis for the 60 day period immediately
preceding the date of the proposed Acquisition and immediately after giving
effect to the consummation of the proposed Acquisition;

(f) Borrowers have provided Lender with written notice of the proposed
Acquisition at least 15 Business Days prior to the anticipated closing date of
the proposed Acquisition and, not later than 5 Business Days prior to the
anticipated closing date of the proposed Acquisition, copies of the Acquisition
Agreement and other material documents relative to the proposed Acquisition,
which agreement and documents must be reasonably acceptable to Lender,

(g) the assets being acquired (other than a de minimis amount of assets in
relation to Borrowers’ and their Subsidiaries’ total assets), or the Person
whose Stock is being acquired, are useful in or engaged in, as applicable, the
business of the Loan Parties or a business reasonably related thereto,

(h) the assets being acquired (other than a de minimis amount of assets in
relation to the assets being acquired) are located within the United States or
the Person whose Stock is being acquired is organized in a jurisdiction located
within the United States, unless otherwise consented to by Lender in Lender’s
Permitted Discretion,

(i) if the subject assets or Stock, are being acquired directly by a Borrower or
one of its Subsidiaries that is a Loan Party, such Borrower or the applicable
Loan Party shall have complied with Section 6.15 or 6.16, as applicable, of the
Agreement and, in the case of an acquisition of Stock, such Borrower or the
applicable Loan Party shall have demonstrated to Lender that the new Loan
Parties have received consideration sufficient to make the joinder documents
binding and enforceable against such new Loan Parties, and

(j) the purchase consideration payable in respect of Permitted Acquisitions
(including deferred payment obligations) individually or in the aggregate,
during any twelve-month period, shall not exceed $15,000,000; provided that such
limit shall be $25,000,000 so long as the portion of the purchase consideration
that is paid from a source other than the proceeds of Stock issued after the
Closing Date by Novatel Wireless, Inc. (in connection with Permitted
Acquisitions) does not exceed $15,000,000.

“Permitted Discretion” means a determination made in the exercise of reasonable
(from the perspective of a secured lender) business judgment.

“Permitted Dispositions” means:

(a) sales, abandonment, or other dispositions of Equipment that is substantially
worn, damaged, or obsolete in the ordinary course of business;

(b) sales of Inventory to buyers in the ordinary course of business;

(c) the granting of Permitted Liens;

 

Schedule 1.1

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(d) the making of a Restricted Junior Payment that is expressly permitted to be
made pursuant to this Agreement;

(e) the making of a Permitted Investment;

(f) 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;

(g) the licensing or sublicensing of patents, trademarks, copyrights, and other
intellectual property rights in the ordinary course of business, or the sale or
licensing (or sublicensing) of patents for fair and reasonable consideration (so
long as (x) Borrowers and the other Loan Parties retain, or receive a license
back of, the right to continue to use any patent, trademark, copyright, or other
intellectual property that is necessary for Borrowers’ or such other Loan
Parties’ business, and (y) there is no obligation on the part of any Borrower to
repurchase any such patent, trademark, copyright, or other intellectual
property);

(h) the sale or discount, in each case without recourse, of Accounts arising in
the ordinary course of business, but only in connection with the compromise or
collection thereof;

(i) any involuntary loss, damage or destruction of property;

(j) any involuntary condemnation, seizure or taking, by exercise of the power of
eminent domain or otherwise, or confiscation or requisition of use of property;

(k) the leasing or subleasing of assets of any Loan Party or its Subsidiaries in
the ordinary course of business;

(l) the sale or issuance of Stock (other than Prohibited Preferred Stock) of any
Borrower;

(m) the lapse of registered patents, trademarks and other intellectual property
of any Loan Party or its Subsidiaries to the extent not economically desirable
in the conduct of their business and so long as such lapse is not materially
adverse to the interests of the Lender;

(n) dispositions of assets acquired by any Borrower and its Subsidiaries
pursuant to a Permitted Acquisition consummated within 12 months of the date of
the proposed Disposition (the “Subject Permitted Acquisition”) so long as
(i) the consideration received for the assets to be so disposed is at least
equal to the fair market value thereof, (ii) the assets to be so disposed are
not necessary or economically desirable in connection with the business of
Borrower and its Subsidiaries, and (iii) the assets to be so disposed are
readily identifiable as assets acquired pursuant to the Subject Permitted
Acquisition;

(o) the sale, lease or transfer of property or assets from (i) one Loan Party
(other than a Borrower) to another Loan Party, (ii) one Borrower to another
Borrower, (iii) one Subsidiary that is not a Loan Party to another Subsidiary
that is not a Loan Party, or (iv) one Subsidiary that is not a Loan Party to a
Loan Party; and

(p) other sales or dispositions of assets (other than accounts, inventory,
deposit accounts, or securities accounts and the proceeds thereof) not otherwise
permitted by the preceding clauses, so long as (i) the aggregate fair market
value of all assets disposed of in fiscal year (including the proposed
disposition) would not exceed $250,000 individually or $500,000 in the
aggregate, (ii) no Event of Default shall have occurred and be continuing both
immediately prior to and immediately after giving effect to any such sale or
disposition and (iii) the consideration received in respect of any such sale or
disposition shall not be less than the reasonably equivalent value of the
property sold or disposed of and shall be comprised of at least 75% cash.

“Permitted Indebtedness” means:

(a) Indebtedness evidenced by this Agreement or the other Loan Documents;

(b) Indebtedness set forth on Schedule 5.19 to the Information Certificate and
any Refinancing Indebtedness in respect of such Indebtedness;

(c) Permitted Purchase Money Indebtedness and any Refinancing Indebtedness in
respect of such Indebtedness;

 

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(d) endorsement of instruments or other payment items for deposit, netting
arrangements, and overdrafts in the ordinary course of business;

(e) the incurrence by any Loan Party or its Subsidiaries of Indebtedness under
Hedge Agreements that are incurred for the bona fide purpose of hedging the
interest rate, commodity, or foreign currency risks associated with such Loan
Party’s and its Subsidiaries’ operations and not for speculative purposes;

(f) Indebtedness incurred in respect of Bank Products other than pursuant to
Hedge Agreements;

(g) Indebtedness constituting Permitted Investments;

(h) Indebtedness consisting of (i) unsecured guarantees incurred in the ordinary
course of business with respect to surety and appeal bonds, performance bonds,
bid bonds, appeal bonds, completion guarantee and similar obligations;
(ii) unsecured guarantees arising with respect to customary indemnification
obligations to purchasers in connection with Permitted Dispositions; and
(iii) unsecured guarantees with respect to Indebtedness of any Loan Party or one
of its Subsidiaries, to the extent that the Person that is obligated under such
guaranty could have incurred such underlying Indebtedness;

(i) Indebtedness owed to any Person providing property, casualty, liability, or
other insurance to any Borrower or any of its Subsidiaries, so long as the
amount of such Indebtedness is not in excess of the amount of the unpaid cost
of, and shall be incurred only to defer the cost of, such insurance for the year
in which such Indebtedness is incurred and such Indebtedness is outstanding only
during such year;

(j) unsecured Indebtedness of any Loan Party owing to former employees,
officers, or directors (or any spouses, ex-spouses, or estates of any of the
foregoing) incurred in connection with the repurchase by such Loan Party of the
Stock of such Loan Party that has been issued to such Persons, so long as (i) no
Default or Event of Default has occurred and is continuing or would result from
the incurrence of such Indebtedness, (ii) the aggregate amount of all such
Indebtedness outstanding at any one time does not exceed $250,000, and
(iii) such Indebtedness is subordinated to the Obligations on terms and
conditions reasonably acceptable to Lender;

(k) unsecured Indebtedness (including, but not limited to, earnouts) of any
Borrower that is incurred on the date of the consummation of a Permitted
Acquisition solely for the purpose of consummating such Permitted Acquisition so
long as (i) no Event of Default has occurred and is continuing or would result
therefrom, (ii) such unsecured Indebtedness is not incurred for working capital
purposes, (iii) such unsecured Indebtedness (other than earnouts) does not
mature prior to the date that is 6 months after the Maturity Date, and (iv) such
Indebtedness is subordinated in right of payment to the Obligations on terms and
conditions reasonably satisfactory to Lender;

(l) Acquired Indebtedness in an amount not to exceed $750,000 outstanding at any
one time;

(m) contingent liabilities in respect of any indemnification obligation,
adjustment of purchase price, non-compete, or similar obligation of any Borrower
or the applicable Loan Party incurred in connection with the consummation of one
or more Permitted Acquisitions;

(n) Subordinated Debt in an aggregate principal amount not to exceed $250,000 at
any one time outstanding as long as (i) no Event of Default shall have occurred
and be continuing, both immediately before and immediately after giving effect
to any such incurrence of Indebtedness, (ii) such Indebtedness is not secured by
any of the assets or properties of a Loan Party, and (iii) the terms and
conditions of which are satisfactory to Lender in Lender’s Permitted Discretion;

(o) obligations under corporate credit cards incurred in the ordinary course of
business;

(p) Indebtedness incurred by Subsidiaries not to exceed $250,000 at any one time
outstanding, provided that no Loan Party shall guarantee or have any other
obligation or liability with respect to such Indebtedness (whether by
indemnification or otherwise); and

(q) any other Indebtedness not otherwise permitted by the preceding clauses in
an aggregate principal amount not to exceed $250,000 at any one time outstanding
as long as (i) no Event of Default shall have occurred and be continuing, both
immediately before and immediately after giving effect to any such incurrence of
Indebtedness and (ii) such Indebtedness is not secured by any of the assets or
properties of a Loan Party.

 

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“Permitted Intercompany Advances” means loans made by (a) a Loan Party to
another Loan Party (provided that the aggregate outstanding balance of loans
made by (x) the Borrowers to the Loan Parties that are not Borrowers shall not
at any time exceed the sum of (A) $500,000 less (B) the outstanding aggregate
amount of Investments described in clause (l) of the definition of Permitted
Investments, and (y) any Loan Party to any Loan Party that is not organized
under one of the States of the United States shall not exceed $250,000; provided
that foregoing limitations shall not restrict the amount of loans made by
Borrowers to non-Borrowers that are funded with the proceeds of the issuance of
Stock of Novatel Wireless, Inc. after the Closing Date for the purpose of
consummating, but only to the extent necessary to consummate, a Permitted
Acquisition), (b) a Subsidiary of a Loan Party which is not a Loan Party to
another Subsidiary of a Loan Party which is not a Loan Party, and (c) a
Subsidiary of a Loan Party which is not a Loan Party to a Loan Party, so long as
the parties thereto are party to an Intercompany Subordination Agreement.

“Permitted Investments” means:

(a) Investments in cash and Cash Equivalents;

(b) Investments in negotiable instruments deposited or to be deposited for
collection in the ordinary course of business;

(c) advances made in connection with purchases of Goods or services in the
ordinary course of business;

(d) (x) Investments owned by any Loan Party or any of its Subsidiaries on the
Closing Date, and (y) any other Investments set forth on Schedule P-1;

(e) Permitted Intercompany Advances;

(f) Investments resulting from entering into (i) Bank Product Agreements, or
(ii) agreements relative to Indebtedness that is permitted under clause (f) of
the definition of Permitted Indebtedness;

(g) Investments received in settlement of amounts due to any Loan Party or any
of its Subsidiaries effected in the ordinary course of business or owing to any
Loan Party or any of its Subsidiaries as a result of Insolvency Proceedings
involving an Account Debtor or upon the foreclosure or enforcement of any Lien
in favor of a Loan Party or its Subsidiaries;

(h) Stock or other securities acquired in connection with the satisfaction or
enforcement of Indebtedness or claims due or owing to a Loan Party or its
Subsidiaries (in bankruptcy of customers or suppliers or otherwise outside the
ordinary course of business) or as security for any such Indebtedness or claims;

(i) deposits of cash made in the ordinary course of business to secure
performance of operating leases or capital leases;

(j) non-cash loans to employees, officers, and directors of any Borrower or any
of its Subsidiaries for the purpose of purchasing Stock in any Borrower so long
as the proceeds of such loans are used in their entirety to purchase such stock
in any Borrower;

(k) guarantees permitted under the definition of Permitted Indebtedness;

(l) Investments in the form of capital contributions and the acquisition of
Stock made by any Loan Party in any other Loan Party (other than capital
contributions to or the acquisition of Stock of a Borrower by a Loan Party that
is not a Borrower); provided that outstanding Investments made by Borrowers in
any Loan Parties that are not Borrowers shall not at any time exceed the sum of
(A) $500,000 less (B) the outstanding aggregate amount of outstanding loans
described under subclause (x) of clause (a) of the definition of Permitted
Intercompany Advances; provided that foregoing limitations shall not restrict
the amount of Investments made by Borrowers in non-Borrowers that are funded
with the proceeds of the issuance of Stock of Novatel Wireless, Inc. after the
Closing Date for the purpose of consummating, but only to the extent necessary
to consummate, a Permitted Acquisition;

(m) Investments held by a Person acquired in a Permitted Acquisition to the
extent that such Investments were not made in contemplation of or in connection
with such Permitted Acquisition and were in existence on the date of such
Permitted Acquisition;

(n) Permitted Acquisitions;

 

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(o) Repurchases of patents or other Intellectual Property from Persons who
previously purchased such items from Borrowers, provided that Borrowers’
Liquidity, for the 30-day period immediately prior to the date of any such
repurchase and on the date of such repurchase, in each case after giving effect
to the amount of such repurchase, is not less than $10,000,000; and

(p) Establishment or acquisition of a Subsidiary in order to consummate a
Permitted Acquisition.

“Permitted Liens” means

(a) Liens granted to, or for the benefit of, Lender 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
Lender’s Liens and the underlying taxes, assessments, or charges or levies are
the subject of Permitted Protests;

(c) judgment Liens arising solely as a result of the existence of judgments,
orders, or awards that do not constitute an Event of Default under Section 9.3;

(d) Liens set forth on Schedule P-2; provided, however, that to qualify as a
Permitted Lien, any such Lien described on Schedule P-2 shall only secure the
Indebtedness that it secures on the Closing Date and any Refinancing
Indebtedness in respect thereof;

(e) the interests of lessors under operating leases and licensors under license
agreements;

(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 that are replacements of Permitted Liens to the extent that the
original Indebtedness is the subject of permitted Refinancing Indebtedness and
so long as the replacement Liens only encumber those assets that secured the
original Indebtedness;

(h) 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,

(i) Liens on amounts deposited to secure Loan Parties’ and their Subsidiaries’
obligations in connection with worker’s compensation or other unemployment
insurance,

(j) Liens on amounts deposited to secure Loan Parties’ and their Subsidiaries’
obligations 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,

(k) Liens on amounts deposited to secure Loan Parties’ and their Subsidiaries’
reimbursement obligations with respect to surety or appeal bonds obtained in the
ordinary course of business,

(l) 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,

(m) licenses of patents, trademarks, copyrights, and other intellectual property
rights in the ordinary course of business, or the licensing (or sublicensing) of
patents for fair and reasonable consideration (so long as Borrowers and the
other Loan Parties retain, or receive a license back of, the right to continue
to use any patent that is necessary for Borrowers’ or such other Loan Parties’
business);

(n) rights of setoff or bankers’ liens upon deposits of cash in favor of banks
or other depository institutions, solely to the extent incurred in connection
with the maintenance of such deposit accounts in the ordinary course of
business,

 

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(o) Liens granted in the ordinary course of business on the unearned portion of
insurance premiums securing the financing of insurance premiums to the extent
the financing is permitted under the definition of Permitted Indebtedness,

(p) Liens in favor of customs and revenue authorities arising as a matter of law
to secure payment of customs duties in connection with the importation of goods,

(q) Liens solely on any cash earnest money deposits made by any Borrower or any
of its Subsidiaries in connection with any letter of intent or purchase
agreement with respect to a Permitted Acquisition,

(r) Liens assumed by any Borrower or its Subsidiaries in connection with a
Permitted Acquisition that secure Acquired Indebtedness, and

(s) additional Liens so long as the principal amount of Indebtedness and other
obligations secured thereby does not exceed $250,000 in the aggregate at any
time.

“Permitted Preferred Stock” means and refers to any Preferred Stock issued by a
Borrower (and not by one or more of its Subsidiaries) that is not Prohibited
Preferred Stock.

“Permitted Protest” means the right of any Borrower or any other Loan Party or
any of their respective 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 books and
records of such Borrower, such other Loan Party or such Subsidiary in such
amount as is required under GAAP, (b) any such protest is instituted promptly
and prosecuted diligently by such Borrower, Loan Party or Subsidiary, as
applicable, in good faith, and (c) Lender is satisfied that, while any such
protest is pending, there will be no impairment of the enforceability, validity,
or priority of any of Lender’s Liens.

“Permitted Purchase Money Indebtedness” means, as of any date of determination,
Purchase Money Indebtedness incurred after the Closing Date in an aggregate
principal amount outstanding at any one time not in excess of $1,000,000.

“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.

“Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA)
maintained for employees of any Borrower or any of its Subsidiaries or any ERISA
Affiliate.

“Pledged Companies” means each Person listed on Schedule 5.26(d) to the
Information Certificate as a “Pledged Borrower”, together with each other
Person, all or a portion of whose Stock is acquired or otherwise owned by a
Borrower after the Closing Date.

“Pledged Interests” means all of each Loan Party’s right, title and interest in
and to all of the Stock now owned or hereafter acquired by such Loan Party,
regardless of class or designation, including in each of the Pledged Companies,
and all substitutions therefor and replacements thereof, all proceeds thereof
and all rights relating thereto, also including any certificates representing
the Stock, the right to receive any certificates representing any of the Stock,
all warrants, options, share appreciation rights and other rights, contractual
or otherwise, in respect thereof and the right to receive all dividends,
distributions of income, profits, surplus, or other compensation by way of
income or liquidating distributions, in cash or in kind, and all cash,
instruments, and other property from time to time received, receivable, or
otherwise distributed in respect of or in addition to, in substitution of, on
account of, or in exchange for any or all of the foregoing.

“Pledged Interests Addendum” means a Pledged Interests Addendum substantially in
the form of Exhibit F.

“Pledged Notes” has the meaning specified thereof in Section 5.26(e) of the
Agreement.

“Pledged Operating Agreements” means all of each Loan Party’s rights, powers,
and remedies under the limited liability Borrower operating agreements of each
of the Pledged Companies that are limited liability companies.

“Pledged Partnership Agreements” means all of each Loan Party’s rights, powers,
and remedies under the partnership agreements of each of the Pledged Companies
that are partnerships.

 

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“Preferred Stock” means, as applied to the Stock of any Person, the Stock of any
class or classes (however designated) that is preferred with respect to the
payment of dividends, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such Person, over shares of Stock of
any other class of such Person.

“Prime Rate” means at any time the rate of interest most recently announced by
Lender at its principal office as its Prime Rate, with the understanding that
the Prime Rate is one of Lender’s base rates, and serves as the basis upon which
effective rates of interest are calculated for those loans making reference to
it, and is evidenced by its recording in such internal publication or
publications as Lender may designate. Each change in the rate of interest shall
become effective on the date each Prime Rate change is announced by Lender.

“Proceeds” has the meaning specified therefor in the definition of “Collateral”
set forth in Schedule 1.1.

“Prohibited Preferred Stock” means any Preferred Stock that by its terms is
mandatorily redeemable or subject to any other mandatory payment obligation
(including any mandatory obligation to pay dividends, other than dividends of
shares of Preferred Stock of the same class and series payable in kind or
dividends of shares of common stock) on or before a date that is less than 1
year after the Maturity Date, or, on or before the date that is less than 1 year
after the Maturity Date, is redeemable at the option of the holder thereof for
cash or assets or securities (other than distributions in kind of shares of
Preferred Stock of the same class and series or of shares of common stock).

“Projections” means each Borrower’s and their Subsidiaries’, on a consolidated
basis, forecasted (a) balance sheets, (b) profit and loss statements,
(c) Availability projections, and (d) cash flow statements, all prepared on a
basis consistent with such Borrower’s and Guarantor’s historical financial
statements, together with appropriate supporting details and a statement of
underlying assumptions.

“Protective Advance” has the meaning specified therefor in Section 2.3(d).

“PTO” means the United States Patent and Trademark Office.

“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, domestic cash and Cash Equivalents of each Borrower 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 (or other control arrangement satisfactory to Lender in Lender’s
Permitted Discretion) and is maintained by a branch office of the Lender or
securities intermediary (that is an Affiliate of Lender) located within the
United States.

“Real Property” means any estates or interests in real property now owned or
hereafter acquired in fee simple by a Loan Party and the improvements thereto.

“Real Property Collateral” means any Real Property hereafter acquired by any
Loan Party.

“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) such refinancings, renewals, or extensions do not result in an increase in
the principal amount of the Indebtedness so refinanced, renewed, or extended,
other than by the amount of premiums paid thereon and the fees and expenses
incurred in connection therewith and by the amount of unfunded commitments with
respect thereto,

(b) such refinancings, renewals, or extensions do not result in a shortening of
the average weighted maturity (measured as of the refinancing, renewal, or
extension) of the Indebtedness so refinanced, renewed, or extended, nor are they
on terms or conditions that, taken as a whole, are or could reasonably be
expected to be materially adverse to the interests of Lender,

(c) 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 as those that
were applicable to the refinanced, renewed, or extended Indebtedness, and

 

Schedule 1.1

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(d) 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.

“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 required by Environmental Laws.

“Reportable Event” means any of the events set forth in Section 4043(c) of
ERISA, other than events for which the 30 day notice period has been waived.

“Reserves” means, as of any date of determination, the sum of (a) an amount or
percent of a specified item or category of items that Lender establishes from
time to time in its Permitted Discretion to reduce Availability under the
Borrowing Base or the Maximum Revolver Amount to reflect (i) such matters,
events, conditions, contingencies or risks which affect or which may reasonably
be expected to affect the assets, business or prospects of a Borrower, any other
Loan Party or the Collateral or its value or the enforceability, perfection or
priority of Lender’s Liens in the Collateral, or (ii) Lender’s judgment that any
collateral report or financial information relating to a Borrower or any other
Loan Party delivered to Lender is incomplete, inaccurate or misleading in any
material respect, plus (b) the Dilution Reserve, the Bank Product Reserve
Amount, reserves related to currency exchange (as determined by Lender in
Lender’s Permitted Discretion from time to time), reserves related to royalty
and warranty accruals, and reserves related to foreign receivable insurance
deductibles.

“Restricted Junior Payment” means (a) any declaration or payment of any dividend
or the making of any other payment or distribution on account of Stock issued by
any Loan Party (including any payment in connection with any merger or
consolidation involving any Loan Party unless its consists of a Permitted
Investment or Permitted Disposition) or to the direct or indirect holders of
Stock issued by any Loan Party in their capacity as such (other than dividends
or distributions payable in Stock (other than Prohibited Preferred Stock) issued
by any Loan Party, or (b) any purchase, redemption, or other acquisition or
retirement for value (including in connection with any merger or consolidation
involving any Loan Party) of any Stock issued by any Loan Party.

“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.

“Revolving Credit Facility” means the revolving line of credit facility
described in Section 2.1 pursuant to which Lender provides Advances to Borrowers
and issues Letters of Credit for the account of Borrowers.

“Sanctioned Entity” means (a) a country or a government of a country, (b) an
agency of the government of a country, (c) an organization directly or
indirectly controlled by a country or its government, (d) a Person resident in
or determined to be resident in a country, in each case, that is subject to a
country sanctions program administered and enforced by OFAC.

“Sanctioned Person” means a person named on the list of Specially Designated
Nationals maintained by OFAC.

“S&P” has the meaning specified therefor in the definition of Cash Equivalents.

“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).

“Securities Act” means the Securities Act of 1933, as amended from time to time,
and any successor statute.

“Security Interest” has the meaning specified therefor in Section 3.1.

“SIS” means Strategic Intellectual Solutions LLC, a Texas limited liability
company.

 

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“SIS Agreement” means the Agreement between the Administrative Borrower and SIS,
dated October 16, 2014.

“SIS Patents” means those patents and related rights subject to the SIS
Agreement.

“Solvent” means, with respect to any Person as of any date of determination,
that (a) at fair valuations, the sum of such Person’s debts (including
contingent liabilities) is less than all of such Person’s assets, (b) such
Person is not engaged or about to engage in a business or transaction for which
the remaining assets of such Person are unreasonably small in relation to the
business or transaction or for which the property remaining with such Person
constitutes unreasonably small capital, and (c) such Person has not incurred and
does not intend to incur, or reasonably believe that it will incur, debts beyond
its ability to pay such debts as they become due (whether at maturity or
otherwise), and (d) such Person is “solvent” or not “insolvent”, as applicable
within the meaning given those terms and similar terms under applicable laws
relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability (irrespective of whether such contingent liabilities
meet the criteria for accrual under Statement of Financial Accounting Standard
No. 5).

“Standard Letter of Credit Practice” means, for Lender, any domestic or foreign
law or letter of credit practices applicable in the city in which Lender issued
the applicable Letter of Credit or, for its branch or correspondent, such laws
and practices applicable in the city in which it has advised, confirmed or
negotiated such Letter of Credit, as the case may be, in each case, (a) which
letter of credit practices are of banks that regularly issue letters of credit
in the particular city, and (b) which laws or letter of credit practices are
required or permitted under ISP or UCP 600, as chosen in the applicable Letter
of Credit.

“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).

“Subject Permitted Acquisition” has the meaning specified therefor in clause
(n) of the definition of “Permitted Disposition”.

“Subordinated Debt” means Indebtedness owed by any Borrower that has been
subordinated to the Obligations pursuant to a written subordination agreement in
form and substance reasonably acceptable to Lender.

“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.

“Supporting Obligations” means supporting obligations (as such term is defined
in the Code), and includes letters of credit and guaranties issued in support of
Accounts, Chattel Paper, documents, General Intangibles, instruments or
Investment Related Property.

“Taxes” means 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 and all interest, penalties or similar liabilities with respect
thereto; provided, however, that Taxes shall exclude any such Taxes (a) imposed
on the net income or net profits (however denominated) of Lender, branch profits
Taxes and franchise Taxes, in each case imposed by the jurisdiction (or by any
political subdivision or taxing authority thereof) in which Lender is organized
or the jurisdiction (or by any political subdivision or taxing authority
thereof) in which Lender’s principal office or lending office is located or
imposed as a result of a present or former connection between Lender and the
jurisdiction (or by any political subdivision or taxing authority thereof)
imposing the Tax (other than any such connection arising solely from Lender
having executed, delivered or performed its obligations or received payment
under, or enforced its rights or remedies under this agreement or any other Loan
Document); (b) U.S. federal withholding Taxes imposed on amounts payable to or
for the account of Lender with respect to an applicable interest in the Advances
or commitment pursuant to a law in effect on the date on which (i) Lender
acquires such interest in the Advances or commitment or (ii) Lender changes its
lending office, except in each case to the extent that, pursuant to Section 16,
amounts with respect to such Taxes were payable either to Lender’s assignor
immediately before Lender became a party hereto or to Lender immediately before
it changed its lending office, (c) Taxes attributable to Lender’s failure to
comply with Section 16(c) and (d) any Taxes imposed under FATCA (all such
excluded Taxes in clauses (a) through (d), “Excluded Taxes”).

 

Schedule 1.1

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“Termination Date” has the meaning specified therefor in Section 2.9.

“Trademarks” means any and all trademarks, trade names, registered trademarks,
trademark applications, service marks, registered service marks and service mark
applications, including (i) the trade names, registered trademarks, trademark
applications, registered service marks and service mark applications listed on
Schedule 5.26(b) to the Information Certificate, (ii) all renewals thereof,
(iii) all income, royalties, damages and payments now and hereafter due or
payable under and with respect thereto, including payments under all licenses
entered into in connection therewith and damages and payments for past or future
infringements or dilutions thereof, (iv) the right to sue for past, present and
future infringements and dilutions thereof, (v) the goodwill of each Loan
Party’s business symbolized by the foregoing or connected therewith, and
(vi) all of each Loan Party’s rights corresponding thereto throughout the world.

“UCP 600” means, with respect to any Letter of Credit, the Uniform Customs and
Practice for Documentary Credits 2007 Revision, International Chamber of
Commerce Publication No. 600 and any subsequent revision thereof adopted by the
International Chamber of Commerce on the date such Letter of Credit is issued.

“United States” means the United States of America.

“Unused Amount” has the meaning specified therefor in Schedule 2.12 of this
Agreement.

“Unused Fee” has the meaning specified therefor in Schedule 2.12 of this
Agreement.

“URL” means “uniform resource locator,” an internet web address.

“U.S. Person” has the meaning specified therefor in Section 16.

“U.S. Tax Compliance Certificate” has the meaning specified therefor in
Section 16.

“Voidable Transfer” has the meaning specified therefor in Section 17.7.

b. Accounting Terms. All accounting terms not specifically defined herein shall
be construed in accordance with GAAP; provided, however, that if any Borrower
notifies Lender that such Borrower requests an amendment to any provision hereof
to eliminate the effect of any change in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants (or successor thereto or any agency with similar functions) (an
“Accounting Change”) occurring after the Closing Date, or in the application
thereof (or if Lender notifies any Borrower that Lender requests an amendment to
any provision hereof for such purpose), regardless of whether any such notice is
given before or after such Accounting Change or in the application thereof, then
Lender and Borrowers agree that they will negotiate in good faith amendments to
the provisions of this Agreement that are directly affected by such Accounting
Change with the intent of having the respective positions of the Lender and each
Borrower after such Accounting Change conform as nearly as possible to their
respective positions as of the date of this Agreement and, until any such
amendments have been agreed upon, the provisions in this Agreement shall be
calculated as if no such Accounting Change had occurred. Whenever used herein,
the term “financial statements” shall include the footnotes and schedules
thereto. Whenever the term “Borrower” is used in respect of a financial covenant
or a related definition, it shall be understood to mean Borrowers and their
respective Subsidiaries on a consolidated basis, unless the context clearly
requires otherwise.

c. 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.
The meaning of any term defined herein by reference to the Code will not be
limited by reason of any limitation set forth on the scope of the Code, whether
under Section 9-109 of the Code, by reason of federal preemption or otherwise.

d. 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,

 

Schedule 1.1

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and supplements set forth herein). The words “asset” and “property” shall be
construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts, and contract rights. Any reference herein or in any other Loan
Document to the satisfaction, repayment, or payment in full of the Obligations
shall mean the repayment in full in cash or immediately available funds (or,
(a) in the case of contingent reimbursement obligations with respect to Letters
of Credit, providing Letter of Credit Collateralization, and (b) in the case of
obligations with respect to Bank Products (other than Hedge Obligations),
providing Bank Product Collateralization) of all of the Obligations (including
the payment of any Lender Expenses that have accrued irrespective of whether
demand has been made therefor and the payment of any termination amount then
applicable (or which would or could become applicable as a result of the
repayment of the other Obligations) under Hedge Agreements) other than
unasserted contingent indemnification Obligations. 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. References herein to any statute or
any provision thereof include such statute or provision (and all rules,
regulations and interpretations thereunder) as amended, revised, re-enacted, and
/or consolidated from time to time and any successor statute thereto.

e. Schedules and Exhibits. All of the schedules and exhibits attached to this
Agreement shall be deemed incorporated herein by reference.

f. Conversion of Foreign Currencies. The Lender shall determine the Dollar
Equivalent of any amount as required hereby, and a determination thereof by the
Lender shall be conclusive absent manifest error. The Lender may, but shall not
be obligated to, rely on any determination made by any Loan Party in any
document delivered to the Lender. The Lender may determine or redetermine the
Dollar Equivalent of any amount on any date in its own discretion.

 

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Schedule 2.12

TO CREDIT AND SECURITY AGREEMENT

Borrowers shall pay to Lender each of the following fees:

On the Closing Date:

Origination Fee. A one-time origination fee of $125,000, which shall be fully
earned upon the execution of this Agreement, and payable on the Closing Date.

Monthly:

(a) Unused Fee. An unused line fee of 0.375% per annum of the daily average of
the Maximum Revolver Amount reduced by outstanding Advances and Letter of Credit
Usage (the “Unused Amount”), from the date of this Agreement to and including
the Termination Date, which unused line fee shall be payable monthly in arrears
on the first day of each month and on the Termination Date (such fee payable
from time to time, the “Unused Fee”).

(b) Collateral Monitoring Fee. A collateral monitoring fee of $500 per month,
due and payable monthly in advance on the first day of the month.

(c) Cash Management and Other Service Fees. Service fees to Lender for Cash
Management Services provided pursuant to the Cash Management Documents, Bank
Product Agreements or any other agreement entered into by the parties, including
Lender’s customary fees and charges (as adjusted from time to time) with respect
to the disbursement of funds (or the receipt of funds) to or for the account of
Borrowers (whether by wire transfer or otherwise) in the amount prescribed in
Lender’s current service fee schedule.

(d) Letter of Credit Fees. A Letter of Credit fee (in addition to the charges,
commissions, fees, and costs set forth in Section 2.13(e)) which shall accrue at
a per annum rate equal to the Applicable Margin that applies when the Interest
Rate is based on Daily Three Month LIBOR times the Daily Balance of the undrawn
amount of all outstanding Letters of Credit, payable in arrears on the first day
of each month and on the Termination Date and continuing until all undrawn
Letters of Credit have expired or been returned for cancellation. All fees upon
the occurrence of any other activity with respect to any Letter of Credit
(including, without limitation, the issuance, transfer, amendment, extension or
cancellation of any Letter of Credit and honoring of draws under any Letter of
Credit) determined in accordance with Lender’s standard fees and charges then in
effect for such activity.

(e) Minimum Interest Charge. [Intentionally Omitted].

Annually:

(a) Facility Fee. [Intentionally Omitted.]

Upon demand by Lender or as otherwise specified in this Agreement:

(a) Collateral Exam Fees, Costs and Expenses. Lender’s fees, costs and expenses
in connection with any collateral exams or inspections conducted by or on behalf
of Lender at the current rates established from time to time by Lender as its
fee for collateral exams or inspections (which fees are currently $1,080 per day
per collateral examiner), together with all actual out-of-pocket costs and
expenses incurred in conducting any collateral exam or inspection; provided,
however, (i) so long as no Default or Event of Default shall have occurred and
be continuing and Borrowers’ Liquidity is greater than $15,000,000 at all times,
Borrowers shall be obligated to reimburse Lender for fees, costs and expenses
related for not more than two (2) such collateral exams and inspections in any
twelve-month period, and (ii) if Borrowers’ Liquidity is $15,000,000 or less at
any time, but so long as no Default or Event of Default shall have occurred and
be continuing, Borrowers shall be obligated to reimburse Lender for fees, costs
and expenses related for not more than four (4) such collateral exams and
inspections in any twelve-month period. Furthermore, so long as no Default or
Event of Default shall have occurred and be continuing, Borrowers shall not be
obligated to reimburse Lender for fees, costs and expenses that exceed in the
aggregate $7,500 for any single collateral exam (but such cap shall not apply to
collateral exams conducted prior to the Closing Date). In addition (and not
subject to the foregoing 2 or 4 collateral exam and inspection limit), Borrowers
shall be obligated to reimburse Lender for all fees, costs and expenses related
to any collateral exams or inspections obtained prior to the Closing Date.
Applicable fees related to electronic collateral reporting will also be charged.

(b) Appraisal Fees, Costs and Expenses. Lender’s fees, costs and expenses
(including any fees, costs and expenses incurred by any appraiser) in connection
with any appraisal of all or any part of the Collateral conducted at the request
of Lender.

 

Schedule 2.12

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(c) Termination and Reduction Fees. If (i) Lender terminates the Revolving
Credit Facility after the occurrence of an Event of Default, or (ii) Borrowers
terminate the Revolving Credit Facility on a date prior to the Maturity Date, or
(iii) Borrowers reduce the Maximum Revolver Amount or if Borrowers and Lender
agree to reduce the Maximum Revolver Amount, then Borrowers shall pay Lender as
liquidated damages (and not as a penalty) a termination or reduction fee in an
amount equal to a percentage of the Maximum Revolver Amount in the case of a
termination of the Revolving Credit Facility or a percentage of the amount of
reduction of the Maximum Revolver Amount in the case of a reduction in the
Maximum Revolver Amount, as the case may be) calculated as follows: (A) two
percent (2.0%) if the termination or reduction occurs on or before the first
anniversary of the first Advance; (B) one percent (1.0%) if the termination or
reduction occurs after the first anniversary of the first Advance, but on or
before the second anniversary of the first Advance; and (C) one-half of one
percent (0.50%) if the termination or reduction occurs after the second
anniversary of the first Advance. If the Credit Facility is transferred to or
refinanced by a Wells Fargo Commercial Banking office or another Subsidiary or
operating division of Lender, such transfer shall not be deemed a termination
resulting in the payment of termination fees.

 

Schedule 2.12

Page 2

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Schedule 6.1

TO CREDIT AND SECURITY AGREEMENT

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

 

as soon as available, but in any event within 30 days after the end of each
month   

(a) an unaudited consolidated balance sheet, income statement, statement of cash
flow, and statement of shareholder’s equity with respect to the Borrowers and
their respective Subsidiaries during such period and compared to the prior
period and plan, prepared in accordance with GAAP, subject to year-end audit
adjustments and the absence of footnotes, together with a corresponding
discussion and analysis of financial results from management;

 

(b) a Compliance Certificate along with the underlying calculations, including
the calculations to establish compliance with the financial covenants set forth
in Section 8 and certain other covenants under this Agreement; and

 

(c) a backlog report.

as soon as available, but in any event within 90 days after the end of each
fiscal year   

(a) consolidated and consolidating financial statements of Borrowers and their
respective Subsidiaries for such fiscal year, audited by independent certified
public accountants reasonably acceptable to Lender, prepared in accordance with
GAAP, 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), by such accountants to
have been prepared in accordance with GAAP (such audited financial statements to
include a balance sheet, income statement, statement of cash flow, and statement
of shareholder’s equity and, if prepared, such accountants’ letter to
management); and

 

(b) a Compliance Certificate along with the underlying calculations, including
the calculations to establish compliance with the financial covenants set forth
in Section 8 and certain other covenants under this Agreement.

as soon as available, but in any event within 30 days after the start of each of
Borrowers’ fiscal years, with drafts due no later than 10 days prior to the
beginning of each such year    (a) copies of Borrowers’ and Guarantors’
Projections, in form and substance (including as to scope and underlying
assumptions) satisfactory to Lender, in its Permitted Discretion, for the
forthcoming fiscal year, on a monthly basis, certified by the chief financial
officer of Administrative Borrowers as being such officer’s good faith estimate
of the financial performance of the Borrowers, Guarantors, and their respective
Subsidiaries during the period covered thereby. if and when prepared by any
Borrower or Guarantor,    (a) any other information that is provided by any
Borrower or Guarantor to its shareholders generally.

 

 

Schedule 6.1

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Schedule 6.2

TO CREDIT AND SECURITY AGREEMENT

Provide Lender with each of the documents and information set forth below at the
following times in form and substance satisfactory to Lender:

 

During each Weekly Reporting Period (as defined below), weekly (no later than
Tuesday of each week for the seven day period ending on Friday of the
immediately preceding week) and at all other times, monthly (no later than the
15th day of each month), or more frequently if the Lender reasonably requests   

(a) a Borrowing Base Certificate;

 

(b) an Account roll-forward with supporting details supplied from sales
journals, collection journals, credit registers and any other records;

 

(c) notice of all claims, offsets, or disputes asserted by Account Debtors with
respect to Borrowers’ Accounts; 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 Lender from time to time.

Monthly (no later than the 15th day of each month) or more frequently if Lender
reasonably requests   

(a) a monthly Account roll-forward, in a format acceptable to Lender in its
Permitted Discretion;

 

(b) a detailed aging of each Borrower’s Accounts, together with a reconciliation
to the monthly Account roll-forward and supporting documentation for any
reconciling items noted (delivered electronically in an acceptable format, if a
Borrower has implemented electronic reporting);

 

(c) a detailed calculation of those Accounts that are not eligible for the
Borrowing Base;

 

(d) a summary aging, by vendor, of Borrowers’ accounts payable (delivered
electronically in an acceptable format, if a Borrower has implemented electronic
reporting); and

 

(e) a detailed report regarding Borrowers’ cash and Cash Equivalents, including
an indication of which amounts constitute Qualified Cash.

Monthly (no later than the 30th day of each month) or more frequently if Lender
reasonably requests    (a) a reconciliation of Accounts aging and trade accounts
payable aging of each Borrower to the general ledger and the monthly financial
statements, including any book reserves related to each category. Annually   

(a) a detailed list of Borrowers’ customers, with address and contact
information; and

 

(b) financial statements and tax returns of each Guarantor.

Upon reasonable request by Lender   

(a) copies of purchase orders and invoices for Inventory and Equipment acquired
by each Borrower, and

 

(b) such other reports and information as to the Collateral and as to each Loan
Party and its Subsidiaries, as Lender may reasonably request.

For purposes of this Schedule 6.2, “Weekly Reporting Period” means each period
(a) commencing on any day that Liquidity is less than $15,000,000 for any five
(5) consecutive Business Day period or an Event of Default occurs, and
(b) continuing until Liquidity has been greater than or equal to $15,000,000 at
all times and no Event of Default has existed for 30 consecutive calendar days
(for both the Liquidity and no Event of Default requirements).

 

Schedule 6.2

Page 1

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EXHIBIT A

TO CREDIT AND SECURITY AGREEMENT

FORM OF COMPLIANCE CERTIFICATE

[on Borrower’s letterhead]

 

To:    Wells Fargo Bank, National Association       2450 Colorado Avenue, Suite
3000W       Santa Monica, California 90404       Attn: Relationship
Manager—Novatel Wireless, Inc.    Re:    Compliance Certificate dated [    ]

Ladies and Gentlemen:

Reference is made to that certain Credit and Security Agreement (as amended,
restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”) dated as of October 31, 2014, by and among, WELLS FARGO BANK,
NATIONAL ASSOCIATION (“Lender”), NOVATEL WIRELESS, INC., a Delaware corporation
(“Novatel Wireless, Inc.”), and ENFORA, INC., a Delaware corporation (“Enfora,
Inc.”, and together with Novatel Wireless, Inc. and any other Person that joins
the Credit Agreement as a Borrower in accordance with the terms thereof,
(collectively, the “Borrowers”). Capitalized terms used in this Compliance
Certificate have the meanings set forth in the Credit Agreement unless
specifically defined herein.

Pursuant to Schedule 6.1 of the Credit Agreement, the undersigned officer of
Novatel Wireless, Inc. hereby certifies that:

1. Attached is the financial information of Novatel Wireless, Inc. and its
Subsidiaries which is required to be furnished to Lender pursuant to Section 6.1
of the Credit Agreement for the period ended             ,             (the
“Reporting Date”). Such financial information has been prepared in accordance
with GAAP [(except for year-end adjustments and the lack of footnotes)]1, and
fairly presents in all material respects the financial condition of Novatel
Wireless, Inc. 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 each Borrower and its Subsidiaries during the
accounting period covered by the financial statements delivered pursuant to
Schedule 6.1 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.

4. The representations and warranties of each Loan Party 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).

5. As of the Reporting Date, the Loan Parties and their respective Subsidiaries
are in compliance with the applicable covenants contained in Section 7 and
Section 8 of the Credit Agreement as demonstrated on Schedule 1 hereof.

6. Schedule 5.17 to the Information Certificate (attached to the Credit
Agreement) is hereby amended to add the following additional Material Contracts:
[                    ].

7. In accordance with Section 6.12(e) of the Credit Agreement, the Loan Parties
hereby notify Lender of the following Commercial Tort Claims:
[                    ].

IN WITNESS WHEREOF, this Compliance Certificate is executed by the undersigned
this [            ] day of [            ], [            ].

 

 

1  Exclude bracketed language with annual audits

 

Exhibit A

Page 1

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NOVATEL WIRELESS, INC., as Administrative Borrower, on behalf of itself and each
of the other Loan Parties

By:

 

 

Name:

 

 

Title:

 

 

 

Exhibit A

Page 2

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SCHEDULE 1 TO COMPLIANCE CERTIFICATE

Financial Covenants

I further certify that (Please check and complete each of the following):

1. Minimum EBITDA. The EBITDA of the Novatel Wireless, Inc. and its
Subsidiaries, for the twelve-month period ending on the Reporting Date is
$[            ], which ¨ satisfies ¨ does not satisfy the requirement set forth
in Section 8(a) of the Credit Agreement that the EBITDA be not less than
$[            ] as required during such period ending on the Reporting Date.
Attached to this Schedule 1 are calculations supporting the foregoing
calculation with respect to the EBITDA for such period.

2. Liquidity. The Liquidity of the Borrowers at all times prior to the Reporting
Date was not less than $            .

3. Capital Expenditures. Borrowers’ Capital Expenditures for the calendar year
to date period ending on the last day of the month ending             ,
20            , is $            , which [is/is not] less than the limit set
forth in Section 8(b) of the Credit Agreement for such period.

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

EXHIBIT B

TO CREDIT AND SECURITY AGREEMENT

CONDITIONS PRECEDENT

The obligation of Lender to make its initial extension of credit provided for in
this Agreement is subject to the fulfillment, to the satisfaction of Lender, of
each of the following conditions precedent:

(a) the Closing Date shall occur on or before October 31, 2014;

(b) Lender shall have received a letter duly executed by each Borrower and each
other Loan Party authorizing Lender to file appropriate financing statements in
such office or offices as may be necessary or, in the opinion of Lender,
desirable to perfect the security interests to be created by the Loan Documents;

(c) Lender 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 Lender, desirable to perfect the Lender’s Liens in and to the
Collateral, and Lender shall have received searches reflecting the filing of all
such financing statements;

(d) Lender shall have received each of the following documents, in form and
substance satisfactory to Lender, duly executed, and each such document shall be
in full force and effect:

(i) this Agreement and the other Loan Documents,

(ii) the Cash Management Documents,

(iii) the Control Agreements,

(iv) a disbursement letter executed and delivered by each Borrower to Lender
regarding the extensions of credit to be made on the Closing Date, the form and
substance of which is satisfactory to Lender, and

(v) a letter, in form and substance satisfactory to Lender, from the Existing
Creditor to Lender with respect to the amount necessary to repay in full all of
the obligations of the Borrowers and their Subsidiaries owing to Existing
Creditor and obtain a release of all of the Liens existing in favor of Existing
Creditor in and to the assets of Loan Parties and their Subsidiaries, together
with termination statements and other documentation evidencing the termination
by Existing Creditor of its Liens in and to the properties and assets of the
Loan Parties and their Subsidiaries;

(e) Lender shall have received a certificate from the Secretary of each Loan
Party (i) attesting to the resolutions of such Loan Party’s Board of Directors
authorizing its execution, delivery, and performance of this Agreement and the
other Loan Documents to which such Loan Party is a party, (ii) authorizing
specific officers of such Loan Party to execute the same, and (iii) attesting to
the incumbency and signatures of such specific officers of such Loan Party;

(f) Lender shall have received copies of each Loan Party’s Governing Documents,
as amended, modified, or supplemented to the Closing Date, certified as true,
correct and complete by the Secretary of such Loan Party;

(g) Lender shall have received a certificate of status with respect to each Loan
Party, dated within 30 days of the Closing Date, such certificate to be issued
by the appropriate officer of the jurisdiction of organization of each Loan
Party, which certificate shall indicate that such Loan Party is in good standing
in such jurisdiction;

(h) Lender shall have received certificates of status with respect to each Loan
Party, 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 Loan Party) in which its failure to be duly
qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that such Loan Party is in good standing in such
jurisdictions;

(i) Lender shall have received copies of the policies of insurance and
certificates of insurance, together with the endorsements thereto, as are
required by Section 6.6, the form and substance of which shall be satisfactory
to Lender;

(j) [Reserved];

 

Exhibit B

Page 1

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

(k) Lender shall have received a legal opinion from Paul Hastings LLP, counsel
to the Loan Parties, in form and substance satisfactory to Lender;

(l) Borrowers shall have Excess Availability of at least $10,000,000 after
giving effect to (i) the initial extensions of credit hereunder, (ii) 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, and (iii) payoff of the
amount necessary to repay in full all of the obligations of the Borrowers and
their Subsidiaries owing to the Existing Creditor;

(m) Lender shall have completed its business, legal, and collateral due
diligence, including (i) a collateral examination and review of Borrowers and
Guarantors Books and verification of each Loan Party’s representations and
warranties to Lender, the results of which must be satisfactory to Lender,
(ii) an inspection of each of the locations where the Inventory of each Loan
Party and its Subsidiaries is located, the results of which must be satisfactory
to Lender, (iii) completion of vendor and customer references and invoice
verification, and (iv) Borrowers’ and their Subsidiaries’ material contracts and
lease agreements, the results of which shall be satisfactory to Agent;

(n) Lender shall have completed (i) Patriot Act searches, OFAC/PEP searches and
customary individual background checks for each Loan Party, and (ii) OFAC/PEP
searches and customary individual background searches for each Borrower’s senior
management and key principals, and each other Loan Party, the results of which
shall be satisfactory to Lender;

(o) [Reserved];

(p) Lender shall have received a set of Projections of each Borrower and
Guarantor for the 3 year period following the Closing Date (on a year by year
basis, and for the 1 year period following the Closing Date, on a month by month
basis), in form and substance (including as to scope and underlying assumptions)
satisfactory to Lender;

(q) Borrowers shall have paid all Lender Expenses incurred in connection with
the transactions evidenced by this Agreement;

(r) Each Loan Party 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 such Loan Party or
its Subsidiaries of the Loan Documents or with the consummation of the
transactions contemplated thereby;

(s) Since December 31, 2013, there shall not have occurred any Material Adverse
Change;

(t) Lender shall have received final credit approval for the Credit Facility and
the transactions described in this Agreement; and

(u) 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 Lender.

 

Exhibit B

Page 2

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EXHIBIT C

TO CREDIT AND SECURITY AGREEMENT

CONDITIONS SUBSEQUENT

1. No later than 15 Business Days after the Closing Date (or such longer period
permitted by Lender in Lender’s sole discretion), Borrowers shall have
(i) closed any securities accounts maintained with any Person other than Lender
or an Affiliate of Lender, (ii) established one or more securities accounts with
Lender or an Affiliate of Lender (the “WF Securities Accounts”), and
(iii) entered into a Control Agreement in favor of Lender for the WF Securities
Accounts.

2. No later than 45 days after the Closing Date (or such longer period permitted
by Lender in Lender’s sole discretion), Borrowers shall have exercised
commercially reasonable efforts to obtain a Collateral Access Agreement with
respect to the following location: 9645 Scranton Road, Suite 205, San Diego, CA
92121. Until such time as Lender has a received a Collateral Access Agreement
for such location, Lender may (in Lender’s sole discretion) establish, and
adjust from time to time, a Reserve in an amount equal to three-months rent for
such location (or such lesser amount as Lender may elect in Lender’s sole
discretion).

3. Upon the request of Lender, Borrowers shall arrange for the prompt execution
and delivery to Lender of an Intercompany Subordination Agreement from Novatel
Wireless Technologies, Ltd.

 

Exhibit C

Page 1

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EXHIBIT D

TO CREDIT AND SECURITY AGREEMENT

REPRESENTATIONS AND WARRANTIES

5.1 Due Organization and Qualification; Subsidiaries.

(a) Each Loan Party and each Subsidiary of each Loan Party (i) is duly organized
and existing and in good standing under the laws of the jurisdiction of its
organization, (ii) is qualified to do business in any jurisdiction where the
failure to be so qualified could reasonably be expected to result in a Material
Adverse Change, and (iii) has all requisite power and authority to own and
operate its properties, to carry on its business as now conducted and as
proposed to be conducted, to enter into the Loan Documents to which it is a
party and to carry out the transactions contemplated thereby.

(b) As of the Closing Date, set forth on Schedule 5.1(b) to the Information
Certificate is a complete and accurate description of the authorized capital
Stock of each Loan Party, by class, and, a description of the number of shares
of each such class that are issued and outstanding. As of the Closing Date,
other than as described on Schedule 5.1(b) to the Information Certificate, there
are no subscriptions, options, warrants, or calls relating to any shares of any
Loan Party’s capital Stock, including any right of conversion or exchange under
any outstanding security or other instrument. No Loan Party is 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 5.1(c) to the Information Certificate (as such
Schedule may be updated from time to time to reflect changes resulting from
transactions permitted under this Agreement), is a complete and accurate list of
the Loan Parties’ direct and indirect Subsidiaries, showing: (i) the number of
shares of each class of common and preferred Stock authorized for each of such
Subsidiaries, and (ii) the number and the percentage of the outstanding shares
of each such class owned directly or indirectly by each Loan Party. 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 5.1(b) to the Information Certificate, there
are no subscriptions, options, warrants, or calls relating to any shares of any
capital stock or any Loan Party or of any of its Subsidiaries, including any
right of conversion or exchange under any outstanding security or other
instrument; provided that such information as it relates to Stock of Novatel
Wireless, Inc. is provided as of the Closing Date and only pertains to such
subscriptions, options, warrants, and calls to which Novatel Wireless, Inc. is a
party. No Loan Party nor any of its Subsidiaries is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of such Loan Party’s Subsidiaries’ capital Stock or any security
convertible into or exchangeable for any such capital Stock.

5.2 Due Authorization; No Conflict.

(a) As to each Loan Party, the execution, delivery, and performance by such Loan
Party of the Loan Documents to which it is a party have been duly authorized by
all necessary action on the part of such Loan Party.

(b) As to each Loan Party, the execution, delivery, and performance by such Loan
Party of the Loan Documents to which it is a party do not and will not
(i) violate any material provision of federal, state, or local law or regulation
applicable to any Loan Party or its Subsidiaries, the Governing Documents of any
Loan Party or its Subsidiaries, or any order, judgment, or decree of any court
or other Governmental Authority binding on any Loan Party or its Subsidiaries,
(ii) result in a breach of, or constitute (with due notice or lapse of time or
both) a default under any Material Contract of any Loan Party or its
Subsidiaries except to the extent that any such breach or default could not
individually or in the aggregate reasonably be expected to cause a Material
Adverse Change, (iii) result in or require the creation or imposition of any
Lien of any nature whatsoever upon any assets of any Loan Party, other than
Permitted Liens, or (iv) require any approval or consent of any Person under any
Material Contract of any Loan Party, other than consents or approvals that have
been obtained and that are still in force and effect and except, in the case of
Material Contracts, for consents or approvals, the failure to obtain could not
individually or in the aggregate reasonably be expected to cause a Material
Adverse Change.

5.3 Governmental and Other Consents. No consent, approval, authorization, or
other order or other action by, and no notice to or filing with, any
Governmental Authority or any other Person is required (a) for the grant of a
Lien by such Loan Party in and to the Collateral pursuant to this Agreement or
the other Loan Documents or for the execution, delivery, or performance of this
Agreement by such Loan Party, or (b) for the exercise by Lender of the voting or
other rights provided for in this Agreement with respect to the Investment
Related Property or the remedies in respect of the Collateral pursuant to this

 

Exhibit D

Page 1

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Agreement, except as may be required in connection with such disposition of
Investment Related Property by laws affecting the offering and sale of
securities generally. No Intellectual Property License of any Loan Party that is
necessary to the conduct of such Loan Party’s business requires any consent of
any other Person in order for such Loan Party to grant the security interest
granted hereunder in such Loan Party’s right, title or interest in or to such
Intellectual Property License.

5.4 Binding Obligations. Each Loan Document has been duly executed and delivered
by each Loan Party that is a party thereto and is the legally valid and binding
obligation of such Loan Party, enforceable against such Loan Party in accordance
with its 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.

5.5 Title to Assets; No Encumbrances. Each of the Loan Parties and its
Subsidiaries has (a) good, sufficient and legal title to (in the case of fee
interests in Real Property), (b) valid leasehold interests in (in the case of
leasehold interests in real or personal property), and (c) good and marketable
title to (in the case of all other personal property), all of their respective
assets reflected in their most recent financial statements delivered pursuant to
Section 6.1 and most recent collateral reports delivered pursuant to
Section 6.2, in each case except for assets disposed of since the date of such
financial statements to the extent permitted under this Agreement. All of such
assets are free and clear of Liens except for Permitted Liens.

5.6 Jurisdiction of Organization; Location of Chief Executive Office;
Organizational Identification Number; Commercial Tort Claims.

(a) The exact legal name of (within the meaning of Section 9-503 of the Code)
and jurisdiction of organization of each Loan Party and each of its Subsidiaries
is set forth on Schedule 5.6(a) to the Information Certificate (as such Schedule
may be updated from time to time to reflect changes resulting from transactions
permitted under this Agreement).

(b) The chief executive office of each Loan Party is located at the address
indicated on Schedule 5.6(b) to the Information Certificate (as such Schedule
may be updated from time to time to reflect changes resulting from transactions
permitted under this Agreement).

(c) The tax identification number and organizational identification number, if
any, of each Loan Party are identified on Schedule 5.6(c) to the Information
Certificate (as such Schedule may be updated from time to time to reflect
changes resulting from transactions permitted under this Agreement).

(d) As of the Closing Date, no Loan Party holds any Commercial Tort Claims that
exceeds $250,000 in amount, except as set forth on Schedule 5.6(d) to the
Information Certificate.

5.7 Litigation.

(a) There are no actions, suits, or proceedings pending or, to the knowledge of
any Loan Party, after reasonable inquiry, threatened in writing against a Loan
Party or any of its Subsidiaries that either individually or in the aggregate
could reasonably be expected to result in a Material Adverse Change.

(b) Schedule 5.7(b) to the Information Certificate sets forth a complete and
accurate description, with respect to each of the actions, suits, or proceedings
with asserted liabilities in excess of, or that could reasonably be expected to
result in liabilities in excess of, $250,000 that, as of the Closing Date, is
pending or, to the knowledge of any Loan Party, after reasonable inquiry,
threatened against any Loan Party or any of its Subsidiaries, including (i) the
parties to such actions, suits, or proceedings, (ii) the nature of the dispute
that is the subject of such actions, suits, or proceedings, (iii) the status, as
of the Closing Date, with respect to such actions, suits, or proceedings, and
(iv) whether any liability of any Loan Party or any Subsidiary in connection
with such actions, suits, or proceedings is covered by insurance.

5.8 Compliance with Laws. No Loan Party nor any of its Subsidiaries (a) is in
violation of any applicable laws, rules, regulations, executive orders, or codes
(including Environmental Laws) that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Change, or (b) is subject
to or in default with respect to any final judgments, writs, injunctions,
decrees, rules or regulations of any court or any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Change.

5.9 No Material Adverse Change. All historical financial statements relating to
the Loan Parties and their Subsidiaries that have been delivered by Borrowers to
Lender 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
consolidated financial condition of the Loan Parties and their Subsidiaries as
of the date thereof and results of operations for the period then ended. Since
the date of the most recent financial statement delivered to Lender, no event,
circumstance, or change has occurred that has or could reasonably be expected to
result in a Material Adverse Change with respect to the Loan Parties and their
Subsidiaries.

 

Exhibit D

Page 2

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5.10 Fraudulent Transfer.

(a) The Loan Parties, taken as a whole, are Solvent.

(b) No transfer of property is being made by any Loan Party and no obligation is
being incurred by any Loan Party 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 such Loan Party.

5.11 Employee Benefits. No Loan Party, nor any of its ERISA Affiliates maintains
or contributes to any Benefit Plan.

5.12 Environmental Condition. Except as set forth on Schedule 5.12 to the
Information Certificate, (a) to each Loan Party’s knowledge, no properties or
assets of any Loan Party or any of its Subsidiaries have ever been used by a
Loan Party, 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 disposal, production, storage, handling, treatment,
release or transport was in violation, in any material respect, of any
applicable Environmental Law, (b) to each Loan Party’s knowledge, after
reasonable inquiry, no Loan Party’s nor any of its Subsidiaries’ properties or
assets have ever been designated or identified in any manner pursuant to any
environmental protection statute as a Hazardous Materials disposal site, (c) no
Loan Party nor any of its Subsidiaries has received notice that a Lien arising
under any Environmental Law has attached to any revenues or to any Real Property
owned or operated by a Loan Party or its Subsidiaries, and (d) no Loan Party nor
any of its Subsidiaries nor any of their respective facilities or operations is
subject to any outstanding written order, consent decree, or settlement
agreement with any Person relating to any Environmental Law or Environmental
Liability that, individually or in the aggregate, could reasonably be expected
to result in a Material Adverse Change.

5.13 Intellectual Property. Each Loan Party and each of its Subsidiaries own, or
hold licenses in, all trademarks, trade names, copyrights, patents, and licenses
that are necessary to the conduct of its business as currently conducted.

5.14 Leases. Each Loan Party and each of its Subsidiaries enjoy peaceful and
undisturbed possession under all leases material to their business and to which
it is a party or under which it is operating, and, subject to Permitted
Protests, all of such material leases are valid and subsisting and no material
default by the applicable Loan Party or the applicable Subsidiary exists under
any of them.

5.15 Deposit Accounts and Securities Accounts. Set forth on Schedule 5.15 to the
Information Certificate (as updated pursuant to Section 6.12(j)(iv)) is a
listing of all of the Deposit Accounts and Securities Accounts of each Loan
Party, 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.

5.16 Complete Disclosure. All factual information taken as a whole (other than
forward-looking information and projections and information of a general
economic nature and general information about the industry of a Loan Party or
any of its Subsidiaries) furnished by or on behalf of a Loan Party or any of its
Subsidiaries in writing to Lender (including all information contained in the
Schedules hereto or in the other Loan Documents) for purposes of or in
connection with this Agreement or the other Loan Documents, and all other such
factual information taken as a whole (other than forward-looking information and
projections and information of a general economic nature and general information
about the industry of a Loan Party or any of its Subsidiaries) hereafter
furnished by or on behalf of a Loan Party or any of its Subsidiaries in writing
to 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. The Projections most recently
delivered to Lender represent, and as of the date on which any other Projections
are delivered to Lender, such additional Projections represent, each Borrowers’
good faith estimate, on the date such Projections are delivered, of the future
performance of a Loan Party or any of its Subsidiaries for the periods covered
thereby based upon assumptions believed by Borrowers to be reasonable at the
time of the delivery thereof to Lender, it being understood that actual results
during the period or periods covered by such Projections may differ and that
such differences may be material.

5.17 Material Contracts. Set forth on Schedule 5.17 to the Information
Certificate (as such Schedule may be updated from time to time in accordance
herewith) is a reasonably detailed description of the Material Contracts of each
Loan Party and each of its Subsidiaries as of the most recent date on which
Borrowers provided their Compliance Certificate pursuant to Section 6.1;
provided, however, that any Borrower may amend Schedule 5.17 to the Information
Certificate to add additional Material Contracts so long as such amendment
occurs by written notice to Lender on the date that such Borrower provides its
Compliance Certificate. Except for matters which, either individually or in the
aggregate, could not reasonably be expected to

 

Exhibit D

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result in a Material Adverse Change, each Material Contract (other than those
that have expired at the end of their normal terms) (a) is in full force and
effect and is binding upon and enforceable against the applicable Loan Party or
the applicable Subsidiary and, to such Borrower’s knowledge, after reasonable
inquiry, each other Person that is a party thereto in accordance with its terms,
(b) has not been otherwise amended or modified (other than amendments or
modifications permitted by Section 7.7(b)), and (c) is not in default due to the
action or inaction of the applicable Loan Party or the applicable Subsidiary.

5.18 Patriot Act. To the extent applicable, each Loan Party and each of its
Subsidiaries is in compliance, in all material respects, with the (a) Trading
with the Enemy Act, as amended, and each of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) and any other enabling legislation or executive order
relating thereto, and (b) Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act
of 2001) (the “Patriot Act”). No part of the proceeds of the loans made
hereunder will be used by any Loan Party or any of its Subsidiaries or any of
their Affiliates, directly or indirectly, for any payments to any governmental
official or employee, political party, official of a political party, candidate
for political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977, as amended.

5.19 Indebtedness. Set forth on Schedule 5.19 to the Information Certificate is
a true and complete list of all Indebtedness of each Loan Party and each of its
Subsidiaries outstanding immediately prior to the Closing Date that is to remain
outstanding immediately after giving effect to the closing hereunder on the
Closing Date and such Schedule accurately sets forth the aggregate principal
amount of such Indebtedness as of the Closing Date.

5.20 Payment of Taxes. Except as otherwise permitted under Section 6.5, all
material tax returns and reports of each Loan Party and each of its Subsidiaries
required to be filed by any of them have been timely filed, and all taxes shown
on such tax returns to be due and payable and all assessments, fees and other
governmental charges upon a Loan Party and its Subsidiaries and upon their
respective assets, income, businesses and franchises that are due and payable
have been paid when due and payable. Each Loan Party and each of its
Subsidiaries have made adequate provision in accordance with GAAP for all taxes
not yet due and payable. No Borrower knows of any assessment proposed against it
that is not being actively contested by such Person diligently, in good faith,
and by appropriate proceedings; provided such reserves or other appropriate
provisions, if any, as shall be required in conformity with GAAP shall have been
made or provided therefor.

5.21 Margin Stock. No Loan Party nor any of its Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock. No part of
the proceeds of the loans made to Borrowers will be used to purchase or carry
any such Margin Stock or to extend credit to others for the purpose of
purchasing or carrying any such Margin Stock or for any purpose that violates
the provisions of Regulation T, U or X of the Board of Governors of the United
States Federal Reserve.

5.22 Governmental Regulation. No Loan Party nor any of its Subsidiaries is
subject to regulation under the Federal Power Act or the Investment Company Act
of 1940 or under any other federal or state statute or regulation which may
limit its ability to incur Indebtedness or which may otherwise render all or any
portion of the Obligations unenforceable. No Loan Party nor any of its
Subsidiaries is a “registered investment company” or a company “controlled” by a
“registered investment company” or a “principal underwriter” of a “registered
investment company” as such terms are defined in the Investment Company Act of
1940.

5.23 OFAC. No Loan Party nor any of its Subsidiaries is in violation of any of
the country or list based economic and trade sanctions administered and enforced
by OFAC. No Loan Party nor any of its Subsidiaries (a) is a Sanctioned Person or
a Sanctioned Entity, (b) has its assets located in Sanctioned Entities, or
(c) derives revenues from investments in, or transactions with Sanctioned
Persons or Sanctioned Entities. No proceeds of any loan made hereunder will be
used to fund any operations in, finance any investments or activities in, or
make any payments to, a Sanctioned Person or a Sanctioned Entity.

5.24 Employee and Labor Matters. There is (a) no unfair labor practice complaint
pending or, to the knowledge of Borrowers, threatened against any Loan Party or
any of its Subsidiaries before any Governmental Authority and no grievance or
arbitration proceeding pending or threatened against any Loan Party or any of
its Subsidiaries which arises out of or under any collective bargaining
agreement and that could reasonably be expected to result in a material
liability, (b) no strike, labor dispute, slowdown, stoppage or similar action or
grievance pending or threatened in writing against any Loan Party or any of its
Subsidiaries that could reasonably be expected to result in a material
liability, or (c) to the knowledge of Borrowers, after reasonable inquiry, no
union representation question existing with respect to the employees of any Loan
Party or any of its Subsidiaries and no union organizing activity taking place
with respect to any of the employees of any Loan Party or any of its
Subsidiaries. No Loan Party or any of its Subsidiaries has incurred any
liability or obligation under the Worker Adjustment and Retraining Notification
Act or similar state law, which remains unpaid or unsatisfied. The hours worked
and payments made to employees of each Loan Party and each of its Subsidiaries
have not been in violation of the Fair Labor Standards Act or any other
applicable legal requirements, except to the extent such violations could not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Change. All material payments due from any Loan Party or any of its
Subsidiaries on account of wages and employee health and welfare insurance and
other benefits have been paid or accrued as a liability on the books of such
Loan Party, except where the failure to do so could not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Change.

 

Exhibit D

Page 4

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5.25 [Reserved]

5.26 Collateral.

(a) Real Property. Schedule 5.26(a) to the Information Certificate sets forth
all Real Property owned by any of the Loan Parties as of the Closing Date.

(b) Intellectual Property.

(i) As of the Closing Date, Schedule 5.26(b) to the Information Certificate
provides a complete and correct list of (other than readily available
off-the-shelf Intellectual Property): (A) all registered Copyrights owned by any
Loan Party and all applications for registration of Copyrights owned by any Loan
Party; (B) all material Intellectual Property Licenses entered into out of the
ordinary course of business by any Loan Party pursuant to which (x) any Loan
Party has provided any license or other rights in Intellectual Property owned or
controlled by such Loan Party to any other Person or (y) any Person has granted
to any Loan Party any license or other rights in Intellectual Property owned or
controlled by such Person that is material to the business of such Loan Party,
including any Intellectual Property that is incorporated in any Inventory,
software, or other product marketed, sold, licensed, or distributed by such Loan
Party; (C) all registered Patents owned by any Loan Party and all applications
for Patents owned by any Loan Party; and (D) all registered Trademarks owned by
any Loan Party and all applications for registration of Trademarks owned by any
Loan Party;

(ii) all employees and contractors of each Loan Party who were involved in the
creation or development of any Intellectual Property for such Loan Party that is
necessary to the business of such Loan Party have signed agreements containing
assignment of Intellectual Property rights to such Loan Party and obligations of
confidentiality;

(iii) to each Loan Party’s knowledge after reasonable inquiry, no Person has
infringed or misappropriated or is currently infringing or misappropriating any
Intellectual Property rights owned by such Loan Party, in each case, that either
individually or in the aggregate could reasonably be expected to result in a
Material Adverse Change;

(iv) to each Loan Party’s knowledge after reasonable inquiry, all registered
Copyrights, registered Trademarks, and issued Patents that are owned by such
Loan Party and necessary in to the conduct of its business are valid, subsisting
and enforceable and in compliance in all material respects with all legal
requirements, filings, and payments and other actions that are required to
maintain such Intellectual Property in full force and effect; and

(v) each Loan Party has taken reasonable steps to maintain the confidentiality
of and otherwise protect and enforce its rights in all trade secrets owned by
such Loan Party that are necessary in the business of such Loan Party;

(c) Motor Vehicles. [Reserved].

(d) Pledged Interests. (i) Except for the Security Interest created hereby, each
Loan Party is and will at all times be the sole holder of record and the legal
and beneficial owner, free and clear of all Liens other than Permitted Liens, of
the Pledged Interests indicated on Schedule 5.26(d) to the Information
Certificate as being owned by such Loan Party and, when acquired by such Loan
Party, any Pledged Interests acquired after the Closing Date; (ii) all of the
Pledged Interests are duly authorized, validly issued, fully paid and
non-assessable and the Pledged Interests constitute or will constitute the
percentage of the issued and outstanding Stock of the Pledged Companies of such
Loan Party identified on Schedule 5.26(d) to the Information Certificate as
supplemented or modified by any Pledged Interests Addendum or any Joinder to
this Agreement; (iii) such Loan Party has the right and requisite authority to
pledge the Investment Related Property pledged by such Loan Party to Lender as
provided herein; (iv) except as permitted in Section 4.3 and Exhibit C, all
actions necessary or desirable to perfect and establish the first priority of,
or otherwise protect, Lender’s Liens in the Investment Related Property, and the
proceeds thereof, have been duly taken, upon (A) the execution and delivery of
this Agreement; (B) the taking of possession by Lender (or its Lender or
designee) of any certificates representing the Pledged Interests, together with
undated powers (or other documents of transfer acceptable to Lender) endorsed in
blank by the applicable Loan Party; (C) the filing of financing statements in
the applicable jurisdiction set forth on Schedule 5.6(a) to the Information
Certificate for such Loan Party with respect to the Pledged Interests of such
Loan Party that are not represented by certificates, and (D) with respect to any
Securities Accounts, the delivery of Control Agreements with respect thereto;
and (v) each Loan Party has delivered to and deposited with Lender all
certificates representing the Pledged Interests owned by such Loan Party to the
extent such Pledged Interests are represented by certificates, and undated
powers (or other documents of transfer acceptable to Lender) endorsed in blank
with respect to such certificates. None of the

 

Exhibit D

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Pledged Interests owned or held by such Loan Party has been issued or
transferred in violation of any securities registration, securities disclosure,
or similar laws of any jurisdiction to which such issuance or transfer may be
subject. As to all limited liability company or partnership interests issued
under any Pledged Operating Agreement or Pledged Partnership Agreement, each
Borrower hereby represents and warrants that the Pledged Interests issued
pursuant to such agreement (A) are not dealt in or traded on securities
exchanges or in securities markets, (B) do not constitute investment company
securities, and (C) are not held by such Loan Party in a securities account. In
addition, none of the Pledged Operating Agreements, the Pledged Partnership
Agreements, or any other agreements governing any of the Pledged Interests
issued under any Pledged Operating Agreement or Pledged Partnership Agreement
provide that such Pledged Interests are securities governed by Section 8 of the
Uniform Commercial Code as in effect in any relevant jurisdiction.

(e) Pledged Notes. There is no default, breach, violation, or event of
acceleration existing under any promissory note (as defined in the Code)
constituting Collateral and pledged hereunder (each a “Pledged Note”) and no
event has occurred or circumstance exists which, with the passage of time or the
giving of notice, or both, would constitute a default, breach, violation, or
event of acceleration under any Pledged Note. No Loan Party that is an obligee
under a Pledged Note has waived any default, breach, violation, or event of
acceleration under such Pledged Note.

(f) Valid Security Interest. This Agreement creates a valid security interest in
the Collateral of each Loan Party, to the extent a security interest therein can
be created under the Code, securing the payment of the Obligations. Except to
the extent a security interest in the Collateral cannot be perfected by the
filing of a financing statement under the Code, all filings and other actions
necessary or desirable to perfect and protect such security interest have been
duly taken or will have been taken upon the filing of financing statements
listing each applicable Loan Party, as a debtor, and Lender for itself and as
agent for the Bank Product Providers, as secured party, in the jurisdictions
listed next to such Loan Party’s name on Schedule 5.6(a) to the Information
Certificate. Upon the making of such filings, Lender shall have a first priority
perfected security interest in the Collateral of each Loan Party to the extent
such security interest can be perfected by the filing of a financing statement,
subject to Permitted Liens which are purchase money Liens. Upon filing of the
Copyright Security Agreement with the United States Copyright Office, filing of
the Patent and Trademark Security Agreement with the PTO, and the filing of
appropriate financing statements in the jurisdictions listed on Schedule 5.6(a)
to the Information Certificate, all action necessary or desirable to protect and
perfect the Security Interest in and to on each Loan Party’s Patents,
Trademarks, or Copyrights has been taken and such perfected Security Interest is
enforceable as such as against any and all creditors of and purchasers from any
Loan Party. All action by any Loan Party necessary to protect and perfect such
security interest on each item of Collateral has been duly taken.

5.27 Eligible Accounts. As to each Account that is identified by a Borrower as
an Eligible Account in a Borrowing Base Certificate submitted to Lender, 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 Borrower’s
business, (b) owed to such Borrower, and (c) not excluded as ineligible by
virtue of one or more of the excluding criteria (other than Lender-discretionary
criteria) set forth in the definition of Eligible Accounts.

5.28 [Reserved].

5.29 Locations of Inventory and Equipment. The Inventory and Equipment (other
than vehicles or Equipment out for repair) of the Loan Parties are not stored
with a bailee, warehouseman, or similar party (other than processors in the
ordinary course of business) and are located only at, or in-transit between or
to, the locations identified on Schedule 5.29 to the Information Certificate (as
such Schedule may be updated pursuant to Section 6.14).

5.30 Inventory Records. Each Loan Party keeps correct and accurate records, in
all material respects, itemizing and describing the type, quality, and quantity
of its Inventory and of the Inventory of its Subsidiaries and the book value
thereof.

5.31 ERISA Compliance.

(a) Each Plan is in compliance in all material respects with the applicable
provisions of ERISA, the IRC and other Federal or state laws. Each Pension Plan
that is intended to be a qualified plan under Section 401(a) of the IRC has
received a favorable determination letter from the Internal Revenue Service to
the effect that the form of such Plan is qualified under Section 401(a) of the
IRC and the trust related thereto has been determined by the Internal Revenue
Service to be exempt from federal income tax under Section 501(a) of the IRC, or
an application for such a letter is currently being processed by the Internal
Revenue Service. To the knowledge of the Loan Parties, nothing has occurred that
would prevent or cause the loss of such tax-qualified status.

(b) There are no pending or, to the knowledge of the Loan Parties, threatened
claims, actions or lawsuits, or action by any Governmental Authority, with
respect to any Plan that could reasonably be expected to result in a Material
Adverse Change. There has been no prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan that has resulted or
could reasonably be expected to result in a Material Adverse Change.

 

Exhibit D

Page 6

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(c) No ERISA Event has occurred, and neither the Loan Parties nor any ERISA
Affiliate is aware of any fact, event or circumstance that could reasonably be
expected to constitute or result in an ERISA Event with respect to any Pension
Plan; (ii) the Loan Parties and each ERISA Affiliate has met all applicable
requirements under the Pension Funding Rules in respect of each Pension Plan,
and no waiver of the minimum funding standards under the Pension Funding Rules
has been applied for or obtained; (iii) as of the most recent valuation date for
any Pension Plan, the funding target attainment percentage (as defined in
Section 430(d)(2) of the IRC) is 60% or higher and neither the Loan Parties nor
any ERISA Affiliate knows of any facts or circumstances that could reasonably be
expected to cause the funding target attainment percentage for any such plan to
drop below 60% as of the most recent valuation date; (iv) neither the Loan
Parties nor any ERISA Affiliate has incurred any liability to the PBGC other
than for the payment of premiums, and there are no premium payments which have
become due that are unpaid; (v) neither the Loan Parties nor any ERISA Affiliate
has engaged in a transaction that could be subject to Section 4069 or
Section 4212(c) of ERISA; and (vi) no Pension Plan has been terminated by the
plan administrator thereof nor by the PBGC, and no event or circumstance has
occurred or exists that could reasonably be expected to cause the PBGC to
institute proceedings under Title IV of ERISA to terminate any Pension Plan.

(d) No Loan Party or any ERISA Affiliate maintains or contributes to, or has any
unsatisfied obligation to contribute to, or liability under, any active or
terminated Pension Plan other than Pension Plans not otherwise prohibited by
this Agreement.

 

Exhibit D

Page 7

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EXHIBIT E

INFORMATION CERTIFICATE

OF

NOVATEL WIRELESS, INC.,

and

ENFORA, INC.

Dated: October 31, 2014

Wells Fargo Bank, National Association

2450 Colorado Avenue, Suite 3000W

Santa Monica, California 90404

Attention: Relationship Manager – Novatel Wireless, Inc.

In connection with certain financing provided or to be provided by Wells Fargo
Bank, National Association (“Lender”), each of the undersigned Borrowers (each a
“Loan Party”) represents and warrants to Lender the following information about
each Loan Party as of the date of this Agreement (capitalized terms not
specifically defined shall have the meaning set forth in the Agreement):

 

1. Attached as Schedule 5.1(b) is a complete and accurate description of (i) the
authorized capital Stock of each Loan Party and each of its direct Subsidiaries,
by class, and the number of shares issued and outstanding, (ii) all
subscriptions, options, warrants or calls relating to any shares of Stock of
each Loan Party, including any right of conversion or exchange; (iii) each
stockholders’ agreement, restrictive agreement, voting agreement or similar
agreement relating to any such capital Stock; and (iv) an organization chart of
each Loan Party and all Subsidiaries.

 

2. Each Loan Party has ownership in the entities (including Subsidiaries) set
forth on Schedule 5.1(c).

 

3. The Loan Parties use the following trade name(s) in the operation of their
business (e.g. billing, advertising, etc.):

NOVATEL WIRELESS, INC.; ENFORA INC.; MIFI

 

4. Each of the Loan Parties is a registered organization of the following type:

DELAWARE CORPORATION

 

5. The exact legal name (within the meaning of Section 9-503 of the Code) of
each Loan Party as set forth in its respective certificate of incorporation,
organization or formation, or other public organic document, as amended to date
is set forth in Schedule 5.6(a).

 

6. Each Loan Party is organized solely under the laws of the State set forth on
Schedule 5.6(a). Each Loan Party is in good standing under those laws and no
Loan Party is organized in any other State.

 

7. The chief executive office and mailing address of each Loan Party is located
at the address set forth on Schedule 5.6(b) hereto.

 

8. The books and records of each Loan Party pertaining to Accounts, contract
rights, Inventory, and other assets are located at the addresses specified on
Schedule 5.6(b).

 

9. The identity and Federal Employer Identification Number of each Loan Party
and organizational identification number, if any, is set forth on Schedule
5.6(c).

 

10. No Loan Party has any Commercial Tort Claims, except as set forth on
Schedule 5.6(d).

 

11. There are no actions, suits or proceedings with asserted liabilities in
excess of, or that could reasonably be expected to result in liabilities in
excess of, $250,000 that are pending or, to the knowledge of any Loan Party,
after reasonable inquiry, threatened in writing against any Loan Party or any of
its Subsidiaries except as set forth on Schedule 5.7(b).

 

Exhibit E

Page 1

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12. In the last five years, the name as set forth in each Loan Party’s
organizational documentation filed of record with the applicable state authority
has been changed as follows:

 

Date

   Prior Name      None      

 

13. Since the dates of their respective organization, the Loan Parties have made
or entered into the following mergers or acquisitions:

NOVATEL WIRELESS, INC. acquired ENFORA, INC. in 2010. ENFORA, INC. merged with
ENGLAND ACQUISITION CORPORATION on November 30, 2010 with ENFORA, INC. as the
surviving corporation

 

14. The assets of each Loan Party and of each Subsidiary of each Loan Party are
owned and held free and clear of Liens, mortgages, pledges, security interests,
encumbrances or charges except as set forth below:

 

Name and Address

of Secured Party

 

Description of Collateral

 

File No. of Financing Statement/Jurisdiction

SHAREHOLDER SETTLEMENT NOTE AND SECURITY AGREEMENT between Novatel Wireless,
Inc. and the Escrow Agent for the Class   Accounts Receivable as defined in the
Security Agreement.   None

 

15. Each Loan Party and each Subsidiary of each Loan Party has been and remains
in compliance, in all material respects, with all environmental laws applicable
to its business or operations except as set forth on Schedule 5.12.

 

16. No Loan Party has any Deposit Accounts, investment accounts, Securities
Accounts or similar accounts with any bank, securities intermediary or other
financial institution, except as set forth on Schedule 5.15 for the purposes and
of the types indicated therein.

 

17. No Loan Party and no Subsidiary of any Loan Party is a party to or bound by
an collective bargaining or similar agreement with any union, labor organization
or other bargaining agent except as set forth below (indicate date of agreement,
parties to agreement, description of employees covered, and date of termination)

None

 

18. Set forth on Schedule 5.17 is a reasonably detailed description of each
Material Contract of each Loan Party and its Subsidiaries as of the date of the
Agreement.

 

19. Set forth on Schedule 5.19 is a true and complete list of all Indebtedness
of each Loan Party and its Subsidiaries outstanding immediately prior to the
Closing Date which will remain outstanding after the Closing Date.

 

20. No Loan Party and no Subsidiary of any Loan Party has made any loans or
advances or guaranteed or otherwise become liable for the obligations of any
others (other than another Loan Party), except as set forth below:

None

 

21. No Loan Party has any Chattel Paper (whether tangible or electronic) or
instruments as of the date hereof, except as follows:

None

 

22. No Loan Party owns or licenses (other than off-the-shelf software licenses)
any material Trademarks, Patents, Copyrights or other Intellectual Property, and
is not a party to any material Intellectual Property License except as set forth
on Schedule 5.26(b) and there are no restrictions in any such Intellectual
Property License that restrict the sale or other disposition of any Inventory,
Equipment or other property of any Loan Party other than as set forth in
Schedule 5.26.(b).

 

23. Schedule 5.26(a) sets forth all Real Property owned by each Loan Party.

 

Exhibit E

Page 2

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

24. The Inventory, Equipment and other goods of each Loan Party are located only
at the locations set forth on Schedule 5.29.

 

25. At the present time, there are no material delinquent taxes due (including,
but not limited to, all payroll taxes, personal property taxes, real estate
taxes or income taxes) of any Loan Party or any Subsidiary of any Loan Party
except as follows:

None

 

26. There are no consignment, bill and hold, sale or return, sale on approval or
conditional sale arrangements with respect to any Inventory of any Borrower or
any other Loan or other goods except as set forth in Schedule 7.15.

 

27. No Borrower or other Loan Party has any Inventory stored with or in the
possession of a bailee, warehouseman, processor or other third party except as
set forth in Schedule 7.16.

 

28. Schedule 5.26(d) sets forth all Pledged Interests owned by each Borrower as
of the Closing Date, together with the percentage of the issued and outstanding
Stock of the Pledged Companies of such Borrower represented by such Pledged
Interests.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

Exhibit E

Page 3

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

Lender shall be entitled to rely upon the foregoing in all respects and the
undersigned is duly authorized to execute and deliver this Information
Certificate on behalf of each Loan Party.

 

Very truly yours,

NOVATEL WIRELESS, INC.

By:

 

/s/ Michael Newman

Name:

 

Michael Newman

Title:

 

Chief Financial Officer

ENFORA, INC.

By:

 

/s/ Michael Newman

Name:

 

Michael Newman

Title:

 

Chief Financial Officer

 

Exhibit E

Page 4

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

EXHIBIT F

TO CREDIT AND SECURITY AGREEMENT

Form of Pledged Interest Addendum

PLEDGED INTERESTS ADDENDUM

This Pledged Interests Addendum, dated as of [            ] [            ],
201[__] (this “Pledged Interests Addendum”), is delivered pursuant to
Section 6.12(l) of the Credit and Security Agreement referred to below. The
undersigned hereby agree that this Pledged Interests Addendum may be attached to
that certain Credit and Security Agreement, dated as of October 31, 2014 (as
amended, restated, supplemented, renewed, extended or otherwise modified from
time to time, the “Credit Agreement”), by and among Wells Fargo Bank, National
Association (“Lender”), the undersigned, and the other Borrowers party thereto.
Capitalized terms used but not defined herein shall have the meaning ascribed to
such terms in the Credit Agreement. The undersigned hereby agree that the
additional interests listed on Schedule I attached hereto shall be and become
part of the Pledged Interests pledged by the undersigned to Lender in the Credit
Agreement, with the same force and effect as if originally named therein.
Without limiting the generality of the foregoing, the undersigned hereby grant
to Lender a security interest in the Pledged Interests described on Schedule I
attached hereto to secure all now existing or hereafter arising Obligations.

This Pledged Interests Addendum is a Loan Document. Delivery of an executed
counterpart of this Pledged Interests Addendum by telefacsimile or other
electronic method of transmission shall be equally as effective as delivery of
an original executed counterpart of this Pledged Interests Addendum. If any of
the undersigned delivers an executed counterpart of this Pledged Interests
Addendum by telefacsimile or other electronic method of transmission, such
person shall also deliver an original executed counterpart of this Pledged
Interests Addendum but the failure to deliver an original executed counterpart
shall not affect the validity, enforceability, and binding effect of this
Pledged Interests Addendum.

The undersigned hereby certify that the representations and warranties set forth
in Section 5 and Exhibit D of the Credit Agreement of the undersigned are true
and correct in all material respects as to the Pledged Interests listed herein
on and as of the date hereof.

THE TERMS AND CONDITIONS OF THE CREDIT AGREEMENT ARE HEREBY INCORPORATED BY
REFERENCE INTO THIS PLEDGED INTERESTS ADDENDUM.

[SIGNATURE PAGE FOLLOWS]

 

EXHIBIT F

Page 1

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

IN WITNESS WHEREOF, the undersigned have caused this Pledged Interests Addendum
to be executed and delivered as of the day and year first above written.

 

  [—NAME OF ENTITY—] By:      

Name:

 

Title:

 

EXHIBIT F

Page 2

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

Schedule A-1

TO CREDIT AND SECURITY AGREEMENT

Collection Account

1. Novatel Wireless:

2. Enfora, Inc.:

 

Schedule A-1

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

Schedule A-2

TO CREDIT AND SECURITY AGREEMENT

Authorized Person

Mike Newman, Chief Financial Officer

Jutta Gebauer, Vice President Accounting and Controller

Tom Giesey, Manager Financial Reporting

 

Schedule A-2

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

Schedule D-1

TO CREDIT AND SECURITY AGREEMENT

Designated Account

1. Novatel Wireless, Inc:

2. Enfora, Inc.:

 

Schedule D-1

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

Schedule P-1

TO CREDIT AND SECURITY AGREEMENT

Permitted Investments

None

 

Schedule P-1

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

Schedule P-2

TO CREDIT AND SECURITY AGREEMENT

Permitted Liens

None

 

Schedule P-2

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

Schedule R

TO CREDIT AND SECURITY AGREEMENT

Australia

Austria

Belgium

Denmark

Finland

France

Germany

Hong Kong

Ireland

Israel

Japan

Netherlands

New Zealand

Northern Ireland

Norway

Puerto Rico

Scotland

Spain

Sweden

Switzerland

 

Schedule R