Exhibit 10.1


 




 





SECOND AMENDED AND RESTATED CREDIT AGREEMENT


 


by and among


 


SILICON GRAPHICS, INC.


 


and


 


EACH OF ITS SUBSIDIARIES THAT ARE SIGNATORIES HERETO


 


as Borrowers,


 


THE LENDERS THAT ARE SIGNATORIES HERETO


 


as the Lenders,


 


and


 


WELLS FARGO FOOTHILL, INC.


 


as the Arranger and Administrative Agent


 


Dated as of April 12, 2005


 




 
























 


TABLE OF
CONTENTS


 


	
  1.

  	
  DEFINITIONS AND CONSTRUCTION

  	
   

  
	
   

  	
  1.1

  	
  Definitions

  	
   

  
	
   

  	
  1.2

  	
  Accounting Terms

  	
   

  
	
   

  	
  1.3

  	
  Code

  	
   

  
	
   

  	
  1.4

  	
  Construction

  	
   

  
	
   

  	
  1.5

  	
  Schedules and Exhibits

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  LOAN AND TERMS OF PAYMENT

  	
   

  
	
   

  	
  2.1

  	
  Revolver Advances

  	
   

  
	
   

  	
  2.2

  	
  [Intentionally Omitted]

  	
   

  
	
   

  	
  2.3

  	
  Borrowing Procedures and Settlements

  	
   

  
	
   

  	
  2.4

  	
  Payments

  	
   

  
	
   

  	
  2.5

  	
  Overadvances

  	
   

  
	
   

  	
  2.6

  	
  Interest Rates and Letter of Credit Fee:
  Rates, Payments, and Calculations

  	
   

  
	
   

  	
  2.7

  	
  Cash Management

  	
   

  
	
   

  	
  2.8

  	
  Crediting Payments; Clearance Charge

  	
   

  
	
   

  	
  2.9

  	
  Designated Account

  	
   

  
	
   

  	
  2.10

  	
  Maintenance of Loan Account; Statements of Obligations

  	
   

  
	
   

  	
  2.11

  	
  Fees

  	
   

  
	
   

  	
  2.12

  	
  Letters of Credit

  	
   

  
	
   

  	
  2.13

  	
  LIBOR Option

  	
   

  
	
   

  	
  2.14

  	
  Capital Requirements

  	
   

  
	
   

  	
  2.15

  	
  Joint and Several Liability of Borrowers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  CONDITIONS; TERM OF AGREEMENT

  	
   

  
	
   

  	
  3.1

  	
  Conditions Precedent to the Initial
  Extension of Credit

  	
   

  
	
   

  	
  3.2

  	
  Conditions Precedent to all Extensions of
  Credit

  	
   

  
	
   

  	
  3.3

  	
  Term

  	
   

  
	
   

  	
  3.4

  	
  Effect of Termination

  	
   

  
	
   

  	
  3.5

  	
  Early Termination by Borrowers

  	
   

  
	
   

  	
  3.6

  	
  Condition Subsequent to the Initial
  Extension of Credit

  	
   

  
	
   

  	
  3.7

  	
  Conditional Waiver

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
  4.1

  	
  No Encumbrances

  	
   

  
	
   

  	
  4.2

  	
  Eligible Accounts

  	
   

  
	
   

  	
  4.3

  	
  Eligible Inventory

  	
   

  
	
   

  	
  4.4

  	
  Equipment

  	
   

  
	
   

  	
  4.5

  	
  Location of Inventory and Equipment

  	
   

  
	
   

  	
  4.6

  	
  Inventory Records

  	
   

  
	
   

  	
  4.7

  	
  State of Incorporation; Location of Chief
  Executive Office; Organizational Identification Number; Commercial Tort
  Claims

  	
   

  
	
   

  	
  4.8

  	
  Due Organization and Qualification;
  Subsidiaries

  	
   

  
							



 


i





















 


	
   

  	
  4.9

  	
  Due Authorization; No Conflict

  	
   

  
	
   

  	
  4.10

  	
  Litigation

  	
   

  
	
   

  	
  4.11

  	
  No
  Material Adverse Change

  	
   

  
	
   

  	
  4.12

  	
  Fraudulent
  Transfer

  	
   

  
	
   

  	
  4.13

  	
  Employee Benefits

  	
   

  
	
   

  	
  4.14

  	
  Environmental Condition

  	
   

  
	
   

  	
  4.15

  	
  Intellectual
  Property

  	
   

  
	
   

  	
  4.16

  	
  Leases

  	
   

  
	
   

  	
  4.17

  	
  Deposit Accounts and Securities Accounts

  	
   

  
	
   

  	
  4.18

  	
  Complete Disclosure

  	
   

  
	
   

  	
  4.19

  	
  Indebtedness

  	
   

  
	
   

  	
  4.20

  	
  Classified
  Material

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  AFFIRMATIVE
  COVENANTS

  	
   

  
	
   

  	
  5.1

  	
  Accounting System

  	
   

  
	
   

  	
  5.2

  	
  Collateral Reporting

  	
   

  
	
   

  	
  5.3

  	
  Financial Statements, Reports, Certificates

  	
   

  
	
   

  	
  5.4

  	
  [Intentionally Omitted]

  	
   

  
	
   

  	
  5.5

  	
  Inspection

  	
   

  
	
   

  	
  5.6

  	
  Maintenance of Properties

  	
   

  
	
   

  	
  5.7

  	
  Taxes

  	
   

  
	
   

  	
  5.8

  	
  Insurance

  	
   

  
	
   

  	
  5.9

  	
  Location of Threshold Inventory and
  Threshold Equipment

  	
   

  
	
   

  	
  5.10

  	
  Compliance with Laws

  	
   

  
	
   

  	
  5.11

  	
  Leases

  	
   

  
	
   

  	
  5.12

  	
  Existence

  	
   

  
	
   

  	
  5.13

  	
  Environmental

  	
   

  
	
   

  	
  5.14

  	
  Disclosure Updates

  	
   

  
	
   

  	
  5.15

  	
  Control Agreements

  	
   

  
	
   

  	
  5.16

  	
  Assignment of Proceeds

  	
   

  
	
   

  	
  5.17

  	
  Employee Benefits

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  NEGATIVE
  COVENANTS

  	
   

  
	
   

  	
  6.1

  	
  Indebtedness

  	
   

  
	
   

  	
  6.2

  	
  Liens

  	
   

  
	
   

  	
  6.3

  	
  Restrictions on Fundamental Changes

  	
   

  
	
   

  	
  6.4

  	
  Disposal of Assets

  	
   

  
	
   

  	
  6.5

  	
  Change Name

  	
   

  
	
   

  	
  6.6

  	
  Nature of Business

  	
   

  
	
   

  	
  6.7

  	
  Prepayments and Amendments

  	
   

  
	
   

  	
  6.8

  	
  Change of Control

  	
   

  
	
   

  	
  6.9

  	
  Consignments

  	
   

  
	
   

  	
  6.10

  	
  Distributions

  	
   

  
	
   

  	
  6.11

  	
  Accounting Methods

  	
   

  



 


ii





















 


	
   

  	
  6.12

  	
  Investments

  	
   

  
	
   

  	
  6.13

  	
  Transactions with Affiliates

  	
   

  
	
   

  	
  6.14

  	
  Use of Proceeds

  	
   

  
	
   

  	
  6.15

  	
  Inventory and Equipment with Bailees

  	
   

  
	
   

  	
  6.16

  	
  Financial Covenants

  	
   

  
	
   

  	
  6.17

  	
  No Transactions Prohibited Under ERISA;
  Unfunded Liability

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  EVENTS
  OF DEFAULT

  	
   

  
	
   

  	
  7.2

  	
  If Borrowers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  THE
  LENDER GROUP’S RIGHTS AND REMEDIES

  	
   

  
	
   

  	
  8.1

  	
  Rights and Remedies

  	
   

  
	
   

  	
  8.2

  	
  Remedies Cumulative

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  TAXES
  AND EXPENSES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  WAIVERS;
  INDEMNIFICATION

  	
   

  
	
   

  	
  10.1

  	
  Demand; Protest; etc

  	
   

  
	
   

  	
  10.2

  	
  The Lender Group’s Liability for Collateral

  	
   

  
	
   

  	
  10.3

  	
  Indemnification

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  NOTICES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS

  	
   

  
	
   

  	
  13.1

  	
  Assignments and Participations

  	
   

  
	
   

  	
  13.2

  	
  Successors

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  AMENDMENTS;
  WAIVERS

  	
   

  
	
   

  	
  14.1

  	
  Amendments
  and Waivers

  	
   

  
	
   

  	
  14.2

  	
  Replacement of Holdout Lender

  	
   

  
	
   

  	
  14.3

  	
  No Waivers; Cumulative Remedies

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  AGENT; THE LENDER GROUP

  	
   

  
	
   

  	
  15.1

  	
  Appointment and Authorization of Agent

  	
   

  
	
   

  	
  15.2

  	
  Delegation of Duties

  	
   

  
	
   

  	
  15.3

  	
  Liability
  of Agent

  	
   

  
	
   

  	
  15.4

  	
  Reliance
  by Agent

  	
   

  
	
   

  	
  15.5

  	
  Notice
  of Default or Event of Default

  	
   

  
	
   

  	
  15.6

  	
  Credit
  Decision

  	
   

  
	
   

  	
  15.7

  	
  Costs
  and Expenses; Indemnification

  	
   

  
	
   

  	
  15.8

  	
  Agent
  in Individual Capacity

  	
   

  
	
   

  	
  15.9

  	
  Successor
  Agent

  	
   

  
	
   

  	
  15.10

  	
  Lender
  in Individual Capacity

  	
   

  



 


iii





















 


	
   

  	
  15.11

  	
  Withholding
  Taxes

  	
   

  
	
   

  	
  15.12

  	
  Collateral
  Matters

  	
   

  
	
   

  	
  15.13

  	
  Restrictions
  on Actions by Lenders; Sharing of Payments

  	
   

  
	
   

  	
  15.14

  	
  Agency
  for Perfection

  	
   

  
	
   

  	
  15.15

  	
  Payments by Agent to the Lenders

  	
   

  
	
   

  	
  15.16

  	
  Concerning the Collateral and Related Loan
  Documents

  	
   

  
	
   

  	
  15.17

  	
  Field
  Audits and Examination Reports; Confidentiality; Disclaimers by Lenders;
  Other Reports and Information

  	
   

  
	
   

  	
  15.18

  	
  Several
  Obligations; No Liability

  	
   

  
	
   

  	
  15.19

  	
  Bank Product Providers

  	
   

  
	
   

  	
  15.20

  	
  Disclosure
  of Classified Material

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  GENERAL
  PROVISIONS

  	
   

  
	
   

  	
  16.1

  	
  Effectiveness

  	
   

  
	
   

  	
  16.2

  	
  Section Headings

  	
   

  
	
   

  	
  16.3

  	
  Interpretation

  	
   

  
	
   

  	
  16.4

  	
  Severability of Provisions

  	
   

  
	
   

  	
  16.5

  	
  Counterparts; Electronic Execution

  	
   

  
	
   

  	
  16.6

  	
  Revival and Reinstatement of Obligations

  	
   

  
	
   

  	
  16.7

  	
  Confidentiality

  	
   

  
	
   

  	
  16.8

  	
  Integration

  	
   

  
	
   

  	
  16.9

  	
  Parent as Agent for Borrowers

  	
   

  



 


iv





















 


CREDIT AGREEMENT


 


THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this “Agreement”), is entered into as
of April 12, 2005, by and among the lenders identified on the signature
pages hereof (such lenders, together with their respective successors and
permitted assigns, are referred to hereinafter each individually as a “Lender”
and collectively as the “Lenders”), WELLS FARGO FOOTHILL,
INC., a California corporation, as the arranger and administrative
agent for the Lenders (in such capacity, together with its successors and
assigns in such capacity, “Agent”), SILICON
GRAPHICS, INC., a Delaware corporation (“Parent”), and each of
Parent’s Subsidiaries identified on the signature pages hereof (such
Subsidiaries, together with Parent, are referred to hereinafter each
individually as a “Borrower”, and collectively, jointly and severally, as the “Borrowers”).


 


INTRODUCTION STATEMENT


 


All defined terms not otherwise defined above or in this Introduction
Statement are as defined in Schedule 1.1 or as defined elsewhere herein.


 


The Borrowers, Agent, and certain lenders have entered into a Loan and
Security Agreement, dated as of April 10, 2001, providing for a secured
credit facility (the “2001 Credit Agreement”). 
As of September 24, 2002, the 2001 Credit Agreement, was amended
and restated in its entirety (as so amended and restated and further amended
through the date hereof, the “Existing Credit Agreement”).


 


The Borrowers have requested that the Lenders agree to further amend
and restate the Existing Credit Agreement, in order to, among other things,
make available a secured credit facility of $60,000,000, the proceeds of which
will be used to (i) refinance outstanding obligations under the Existing Credit
Agreement, and (ii) fund general working capital requirements and other general
corporate purposes.


 


To provide assurance and security for the repayment of the loans and
other Obligations of the Borrowers hereunder, the Borrowers will provide or
will cause to be provided to Agent (for the benefit of the Lender Group and the
Bank Product Providers), a security interest in the Collateral.


 


Subject to the terms and conditions set forth herein, Agent is willing
to act as agent for the Lenders and each Lender is willing to make loans to the
Borrowers and participate in the Letters of Credit in an aggregate amount not
in excess of its Commitment hereunder.


 


Accordingly, the parties hereto hereby agree that, effective as of the
Closing Date, the Existing Credit Agreement is hereby amended and restated in
its entirety to read as follows:


 


1.              DEFINITIONS
AND CONSTRUCTION.


 


1.1                                 Definitions.
 Capitalized terms used in this
Agreement shall have the meanings specified therefor on Schedule 1.1.


 


1





















 


1.2                                 Accounting Terms.  All accounting terms
not specifically defined herein shall be construed in accordance with
GAAP.  When used herein, the term “financial
statements” shall include the notes and schedules thereto.


 


1.3                                 Code.  Any terms used in this Agreement
that are defined in the Code shall be construed and defined as set forth in the
Code unless otherwise defined herein, provided, however, that to
the extent that the Code is used to define any term herein and such term is
defined differently in different Articles of the Code, the definition of such
term contained in Article 9 shall govern.


 


1.4                                 Construction.
 Unless the context of this Agreement
or any other Loan Document clearly requires otherwise, references to the plural
include the singular, references to the singular include the plural, the terms “includes”
and “including” are not limiting, the term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase “and/or,” and any
provision that is set forth herein as part of a list or series is to be
construed in a manner that does not result in duplication of any other provision
in such list or series.  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 the
other Loan Documents to any agreement, instrument, or document shall include
all alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein). 
Any reference herein to the satisfaction or repayment in full of the
Obligations shall mean the repayment in full in cash (or cash collateralization
in accordance with the terms hereof) of all Obligations other than contingent
indemnification Obligations and other than any Bank Product Obligations that,
at such time, are allowed by the applicable Bank Product Provider to remain
outstanding and are not required to be repaid or cash collateralized pursuant
to the provisions of this Agreement.  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 the other Loan Documents shall be satisfied by
the transmission of a Record and any Record transmitted shall constitute a
representation and warranty as to the accuracy and completeness of the
information contained therein.


 


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


 


2.              LOAN AND TERMS OF PAYMENT.


 


2.1                                 Revolver
Advances.


 


(a)  Subject to the terms and
conditions of this Agreement, and during the term of this Agreement, each
Lender with a Commitment agrees (severally, not jointly or jointly and
severally) to make advances (“Advances”) to Borrowers in an amount at any one
time outstanding not to exceed such Lender’s Pro Rata Share of an amount equal to the lesser of (i) the


 


2





















 


Maximum Revolver Amount less the Letter
of Credit Usage, or (ii) the Borrowing Base less the Letter
of Credit Usage.


 


(b)  Anything to the contrary in
this Section 2.1 notwithstanding, Agent shall have the right to
establish reserves in such amounts, and with respect to such matters, as Agent
in its Permitted Discretion shall deem necessary or appropriate, against the
Borrowing Base, including reserves with respect to (A) sums that Borrowers are
required to pay by any Section of this Agreement or any other Loan
Document (such as taxes, assessments, insurance premiums, or, in the case of
leased assets, rents or other amounts payable under such leases) and have failed
to pay, and (B) amounts owing by Borrowers to any Person to the extent secured
by a Lien on, or trust over, any of the Collateral (other than a Permitted
Lien), which Lien or trust, in the Permitted Discretion of Agent likely would
have a priority superior to the Agent’s Liens (such as Liens or trusts in favor
of landlords, warehousemen, carriers, mechanics, materialmen, laborers, or
suppliers, or Liens or trusts for ad valorem,
excise, sales, or other taxes where given priority under applicable law) in and
to such item of the Collateral, and (ii) after the occurrence and during the
continuance of an Event of Default, with respect to such other matters as Agent
in its Permitted Discretion shall deem necessary or appropriate.  In addition to the foregoing, Agent shall
have the right to have the Inventory reappraised by a qualified appraisal
company selected by Agent from time to time after the Closing Date for the
purpose of redetermining the Net Orderly Liquidation Percentage and, as a
result, redetermining the Borrowing Base.


 


(c)  Amounts borrowed pursuant to
this Section 2.1 may be repaid and, subject to the terms and
conditions of this Agreement, reborrowed at any time during the term of this
Agreement.


 


2.2                                 [Intentionally
Omitted].


 


2.3                                 Borrowing Procedures
and Settlements.


 


(a)  Procedure for Borrowing.  Each
Borrowing shall be made by an irrevocable written request by an Authorized
Person delivered to Agent.  Such notice
must be received by Agent no later than 10:00 a.m. (California time) on the Business
Day that is the requested Funding Date specifying (i) the amount of such
Borrowing, and (ii) the requested Funding Date, which shall be a Business Day; provided,
however, that if Swing Lender is not obligated to make a Swing Loan as
to a requested Borrowing pursuant to Section 2.3(b) below, such notice
must be received by Agent no later than 10:00 a.m. (California time) on the
Business Day prior to the date that is the requested Funding Date.  At Agent’s election, in lieu of delivering
the above-described written request, any Authorized Person may give Agent
telephonic notice of such request by the required time.  In such circumstances, Borrowers agree that
any such telephonic notice will be confirmed in writing within 24 hours of the
giving of such telephonic notice, but the failure to provide such written
confirmation shall not affect the validity of the request.


 


(b)  Making of Swing Loans. 
In the case of a request for an Advance and so long as either (i) the
aggregate amount of Swing Loans made since the last Settlement Date plus the
amount of the requested Advance does not exceed $1,000,000, or (ii) Swing
Lender, in its sole discretion, shall agree to make a Swing Loan
notwithstanding the foregoing limitation, Swing Lender, as a Lender, shall make
an Advance in the amount of such Borrowing (any such


 


3





















 


Advance made solely by Swing Lender as a Lender pursuant to this Section 2.3(b)
being referred to as a “Swing Loan” and such Advances being referred to
collectively as “Swing Loans”) available to Borrowers on the Funding Date
applicable thereto by transferring immediately available funds to Borrowers’
Designated Account.  Each Swing Loan
shall be deemed to be an Advance hereunder and shall be subject to all the
terms and conditions applicable to other Advances, except that all payments on
any Swing Loan shall be payable to Swing Lender as a Lender solely for its own
account.  Subject to the provisions of Section 2.3(d)(ii),
Swing Lender as a Lender shall not make and shall not be obligated to make any
Swing Loan if Swing Lender has actual knowledge that (A) one or more of the
applicable conditions precedent set forth in Section 3 will not be
satisfied on the requested Funding Date for the applicable Borrowing,  or (B) the requested Borrowing would exceed
the Availability on such Funding Date. 
Swing Lender as a Lender shall not otherwise be required to determine
whether the applicable conditions precedent set forth in Section 3
have been satisfied on the Funding Date applicable thereto prior to making any
Swing Loan.  The Swing Loans shall be
secured by the Agent’s Liens, constitute Obligations hereunder, and bear
interest at the rate applicable from time to time to Advances that are Base
Rate Loans.


 


(c)  Making of Loans.


 


(i)                                     In
the event that Swing Lender is not obligated to make a Swing Loan, then
promptly after receipt of a request for a Borrowing pursuant to Section 2.3(a),
Agent shall notify the Lenders, not later than 1:00 p.m. (California time) on
the Business Day immediately preceding the Funding Date applicable thereto, by
telecopy, telephone, or other similar form of transmission, of the requested
Borrowing.  Each Lender shall make the
amount of such Lender’s Pro Rata Share of the requested Borrowing available to
Agent in immediately available funds, to Agent’s Account, not later than 10:00
a.m. (California time) on the Funding Date applicable thereto.  After Agent’s receipt of the proceeds of such
Advances, Agent shall make the proceeds thereof available to Administrative
Borrower on the applicable Funding Date by transferring immediately available
funds equal to such proceeds received by Agent to Administrative Borrower’s
Designated Account; provided, however, that, subject to the
provisions of Section 2.3(d)(ii), Agent shall not request any
Lender to make, and no Lender shall have the obligation to make, any Advance if
Agent shall have actual knowledge that (1) one or more of the applicable
conditions precedent set forth in Section 3 will not be satisfied
on the requested Funding Date for the applicable Borrowing unless such
condition has been waived, or (2) the requested Borrowing would exceed the
Availability on such Funding Date.


 


(ii)                                  Unless
Agent receives notice from a Lender prior to 9:00 a.m. (California time) on the
date of a Borrowing, that such Lender will not make available as and when
required hereunder to Agent for the account of Borrowers the amount of that
Lender’s Pro Rata Share of the Borrowing, Agent may assume that each Lender has
made or will make such amount available to Agent in immediately available funds
on the Funding Date and Agent may (but shall not be so required), in reliance
upon such assumption, make available to Borrowers on such date a corresponding
amount.  If and to the extent any Lender
shall not have made its full amount available to Agent in immediately available
funds and Agent in such circumstances has made available to Borrowers such
amount, that Lender shall on the Business Day following such Funding Date make such
amount available to Agent, together with interest at the Defaulting Lender Rate
for each day during such period.  A
notice submitted by Agent to any Lender with 


 


4





















 


respect to amounts owing under this subsection shall be
conclusive, absent manifest error.  If
such amount is so made available, such payment to Agent shall constitute such
Lender’s Advance on the date of Borrowing for all purposes of this
Agreement.  If such amount is not made
available to Agent on the Business Day following the Funding Date, Agent will
notify Administrative Borrower of such failure to fund and, upon demand by
Agent, Borrowers shall pay such amount to Agent for Agent’s account, together
with interest thereon for each day elapsed since the date of such Borrowing, at
a rate per annum equal to the interest rate applicable at the time to the
Advances composing such Borrowing.  The
failure of any Lender to make any Advance on any Funding Date shall not relieve
any other Lender of any obligation hereunder to make an Advance on such Funding
Date, but no Lender shall be responsible for the failure of any other Lender to
make the Advance to be made by such other Lender on any Funding Date.


 


(iii)                               Agent
shall not be obligated to transfer to a Defaulting Lender any payments made by
Borrowers to Agent for the Defaulting Lender’s benefit, and, in the absence of
such transfer to the Defaulting Lender, Agent shall transfer any such payments
to each other non-Defaulting Lender member of the Lender Group ratably in
accordance with their Commitments (but only to the extent that such Defaulting
Lender’s Advance was funded by the other members of the Lender Group) or, if so
directed by Administrative Borrower and if no Default or Event of Default had
occurred and is continuing (and to the extent such Defaulting Lender’s Advance
was not funded by the Lender Group), retain same to be re-advanced to Borrowers
as if such Defaulting Lender had made Advances to Borrowers.  Subject to the foregoing, Agent may hold and,
in its Permitted Discretion, re-lend to Borrowers for the account of such
Defaulting Lender the amount of all such payments received and retained by
Agent for the account of such Defaulting Lender.  Solely for the purposes of voting or consenting
to matters with respect to the Loan Documents, such Defaulting Lender shall be
deemed not to be a “Lender” and such Lender’s Commitment shall be deemed to be
zero.  This Section shall remain
effective with respect to such Lender until (x) the Obligations under this
Agreement shall have been declared or shall have become immediately due and
payable, (y) the non-Defaulting Lenders, Agent, and Administrative Borrower
shall have waived such Defaulting Lender’s default in writing, or (z) the
Defaulting Lender makes its Pro Rata Share of the applicable Advance and pays
to Agent all amounts owing by Defaulting Lender in respect thereof.  The operation of this Section shall not
be construed to increase or otherwise affect the Commitment of any Lender, to
relieve or excuse the performance by such Defaulting Lender or any other Lender
of its duties and obligations hereunder, or to relieve or excuse the
performance by Borrowers of their duties and obligations hereunder to Agent or
to the Lenders other than such Defaulting Lender.  Any such failure to fund by any Defaulting
Lender shall constitute a material breach by such Defaulting Lender of this
Agreement and shall entitle Administrative Borrower at its option, upon written
notice to Agent, to arrange for a substitute Lender to assume the Commitment of
such Defaulting Lender, such substitute Lender to be reasonably acceptable to
Agent.  In connection with the
arrangement of such a substitute Lender, the Defaulting Lender shall have no
right to refuse to be replaced hereunder, and agrees to execute and deliver a
completed form of Assignment and Acceptance in favor of the substitute Lender
(and agrees that it shall be deemed to have executed and delivered such
document if it fails to do so) subject only to being repaid its share of the
outstanding Obligations (other than Bank Product Obligations, but including an
assumption of its Pro Rata Share of the Risk Participation Liability) without
any premium or penalty of any kind whatsoever; provided however, that any such assumption
of the Commitment of such Defaulting Lender shall not be deemed to constitute a
waiver of any of the Lender Group’s or Borrowers’


 


5





















 


rights or remedies against any such Defaulting Lender arising out of or
in relation to such failure to fund.


 


(d)  Protective Advances and Optional Overadvances.


 


(i)                                     Agent
hereby is authorized by Borrowers and the Lenders, from time to time in Agent’s
sole discretion, (A) after the occurrence and during the continuance of a
Default or an Event of Default, or (B) at any time that any of the other
applicable conditions precedent set forth in Section 3 are not
satisfied, to make Advances to Borrowers on behalf of the Lenders that Agent,
in its Permitted Discretion deems necessary or desirable (1) to preserve or
protect the Collateral, or any portion thereof, (2) to enhance the likelihood
of repayment of the Obligations (other than the Bank Product Obligations), or
(3) to pay any other amount chargeable to Borrowers pursuant to the terms of
this Agreement, including Lender Group Expenses and the costs, fees, and
expenses described in Section 9 (any of the Advances described in
this Section 2.3(d)(i) shall be referred to as “Protective Advances”).


 


(ii)                                  Any
contrary provision of this Agreement notwithstanding, the Lenders hereby
authorize Agent or Swing Lender, as applicable, and either Agent or Swing
Lender, as applicable, may, but is not obligated to, knowingly and
intentionally, continue to make Advances (including Swing Loans) to Borrowers
notwithstanding that an Overadvance exists or thereby would be created, so long
as (A) after giving effect to such Advances, the outstanding Revolver Usage
does not exceed the Borrowing Base by more than $1,000,000, and (B) after
giving effect to such Advances, the outstanding Revolver Usage (except for and
excluding amounts charged to the Loan Account for interest, fees, or Lender
Group Expenses) does not exceed the Maximum Revolver Amount.  In the event Agent obtains actual knowledge
that the Revolver Usage exceeds the amounts permitted by the immediately
foregoing provisions, regardless of the amount of, or reason for, such excess,
Agent shall notify the Lenders as soon as practicable (and prior to making any
(or any additional) intentional Overadvances (except for and excluding amounts
charged to the Loan Account for interest, fees, or Lender Group Expenses)
unless Agent determines that prior notice would result in imminent harm to the
Collateral or its value), and the Lenders with Revolver Commitments thereupon
shall, together with Agent, jointly determine the terms of arrangements that
shall be implemented with Borrowers intended to reduce, within a reasonable
time, the outstanding principal amount of the Advances to Borrowers to an amount
permitted by the preceding sentence.  In
such circumstances, if any Lender with a Commitment disagrees over the proposed
terms of reduction or repayment of any Overadvance, the terms of reduction or
repayment thereof shall be implemented according to the determination of the
Required Lenders.  Each Lender with a
Commitment shall be obligated to settle with Agent as provided in Section 2.3(e)
for the amount of such Lender’s Pro Rata Share of any unintentional
Overadvances by Agent reported to such Lender, any intentional Overadvances
made as permitted under this Section 2.3(d)(ii), and any
Overadvances resulting from the charging to the Loan Account of interest, fees,
or Lender Group Expenses.


 


(iii)                               Each
Protective Advance and each Overadvance shall be deemed to be an Advance
hereunder, except that no Protective Advance or Overadvance shall be eligible
to be a LIBOR Rate Loan and all payments on the Protective Advances shall be
payable to Agent solely for its own account. 
The Protective Advances and Overadvances shall be repayable on 


 


6





















 


demand, secured by the Agent’s Liens, constitute Obligations hereunder,
and bear interest at the rate applicable from time to time to Advances that are
Base Rate Loans.  The provisions of this Section 2.3(d)
are for the exclusive benefit of Agent, Swing Lender, and the Lenders and are
not intended to benefit any Borrower in any way.


 


(e)  Settlement.  It is
agreed that each Lender’s funded portion of the Advances is intended by the
Lenders to equal, at all times, such Lender’s Pro Rata Share of the outstanding
Advances.  Such agreement
notwithstanding, Agent, Swing Lender, and the other Lenders agree (which
agreement shall not be for the benefit of any Borrower) that in order to
facilitate the administration of this Agreement and the other Loan Documents,
settlement among the Lenders as to the Advances, the Swing Loans, and the
Protective Advances shall take place on a periodic basis in accordance with the
following provisions:


 


(i)                                     Agent
shall request settlement (“Settlement”) with the Lenders on a weekly basis, or
on a more frequent basis if so determined by Agent, (1) on behalf of Swing
Lender, with respect to each outstanding Swing Loan, (2) for itself, with
respect to the outstanding Protective Advances, and (3) with respect to
Borrowers’ Collections received, as to each by notifying the Lenders by
telecopy, telephone, or other similar form of transmission, of such requested
Settlement, no later than 2:00 p.m. (California time) on the Business Day
immediately prior to the date of such requested Settlement (the date of such
requested Settlement being the “Settlement Date”).  Such notice of a Settlement Date shall
include a summary statement of the amount of outstanding Advances, Swing  Loans, and Protective Advances for the period
since the prior Settlement Date.  Subject
to the terms and conditions contained herein: (y) if a Lender’s balance of the
Advances (including Swing Loans and Protective Advances) exceeds such Lender’s Pro
Rata Share of the Advances (including Swing Loans and Protective Advances) as
of a Settlement Date, then Agent shall, by no later than 12:00 p.m. (California
time) on the Settlement Date, transfer in immediately available funds to a
Deposit Account of such Lender (as such Lender may designate), an amount such
that each such Lender shall, upon receipt of such amount, have as of the
Settlement Date, its Pro Rata Share of the Advances (including Swing Loans and
Protective Advances), and (z) if a Lender’s balance of the Advances (including
Swing Loans and Protective Advances) is less than such Lender’s Pro Rata Share
of the Advances (including Swing Loans and Protective Advances) as of a
Settlement Date, such Lender shall no later than 12:00 p.m. (California time)
on the Settlement Date transfer in immediately available funds to the Agent’s
Account, an amount such that each such Lender shall, upon transfer of such
amount, have as of the Settlement Date, its Pro Rata Share of the Advances
(including Swing Loans and Protective Advances).  Such amounts made available to Agent under
clause (z) of the immediately preceding sentence shall be applied against the
amounts of the applicable Swing Loans or Protective Advances and, together with
the portion of such Swing Loans or Protective Advances representing Swing
Lender’s Pro Rata Share thereof, shall constitute Advances of such
Lenders.  If any such amount is not made
available to Agent by any Lender on the Settlement Date applicable thereto to
the extent required by the terms hereof, Agent shall be entitled to recover for
its account such amount on demand from such Lender together with interest
thereon at the Defaulting Lender Rate.


 


(ii)                                  In
determining whether a Lender’s balance of the Advances, Swing Loans, and Protective
Advances is less than, equal to, or greater than such Lender’s Pro Rata Share
of the Advances, Swing Loans, and Protective Advances as of a Settlement Date,
Agent


 


7





















 


shall, as part of the relevant Settlement, apply to such balance the
portion of payments actually received in good funds by Agent with respect to
principal, interest and fees payable by Borrowers and allocable to the Lenders
hereunder, and proceeds of Collateral. 
To the extent that a net amount is owed to any such Lender after such
application, such net amount shall be distributed by Agent to that Lender as
part of such next Settlement.


 


(iii)                               Between
Settlement Dates, Agent, to the extent no Protective Advances or Swing Loans
are outstanding, may pay over to Swing Lender any payments received by Agent,
that in accordance with the terms of this Agreement would be applied to the
reduction of the Advances, for application to Swing Lender’s Pro Rata Share of
the Advances.  If, as of any Settlement
Date, Collections of Borrowers received since the then immediately preceding
Settlement Date have been applied to Swing Lender’s Pro Rata Share of the
Advances other than to Swing Loans, as provided for in the previous sentence,
Swing Lender shall pay to Agent for the accounts of the Lenders, and Agent
shall pay to the Lenders, to be applied to the outstanding Advances of such
Lenders, an amount such that each Lender shall, upon receipt of such amount,
have, as of such Settlement Date, its Pro Rata Share of the Advances.  During the period between Settlement Dates,
Swing Lender with respect to Swing Loans, Agent with respect to Protective
Advances, and each Lender (subject to the effect of agreements between Agent
and individual Lenders) with respect to the Advances other than Swing Loans and
Protective Advances, shall be entitled to interest at the applicable rate or
rates payable under this Agreement on the daily amount of funds employed by
Swing Lender, Agent, or the Lenders, as applicable.


 


(f)  Notation.  Agent shall
record on its books the principal amount of the Advances owing to each Lender,
including the Swing Loans owing to Swing Lender, and Protective Advances owing
to Agent, and the interests therein of each Lender, from time to time and such
records shall, absent manifest error, gross negligence or willful misconduct on
the part of Agent, conclusively be presumed to be correct and accurate.


 


(g)  Lenders’ Failure to Perform.  All
Advances (other than Swing Loans and Protective Advances) shall be made by the
Lenders contemporaneously and in accordance with their Pro Rata Shares.  It is understood that (i) no Lender shall be
responsible for any failure by any other Lender to perform its obligation to
make any Advance (or other extension of credit) hereunder, nor shall any
Commitment of any Lender be increased or decreased as a result of any failure
by any other Lender to perform its obligations hereunder, and (ii) no failure
by any Lender to perform its obligations hereunder shall excuse any other
Lender from its obligations hereunder.


 


2.4                                 Payments.


 


(a)  Payments by Borrowers.


 


(i)                                     Except
as otherwise expressly provided herein, all payments by Borrowers shall be made
in Dollars to Agent’s Account for the account of the Lender Group and shall be made
in immediately available funds, no later than 11:00 a.m. (California time) on
the date specified herein.  Any payment
received by Agent later than 11:00 a.m. (California time),


 


8





















 


shall be deemed to have been received on the following Business Day and
any applicable interest or fee shall continue to accrue until such following
Business Day.


 


(ii)                                  Unless
Agent receives notice from Administrative Borrower prior to the date on which
any payment is due to the Lenders that Borrowers will not make such payment in
full as and when required, Agent may assume that Borrowers have made (or will
make) such payment in full to Agent on such date in immediately available funds
and Agent may (but shall not be so required), in reliance upon such assumption,
distribute to each Lender on such due date an amount equal to the amount then
due such Lender.  If and to the extent
Borrowers do not make such payment in full to Agent on the date when due, each
Lender severally shall repay to Agent on demand such amount distributed to such
Lender, together with interest thereon at the Defaulting Lender Rate for each
day from the date such amount is distributed to such Lender until the date
repaid.


 


(b)  Apportionment and Application.


 


(i)                                     Except
as otherwise provided with respect to Defaulting Lenders and except as
otherwise provided in the Loan Documents (including agreements between Agent
and individual Lenders), aggregate principal and interest payments shall be
apportioned ratably among the Lenders (according to the unpaid principal
balance of the Obligations to which such payments relate held by each Lender)
and payments of fees and expenses (other than fees or expenses that are for
Agent’s separate account, after giving effect to any agreements between Agent
and individual Lenders) shall be apportioned ratably among the Lenders.  All payments shall be remitted to Agent and
all such payments, and all proceeds of Collateral received by Agent, shall be
applied as follows:


 


(A)  first, ratably to pay
any Lender Group Expenses then due to Agent or any of the Lenders under the
Loan Documents, until paid in full,


 


(B)  second, ratably to
pay any fees or premiums then due to Agent (for its separate account, after
giving effect to any agreements between Agent and individual Lenders) or any of
the Lenders under the Loan Documents until paid in full,


 


(C)  third, to pay
interest due in respect of all Protective Advances until paid in full,


 


(D)  fourth, to pay the
principal of all Protective Advances until paid in full,


 


(E)  fifth, ratably to pay
interest due in respect of the Advances (other than Protective Advances) and
the Swing Loans until paid in full,


 


(F)  sixth, to pay the
principal of all Swing Loans until paid in full,


 


(G)  seventh, so long as
no Event of Default has occurred and is continuing, and at Agent’s election
(which election Agent agrees will not be made if an Overadvance would be
created thereby), to pay amounts then due and owing by Administrative Borrower
in respect of Bank Products, until paid in full,


 


9





















 


(H)  eighth, so long as no
Event of Default has occurred and is continuing, to pay the principal of all
Advances until paid in full,


 


(I)  ninth, if an Event of
Default has occurred and is continuing, ratably (i) to pay the principal of all
Advances until paid in full, (ii) to Agent, to be held by Agent, for the
ratable benefit of Issuing Lender and those Lenders having a Commitment, as
cash collateral in an amount up to 105% of the Letter of Credit Usage until
paid in full, and (iii) to Agent, to be held by Agent, for the benefit of the
Bank Product Providers, as cash collateral in an amount up to the amount of the
Bank Product Reserve established prior to the occurrence of, and not in
contemplation of, the subject Event of Default until Borrowers’ obligations in
respect of Bank Products have been paid in full or the cash collateral amount
has been exhausted,


 


(J)  tenth, if an Event of
Default has occurred and is continuing, to pay any other Obligations (including
the provision of amounts to Agent, to be held by Agent, for the benefit of the
Bank Product Providers, as cash collateral in an amount up to the amount
determined by Agent in its Permitted Discretion as the amount necessary to
secure Borrowers’ obligations in respect of Bank Products), and


 


(K)  eleventh, to
Borrowers (to be wired to the Designated Account) or such other Person entitled
thereto under applicable law.


 


(ii)                                  Agent
promptly shall distribute to each Lender, pursuant to the applicable wire
instructions received from each Lender in writing, such funds as it may be
entitled to receive, subject to a Settlement delay as provided in Section 2.3(e).


 


(iii)                               In
each instance, so long as no Event of Default has occurred and is continuing,
this Section 2.4(b) shall not apply to any payment made by
Borrowers to Agent and specified by Borrowers to be for the payment of specific
Obligations then due and payable (or prepayable) under any provision of this
Agreement.


 


(iv)                              For
purposes of the foregoing, “paid in full” means payment of all amounts owing
under the Loan Documents according to the terms thereof, including loan fees,
service fees, professional fees, interest (and specifically including interest
accrued after the commencement of any Insolvency Proceeding), default interest,
interest on interest, and expense reimbursements, and whether or not any of the
foregoing would be or is allowed or disallowed in whole or in part in any
Insolvency Proceeding.


 


(v)                                 In
the event of a direct conflict between the priority provisions of this Section 2.4
and other provisions contained in any other Loan Document, it is the intention
of the parties hereto that such priority provisions in such documents shall be
read together and construed, to the fullest extent possible, to be in concert
with each other.  In the event of any
actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms
and provisions of this Section 2.4 shall control and govern.


 


2.5                                 Overadvances.  If, at any time or for any reason, the
aggregate amount of outstanding principal of the Advances, Letter of Credit
Usage and other Obligations accrued and payable by Borrowers to the Lender
Group pursuant to Section 2.1 or Section 2.12 is
greater than any of the limitations set forth in Section 2.1 or Section 2.12,
as applicable (an “Overadvance”), 


 


10





















 


Borrowers immediately shall pay to Agent, in cash, the amount of such
excess, which amount shall be used by Agent to reduce the Obligations in
accordance with the priorities set forth in Section 2.4(b).  In addition, Borrowers hereby promise to pay
the Obligations (including principal, interest, fees, costs, and expenses) in
Dollars in full as and when due and payable under the terms of this Agreement
and the other Loan Documents.


 


2.6                                 Interest
Rates and Letter of Credit Fee:  Rates,
Payments, and Calculations.


 


(a)  Interest Rates.  Except
as provided in clause (c) below, all Obligations (except for undrawn Letters of
Credit, Bank Product Obligations and other amounts that have accrued but are
not yet due and payable pursuant to Section 2.6(d)) that have been
charged to the Loan Account pursuant to the terms hereof shall bear interest on
the Daily Balance thereof as follows: 
(i) if the relevant Obligation is an Advance that is a LIBOR Rate Loan,
at a per annum rate equal to the LIBOR Rate plus the LIBOR Rate Margin, and
(ii) otherwise, at a per annum rate equal to the Base Rate plus the Base Rate
Margin.


 


The foregoing notwithstanding, at no time shall any portion of the
Advances bear interest on the Daily Balance thereof at a per annum rate less
than 4%.  To the extent that interest
accrued hereunder at the rate set forth herein would be less than the foregoing
minimum daily rate, the interest rate chargeable hereunder for such day
automatically shall be deemed increased to the minimum rate.


 


(b)  Letter of Credit Fee.  Borrowers
shall pay Agent (for the ratable benefit of the Lenders with a Commitment,
subject to any agreements between Agent and individual Lenders), a Letter of
Credit fee (in addition to the charges, commissions, fees, and costs set forth
in Section 2.12(e)) which shall accrue at a rate equal to 2% per
annum times the Daily Balance of the undrawn amount of all outstanding Letters
of Credit.


 


(c)  Default Rate.  Upon the
occurrence and during the continuation of an Event of Default (and at the
election of Agent or the Required Lenders),


 


(i)                                     all
Obligations (except for undrawn Letters of Credit and except for Bank Product
Obligations) that have been charged to the Loan Account pursuant to the terms
hereof shall bear interest on the Daily Balance thereof at a per annum rate
equal to 3 percentage points above the per annum rate otherwise applicable hereunder,
and


 


(ii)                                  the
Letter of Credit fee provided for above shall be increased to 3 percentage
points above the per annum rate otherwise applicable hereunder.


 


(d)  Payment.  Except as
provided to the contrary in Section 2.11 or Section 2.13(a),
interest, Letter of Credit fees, and all other fees payable hereunder shall be
due and payable, in arrears, on the first day of each month at any time that
Obligations or Commitments are outstanding. 
Borrowers hereby authorize Agent, from time to time, without prior
notice to Borrowers, to charge all interest and fees (when due and payable),
all Lender Group Expenses (as and when incurred), all charges, commissions,
fees, and costs provided for in Section 2.12(e) (as and when
accrued or incurred), all fees and costs provided for in Section 2.11
(as and when accrued or incurred), and all other payments as and when due and
payable under any Loan Document (including any amounts due and payable to the
Bank Product


 


11





















 


Provider in respect of Bank Products up to the amount of the Bank
Product Reserve) to Borrowers’ Loan Account, which amounts thereafter shall
constitute Advances hereunder and shall accrue interest at the rate then
applicable to Advances hereunder.  Any
interest not paid when due shall be compounded by being charged to Borrowers’
Loan Account and shall thereafter constitute Advances hereunder and shall
accrue interest at the rate then applicable to Advances that are Base Rate
Loans hereunder.


 


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


 


(f)  Intent to Limit Charges to Maximum Lawful Rate.  In no event shall the interest
rate or rates payable under this Agreement, plus any other amounts paid in
connection herewith, exceed the highest rate permissible under any law that a
court of competent jurisdiction shall, in a final determination, deem
applicable.  Borrowers and the Lender
Group, in executing and delivering this Agreement, intend legally to agree upon
the rate or rates of interest and manner of payment stated within it; provided,
however, that, anything contained herein to the contrary
notwithstanding, if said rate or rates of interest or manner of payment exceeds
the maximum allowable under applicable law, then, ipso facto,
as of the date of this Agreement, Borrowers are and shall be liable only for
the payment of such maximum as allowed by law, and payment received from
Borrowers in excess of such legal maximum, whenever received, shall be applied
to reduce the principal balance of the Obligations to the extent of such
excess.


 


2.7                                 Cash Management


 


Subject to Section 3.6 hereof:


 


(a)  Borrowers shall (i)
establish and maintain cash management services of a type and on terms
satisfactory to Agent at one or more of the banks set forth on Schedule 2.7(a)
(each a “Cash Management Bank”), and shall request in writing and otherwise
take such reasonable steps to ensure that all of their Account Debtors forward
payment of the amounts owed by them directly to such Cash Management Bank, and
(ii) deposit or cause to be deposited promptly, and in any event no later than
the first Business Day after the date of receipt thereof, all of their
Collections (including those sent directly by their Account Debtors to
Borrowers) into a bank account in Agent’s name (a “Cash Management Account”) at
one of the Cash Management Banks.


 


(b)  Each Cash Management Bank
shall establish and maintain Cash Management Agreements with Agent and Borrowers,
in form and substance reasonably acceptable to Agent.  Each such Cash Management Agreement shall
provide, among other things, that (i) the Cash Management Bank will comply with
any instructions originated by Agent directing the disposition of the funds in
such Cash Management Account without further consent by Borrowers, (ii) the
Cash Management Bank has no rights of setoff or recoupment or any other claim
against the applicable Cash Management Account, other than for payment of its
service fees and other charges directly related to the administration of such
Cash Management Account


 


12





















 


and for returned checks or other items of payment, and (iii) it will
forward by daily sweep all amounts in the applicable Cash Management Account to
the Agent’s Account.


 


(c)  So long as no Event of
Default has occurred and is continuing, Administrative Borrower may amend Schedule 2.7(a)
to add or replace a Cash Management Bank or Cash Management Account; provided,
however, that (i) such prospective Cash Management Bank shall be
reasonably satisfactory to Agent, and (ii) prior to the time of the opening of
such Cash Management Account, a Borrower, as applicable, and such prospective
Cash Management Bank shall have executed and delivered to Agent a Cash
Management Agreement.  Borrowers shall
close any of their Cash Management Accounts (and establish replacement cash
management accounts in accordance with the foregoing sentence) promptly and in
any event within 30 days of written notice from Agent that the creditworthiness
of any Cash Management Bank is no longer acceptable in Agent’s reasonable
judgment, or as promptly as practicable and in any event within 60 days of
notice from Agent that the operating performance, funds transfer, or
availability procedures or performance of the Cash Management Bank with respect
to Cash Management Accounts or Agent’s liability under any Cash Management
Agreement with such Cash Management Bank is no longer acceptable in Agent’s
reasonable judgment.


 


(d)  The Cash Management Accounts
shall be cash collateral accounts subject to Control Agreements.


 


2.8                                 Crediting Payments; Clearance Charge.  The receipt of any payment item by Agent
(whether from transfers to Agent by the Cash Management Banks pursuant to the
Cash Management Agreements or otherwise) shall not be considered a payment on
account unless such payment item is a wire transfer of immediately available
federal funds made to the Agent’s Account or unless and until such payment item
is honored when presented for payment. 
Should any payment item not be honored when presented for payment, then
Borrowers shall be deemed not to have made such payment and interest shall be
calculated accordingly.  Anything to the
contrary contained herein notwithstanding, any payment item shall be deemed
received by Agent only if it is received into the Agent’s Account on a Business
Day on or before 11:00 a.m. (California time). 
If any payment item is received into the Agent’s Account on a
non-Business Day or after 11:00 a.m. (California time) on a Business Day, it
shall be deemed to have been received by Agent as of the opening of business on
the immediately following Business Day. 
The parties acknowledge and agree that the economic benefit of the
foregoing provisions of this Section 2.8 shall be for the exclusive
benefit of Agent.


 


2.9                                 Designated Account.  Agent is authorized
to make the Advances, and Issuing Lender is authorized to issue the Letters of
Credit, under this Agreement based upon telephonic or other instructions
received from anyone purporting to be an Authorized Person or, without
instructions, if pursuant to Section 2.6(d).  Administrative Borrower agrees to establish
and maintain the Designated Account with the Designated Account Bank for the
purpose of receiving the proceeds of the Advances requested by Borrowers and
made by Agent or the Lenders hereunder. 
Unless otherwise agreed by Agent and Administrative Borrower, any
Advance, Protective Advance, or Swing Loan requested by Borrowers and made by
Agent or the Lenders hereunder shall be made to the Designated Account.


 


13





















 


2.10                           Maintenance of Loan Account; Statements of Obligations.  Agent shall maintain an account on its
books in the name of Borrowers (the “Loan Account”) on which Borrowers will be
charged with all Advances (including Protective Advances and Swing Loans) made
by Agent, Swing Lender, or the Lenders to Borrowers or for Borrowers’ account,
the amounts charged pursuant to Section 2.12 in respect of the
Letters of Credit issued by Issuing Lender for Borrowers’ account, and with all
other payment Obligations hereunder or under the other Loan Documents (except
for Bank Product Obligations), including, accrued interest, fees and expenses,
and Lender Group Expenses.  In accordance
with Section 2.8, the Loan Account will be credited with all
payments received by Agent from Borrowers or for Borrowers’ account, including
all amounts received in the Agent’s Account from any Cash Management Bank.  Agent shall render statements regarding the
Loan Account to Administrative Borrower, including principal, interest, fees,
and including an itemization of all charges and expenses constituting Lender
Group Expenses owing, and such statements, absent manifest error, gross
negligence or willful misconduct, shall be conclusively presumed to be correct
and accurate and constitute an account stated between Borrowers and the Lender
Group unless, within 30 days after receipt thereof by Administrative Borrower, Administrative
Borrower shall deliver to Agent written objection thereto describing the error
or errors contained in any such statements.


 


2.11                           Fees. 
Borrowers shall pay to Agent, as and when due and payable
under the terms of the Fee Letter, the fees set forth in the Fee Letter.


 


2.12                           Letters of Credit.


 


(a)  Subject to the terms and
conditions of this Agreement, the Issuing Lender agrees to issue letters of
credit for the account of Borrowers (each, an “L/C”) or to purchase
participations or execute indemnities or reimbursement obligations (each such
undertaking, an “L/C Undertaking”) with respect to letters of credit issued by
an Underlying Issuer (as of the Closing Date, the prospective Underlying Issuer
is to be Wells Fargo) for the account of Borrowers.  Each request for the issuance of a Letter of
Credit or the amendment, renewal, or extension of any outstanding Letter of
Credit shall be made in writing by an Authorized Person and delivered to the
Issuing Lender and Agent via hand delivery, telefacsimile, or other electronic
method of transmission reasonably in advance of the requested date of issuance,
amendment, renewal, or extension.  Each
such request shall be in form and substance reasonably satisfactory to the
Issuing Lender in its Permitted Discretion and shall specify (i) the amount of
such Letter of Credit, (ii) the date of issuance, amendment, renewal, or
extension of such Letter of Credit, (iii) the expiration date of such Letter of
Credit, (iv) the name and address of the beneficiary thereof (or the
beneficiary of the Underlying Letter of Credit, as applicable), and (v) such
other information (including, in the case of an amendment, renewal, or
extension, identification of the outstanding Letter of Credit to be so amended,
renewed, or extended) as shall be necessary to prepare, amend, renew, or extend
such Letter of Credit.  If requested by
the Issuing Lender, Borrowers also shall be an applicant under the application
with respect to any Underlying Letter of Credit that is to be the subject of an
L/C Undertaking.  The Issuing Lender
shall have no obligation to issue a Letter of Credit if any of the following
would result after giving effect to the issuance of such requested Letter of
Credit:


 


(i)                                     the
Letter of Credit Usage would exceed the Borrowing Base less the
then extant outstanding amount of Advances, or


 


14





















 


(ii)                                  the
Letter of Credit Usage would exceed $60,000,000, or


 


(iii)                               the
Letter of Credit Usage would exceed the Maximum Revolver Amount less the then extant outstanding amount of Advances.


 


Borrowers and the Lender Group acknowledge and agree that certain
Underlying Letters of Credit may, at Administrative Borrower’s request, be
issued to support letters of credit for the account of any Borrower that
already are outstanding as of the Closing Date. 
Each Letter of Credit (and corresponding Underlying Letter of Credit)
shall be in form and substance acceptable to the Issuing Lender (in the
exercise of its Permitted Discretion), including the requirement that the
amounts payable thereunder must be payable in Dollars.  If Issuing Lender is obligated to advance
funds under a Letter of Credit, Borrowers immediately shall reimburse such L/C
Disbursement to Issuing Lender by paying to Agent an amount equal to such L/C
Disbursement not later than 11:00 a.m., California time, on the date that such
L/C Disbursement is made, if Administrative Borrower shall have received
written or telephonic notice of such L/C Disbursement prior to 10:00 a.m.,
California time, on such date, or, if such notice has not been received by
Administrative Borrower prior to such time on such date, then not later than
11:00 a.m., California time, on the Business Day that Administrative Borrower
receives such notice, if such notice is received prior to 10:00 a.m.,
California time, on the date of receipt, and, in the absence of such
reimbursement, the L/C Disbursement immediately and automatically shall be
deemed to be an Advance hereunder and, thereafter, shall bear interest at the
rate then applicable to Advances that are Base Rate Loans under Section 2.6.  To the extent an L/C Disbursement is deemed
to be an Advance hereunder, Borrowers’ obligation to reimburse such L/C
Disbursement shall be discharged and replaced by the resulting Advance.  Promptly following receipt by Agent of any
payment from Borrowers pursuant to this paragraph, Agent shall distribute such
payment to the Issuing Lender or, to the extent that Lenders have made payments
pursuant to Section 2.12(b) to reimburse the Issuing Lender, then
to such Lenders and the Issuing Lender as their interests may appear.


 


(b)  Promptly following receipt
of a notice of L/C Disbursement pursuant to Section 2.12(a), each
Lender with a Commitment agrees to fund its Pro Rata Share of any Advance
deemed made pursuant to the foregoing subsection on the same terms and
conditions as if Borrowers had requested such Advance and Agent shall promptly
pay to Issuing Lender the amounts so received by it from the Lenders.  By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Lender or the Lenders with
Commitments, the Issuing Lender shall be deemed to have granted to each Lender
with a Commitment, and each Lender with a Commitment shall be deemed to have
purchased, a participation in each Letter of Credit, in an amount equal to its
Pro Rata Share of the Risk Participation Liability of such Letter of Credit,
and each such Lender agrees to pay to Agent, for the account of the Issuing
Lender, such Lender’s Pro Rata Share of any payments made by the Issuing Lender
under such Letter of Credit.  In
consideration and in furtherance of the foregoing, each Lender with a
Commitment hereby absolutely and unconditionally agrees to pay to Agent, for
the account of the Issuing Lender, such Lender’s Pro Rata Share of each L/C
Disbursement made by the Issuing Lender and not reimbursed by Borrowers on the
date due as provided in clause (a) of this Section, or of any reimbursement
payment required to be refunded to Borrowers for any reason.  Each Lender with a Commitment acknowledges
and agrees that its obligation to deliver to Agent, for the account of


 


15





















 


the Issuing Lender, an amount equal to its respective Pro Rata Share of
each L/C Disbursement made by the Issuing Lender pursuant to this Section 2.12(b)
shall be absolute and unconditional and such remittance shall be made
notwithstanding the occurrence or continuation of an Event of Default or
Default or the failure to satisfy any condition set forth in Section 3
hereof.  If any such Lender fails to make
available to Agent the amount of such Lender’s Pro Rata Share of each L/C
Disbursement made by the Issuing Lender in respect of such Letter of Credit as
provided in this Section, such Lender shall be deemed to be a Defaulting Lender
and Agent (for the account of the Issuing Lender) shall be entitled to recover
such amount on demand from such Lender together with interest thereon at the
Defaulting Lender Rate until paid in full.


 


(c)  Each Borrower hereby agrees
to indemnify, save, defend, and hold the Lender Group harmless from any loss,
cost, expense, or liability, and reasonable attorneys fees incurred by the
Lender Group arising out of or in connection with any Letter of Credit; provided,
however, that no Borrower shall be obligated hereunder to indemnify for
any loss, cost, expense, or liability to the extent that it is caused by the
gross negligence or willful misconduct of the Issuing Lender or any other
member of the Lender Group.  Each
Borrower agrees to be bound by the Underlying Issuer’s regulations and
interpretations of any Underlying Letter of Credit or by Issuing Lender’s
interpretations of any L/C issued by Issuing Lender to or for such Borrower’s
account, even though this interpretation may be different from such Borrower’s
own, and each Borrower understands and agrees that the Lender Group shall not
be liable for any error, negligence, or mistake, whether of omission or
commission, in following Borrowers’ instructions or those contained in the
Letter of Credit or any modifications, amendments, or supplements thereto.  Each Borrower understands that the L/C
Undertakings may require Issuing Lender to indemnify the Underlying Issuer for
certain costs or liabilities arising out of claims by Borrowers against such
Underlying Issuer.  Each Borrower hereby
agrees to indemnify, save, defend, and hold the Lender Group harmless with
respect to any loss, cost, expense (including reasonable attorneys fees), or
liability incurred by the Lender Group under any L/C Undertaking as a result of
the Lender Group’s indemnification of any Underlying Issuer; provided, however,
that no Borrower shall be obligated hereunder to indemnify for any loss, cost,
expense, or liability to the extent that it is caused by the gross negligence
or willful misconduct of the Issuing Lender or any other member of the Lender
Group.  Each Borrower hereby acknowledges
and agrees that neither the Lender Group nor the Issuing Lender shall be
responsible for delays, errors, or omissions resulting from the malfunction of
equipment in connection with any Letter of Credit unless such malfunction is
caused by the gross negligence or willful misconduct of the Lender Group or
Issuing Lender.


 


(d)  Each Borrower hereby
authorizes and directs any Underlying Issuer to deliver to the Issuing Lender
all instruments, documents, and other writings and property received by such
Underlying Issuer pursuant to such Underlying Letter of Credit and to accept
and rely upon the Issuing Lender’s instructions with respect to all matters
arising in connection with such Underlying Letter of Credit and the related
application.


 


(e)  Any and all issuance
charges, commissions, fees, and costs incurred by the Issuing Lender relating
to Underlying Letters of Credit shall be Lender Group Expenses for purposes of
this Agreement and immediately shall be reimbursable by Borrowers to Agent for
the account of the Issuing Lender; it being acknowledged and agreed that the
Underlying Issuer also imposes a schedule of charges for amendments,
extensions, drawings, and renewals.


 


16





















 


(f)  If by reason of (i) any
change after the Closing Date in any applicable law, treaty, rule, or
regulation or any change after the date hereof in the interpretation or
application thereof by any Governmental Authority, or (ii) compliance by the
Underlying Issuer or the Lender Group with any direction, request, or
requirement (irrespective of whether having the force of law) imposed after the
date hereof of any Governmental Authority or monetary authority including, any
change after the date hereof in the application of Regulation D of the Federal
Reserve Board as from time to time in effect (and any successor thereto):


 


(i)                                     any
reserve, deposit, or similar requirement is or shall, after the date hereof, be
imposed or modified in respect of any Letter of Credit issued hereunder, or


 


(ii)                                  there
shall, after the date hereof, be imposed on the Underlying Issuer or the Lender
Group any other condition regarding any Underlying Letter of Credit or any
Letter of Credit issued pursuant hereto;


 


and the result of the foregoing is to increase, directly or indirectly,
the cost to the Lender Group of issuing, making, guaranteeing, or maintaining
any Letter of Credit or to reduce the amount receivable in respect thereof by
the Lender Group, then, and in any such case, Agent may, at any time within a
reasonable period after the additional cost is incurred or the amount received
is reduced, notify Administrative Borrower, and Borrowers shall pay on demand
such amounts as Agent may reasonably specify to be necessary to compensate the
Lender Group for such additional cost or reduced receipt, together with
interest on such amount from the date of such demand until payment in full
thereof at the rate then applicable to Base Rate Loans hereunder.  The determination by Agent of any amount due
pursuant to this Section, as set forth in a certificate setting forth the
calculation thereof in reasonable detail, shall, in the absence of manifest or
demonstrable error, be final and conclusive and binding on all of the parties
hereto.


 


2.13                           LIBOR Option.


 


(a)  Interest and Interest Payment Dates. 
In lieu of having interest charged at the rate determined by
reference to the Base Rate, Borrowers shall have the option (the “LIBOR Option”)
to have interest on all or a portion of the Advances be charged at a rate of
interest determined by reference to the LIBOR Rate.  Interest on LIBOR Rate Loans shall be payable
on the earliest of (i) the last day of the Interest Period applicable thereto,
(ii) the occurrence of an Event of Default in consequence of which the Required
Lenders or Agent on behalf thereof have elected to accelerate the maturity of
all or any portion of the Obligations, or (iii) termination of this Agreement
pursuant to the terms hereof.  On the
last day of each applicable Interest Period, unless Administrative Borrower
properly has exercised the LIBOR Option with respect thereto, the interest rate
applicable to such LIBOR Rate Loan automatically shall convert to the rate of
interest then applicable to Base Rate Loans of the same type hereunder.  At any time that an Event of Default has
occurred and is continuing, Borrowers no longer shall have the option to
request that Advances bear interest at a rate based upon the LIBOR Rate and
Agent shall have the right to convert the interest rate on all outstanding
LIBOR Rate Loans to the rate then applicable to Base Rate Loans hereunder.


 


17





















 


(b)  LIBOR Election.


 


(i)                                     Administrative
Borrower may, at any time and from time to time, so long as no Event of Default
has occurred and is continuing, elect to exercise the LIBOR Option by notifying
Agent prior to 11:00 a.m. (California time) at least 3 Business Days prior to
the commencement of the proposed Interest Period (the “LIBOR Deadline”).  Notice of Administrative Borrower’s election
of the LIBOR Option for a permitted portion of the Advances and an Interest
Period pursuant to this Section shall be made by delivery to Agent of a
LIBOR Notice received by Agent before the LIBOR Deadline, or by telephonic
notice received by Agent before the LIBOR Deadline (to be confirmed by delivery
to Agent of a LIBOR Notice received by Agent prior to 5:00 p.m. (California
time) on the same day).  Promptly upon
its receipt of each such LIBOR Notice, Agent shall provide a copy thereof to each
of the Lenders having a Commitment.


 


(ii)                                  Each
LIBOR Notice shall be irrevocable and binding on Borrowers.  In connection with each LIBOR Rate Loan, each
Borrower shall indemnify, defend, and hold Agent and the Lenders harmless
against any loss, cost, or expense incurred by Agent or any Lender as a result
of (a) the payment of any principal of any LIBOR Rate Loan other than on the
last day of an Interest Period applicable thereto (including as a result of an
Event of Default), (b) the conversion of any LIBOR Rate Loan other than on the
last day of the Interest Period applicable thereto, or (c) the failure to
borrow, convert, continue or prepay any LIBOR Rate Loan on the date specified
in any LIBOR Notice delivered pursuant hereto (such losses, costs, and
expenses, collectively, “Funding Losses”). 
Funding Losses shall, with respect to Agent or any Lender, be deemed to
equal the amount determined by Agent or such Lender to be the excess, if any,
of (i) the amount of interest that would have accrued on the principal amount
of such LIBOR Rate Loan had such event not occurred, at the LIBOR Rate that
would have been applicable thereto, for the period from the date of such event
to the last day of the then current Interest Period therefor (or, in the case
of a failure to borrow, convert or continue, for the period that would have
been the Interest Period therefor), minus (ii) the
amount of interest that would accrue on such principal amount for such period
at the interest rate which Agent or such Lender would be offered were it to be
offered, at the commencement of such period, Dollar deposits of a comparable
amount and period in the London interbank market.  A certificate of Agent or a Lender delivered
to Administrative Borrower setting forth any amount or amounts that Agent or
such Lender is entitled to receive pursuant to this Section 2.13
shall be conclusive absent manifest error.


 


(iii)                               Borrowers
shall have not more than 5 LIBOR Rate Loans in effect at any given time.  Borrowers only may exercise the LIBOR Option
for LIBOR Rate Loans of at least $1,000,000 and integral multiples of $500,000
in excess thereof.


 


(c)  Prepayments.  Borrowers
may prepay LIBOR Rate Loans at any time; provided, however, that
in the event that LIBOR Rate Loans are prepaid on any date that is not the last
day of the Interest Period applicable thereto, including as a result of any
automatic prepayment through the required application by Agent of proceeds of
Borrowers’ Collections in accordance with Section 2.4(b) or for any
other reason, including early termination of the term of this Agreement or
acceleration of all or any portion of the Obligations pursuant to the terms
hereof, each Borrower shall indemnify, defend, and hold Agent and the Lenders
and their Participants harmless against any and all Funding Losses in accordance
with clause (b)(ii) above.


 


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(d)  Special Provisions
Applicable to LIBOR Rate.


 


(i)                                     The
LIBOR Rate may be adjusted by Agent with respect to any Lender on a prospective
basis to take into account any additional or increased costs to such Lender of
maintaining or obtaining any eurodollar deposits or increased costs, in each
case, due to changes after the date hereof in applicable law occurring
subsequent to the commencement of the then applicable Interest Period,
including changes after the date hereof in tax laws (except changes of general
applicability in corporate income tax laws) and changes in the reserve
requirements imposed by the Board of Governors of the Federal Reserve System
(or any successor), excluding the Reserve Percentage, which additional or
increased costs would increase the cost of funding loans bearing interest at a
rate determined by reference to the LIBOR Rate. 
In any such event, the affected Lender shall give Administrative
Borrower and Agent notice of such a determination and adjustment and Agent
promptly shall transmit the notice to each other Lender and, upon its receipt
of the notice from the affected Lender, Administrative Borrower may, by notice
to such affected Lender (y) require such Lender to furnish to Administrative
Borrower a statement setting forth the basis for adjusting such LIBOR Rate and
the method for determining the amount of such adjustment, or (z) repay the
LIBOR Rate Loans with respect to which such adjustment is made (together with
any amounts due under clause (b)(ii) above).


 


(ii)                                  In
the event that any change after the date hereof in market conditions or the
adoption after the date hereof of any law, regulation, treaty, or directive, or
any change therein after the date hereof or in the interpretation of
application thereof, shall at any time after the date hereof, in the reasonable
opinion of any Lender, make it unlawful or impractical for such Lender to fund
or maintain LIBOR Advances or to continue such funding or maintaining, or to
determine or charge interest rates at the LIBOR Rate, such Lender shall give
notice of such changed circumstances to Agent and Administrative Borrower and
Agent promptly shall transmit the notice to each other Lender and (y) in the case
of any LIBOR Rate Loans of such Lender that are outstanding, the date specified
in such Lender’s notice shall be deemed to be the last day of the Interest
Period of such LIBOR Rate Loans, and interest upon the LIBOR Rate Loans of such
Lender thereafter shall accrue interest at the rate then applicable to Base
Rate Loans, and (z) Borrowers shall not be entitled to elect the LIBOR Option
until such Lender determines that it would no longer be unlawful or impractical
to do so.


 


(e)  No Requirement of Matched Funding. 
Anything to the contrary contained herein notwithstanding,
neither Agent, nor any Lender, nor any of their Participants, is required
actually to acquire eurodollar deposits to fund or otherwise match fund any
Obligation as to which interest accrues at a rate determined by reference to
the LIBOR Rate.  The provisions of this Section shall
apply as if each Lender or its Participants had match funded any Obligation as
to which interest is accruing at a rate determined by reference to the LIBOR
Rate by acquiring eurodollar deposits for each Interest Period in the amount of
the LIBOR Rate Loans.


 


2.14                           Capital Requirements. 
If, after the date hereof, any Lender determines that (i) the
adoption of or change after the date hereof in any law, rule, regulation or
guideline regarding capital requirements for banks or bank holding companies,
or any change after the date hereof in the interpretation or application
thereof by any Governmental Authority charged with the administration thereof,
or (ii) compliance by such Lender or its parent bank holding company


 


19





















 


with any guideline, request or directive of any such entity regarding
capital adequacy (whether or not having the force of law), imposed after the
date hereof, has the effect of reducing the return on such Lender’s or such
holding company’s capital as a consequence of such Lender’s Commitments
hereunder to a level below that which such Lender or such holding company could
have achieved but for such adoption, change, or compliance (taking into
consideration such Lender’s or such holding company’s then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity’s capital) by any amount deemed by such Lender to be material, then such
Lender may notify Administrative Borrower and Agent thereof.  Following receipt of such notice, Borrowers
agree to pay such Lender on demand the amount of such reduction of return of
capital as and when such reduction is determined, payable within 90 days after
presentation by such Lender of a statement in the amount and setting forth in
reasonable detail such Lender’s calculation thereof and the assumptions upon
which such calculation was based (which statement shall be deemed true and
correct absent manifest error).  In
determining such amount, such Lender may use any reasonable averaging and
attribution methods.


 


2.15                           Joint and Several Liability of Borrowers.


 


(a)  Each Borrower is accepting
joint and several liability hereunder and under the other Loan Documents in
consideration of the financial accommodations to be provided by the Lender
Group under this Agreement, for the mutual benefit, directly and indirectly, of
each Borrower and in consideration of the undertakings of the other Borrowers
to accept joint and several liability for the Obligations.


 


(b)  Each Borrower, jointly and
severally, hereby irrevocably and unconditionally accepts, not merely as a
surety but also as a co-debtor, joint and several liability with the other
Borrowers, with respect to the payment and performance of all of the
Obligations (including, without limitation, any Obligations arising under this Section 2.15),
it being the intention of the parties hereto that all the Obligations shall be
the joint and several obligations of each Borrower without preferences or
distinction among them.


 


(c)  If and to the extent that
any Borrower shall fail to make any payment with respect to any of the
Obligations as and when due or to perform any of the Obligations in accordance with
the terms thereof, then in each such event the other Borrowers will make such
payment with respect to, or perform, such Obligation.


 


(d)  The Obligations of each
Borrower under the provisions of this Section 2.15 constitute the
absolute and unconditional, full recourse Obligations of each Borrower
enforceable against each Borrower to the full extent of its properties and
assets, irrespective of the validity, regularity or enforceability of this
Agreement or any other circumstances whatsoever.


 


(e)  Except as otherwise
expressly provided in this Agreement, each Borrower hereby waives notice of
acceptance of its joint and several liability, notice of any Advances or
Letters of Credit issued under or pursuant to this Agreement, notice of the
occurrence of any Default, Event of Default, or of any demand for any payment
under this Agreement, notice of any action at any time taken or omitted by
Agent or Lenders under or in respect of any of the Obligations, any requirement
of diligence or to mitigate damages and, generally, to the extent permitted by
applicable law, all demands, notices and other formalities of every kind in


 


20





















 


connection with this Agreement (except as otherwise provided in this
Agreement).  Each Borrower hereby assents
to, and waives notice of, any extension or postponement of the time for the
payment of any of the Obligations, the acceptance of any payment of any of the
Obligations, the acceptance of any partial payment thereon, any waiver, consent
or other action or acquiescence by Agent or Lenders at any time or times in
respect of any default by any Borrower in the performance or satisfaction of
any term, covenant, condition or provision of this Agreement, any and all other
indulgences whatsoever by Agent or Lenders in respect of any of the
Obligations, and the taking, addition, substitution or release, in whole or in
part, at any time or times, of any security for any of the Obligations or the
addition, substitution or release, in whole or in part, of any Borrower.  Without limiting the generality of the
foregoing, each Borrower assents to any other action or delay in acting or
failure to act on the part of any Agent or Lender with respect to the failure
by any Borrower to comply with any of its respective Obligations, including,
without limitation, any failure strictly or diligently to assert any right or
to pursue any remedy or to comply fully with applicable laws or regulations
thereunder, which might, but for the provisions of this Section 2.15
afford grounds for terminating, discharging or relieving any Borrower, in whole
or in part, from any of its Obligations under this Section 2.15, it
being the intention of each Borrower that, so long as any of the Obligations
hereunder remain unsatisfied, the Obligations of each Borrower under this Section 2.15
shall not be discharged except by performance and then only to the extent of
such performance.  The Obligations of
each Borrower under this Section 2.15 shall not be diminished or
rendered unenforceable by any winding up, reorganization, arrangement,
liquidation, reconstruction or similar proceeding with respect to any Borrower
or any Agent or Lender.


 


(f)  Each Borrower represents and
warrants to Agent and Lenders that such Borrower is currently informed of the
financial condition of Borrowers and of all other circumstances which a
diligent inquiry would reveal and which bear upon the risk of nonpayment of the
Obligations.  Each Borrower further
represents and warrants to Agent and Lenders that such Borrower has read and
understands the terms and conditions of the Loan Documents.  Each Borrower hereby covenants that such
Borrower will continue to keep informed of Borrowers’ financial condition, the
financial condition of other guarantors, if any, and of all other circumstances
which bear upon the risk of nonpayment or nonperformance of the Obligations.


 


(g)  Each Borrower waives all
rights and defenses arising out of an election of remedies by Agent or any
Lender, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation, has destroyed
Agent’s or such Lender’s rights of subrogation and reimbursement against such
Borrower by the operation of Section 580d of the California Code of Civil
Procedure or otherwise.


 


(h)  Each Borrower waives all
rights and defenses that such Borrower may have because the Obligations are
secured by Real Property.  This means,
among other things:


 


(i)                                     Agent
and Lenders may collect from such Borrower without first foreclosing on any
Real Property or other Collateral pledged by Borrowers.


 


(ii)                                  If
Agent or any Lender forecloses on any Real Property pledged by Borrowers:


 


21





















 


(A)  The amount of the
Obligations may be reduced only by the price for which that collateral is sold
at the foreclosure sale, even if the collateral is worth more than the sale
price.


 


(B)  Agent and Lenders may
collect from such Borrower even if Agent or Lenders, by foreclosing on the Real
Property, has destroyed any right such Borrower may have to collect from the
other Borrowers.


 


This is an unconditional and irrevocable waiver of any rights and
defenses such Borrower may have because the Obligations are secured by Real
Property.  These rights and defenses
include, but are not limited to, any rights or defenses based upon Section 580a,
580b, 580d or 726 of the California Code of Civil Procedure.


 


(i)  The provisions of this Section 2.15
are made for the benefit of Agent, Lenders and their respective successors and
assigns, and may be enforced by it or them from time to time against any or all
Borrowers as often as occasion therefor may arise and without requirement on
the part of any such Agent, Lender, successor or assign first to marshal any of
its or their claims or to exercise any of its or their rights against any
Borrower or to exhaust any remedies available to it or them against any
Borrower or to resort to any other source or means of obtaining payment of any
of the Obligations hereunder or to elect any other remedy.  The provisions of this Section 2.15
shall remain in effect until all of the Obligations shall have been paid in
full or otherwise fully satisfied.  If at
any time, any payment, or any part thereof, made in respect of any of the
Obligations, is rescinded or must otherwise be restored or returned by any
Agent or Lender upon the insolvency, bankruptcy or reorganization of any
Borrower, or otherwise, the provisions of this Section 2.15 will
forthwith be reinstated in effect, as though such payment had not been made.


 


(j)  Each Borrower hereby agrees
that it will not enforce any of its rights of contribution or subrogation
against any other Borrower with respect to any liability incurred by it
hereunder or under any of the other Loan Documents, any payments made by it to
Agent or Lenders with respect to any of the Obligations or any collateral
security therefor until such time as all of the Obligations have been paid in
full in cash.  Any claim which any
Borrower may have against any other Borrower with respect to any payments to
any Agent or Lender hereunder or under any other Loan Documents are hereby
expressly made subordinate and junior in right of payment, without limitation
as to any increases in the Obligations arising hereunder or thereunder, to the
prior payment in full in cash of the Obligations and, in the event of any
insolvency, bankruptcy, receivership, liquidation, reorganization or other
similar proceeding under the laws of any jurisdiction relating to any Borrower,
its debts or its assets, whether voluntary or involuntary, all such Obligations
shall be paid in full in cash before any payment or distribution of any
character, whether in cash, securities or other property, shall be made to any
other Borrower therefor.


 


(k)  Each Borrower hereby agrees
that, after the occurrence and during the continuance of any Default or Event
of Default, the payment of any amounts due with respect to the indebtedness
owing by any Borrower to any other Borrower is hereby subordinated to the prior
payment in full in cash of the Obligations. 
Each Borrower hereby agrees that after the occurrence and during the
continuance of any Default or Event of Default, such Borrower will


 


22





















 


not demand, sue for or otherwise attempt to collect any indebtedness of
any other Borrower owing to such Borrower until the Obligations shall have been
paid in full in cash.  If,
notwithstanding the foregoing sentence, such Borrower shall collect, enforce or
receive any amounts in respect of such indebtedness, such amounts shall be
collected, enforced and received by such Borrower as trustee for Agent, and
such Borrower shall deliver any such amounts to Agent for application to the
Obligations in accordance with Section 2.4(b).


 


3.                                      CONDITIONS;
TERM OF AGREEMENT.


 


3.1                                 Conditions Precedent to the Initial Extension of Credit.  The obligation of each Lender to make its
initial extension of credit provided for hereunder, is subject to the
fulfillment, to the satisfaction of Agent and each Lender of each of the
conditions precedent set forth on Schedule 3.1 (the making of such
initial extension of credit by a Lender being conclusively deemed to be its
satisfaction or waiver of the conditions precedent).


 


3.2                                 Conditions Precedent to all Extensions of Credit.  The obligation of the Lender Group (or
any member thereof) to make any Advances hereunder at any time (or to extend
any other credit hereunder) shall be subject to the following conditions
precedent:


 


(a)  the representations and
warranties contained in this Agreement or in the other Loan Documents shall be
true and correct in all material respects on and as of the date of such
extension of credit, as though made on and as of such date (except to the
extent that such representations and warranties relate solely to an earlier
date);


 


(b)  no Default or Event of
Default shall have occurred and be continuing on the date of such extension of
credit, nor shall either result from the making thereof;


 


(c)  no injunction, writ, restraining
order, or other order of any nature restricting or prohibiting, directly or
indirectly, the extending of such credit shall have been issued and remain in
force by any Governmental Authority against any Borrower, Agent, any Lender, or
any of their Affiliates; and


 


(d)  no Material Adverse Change
shall have occurred.


 


3.3                                 Term. 
This Agreement shall continue in full force and effect for a
term ending on April 11, 2007 (the “Maturity Date”), unless terminated
earlier in accordance with the terms of this Agreement.  The foregoing notwithstanding, the Lender
Group, upon the election of the Required Lenders, shall have the right to
terminate its obligations under this Agreement pursuant to Section 8.1.


 


3.4                                 Effect of Termination.  On the date of termination of this
Agreement, all Obligations (including contingent reimbursement obligations of
Borrowers with respect to outstanding Letters of Credit and including all Bank
Product Obligations) immediately shall become due and payable without notice or
demand (including (a) either (i) providing cash collateral to be held by Agent
for the benefit of those Lenders with a Commitment in an amount equal to 105%
of the Letter of Credit Usage, or (ii) causing the original Letters of Credit
to be returned to the Issuing Lender, and (b) providing cash collateral
(in an amount determined by Agent as sufficient to satisfy the reasonably
estimated credit exposure) to be held by Agent for


 


23





















 


the benefit of the Bank Product Provider with respect to the Bank
Product Obligations).  No termination of
this Agreement, however, shall relieve or discharge Borrowers of their duties,
Obligations, or covenants hereunder or under any other Loan Document and the
Agent’s Liens in the Collateral shall remain in effect until all Obligations
have been paid in full and the Lender Group’s obligations to provide additional
credit hereunder have been terminated. 
When this Agreement has been terminated and all of the Obligations have
been paid in full and the Lender Group’s obligations to provide additional
credit under the Loan Documents have been terminated irrevocably, Agent will,
at Borrowers’ sole expense, execute and deliver any termination statements,
lien releases, mortgage releases, re-assignments of trademarks, discharges of
security interests, and other similar discharge or release documents (and, if
applicable, in recordable form) as are reasonably necessary to release, as of
record, the Agent’s Liens and all notices of security interests and liens
previously filed by Agent with respect to the Obligations.


 


3.5                                 Early Termination by Borrowers.  Borrowers have the option, at any time
upon 60 days prior written notice by Administrative Borrower to Agent, to
terminate this Agreement by paying to Agent, in cash, the Obligations
(including (a) either (i) providing cash collateral to be held by Agent for the
benefit of those Lenders with a Commitment in an amount equal to 105% of the
Letter of Credit Usage, or (ii) causing the original Letters of Credit to be
returned to the Issuing Lender, and (b) providing cash collateral (in an amount
determined by Agent as sufficient to satisfy the reasonably estimated credit
exposure) to be held by Agent for the benefit of the Bank Product Provider with
respect to the Bank Products Obligations), in full.  If Administrative Borrower has sent a notice
of termination pursuant to the provisions of this Section, then the Commitments
shall terminate and Borrowers shall be obligated to repay the Obligations
(including (a) either (i) providing cash collateral to be held by Agent for the
benefit of those Lenders with a Commitment in an amount equal to 105% of the
Letter of Credit Usage, or (ii) causing the original Letters of Credit to be
returned to the Issuing Lender, and (b) providing cash collateral (in an amount
determined by Agent as sufficient to satisfy the reasonably estimated credit
exposure) to be held by Agent for the benefit of the Bank Product Provider with
respect to the Bank Products Obligations), in full, on the date set forth as
the date of termination of this Agreement in such notice.


 


3.6                                 Condition Subsequent to the Initial Extension of Credit.  The obligation of the Lender Group (or any
member thereof) to continue to make Advances (or otherwise extend credit
hereunder) is subject to the fulfillment, on or before the date applicable
thereto, of each of the conditions subsequent set forth below (the failure by
Borrowers to so perform or cause to be performed constituting an Event of
Default):


 


(a)                                  Within
30 days of the Closing Date, Agent shall have received written confirmation
from the Borrowers that all Cash Management Agreements required by Section 2.7
hereof have been obtained; and


 


(b)                                 Within
30 days of the Closing Date, Agent shall have received written confirmation
from the Borrowers that the following Deposit Accounts have been closed:


 


24





















 


	
  Account Number

  	
   

  	
  Institution

  
	
   

  	
   

  	
   

  
	
  12332-16428

  	
   

  	
  Bank of America

  
	
  50068675

  	
   

  	
  Bank of America

  
	
  50113869

  	
   

  	
  Bank of America

  
	
  491156345

  	
   

  	
  Fidelity Investments

  
	
  85046010

  	
   

  	
  State Street Bank

  
	
  10664800

  	
   

  	
  Wells Fargo Bank

  
	
  99002982

  	
   

  	
  State Street Bank

  



 


(c)                                  Within
60 days of the Closing Date, Agent shall have received written confirmation
from the Borrowers that Control Agreements have been obtained on the following
Deposit Accounts:


 


	
  Account Number

  	
   

  	
  Institution

  
	
   

  	
   

  	
   

  
	
  4173297425

  	
   

  	
  Wells Fargo Bank

  
	
  4125946818

  	
   

  	
  Wells Fargo Bank

  



 


(d)           executed Mortgages and environmental
indemnity agreements, in form and substance satisfactory to Agent, that
encumber (as to the Mortgages) and pertain to (as to the environmental
indemnity agreements) the following: (i) all of the Real Property (other than
that real property located at 1090 Industrial Boulevard, Chippewa Falls,
Wisconsin); and (ii) at Agent’s election, that real property located at 1090
Industrial Boulevard, Chippewa Falls, Wisconsin.  Borrowers acknowledge that their delivery to
Agent of the documents described in this Section 3.6(d) does not, by itself, result
in such Real Property constituting Real Property Collateral for purposes of
computing the Borrowing Base.


 


3.7                                 Conditional Waiver.


 


(a)                                  Agent
grants to Borrowers a limited conditional one-time waiver of the Designated
Event of Default; provided, however, that such waiver shall, immediately,
automatically and without notice to Borrowers or any other Person, be revoked
if either of the following shall occur:


 


(i)                                     the
First Compliance Certificate is not delivered on its due date; or


 


(ii)                                  the
First Compliance Certificate reports EBITDA of less than <$27,195,000>.


 


(b)                                 If
Borrowers deliver to Agent the First Compliance Certificate in compliance with Section 5.3
and such First Compliance Certificate reflects EBITDA of greater than or equal
to <$27,195,000>, then Agent’s waiver of the Designated Event of Default
shall be permanent.


 


(c)                                  The
waiver set forth in this Section 3.7 is not a waiver of any
subsequent Default or Event of Default of the same provisions of this
Agreement, nor is it a waiver of any other current or future Event of
Default.  Agent is not obligated to
provide this or any other waiver of its rights under the Loan Documents.


 


4.                                       REPRESENTATIONS AND WARRANTIES.


 


In order to induce the Lender Group to enter into this Agreement, each
Borrower makes the following representations and warranties to the Lender Group
which shall be true, correct, and complete, in all material respects, as of the
date hereof, and shall be true, correct, and complete, in all material
respects, as of the Closing Date, and at and as of the date of the making


 


25





















 


of each Advance (or other extension of credit) made thereafter, as
though made on and as of the date of such Advance (or other extension of
credit) (except to the extent that such representations and warranties relate
solely to an earlier date) and such representations and warranties shall
survive the execution and delivery of this Agreement:


 


4.1                                 No Encumbrances. 
Each Borrower has good and indefeasible title to, or a valid
leasehold interest in, their personal property assets and good and marketable
title to, or a valid leasehold interest in, their Real Property, in each case,
free and clear of Liens except for Permitted Liens.


 


4.2                                 Eligible Accounts. 
As to each Account that is identified by a Borrower as an Eligible
Account in a borrowing base report submitted to Agent, such Account is (a) a
bona fide existing payment obligation of the applicable Account Debtors created
by the sale and delivery of Inventory or, if applicable, the rendition of
services to such Account Debtors in the ordinary course of Borrowers’ business,
(b) owed to Borrowers without any known defenses, disputes, offsets,
counterclaims, or rights of return or cancellation, and (c) not excluded as
ineligible by virtue of one or more of the excluding criteria set forth in the
definitions comprising Eligible Accounts.


 


4.3                                 Eligible Inventory. 
As to each item of Inventory that is identified by Administrative
Borrower as Eligible Inventory in a borrowing base report submitted to Agent,
such Inventory is (a) of good and merchantable quality, free from known
defects, and (b) not excluded as ineligible by virtue of one or more of the
excluding criteria set forth in the definition of Eligible Inventory.


 


4.4                                 Equipment.  Each material item of Equipment of
Borrowers is used or held for use in their business and is in good working
order, ordinary wear and tear and damage by casualty excepted.


 


4.5                                 Location of Inventory and Equipment.  The Inventory and Equipment (other than
vehicles or Equipment out for repair) of Borrowers are not stored with a
bailee, warehouseman, or similar party and are located only at, or in-transit
between, the locations identified on Schedule 4.5 (as such Schedule may
be updated pursuant to Section 5.9).


 


4.6                                 Inventory Records. 
Each Borrower keeps correct and accurate records itemizing and
describing the type, quality, and quantity of Inventory and the book value
thereof in all material respects.


 


4.7                                 State of Incorporation; Location of Chief Executive Office;
Organizational Identification Number; Commercial Tort Claims.


 


(a)  The jurisdiction of
organization of each Borrower is set forth on Schedule 4.7(a).


 


(b)  The chief executive office
of each Borrower is located at the address indicated on Schedule 4.7(b).


 


26





















 


(c)  Each Borrower’s
organizational identification number, if any, are identified on Schedule 4.7(c).


 


(d)  As of the Closing Date,
Borrowers do not hold any commercial tort claims, except as set forth on Schedule 4.7(d).


 


4.8                                 Due Organization and Qualification; Subsidiaries.


 


(a)  Each Borrower is duly
organized and existing and in good standing under the laws of the jurisdiction
of its organization and qualified to do business in any state where the failure
to be so qualified reasonably could be expected to result in a Material Adverse
Change.


 


(b)  Set forth on Schedule 4.8(b),
is a complete and accurate description of the authorized capital Stock of each
Borrower, by class, and, as of the Closing Date, a description of the number of
shares of each such class that are issued and outstanding.  Other than as described on Schedule 4.8(b),
there are no subscriptions, options, warrants, or calls relating to any shares
of each Borrower’s capital Stock, including any right of conversion or exchange
under any outstanding security or other instrument.  No Borrower 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 4.8(c),
is, a complete and accurate list of each Borrower’s direct and indirect
Subsidiaries, showing: (i) the jurisdiction of their organization, (ii) the
number of shares of each class of common and preferred Stock authorized for
each of such Subsidiaries, and (iii) the number and the percentage of the
outstanding shares of each such class owned directly or indirectly by the
applicable Borrower.  All of the
outstanding capital Stock of each such Subsidiary has been validly issued and
is fully paid and non-assessable.


 


4.9                                 Due Authorization; No Conflict.


 


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


 


(b)  As to each Borrower, the
execution, delivery, and performance by such Borrower of this Agreement and the
other Loan Documents to which it is a party do not and will not (i) violate any
provision of federal, state, or local law or regulation applicable to any
Borrower, the Governing Documents of any Borrower, or any order, judgment, or
decree of any court or other Governmental Authority binding on any Borrower,
(ii) conflict with, result in a breach of, or constitute (with due notice or
lapse of time or both) a default under any material contractual obligation of
any Borrower, (iii) result in or require the creation or imposition of any Lien
of any nature whatsoever upon any properties or assets of Borrower, other than
Permitted Liens, or (iv) require any approval of any Borrower’s interest
holders or any approval or consent of any Person under any material contractual
obligation of any Borrower, other than consents or approvals that have been
obtained and that are still in force and effect.


 


(c)  Other than the filing of
financing statements, and the recordation of the Mortgage, the execution,
delivery, and performance by each Borrower of this Agreement and the


 


27





















 


other Loan Documents to which such Borrower is a party do not and will
not require any registration with, consent, or approval of, or notice to, or
other action with or by, any Governmental Authority, other than consents or
approvals that have been obtained and that are still in force and effect.


 


(d)  As to each Borrower, this
Agreement and the other Loan Documents to which such Borrower is a party, and
all other documents contemplated hereby and thereby, when executed and
delivered by such Borrower will be the legally valid and binding obligations of
such Borrower, enforceable against such Borrower in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors’ rights generally.


 


(e)  The Agent’s Liens are
validly created, perfected (to the extent that perfection can be effected by
the measures required to be taken under the Loan Documents for such purpose), and
first priority Liens, subject only to Permitted Liens.


 


4.10                           Litigation.  Other than those
matters disclosed on Schedule 4.10 or in Parent’s filings with the
Securities and Exchange Commission, there are no material actions, suits, or
proceedings pending or, to the best knowledge of Borrowers, threatened against
Borrowers, or any of their Subsidiaries, as applicable, except for (a) matters
that are fully covered by insurance (subject to customary deductibles) and (b)
matters arising after the Closing Date that, if decided adversely to Borrowers,
or any of their Subsidiaries, as applicable, reasonably could not be expected
to result in a Material Adverse Change.


 


4.11                           No Material
Adverse Change.  All
consolidated financial statements of Parent that have been delivered by
Borrowers to the Lender Group have been prepared in accordance with GAAP
(except, in the case of unaudited financial statements, for the lack of
footnotes and being subject to year-end audit adjustments) and present fairly
in all material respects, Parent’s consolidated financial condition as of the
date thereof and results of operations for the period then ended.  There has not been a Material Adverse Change
with respect to Borrowers since the date of the latest consolidated financial
statements submitted to Agent on or before the Closing Date.


 


4.12                           Fraudulent
Transfer.


 


(a)  Each Borrower is Solvent.


 


(b)  No transfer of property is
being made by any Borrower and no obligation is being incurred by any Borrower
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 Borrowers.


 


4.13                           Employee
Benefits.  Except as set
forth on Schedule 4.13, none of Borrowers or any of their ERISA
Affiliates maintains or contributes to any Benefit Plan or Multiemployer
Plan.  Each of Borrowers and their ERISA
Affiliates have satisfied the minimum funding standards of ERISA and the IRC
with respect to each Benefit Plan to which it is obligated to contribute and
has made all contributions required under the terms of each Multiemployer Plan
to which it is obligated to contribute. 
No ERISA Event has occurred nor has any other event


 


28





















 


occurred that may
result in an ERISA Event that reasonably could be expected to result in a
Material Adverse Change.  None of
Borrowers or any of their ERISA Affiliates is required to provide security to
any Benefit Plan under Section 401(a)(29) of the
IRC.


 


4.14                           Environmental
Condition.  Except as set
forth on Schedule 4.14, and except for other matters that, in the
aggregate, could not reasonably be expected to result in a Material Adverse
Change: (a) to Borrowers’ knowledge, none of Borrowers’ properties or assets
has ever been used by Borrowers, or by previous owners or operators in the
disposal of, or to produce, store, handle, treat, release, or transport, any
Hazardous Materials, where such use, production, storage, handling, treatment,
release or transport was in violation, in any material respect, of any
applicable Environmental Law, (b) to Borrowers’ knowledge, none of Borrowers’
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a Hazardous Materials
disposal site, (c) none of Borrowers have received notice that a Lien arising
under any Environmental Law has attached to any revenues or to any Real
Property owned or operated by Borrowers, and (d) none of Borrowers have
received a summons, citation, notice, or directive from the United States
Environmental Protection Agency or any other federal or state governmental
agency concerning any action or omission by any Borrower resulting in the
releasing or disposing of Hazardous Materials into the environment.


 


4.15                           Intellectual Property.


 


(a)  Each Borrower owns or has a
right to use all Intellectual Property Collateral that is necessary to the
conduct of its business as currently conducted. 
Attached hereto as Schedule 4.15 (as updated semi-annually)
is a true, correct, and complete listing of Patents, Copyrights and Trademarks
as to which each Borrower is the owner or is an exclusive licensee
(collectively, “Scheduled Intellectual Property Collateral”).


 


(b)  Except as set forth in Schedule 4.15:


 


(i)                                     Each
Borrower is the sole owner or is an exclusive licensee of its Scheduled
Intellectual Property Collateral, free and clear of any Lien (other than in
favor of Agent, for the benefit of Lender Group and the Bank Product Provider
or any Permitted Lien) without the payment of any monies or royalty except with
respect to off-the-shelf software;


 


(ii)                                  Each
Borrower has taken, and will continue to take, all actions which are necessary
or advisable to acquire and protect its Scheduled Intellectual Property
Collateral, consistent with prudent commercial practices and such Borrower’s
business judgment, including: (x) registering all Copyrights included within
the Scheduled Intellectual Property Collateral which, in such Borrower’s
business judgment, are of sufficient value to merit such treatment, in the U.S.
Copyright Office, and (y) registering all Patents and Trademarks included
within the Scheduled Intellectual Property Collateral which, in such Borrower’s
business judgment, are of sufficient value to merit such treatment, in the
United States Patent and Trademark Office;


 


(iii)                               Each
Borrower’s rights in the Scheduled Intellectual Property Collateral are valid
and enforceable;


 


29





















 


(iv)                              No
Borrower has received any material demand, claim, notice or inquiry from any
Person in respect of the Scheduled Intellectual Property Collateral which
challenges, threatens to challenge or inquiries as to whether there is any
basis to challenge, the validity of, the rights of Borrowers in or the right of
Borrowers to use, any such Scheduled Intellectual Property Collateral, and
Borrowers know of no basis for any such challenge;


 


(v)                                 Borrowers
have not received any formal written notice of any violation or infringement of
any proprietary rights of any other Person that could reasonably be expected to
result in a Material Adverse Change;


 


(vi)                              except
on an arm’s-length basis for value and other commercially reasonable terms,
Borrowers have not granted any license with respect to any Scheduled
Intellectual Property Collateral to any Person other than that Scheduled
Intellectual Property Collateral that Borrowers have made available to the “open
source community”; and


 


(vii)                           Borrowers
are not pursuing any claims or causes of actions against any Person for
infringement of the Scheduled Intellectual Property Collateral that could
reasonably be expected to result in a Material Adverse Change.


 


4.16                           Leases.  Borrowers enjoy peaceful and
undisturbed possession under all leases of Equipment and Real Property material
to their business and to which they are parties or under which they are
operating and all of such material leases are valid and subsisting and no
material default by Borrowers or their Subsidiaries exists under any of them.


 


4.17                           Deposit Accounts
and Securities Accounts.  Set
forth on Schedule 4.17 as of the Closing Date is a listing of all
of Borrowers’ domestic Deposit Accounts and Securities Accounts, including,
with respect to each bank or securities intermediary (a) the name and address
of such Person, and (b) the account numbers of the Deposit Accounts or
Securities Accounts maintained with such Person.  Each of the Deposit Accounts and Securities
Accounts set forth on Schedule 4.17 is the subject of a Control
Agreement.


 


4.18                           Complete
Disclosure.  All factual
information (taken as a whole) furnished by or on behalf of Borrowers in
writing to Agent or any Lender (including all information contained in the
Schedules hereto or in the other Loan Documents) for purposes of or in
connection with this Agreement, the other Loan Documents, or any transaction
contemplated herein or therein is, and all other such factual information
(taken as a whole) hereafter furnished by or on behalf of Borrowers in writing
to Agent or any Lender will be, true and accurate in all material respects on
the date as of which such information is dated or certified and not incomplete
by omitting to state any fact necessary to make such information (taken as a
whole) not misleading in any material respect at such time in light of the
circumstances under which such information was provided.  On the Closing Date, the Closing Date
Projections represent, and as of the date on which any other Projections are
delivered to Agent, such additional Projections represent Parent’s good faith
estimate of its consolidated future performance for the periods covered
thereby.  Notwithstanding anything in any
Loan Document to the contrary, Borrowers make no representation or warranty for
any purpose, including Section 7.9 hereof,  as to any projection or forecast of results
or other forward looking statement set forth in any Projection, in the Closing
Date Projections or otherwise in any document or statement delivered or made to
the Agent or


 


30





















 


any Lender other than, in the case of any such projection, forecast or
forward looking statement, that Borrowers had a good faith belief at the time
of such delivery that such projection, forecast or forward looking statement
was reasonably supported based on the assumptions described in connection
therewith at the time of such delivery.


 


4.19                           Indebtedness.  Set forth on Schedule 4.19 is
a true and complete list of all Indebtedness of each Borrower outstanding
immediately prior to the Closing Date that is to remain outstanding after the
Closing Date and such Schedule accurately reflects the aggregate principal
amount of such Indebtedness as of the Closing Date.


 


4.20                           Classified
Material.  The Classified
Material is not necessary to and will not otherwise prohibit or impede the
Lender Group’s enforcement rights related to any Collateral (except for
non-material amounts of books and records and Equipment which may contain
Classified Material).


 


5.               AFFIRMATIVE COVENANTS.


 


Each Borrower covenants and agrees that, until termination of all of
the Commitments and payment in full of the Obligations, Borrowers shall do all
of the following (provided, however, that only Administrative Borrower is
required to comply with Section 5.2 and Section 5.3, in each case on
behalf of itself and the other Borrower):


 


5.1                                 Accounting
System.  Maintain a system
of accounting that enables Borrowers to produce financial statements in
accordance with GAAP and maintain records pertaining to the Collateral that contain
information as from time to time reasonably may be requested by Agent.  Borrowers also shall keep a reporting system
that shows all additions, sales, claims, returns, and allowances with respect
to Inventory.


 


5.2                                 Collateral
Reporting.  Provide Agent
(and if so requested by Agent, with copies for each Lender) with each of the
reports set forth on Schedule 5.2 at the times specified
therein.  In addition, each Borrower
agrees to reasonably cooperate fully with Agent to maintain a system of
electronic collateral reporting in order to provide electronic reporting of
each of the items set forth above.


 


5.3                                 Financial
Statements, Reports, Certificates. 
Deliver to Agent, with copies to each Lender, each of the financial
statements, reports, or other items set forth on Schedule 5.3 at
the time specified herein.  (In
connection therewith, at no time shall Silicon Graphics Federal, Inc. have a
fiscal year end that differs from that of Parent.)


 


5.4                                 [Intentionally
Omitted].


 


5.5                                 Inspection.  Permit Agent, each Lender, and each of their
duly authorized representatives or agents to visit any of its properties and
inspect any of its assets or books and records, to examine and make copies of
its books and records, and to discuss its affairs, finances, and accounts with,
its officers and employees at such reasonable times and intervals as Agent or
any such Lender may designate and, so long as no Default or Event of Default
exists, with reasonable prior notice to Administrative Borrower.


 


31





















 


5.6                                 Maintenance of
Properties.  Maintain and
preserve all of their properties which are necessary or useful in the proper
conduct to their business in good working order and condition, ordinary wear,
tear, and casualty excepted (and except where the failure to do so could not be
reasonably expected to result in a Material Adverse Change), and comply in all
material respects at all times with the provisions of all material leases to
which it is a party as lessee, so as to prevent any material loss or forfeiture
thereof or thereunder.


 


5.7                                 Taxes.  Cause all material assessments and
taxes, whether real, personal, or otherwise, due or payable by, or imposed,
levied, or assessed against Borrowers, or any of their respective assets to be
paid in full, before delinquency or before the expiration of any extension
period, except to the extent that the validity of such assessment or tax shall
be the subject of a Permitted Protest. 
Borrowers will make timely payment or deposit of all material tax payments
and withholding taxes required of them by applicable laws, including those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Agent with proof reasonably
satisfactory to Agent indicating that the applicable Borrower has made such
payments or deposits.


 


5.8                                 Insurance.


 


(a)  At Borrowers’ expense,
maintain insurance respecting their assets wherever located, covering loss or
damage by fire, theft, explosion, and all other hazards and risks as ordinarily
are insured against by other Persons engaged in the same or similar
businesses.  Borrowers also shall
maintain business interruption, public liability, and product liability
insurance, as well as insurance against larceny and embezzlement.  All such policies of insurance shall be in
such amounts as are ordinarily maintained by Persons engaged in the same or
similar businesses and with such insurance companies as are reasonably
satisfactory to Agent.  Other than
business interruption insurance policies, Borrowers shall deliver or has
delivered certificates of insurance evidencing all required coverages to Agent
with an endorsement naming Agent as loss payee (under a satisfactory lender’s
loss payable endorsement) or additional insured, as appropriate.  Each certificate of insurance or endorsement
shall contain a clause requiring the insurer to give not less than 30 days’
prior written notice to Agent in the event of cancellation of the policy for
any reason whatsoever.


 


(b)  Administrative Borrower
shall give Agent prompt notice of any loss of the Collateral exceeding $250,000
covered by such insurance.  Borrowers
shall have the exclusive right to adjust any such losses payable under any such
insurance policies which are less than $250,000.  In the case of any losses of the Collateral
payable under such insurance exceeding $250,000, to the extent permitted under
such insurance policies, Agent shall have the exclusive right to adjust any
losses payable under any such insurance policies (other than business
interruption insurance policies), without any liability to Borrowers whatsoever
in respect of such adjustments.  Any
monies received as payment for any loss under any insurance policy mentioned
above (other than liability or business interruption insurance policies) or as
payment of any award or compensation for condemnation or taking by eminent
domain of Collateral, shall be paid over to Agent to be applied at the option
of the Required Lenders either to the prepayment of the Obligations or to be
disbursed to Administrative Borrower under staged payment terms reasonably
satisfactory to the Required Lenders for application to the cost of repairs,
replacements, restorations or reimbursements; provided, however,
that, with respect to 


 


32





















 


any such
monies in an aggregate amount during any 12 consecutive month period not in
excess of $250,000, so long as (A) no Default or Event of Default shall have
occurred and is continuing, (B) Administrative Borrower shall have given Lender
prior written notice of the Borrowers intention to apply such monies to the
costs of repairs, replacement, or restoration of the property which is the
subject of the loss, destruction, or taking by condemnation, (C) the monies are
held in a cash collateral account in which Lender has a perfected
first-priority security interest, and (D) Borrowers complete such repairs,
replacements, or restoration within 180 days after the initial receipt of such
monies, Borrowers shall have the option to apply such monies to the costs of
repairs, replacement, or restoration of the property which is the subject of
the loss, destruction, or taking by condemnation unless and to the extent that
such applicable period shall have expired without such repairs, replacements,
or restoration being made, in which case, any amounts remaining in the cash
collateral account shall be paid to Agent and applied as set forth above.


 


5.9                                 Location of
Threshold Inventory and Threshold Equipment.  Keep the Threshold Inventory and
Threshold Equipment only at the locations identified on Schedule 4.5
or in transit from one such location to another; provided, however,
that Administrative Borrower may amend Schedule 4.5 so long as such
amendment occurs by written notice to Agent not less than 30 days prior to the
date on which such Inventory or Equipment is moved to such new location , so
long as such new location is within the continental United States, and so long
as, at the time of such written notification, if such location is not owned by
a Borrower, the applicable Borrower provides Agent a Collateral Access
Agreement with respect thereto.


 


5.10                           Compliance
with Laws.  Comply with
the requirements of all applicable laws, rules, regulations, and orders of any
Governmental Authority, other than laws, rules, regulations, and orders the
non-compliance with which, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Change.


 


5.11                           Leases.  Pay when due all rents and other amounts
payable under any material leases to which any Borrower is a party or by which
any Borrower’s properties and assets are bound, unless the failure to pay such
amounts would not, individually or in the aggregate, result in and reasonably
could not be expected to result in a Material Adverse Change or a Lien other
than a Permitted Lien.


 


5.12                           Existence.  At all times preserve and keep in full
force and effect each Borrower’s valid existence and
good standing and any rights and franchises, in each case, material to their
businesses.


 


5.13                           Environmental.


 


(a)  Keep any property either
owned or operated by any Borrower free of any Environmental Liens or post bonds
or other financial assurances sufficient to satisfy the obligations or
liability evidenced by such Environmental Liens, (b) comply, in all material
respects, with Environmental Laws and provide to Agent documentation of such
compliance which Agent reasonably requests, (c) promptly notify Agent of any
release of a Hazardous Material in any reportable quantity from or onto
property owned or operated by any Borrower and take any Remedial Actions
required to abate said release or otherwise to come into compliance with
applicable Environmental Law, and (d) promptly, but in any event within 5


 


33





















 


days of its
receipt thereof, provide Agent 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 Borrower that is not a Permitted Lien, (ii) commencement of any
Environmental Action or notice that an Environmental Action will be filed
against any Borrower which could reasonably be expected to cause a Material
Adverse Change, and (iii) notice of a violation, citation, or other
administrative order which reasonably could be expected to result in a Material
Adverse Change.


 


5.14                           Disclosure
Updates.  Promptly and in
no event later than 5 Business Days after obtaining knowledge thereof, notify
Agent if any written information, exhibit, or report furnished to the Lender
Group contained, at the time it was furnished, any untrue statement of a
material fact or omitted to state any material fact necessary to make the
statements contained therein not misleading in light of the facts and
circumstances in which such statement was made or known by any Borrower to
exist at the time such statement was made.


 


5.15                           Control
Agreements.  Take all
reasonable steps in order for Agent to obtain control in accordance with
Sections 8-106, 9-104, 9-105, 9-106, and 9-107 of the Code with respect to
(subject to the proviso contained in Section 6.12) all of its
domestic Securities Accounts, domestic Deposit Accounts, electronic chattel
paper, investment property, and letter of credit rights.


 


5.16                           Assignment of
Proceeds.  Execute and
deliver to Agent any and all additional documents that Agent may request in its
Permitted Discretion, in form and substance reasonably satisfactory to Agent,
providing for the assignment of all proceeds to Agent arising from any license
or royalty agreement entered into by any Borrower with respect to such Borrower’s
General Intangibles.


 


5.17                           Employee
Benefits.


 


(a)  Deliver to Agent:  (i) promptly, and in any event within 10
Business Days after Borrowers know or have reason to know that an ERISA Event
has occurred that reasonably could be expected to result in a Material Adverse
Change, a written statement of the chief financial officer of such Borrower
describing such ERISA Event and any action that is being taking with respect
thereto by Borrowers or ERISA Affiliate, and any action taken or threatened by
the IRS, Department of Labor, or PBGC. 
Borrowers shall be deemed to know all facts known by the administrator
of any Benefit Plan of which it is the plan sponsor, (ii) promptly, and in any
event within three Business Days after the filing thereof with the IRS, a copy
of each funding waiver request filed with respect to any Benefit Plan and all
communications received by Borrowers or, to the knowledge of Borrowers, any
ERISA Affiliate with respect to such request, and (iii) promptly, and in any
event within three Business Days after receipt by Borrowers or, to the
knowledge of Borrowers, any ERISA Affiliate, of the PBGC’s intention to
terminate a Benefit Plan or to have a trustee appointed to administer a Benefit
Plan, copies of each such notice.


 


(b) 
Cause to be delivered to Agent, upon Agent’s request, each of the
following:  (i) a copy of each Plan (or,
where any such plan is not in writing, complete description thereof) (and if
applicable, related trust agreements or other funding instruments) and all
amendments thereto, all material written interpretations thereof and material
written


 


34





















 


descriptions thereof that have been distributed to employees or former
employees of Borrowers; (ii) the most recent determination letter issued by the
IRS with respect to each Benefit Plan; (iii) for the three most recent Plan
years, annual reports on Form 5500 Series required to be filed with any
governmental agency for each Benefit Plan; (iv) all actuarial reports prepared
for the last three Plan years for each Benefit Plan; (v) a listing of all
Multiemployer Plans, with the aggregate amount of the most recent annual
contributions required to be made by Borrowers or any ERISA Affiliate to each
such plan and copies of the collective bargaining agreements requiring such
contributions; (vi) any information that has been provided to Borrowers or any
ERISA Affiliate regarding withdrawal liability under any Multiemployer Plan;
and (vii) the aggregate amount of the most recent annual payments made to
former employees of Borrower or its Subsidiaries under any Retiree Health Plan.


 


6.               NEGATIVE COVENANTS.


 


Each Borrower covenants and agrees that, until termination of all of
the Commitments and payment in full of the Obligations, Borrowers will not to
do any of the following:


 


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


 


(a)  Indebtedness evidenced by
this Agreement and the other Loan Documents, together with Indebtedness owed to
Underlying Issuers with respect to Underlying Letters of Credit,


 


(b)  Indebtedness set forth on Schedule 4.19 ,


 


(c)  Permitted Purchase Money
Indebtedness,


 


(d)  advances,
guaranties, capital contributions and other Investments made to Affiliates in
the ordinary course of business,


 


(e)  other
unsecured Indebtedness in an aggregate principal amount at any time outstanding
not to exceed $50,000,000,


 


(f)  refinancings, renewals, or
extensions of Indebtedness permitted under clauses (b) through (e) of this Section 6.1
or this 6.1(f) (and continuance or renewal of any Permitted Liens associated
therewith) so long as: (i) such refinancings, renewals, or extensions do not
result in an increase in the principal amount of, or interest rate with respect
to, the Indebtedness so refinanced, renewed, or extended or add one or more
Borrowers as liable with respect thereto if such additional Borrowers were not
liable with respect to the original Indebtedness, (ii) such refinancings,
renewals, or extensions do not result in a shortening of the average weighted
maturity of the Indebtedness so refinanced, renewed, or extended, nor are they
on terms or conditions, that, taken as a whole, are materially more burdensome
or restrictive to the applicable Borrower, (iii) 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
Indebtedness must include subordination terms and conditions that are at least
as


 


35





















 


favorable to
the Lender Group as those that were applicable to the refinanced, renewed, or
extended Indebtedness, and (iv) 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,


 


(g)  endorsement
of instruments or other payment items for deposit, and


 


(h)  Indebtedness comprising
Permitted Investments.


 


6.2                                 Liens.  Create, incur, assume, or suffer to
exist, directly or indirectly, any Lien on or with respect to any of its assets
located within the United States, of any kind, whether now owned or hereafter
acquired, or any income or profits therefrom, except for Permitted Liens
(including Liens that are replacements of Permitted Liens to the extent that
the original Indebtedness is refinanced, renewed, or extended under Section 6.1(f)
and so long as the replacement Liens only encumber those assets that secured
the refinanced, renewed, or extended Indebtedness).


 


6.3                                 Restrictions
on Fundamental Changes.


 


(a)  Enter into any merger or
consolidation (other than a merger or consolidation in which a Borrower is the
surviving entity and that is otherwise permitted in Section 6.13),
reorganization or recapitalization not otherwise permitted under the Loan
Documents, or reclassify its Stock other than pursuant to the terms of such
Stock;


 


(b) 
Liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution),


 


(c)  Convey, sell, lease,
license, assign, transfer, or otherwise dispose of, in one transaction or a
series of transactions, all or substantially all of its assets, or


 


(d)  Other than Permitted
Dispositions, suspend or go out of a substantial portion of its or their
business.


 


6.4                                 Disposal of
Assets.  Other than
Permitted Dispositions, convey, sell, lease, license, assign, transfer, or
otherwise dispose of any of the assets of any Borrower.


 


6.5                                 Change Name.  Change any Borrower’s name,
organizational identification number, state of organization, or organizational
identity; provided, however, that a Borrower may change its name
upon at least 30 days’ prior written notice by Administrative Borrower to Agent
of such change and so long as, at the time of such written notification, such
Borrower provides any financing statements necessary to perfect and continue
perfected the Agent’s Liens.


 


6.6                                 Nature of
Business.  Make any change
in the principal nature of their business.


 


6.7                                 Prepayments
and Amendments.  Except in
connection with a refinancing permitted by Section 6.1(f):


 


(a) 
optionally prepay, redeem, defease, purchase, or otherwise acquire any
Indebtedness of any Borrower, other than the Obligations in accordance with
this Agreement,


 


36





















 


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


 


(c)  directly
or indirectly, amend, modify, alter, increase, or change any of the terms or
conditions of any agreement, instrument, document, indenture, or other writing
evidencing or concerning Indebtedness permitted under Section 6.1(b).


 


6.8                                 Change of
Control.  Cause or permit,
directly or indirectly, any Change of Control.


 


6.9                                 Consignments.  Consign any of their Inventory
or sell any of their Inventory on bill and hold, sale or return, sale on
approval, or other conditional terms of sale.


 


6.10                           Distributions.  Other than distributions or declaration
and payment of dividends by a Borrower to another Borrower, make any
distribution or declare or pay any dividends (in cash or other property, other
than common Stock) on, or, except as set forth on Schedule 6.10
hereof, purchase, acquire, redeem, or retire any of any Stock of any Borrower,
of any class, whether now or hereafter outstanding.


 


6.11                           Accounting
Methods.  Materially modify or change their
fiscal year or their method of accounting (other than as may be required to
conform to GAAP) or enter into, modify, or terminate any agreement currently
existing, or at any time hereafter entered into with any third party accounting
firm or service bureau for the preparation or storage of Borrowers’ accounting
records in a manner that would result in said accounting firm or service bureau
declining to provide Agent information regarding Borrowers’ financial
condition.


 


6.12                           Investments.  Except for Permitted Investments,
directly or indirectly, make or acquire any Investment, or incur any
liabilities (including contingent obligations) other than Indebtedness
permitted under Section 6.1 for or in connection with any
Investment; provided, however, that Borrowers shall not have
Permitted Investments (other than in the Cash Management Accounts) in Deposit
Accounts or Securities Accounts in an aggregate amount in excess of $500,000 at
any one time unless the applicable Borrowers and the applicable securities
intermediary or bank have entered into Control Agreements governing such
Permitted Investments in order to perfect (and further establish) the Agent’s
Liens in such Permitted Investments. 
Subject to the foregoing proviso, Borrowers shall not establish or
maintain any Deposit Account or Securities Account unless Agent shall have
received a Control Agreement in respect of such Deposit Account or Securities
Account.


 


6.13                           Transactions
with Affiliates.  Directly
or indirectly enter into or permit to exist any
transaction with any Affiliate of any Borrower except for transactions that (a)
are upon fair and reasonable terms, and (b) are no less favorable to Borrowers,
than would be obtained in an arm’s length transaction with a non-Affiliate.


 


6.14                           Use of
Proceeds.  Use the
proceeds of the Advances for any purpose other than (a) on the Closing Date,
(i) to refinance in full the outstanding principal, accrued interest, and
accrued fees and expenses owing to WFF, and (ii) to pay transactional fees,
costs, and expenses incurred in connection with this Agreement, the other Loan
Documents, and the transactions


 


37





















 


contemplated
hereby and thereby, and (b) thereafter, consistent with the terms and
conditions hereof, for its lawful and permitted purposes.


 


6.15                           Inventory and
Equipment with Bailees.  Except
as set forth on Schedule E-1, store the Threshold Inventory or Threshold
Equipment of Borrowers at any time now or hereafter with a bailee,
warehouseman, or similar party without Agent’s prior written consent.


 


6.16                           Financial
Covenants.


 


(a)  Minimum EBITDA.  Fail
to maintain or achieve EBITDA, measured on a fiscal quarter-end basis, of:


 


(i)                                     Subject
to clause (iii) below, not less than the required amount set forth in the
following table for the applicable period set forth opposite thereto:


 


	
  Applicable Amount

  	
   

  	
  Applicable Period

  	
   

  
	
  $

  	
  (21,067,000

  	
  )

  	
  For Borrowers’ fiscal quarter

  ending in March 2005

  	
   

  
	
  $

  	
  11,616,000

  	
   

  	
  For Borrowers’ fiscal quarter

  ending in June 2005

  	
   

  
	
  $

  	
  -0-

  	
   

  	
  For Borrowers’ fiscal quarter

  ending in September 2005

  	
   

  
	
  $

  	
  16,873,000

  	
   

  	
  For Borrowers’ fiscal quarter

  ending in December 2005

  	
   

  
	
  $

  	
  6,674,000

  	
   

  	
  For Borrowers’ fiscal quarter

  ending in March 2006

  	
   

  
	
  $

  	
  20,654,000

  	
   

  	
  For Borrowers’ fiscal quarter

  ending in June 2006

  	
   

  



 


(ii)                                  Subject
to clause (iii) below, for Borrowers’ fiscal quarter ending in September 2006
and for each fiscal quarter thereafter measured at the end of each such period,
an amount equal to the greater of (A) zero and (B) the difference
between (I) the amount of EBITDA for such 3 month period as set forth in
Borrowers’ Projections delivered to Lender in accordance with Section 5.3
and approved by Agent in its Permitted Discretion, and (II) $5,000,000.


 


(iii)                               Notwithstanding
the foregoing, Borrowers shall not be required to comply with Section 6.16(a)(i)
or (ii), as applicable, during the EBITDA Waiver Period, so long as at
all times during the EBITDA Waiver Period:


 


(Y)                                No
Default or Event of Default (other than a Default or Event of Default arising
from non-compliance with Section 6.16(a) or (b), as applicable, for the
applicable period) has occurred and is continuing; and


 


(Z)                                The
amount of Held Cash Collateral held by Agent in accordance with Section 6.16(c)
is no less than $35,000,000.


 


38





















 


(b)  Minimum Global Unrestricted Cash.  Fail to maintain Global Unrestricted Cash of
Parent and its Subsidiaries, determined on a consolidated basis, of no less
than $25,000,000 at all times during the term of this Agreement, provided,
however, that Borrowers may permit such amount to be reduced to no less than
$20,000,000 for a period of 10 consecutive calendar days during any 30-day
period during the term of this Agreement.


 


(c)  Minimum Held Cash Collateral.  Fail at all times during the term of this
Agreement to cause Agent to hold Held Cash Collateral in an amount equal to no
less than the amount by which the Obligations exceed the Borrowing Base;
provided, however, that at all times during the Conditional Waiver Period, Held
Cash Collateral shall be no less than $20,000,000.


 


(d)  Capital Expenditures.  Make Capital Expenditures in any fiscal quarter in excess of
$10,000,000.


 


6.17                           No
Transactions Prohibited Under ERISA; Unfunded Liability.  


 


(a) 
Directly or indirectly


 


(i)                                     Engage,
in any prohibited transaction which is reasonably likely to result in a civil
penalty or excise tax described in Sections 406 of ERISA or 4975 of
the IRC for which a statutory or class exemption is not available or a private
exemption has not been previously obtained from the Department of Labor;


 


(ii)                                  permit
to exist with respect to any Benefit Plan any accumulated funding deficiency
(as defined in Sections 302 of ERISA and 412 of the IRC), whether or
not waived;


 


(iii)                               fail to pay timely required contributions or annual
installments due with respect to any waived funding deficiency to any Benefit
Plan;


 


(iv)                              terminate any Benefit Plan where such event would result in
any liability of Borrower, or any ERISA Affiliate under Title IV of ERISA
which was not paid in connection with such termination;


 


(v)                                 fail to make any required contribution or payment to any
Multiemployer Plan;


 


(vi)                              fail to pay any required installment or any other payment
required under Section 412 of the IRC on or before the due date for such
installment or other payment;


 


(vii)                           amend a
Plan resulting in an increase in current liability for the Plan year such that
any of Borrowers or any ERISA Affiliate is required to provide security to such
Plan under Section 401(a)(29) of the IRC; or


 


(viii)                        withdraw from any Multiemployer Plan where such withdrawal
is reasonably likely to result in any liability of such entity under Title IV
of ERISA.


 


39





















 


which,
individually or in the aggregate, results in or reasonably would be expected to
result in a claim against or liability of Borrower, any of its Subsidiaries or
any ERISA Affiliate in excess of $1,000,000.


 


7.               EVENTS OF DEFAULT.


 


Any one or more of the following events shall constitute an event of
default (each, an “Event of Default”) under this Agreement:


 


7.1                                 If
Borrowers fail to pay when due and payable, or when declared due and
payable, (a) all or any portion of the Obligations consisting of interest,
fees, or charges due the Lender Group, reimbursement of Lender Group Expenses,
or other amounts (other than any portion thereof constituting principal)
constituting Obligations (including any portion thereof that accrues after the
commencement of an Insolvency Proceeding, regardless of whether allowed or
allowable in whole or in part as a claim in any such Insolvency Proceeding),
and such failure continues for a period of 3 Business Days, or (b) all or any
portion of the principal of the Obligations);


 


7.2                                 If
Borrowers


 


(a)  fail to perform or observe
any covenant or other agreement contained in any of Sections 2.7, 5.5,
5.8, 5.12, 5.14, 5.16, and 6.1 through 6.16
of this Agreement;


 


(b)  fail to perform or observe
any covenant or other agreement contained in any of Sections 5.6, 5.7,
5.9, 5.10, 5.11, and 5.15 of this Agreement and
such failure continues for a period of 10 days after the earlier of (i) the
date on which such failure shall first become known to any officer of any
Borrower or (ii) written notice thereof is given to Administrative Borrower by
Agent;


 


(c)  fail to perform any covenant
or other agreement contained in any of Sections 5.1, 5.2 or 5.3
and such failure or neglect is not cured within 15 days after the date on which
such failure or neglect first occurs; or


 


(d)  fail to perform or observe
any covenant or other agreement contained in this Agreement, or in any of the
other Loan Documents; in each case, other than any such covenant or agreement
that is the subject of another provision of this Section 7 (in
which event such other provision of this Section 7 shall govern),
and such failure continues for a period of 20 days after the earlier of (i) the
date on which such failure shall first become known to any officer of any
Borrower or (ii) written notice thereof is given to Administrative Borrower by
Agent;


 


7.3                                 If
any material portion of any Borrower’s assets is attached, seized, subjected to
a writ or distress warrant, or is levied upon, or comes into the possession of
any third Person and the same is not discharged before the earlier of 30 days
after the date it first arises or 5 days prior to the date on which such
property or asset is subject to forfeiture by such Borrower;


 


7.4                                 If
an Insolvency Proceeding is commenced by any Borrower;


 


40





















 


7.5                                 If
an Insolvency Proceeding is commenced against any Borrower, and any of the
following events occur:  (a) the
applicable Borrower 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, any Borrower, or (e) an order for relief shall have
been issued or entered therein;


 


7.6                                 If
any Borrower is enjoined, restrained, or in any way prevented by court order
from continuing to conduct all or any material part of its business affairs;


 


7.7                                 If
one or more judgments, orders, or awards involving an aggregate amount of
$2,500,000, or more (except to the extent covered by insurance pursuant to
which the insurer has accepted liability therefor in writing) shall be entered
or filed against any Borrower or with respect to any of their respective
assets, and the same is not released, discharged, bonded against, or stayed
pending appeal before the earlier of 30 days after the date it first arises or
5 days prior to the date on which such asset is subject to being forfeited by
the applicable Borrower;


 


7.8                                 If
there is a default in any agreement to which any Borrower is a party with one
or more third Persons relative to Indebtedness of any Borrower involving in an
amount of $3,000,000 or more, and such default (i) occurs at the final maturity
of the obligations thereunder, or (ii) results in a right by such third
Person(s), irrespective of whether exercised, to accelerate the maturity of the
applicable Borrower’s obligations thereunder;


 


7.9                                 If
any warranty, representation, statement, or Record made herein or in any other
Loan Document or delivered to Lender in connection with this Agreement or any
other Loan Document by any Borrower or any officer, employee or director of any
Borrower, proves to have been untrue in any material respect when made;


 


7.10                           [Intentionally
omitted];


 


7.11                           If
the Security Agreement or any other Loan Document that purports to create a
Lien, shall, for any reason, fail or cease to create a valid and perfected (to
the extent that perfection can be effected by the measures required to be taken
under the Loan Documents for such purpose) and, except to the extent permitted
by the terms hereof or thereof, first priority Lien on or security interest in
the Collateral covered hereby or thereby, except as a result of a disposition
of the applicable Collateral in a transaction permitted under this Agreement;
or


 


7.12                           Any
material provision of any Loan Document shall at any time for any reason be
declared to be null and void, or the validity or enforceability thereof shall
be contested by any Borrower, or a proceeding shall be commenced by any
Borrower, or by any Governmental Authority having jurisdiction over any
Borrower, seeking to establish the invalidity or unenforceability thereof.


 


41





















 


8.               THE LENDER GROUP’S RIGHTS AND
REMEDIES.


 


8.1                                 Rights and
Remedies.  Upon the
occurrence, and during the continuation, of an Event of Default, the Required
Lenders (at their election but without notice of their election and without
demand) may authorize and instruct Agent to do any one or more of the following
on behalf of the Lender Group (and Agent, acting upon the instructions of the
Required Lenders, shall do the same on behalf of the Lender Group), all of
which are authorized by Borrowers:


 


(a)  Declare all or any portion
of the Obligations, whether evidenced by this Agreement, by any of the other
Loan Documents, or otherwise, immediately due and payable;


 


(b)  Cease advancing money or
extending credit to or for the benefit of Borrowers under this Agreement, under
any of the Loan Documents, or under any other agreement between Borrowers and
the Lender Group;


 


(c)  Terminate this Agreement and
any of the other Loan Documents as to any future liability or obligation of the
Lender Group, but without affecting any of the Agent’s Liens in the Collateral
and without affecting the Obligations; and


 


(d)  The Lender Group shall have
all other rights and remedies available at law or in equity or pursuant to any
other Loan Document.


 


The foregoing to the contrary notwithstanding, upon the occurrence of
any Event of Default described in Section 7.4 or Section 7.5,
in addition to the remedies set forth above, without any notice to Borrowers or
any other Person or any act by the Lender Group, the Commitments shall
automatically terminate and the Obligations then outstanding, together with all
accrued and unpaid interest thereon and all fees and all other amounts due
under this Agreement and the other Loan Documents, shall automatically and
immediately become due and payable, without presentment, demand, protest, or
notice of any kind, all of which are expressly waived by Borrowers.


 


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


 


9.               TAXES AND EXPENSES.


 


If any Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, Agent, in its sole discretion
and without prior notice to any Borrower, may do any or all of the following, provided,
however, that if any failure by any Borrower described above in this Section 9
does not constitute an Event of Default and occurs when there has not occurred
any Event of Default


 


42





















 


which is continuing, then Agent may do any or
all of the following only if Agent shall have given notice of such failure to
Administrative Borrower and such failure is not cured within 5 Business Days
after the date of such notice:  (a) make
payment of the same or any part thereof, (b) set up such reserves against the
Borrowing Base as Agent deems necessary to protect the Lender Group from the
exposure created by such failure, or (c) in the case of the failure to comply
with Section 5.8 hereof, obtain and maintain insurance policies of
the type described in Section 5.8 and take any action with respect
to such policies as Agent deems prudent. 
Any such amounts paid by Agent shall constitute Lender Group Expenses
and any such payments shall not constitute an agreement by the Lender Group to
make similar payments in the future or a waiver by the Lender Group of any
Event of Default under this Agreement. 
Agent need not inquire as to, or contest the validity of, any such
expense, tax, or Lien and the receipt of the usual official notice for the
payment thereof shall be conclusive evidence that the same was validly due and
owing.


 


10.         WAIVERS;
INDEMNIFICATION.


 


10.1                           Demand;
Protest; etc.  Each
Borrower waives demand, protest, notice of protest, notice of default or
dishonor (other than any notice required under this Agreement), notice of
payment and nonpayment (other than any notice required under this Agreement),
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of documents, instruments, chattel paper, and guarantees at any time held by
the Lender Group on which any such Borrower may in any way be liable.


 


10.2                           The Lender
Group’s Liability for Collateral. 
Each Borrower hereby agrees that: 
(a) so long as the Lender Group complies with its obligations, if any,
under the Code, the Lender Group shall not in any way or manner be liable or
responsible for:  (i) the safekeeping of
the Collateral, (ii) any loss or damage thereto occurring or arising in any
manner or fashion from any cause, (iii) any diminution in the value thereof, or
(iv) any act or default of any carrier, warehouseman, bailee, forwarding
agency, or other Person, and (b) all risk of loss, damage, or destruction of
the Collateral shall be borne by Borrowers.


 


10.3                           Indemnification.  Each Borrower shall pay, indemnify,
defend, and hold the Agent-Related Persons, the Lender-Related Persons, and
each Participant (each, an “Indemnified Person”) harmless (to the fullest
extent permitted by law) from and against any and all claims, demands, suits,
actions, investigations, proceedings, and damages, and all reasonable attorneys
fees and disbursements and other costs and expenses actually incurred in
connection therewith or in connection with the enforcement of this
indemnification (as and when they are incurred and irrespective of whether suit
is brought), at any time asserted against, imposed upon, or incurred by any of
them (a) in connection with or as a result of or related to the execution,
delivery, enforcement, performance, or administration (including any
restructuring or workout with respect hereto) of this Agreement, any of the
other Loan Documents, or the transactions contemplated hereby or thereby or in
connection with the monitoring of Borrowers’ or their Subsidiaries’ compliance
with the terms of the Loan Documents, and (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 (all the
foregoing, collectively, the “Indemnified Liabilities”).  The foregoing to the


 


43





















 


contrary notwithstanding, Borrowers shall have no obligation to any
Indemnified Person under this Section 10.3 with respect to any
Indemnified Liability that a court of competent jurisdiction finally determines
to have resulted from the gross negligence or willful misconduct of such
Indemnified Person.  This provision shall
survive the termination of this Agreement and the repayment of the
Obligations.  If any Indemnified Person
makes any payment to any other Indemnified Person with respect to an
Indemnified Liability as to which Borrowers were required to indemnify the
Indemnified Person receiving such payment, the Indemnified Person making such
payment is entitled to be indemnified and reimbursed by Borrowers 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.


 


11.         NOTICES.


 


Unless otherwise provided in this Agreement, all notices or demands by
Borrowers or Agent to the other relating to this Agreement or any other Loan
Document shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by registered or certified mail (postage
prepaid, return receipt requested), overnight courier, electronic mail (at such
email addresses as Administrative Borrower or Agent, as applicable, may
designate to each other in accordance herewith), or telefacsimile to Borrowers
in care of Administrative Borrower or to Agent, as the case may be, at its
address set forth below:


 


	
  If to Administrative Borrower:

  	
   

  	
  Silicon Graphics, Inc.

  
	
   

  	
   

  	
  1500 Crittenden Lane

  
	
   

  	
   

  	
  Mountain View, California 94043

  
	
   

  	
   

  	
  Attn: Jean Furter, Vice President and Treasurer

  
	
   

  	
   

  	
  Fax No.: (650) 933-0415

  
	
   

  	
   

  	
   

  
	
  With copies
  to:

  	
   

  	
  Davis Polk & Wardwell

  
	
   

  	
   

  	
  450 Lexington Avenue

  
	
   

  	
   

  	
  New York, NY 10017

  
	
   

  	
   

  	
  Attn: Karin Day, Esq.

  
	
   

  	
   

  	
  Fax No.: (212) 450-3800

  
	
   

  	
   

  	
   

  
	
  And to:

  	
   

  	
  Silicon Graphics, Inc.

  
	
   

  	
   

  	
  1500 Crittenden Lane

  
	
   

  	
   

  	
  Mountain View, California 94043

  
	
   

  	
   

  	
  Attn: Barry Weinert, Esq., Associate
  General Counsel

  
	
   

  	
   

  	
  Fax No.: (650) 933-0651

  



 


44





















 


	
  If to Agent:

  	
   

  	
  WELLS FARGO FOOTHILL, INC.

  
	
   

  	
   

  	
  2450 Colorado Avenue

  
	
   

  	
   

  	
  Suite 3000 West

  
	
   

  	
   

  	
  Santa Monica, California 90404

  
	
   

  	
   

  	
  Attn: Business Finance Division Manager

  
	
   

  	
   

  	
  Fax No.: (310) 478-9788

  
	
   

  	
   

  	
   

  
	
  with copies
  to:

  	
   

  	
  Jeffer, Mangels, Butler & Marmaro LLP

  
	
   

  	
   

  	
  1900 Avenue of the Stars, 7th Floor

  
	
   

  	
   

  	
  Los Angeles, California 90067

  
	
   

  	
   

  	
  Attn: Joel J. Berman, Esq.

  
	
   

  	
   

  	
  Fax No.: (310) 203-0567

  



 


Agent and Borrowers may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other party.  All notices or demands sent
in accordance with this Section 11, other than notices by Agent in
connection with enforcement rights against the Collateral under the provisions
of the Code, shall be deemed received on the earlier of the date of actual
receipt or 3 Business Days after the deposit thereof in the mail.  Each Borrower acknowledges and agrees that
notices sent by the Lender Group in connection with the exercise of enforcement
rights against Collateral under the provisions of the Code shall be deemed sent
when deposited in the mail or personally delivered, or, where permitted by law,
transmitted by telefacsimile or any other method set forth above.


 


12.         CHOICE OF LAW AND VENUE; JURY
TRIAL WAIVER.


 


(a)  THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH
OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF
AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO
ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL
BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF CALIFORNIA.


 


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


 


45





















 


MAY HAVE
TO ASSERT THE DOCTRINE OF FORUM  NON  CONVENIENS OR TO
OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION 12(b).


 


(c)  BORROWERS AND EACH MEMBER OF THE LENDER GROUP HEREBY WAIVE, TO THE
EXTENT PERMITTED UNDER APPLICABLE LAW, THEIR RESPECTIVE RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS.  BORROWERS AND EACH
MEMBER OF THE LENDER GROUP REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND
EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.  IN THE
EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT
TO A TRIAL BY THE COURT.


 


13.         ASSIGNMENTS AND PARTICIPATIONS;
SUCCESSORS.


 


13.1                           Assignments
and Participations.


 


(a)  Any Lender may, with the
written consent of Agent (provided that no written consent of Agent shall be
required in connection with any assignment and delegation by a Lender to an
Eligible Transferee) and upon 3 Business Days’ notice to Administrative Borrower,
assign and delegate to one or more assignees (each an “Assignee”) all, or any
ratable part of all, of the Obligations, the Commitments and the other rights
and obligations of such Lender hereunder and under the other Loan Documents, in
a minimum amount of $5,000,000; provided, however, that Borrowers
and Agent may continue to deal solely and directly with such Lender in
connection with the interest so assigned to an Assignee until (i) written
notice of such assignment, together with payment instructions, addresses, and
related information with respect to the Assignee, have been given to
Administrative Borrower and Agent by such Lender and the Assignee, (ii) such
Lender and its Assignee have delivered to Administrative Borrower and Agent an
Assignment and Acceptance, (iii) the assigning Lender or Assignee has paid to
Agent for Agent’s separate account a processing fee in the amount of $5,000,
and (iv) such Assignee has delivered any applicable documentation relating
to exemption from withholding taxes provided in Section 15.11.  Anything contained herein to the contrary
notwithstanding, the consent of Agent or Borrower (and payment of any fees)
shall not be required if such assignment is in connection with any merger,
consolidation, sale, transfer, or other disposition of all or any substantial
portion of the business or loan portfolio of the assigning Lender.


 


(b)  From and after the date that
Agent notifies the assigning Lender (with a copy to Administrative Borrower)
that it has received an executed Assignment and Acceptance and payment of the
above-referenced processing fee, (i) the Assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, shall have the
rights and obligations of a Lender under the Loan Documents, and (ii) the
assigning Lender shall, to the extent that rights and obligations hereunder and
under the other Loan Documents have been assigned by it pursuant to such


 


46





















 


Assignment and
Acceptance, relinquish its rights (except with respect to Section 10.3
hereof) and be released from any future obligations under this Agreement (and
in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender’s rights and obligations under this Agreement
and the other Loan Documents, such Lender shall cease to be a party hereto and
thereto), and such assignment shall effect a novation between Borrowers and the
Assignee; provided, however, that nothing contained herein shall
release any assigning Lender from obligations that survive the termination of
this Agreement, including such assigning Lender’s obligations under Article 15
and Section 16.7 of this Agreement.


 


(c)  By executing and delivering
an Assignment and Acceptance, the assigning Lender thereunder and the Assignee
thereunder confirm to and agree with each other and the other parties hereto as
follows:  (1) other than as provided in
such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other Loan Document furnished pursuant hereto,
(2) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrowers or the
performance or observance by Borrowers of any of their obligations under this
Agreement or any other Loan Document furnished pursuant hereto, (3) such
Assignee confirms that it has received a copy of this Agreement, together with
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Assignment and Acceptance,
(4) such Assignee will, independently and without reliance upon Agent, such
assigning Lender or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement, (5) such
Assignee appoints and authorizes Agent to take such actions and to exercise
such powers under this Agreement as are delegated to Agent, by the terms
hereof, together with such powers as are reasonably incidental thereto, and (6)
such Assignee agrees that it will perform all of the obligations which by the
terms of this Agreement are required to be performed by it as a Lender.


 


(d)  Immediately upon Agent’s
receipt of the required processing fee payment and the fully executed
Assignment and Acceptance, this Agreement shall be deemed to be amended to the
extent, but only to the extent, necessary to reflect the addition of the
Assignee and the resulting adjustment of the Commitments arising
therefrom.  The Commitment allocated to
each Assignee shall reduce such Commitments of the assigning Lender pro tanto.


 


(e)  Any Lender may at any time
sell to one or more commercial banks, financial institutions, or other Persons
(a “Participant”) participating interests in its Obligations, the Commitment,
and the other rights and interests of that Lender (the “Originating Lender”)
hereunder and under the other Loan Documents; provided, however,
that (i) the Originating Lender shall remain a “Lender” for all purposes of
this Agreement and the other Loan Documents and the Participant receiving the
participating interest in the Obligations, the Commitments, and the other
rights and interests of the Originating Lender hereunder shall not constitute a
“Lender” hereunder or under the other Loan Documents and the Originating Lender’s
obligations under this Agreement shall remain unchanged, (ii) the Originating
Lender shall remain solely responsible for the performance of such obligations,
(iii) Borrowers, Agent, and the Lenders shall continue to deal solely and
directly with the Originating Lender in connection


 


47





















 


with the
Originating Lender’s rights and obligations under this Agreement and the other
Loan Documents, (iv) no Lender shall transfer or grant any participating
interest under which the Participant has the right to approve any amendment to,
or any consent or waiver with respect to, this Agreement or any other Loan
Document, except to the extent such amendment to, or consent or waiver with
respect to this Agreement or of any other Loan Document would (A) extend the
final maturity date of the Obligations hereunder in which such Participant is
participating, (B) reduce the interest rate applicable to the Obligations
hereunder in which such Participant is participating, (C) release all or
substantially all of the Collateral or guaranties (except to the extent
expressly provided herein or in any of the Loan Documents) supporting the
Obligations hereunder in which such Participant is participating, (D) postpone
the payment of, or reduce the amount of, the interest or fees payable to such
Participant through such Lender, or (E) change the amount or due dates of
scheduled principal repayments or prepayments or premiums, and (v) all amounts
payable by Borrowers hereunder (including but not limited to amounts payable
under Section 15.11(a)) shall be determined as if such Lender had not sold
such participation.  The rights of any
Participant only shall be derivative through the Originating Lender with whom
such Participant participates and no Participant shall have any rights under
this Agreement or the other Loan Documents or any direct rights as to the other
Lenders, Agent, Borrowers, the Collections of Borrowers, the Collateral, or
otherwise in respect of the Obligations. 
No Participant shall have the right to participate directly in the
making of decisions by the Lenders among themselves.  The provisions of this Section 13.1(e)
are solely for the benefit of the Lender Group, and no Borrower shall have any
rights as third party of any such provisions.


 


(f)  In connection with any such
assignment or participation or proposed assignment or participation, a Lender
may, subject to the provisions of Section 16.7, disclose all
documents and information which it now or hereafter may have relating to
Borrowers and their respective businesses.


 


(g)  Any other provision in this
Agreement notwithstanding, any Lender may at any time create a security
interest in, or pledge, all or any portion of its rights under and interest in
this Agreement in favor of any Federal Reserve Bank in accordance with
Regulation A of the Federal Reserve Bank or U.S. Treasury Regulation 31 CFR § 203.24,
and such Federal Reserve Bank may enforce such pledge or security interest in
any manner permitted under applicable law.


 


13.2                           Successors.  This Agreement shall bind and inure to
the benefit of the respective successors and assigns of each of the parties; provided,
however, that Borrowers may not assign this Agreement or any rights or
duties hereunder without the Lenders’ prior written consent and any prohibited
assignment shall be absolutely void ab initio.  No consent to assignment by the Lenders shall
release any Borrower from its Obligations. 
A Lender may assign this Agreement and the other Loan Documents and its
rights and duties hereunder and thereunder pursuant to Section 13.1
hereof and, except as expressly required pursuant to Section 13.1
hereof, no consent or approval by any Borrower is required in connection with
any such assignment.


 


14.         AMENDMENTS; WAIVERS.


 


14.1                           Amendments and Waivers.  No amendment or waiver of any provision
of this Agreement or any other Loan Document (other than Bank Product
Agreements), and no consent with respect to any departure by Borrowers
therefrom, shall be effective unless the same shall be


 


48





















 


in writing and signed by the Required Lenders (or by Agent at the
written request of the Required Lenders) and Administrative Borrower (on behalf
of all Borrowers) and then any such waiver or consent shall be effective, but
only in the specific instance and for the specific purpose for which given; provided,
however, that no such waiver, amendment, or consent shall, unless in
writing and signed by all of the Lenders affected thereby and Administrative
Borrower (on behalf of all Borrowers), do any of the following:


 


(a)  increase
or extend any Commitment of any Lender,


 


(b)  postpone
or delay any date fixed by this Agreement or any other Loan Document for any
payment of principal, interest, fees, or other amounts due hereunder or under
any other Loan Document,


 


(c)  reduce
the principal of, or the rate of interest on, any loan or other extension of
credit hereunder, or reduce any fees or other amounts payable hereunder or
under any other Loan Document,


 


(d)  change
the Pro Rata Share that is required to take any action hereunder,


 


(e)  amend
or modify this Section or any provision of this Agreement providing for
consent or other action by all Lenders,


 


(f)  other
than as permitted by Section 15.12, release Agent’s Lien in and to
any of the Collateral,


 


(g)  change
the definition of “Required Lenders” or “Pro Rata Share”,


 


(h)  contractually
subordinate any of the Agent’s Liens,


 


(i) 
release any Borrower from any obligation for the payment of money,


 


(j)  change the definition of
Borrowing Base, any of the definitions of Accounts constituting Eligible
Accounts, the definition of Eligible Inventory, the definition of Maximum
Revolver Amount, or Section 2.1(b), or


 


(k)  amend
any of the provisions of Section 15.


 


and, provided
further, however, that no amendment, waiver or consent shall, unless
in writing and signed by Agent, Issuing Lender, or Swing Lender, as applicable,
affect the rights or duties of Agent, Issuing Lender, or Swing Lender, as
applicable, under this Agreement or any other Loan Document.  The foregoing notwithstanding, any amendment,
modification, waiver, consent, termination, or release of, or with respect to,
any provision of this Agreement or any other Loan Document that relates only to
the relationship of the Lender Group among themselves, and that does not affect
the rights or obligations of Borrowers, shall not require consent by or the
agreement of Borrowers.


 


49





















 


14.2                           Replacement of Holdout Lender.


 


(a)  If any action to be taken by
the Lender Group or Agent hereunder requires the unanimous consent,
authorization, or agreement of all Lenders, and a Lender (“Holdout Lender”)
fails to give its consent, authorization, or agreement, then Agent, upon at
least 5 Business Days prior irrevocable notice to the Holdout Lender, may
permanently replace the Holdout Lender with one or more substitute Lenders
(each, a “Replacement Lender”), and the Holdout Lender shall have no right to
refuse to be replaced hereunder.  Such
notice to replace the Holdout Lender shall specify an effective date for such
replacement, which date shall not be later than 15 Business Days after the date
such notice is given.


 


(b)  Prior to the effective date
of such replacement, the Holdout Lender and each Replacement Lender shall
execute and deliver an Assignment and Acceptance, subject only to the Holdout
Lender being repaid its share of the outstanding Obligations (including an
assumption of its Pro Rata Share of the Risk Participation Liability) without
any premium or penalty of any kind whatsoever. 
If the Holdout Lender shall refuse or fail to execute and deliver any
such Assignment and Acceptance prior to the effective date of such replacement,
the Holdout Lender shall be deemed to have executed and delivered such
Assignment and Acceptance.  The replacement
of any Holdout Lender shall be made in accordance with the terms of Section 13.1.  Until such time as the Replacement Lenders
shall have acquired all of the Obligations, the Commitments, and the other
rights and obligations of the Holdout Lender hereunder and under the other Loan
Documents, the Holdout Lender shall remain obligated to make the Holdout Lender’s
Pro Rata Share of Advances and to purchase a participation in each Letter of
Credit, in an amount equal to its Pro Rata Share of the Risk Participation
Liability of such Letter of Credit.


 


14.3                           No Waivers; Cumulative Remedies.  No failure by Agent or any Lender to
exercise any right, remedy, or option under this Agreement or any other Loan
Document, or delay by Agent or any Lender in exercising the same, will operate
as a waiver thereof.  No waiver by Agent
or any Lender will be effective unless it is in writing, and then only to the
extent specifically stated.  No waiver by
Agent or any Lender on any occasion shall affect or diminish Agent’s and each
Lender’s rights thereafter to require strict performance by Borrowers of any
provision of this Agreement.  Agent’s and
each Lender’s rights under this Agreement and the other Loan Documents will be
cumulative and not exclusive of any other right or remedy that Agent or any
Lender may have.


 


15.         AGENT;
THE LENDER GROUP.


 


15.1                           Appointment and Authorization of Agent.  Each Lender hereby designates and
appoints WFF as its representative under this Agreement and the other Loan
Documents and each Lender hereby irrevocably authorizes Agent to execute and
deliver each of the other Loan Documents on its behalf and to take such other
action on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to Agent by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto.  Agent agrees to act as such on the express
conditions contained in this Section 15.  The provisions of this Section 15
(other than the proviso to Section 15.11(a)) are solely for the
benefit of Agent, and the Lenders, and Borrowers and their Subsidiaries shall
have no rights as a third party beneficiary of any of the provisions contained
herein.  Any provision to the contrary
contained elsewhere in this


 


50





















 


Agreement or in any other Loan Document notwithstanding, Agent shall
not have any duties or responsibilities, except those expressly set forth
herein, nor shall Agent have or be deemed to have any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against Agent; it being expressly understood and
agreed that the use of the word “Agent” is for convenience only, that WFF is
merely the representative of the Lenders, and only has the contractual duties
set forth herein.  Except as expressly
otherwise provided in this Agreement, Agent shall have and may use its sole
discretion with respect to exercising or refraining from exercising any
discretionary rights or taking or refraining from taking any actions that Agent
expressly is entitled to take or assert under or pursuant to this Agreement and
the other Loan Documents.  Without
limiting the generality of the foregoing, or of any other provision of the Loan
Documents that provides rights or powers to Agent, Lenders agree that Agent
shall have the right to exercise the following powers as long as this Agreement
remains in effect:  (a) maintain, in
accordance with its customary business practices, ledgers and records
reflecting the status of the Obligations, the Collateral, the Collections of
Borrowers and their Subsidiaries, and related matters, (b) execute or file any
and all financing or similar statements or notices, amendments, renewals,
supplements, documents, instruments, proofs of claim, notices and other written
agreements with respect to the Loan Documents, (c) make Advances, for itself or
on behalf of Lenders as provided in the Loan Documents, (d) exclusively
receive, apply, and distribute the Collections of Borrowers and their
Subsidiaries as provided in the Loan Documents, (e) open and maintain such bank
accounts and cash management accounts as Agent deems necessary and appropriate
in accordance with the Loan Documents for the foregoing purposes with respect
to the Collateral and the Collections of Borrowers and their Subsidiaries, (f)
perform, exercise, and enforce any and all other rights and remedies of the
Lender Group with respect to Borrowers, the Obligations, the Collateral, the
Collections of Borrowers and their Subsidiaries, or otherwise related to any of
same as provided in the Loan Documents, and (g) incur and pay such Lender Group
Expenses as Agent may deem necessary or appropriate for the performance and
fulfillment of its functions and powers pursuant to the Loan Documents.


 


15.2                           Delegation of Duties.  Agent may execute
any of its duties under this Agreement or any other Loan Document by or through
agents, employees or attorneys in fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties.  Agent shall not be responsible for the negligence
or misconduct of any agent or attorney in fact that it selects as long as such
selection was made without gross negligence or willful misconduct.


 


15.3                           Liability of Agent.  None of the Agent Related Persons shall
(a) be liable for any action taken or omitted to be taken by any of them under
or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or
willful misconduct), or (b) be responsible in any manner to any of the Lenders
for any recital, statement, representation or warranty made by any Borrower or
Affiliate of any Borrower, or any officer or director thereof, contained in
this Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by
Agent under or in connection with, this Agreement or any other Loan Document,
or the validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or any other Loan Document, or for any failure of any Borrower
or any other party to any Loan Document to perform its obligations hereunder or
thereunder.  No Agent Related


 


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Person shall be under any obligation to any Lender to ascertain or to
inquire as to the observance or performance of any of the agreements contained
in, or conditions of, this Agreement or any other Loan Document, or to inspect
the books and records or properties of Borrowers or the books or records or properties
of any of Borrowers’ Subsidiaries or Affiliates.


 


15.4                           Reliance by Agent.  Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, telefacsimile or other
electronic method of transmission, telex or telephone message, statement or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent, or made by the proper Person or Persons, and upon
advice and statements of legal counsel (including counsel to Borrowers or
counsel to any Lender), independent accountants and other experts selected by
Agent.  Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless Agent shall first receive such advice or concurrence of the
Lenders as it deems appropriate and until such instructions are received, Agent
shall act, or refrain from acting, as it deems advisable.  If Agent so requests, it shall first be
indemnified to its reasonable satisfaction by the Lenders against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action. 
Agent shall in all cases be fully protected in acting, or in refraining
from acting, under this Agreement or any other Loan Document in accordance with
a request or consent of the requisite Lenders and such request and any action
taken or failure to act pursuant thereto shall be binding upon all of the
Lenders.


 


15.5                           Notice of Default or Event of Default.  Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest, fees,
and expenses required to be paid to Agent for the account of the Lenders and,
except with respect to Events of Default of which Agent has actual knowledge,
unless Agent shall have received written notice from a Lender or Administrative
Borrower referring to this Agreement, describing such Default or Event of
Default, and stating that such notice is a “notice of default.”  Agent promptly will notify the Lenders of its
receipt of any such notice or of any Event of Default of which Agent has actual
knowledge.  If any Lender obtains actual
knowledge of any Event of Default, such Lender promptly shall notify the other
Lenders and Agent of such Event of Default. 
Each Lender shall be solely responsible for giving any notices to its
Participants, if any.  Subject to Section 15.4,
Agent shall take such action with respect to such Default or Event of Default
as may be requested by the Required Lenders in accordance with Section 8;
provided, however, that unless and until Agent has received any
such request, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable.


 


15.6                           Credit Decision.  Each Lender acknowledges that none of the
Agent Related Persons has made any representation or warranty to it, and that
no act by Agent hereinafter taken, including any review of the affairs of
Borrowers and their Subsidiaries or Affiliates, shall be deemed to constitute
any representation or warranty by any Agent-Related Person to any Lender.  Each Lender represents to Agent that it has,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations, property,
financial and other condition and creditworthiness of Borrowers and any other
Person party to a


 


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Loan Document, and all applicable bank
regulatory laws relating to the transactions contemplated hereby, and made its
own decision to enter into this Agreement and to extend credit to
Borrowers.  Each Lender also represents
that it will, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to
the business, prospects, operations, property, financial and other condition
and creditworthiness of Borrowers and any other Person party to a Loan
Document.  Except for notices, reports,
and other documents expressly herein required to be furnished to the Lenders by
Agent, Agent shall not have any duty or responsibility to provide any Lender
with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of
Borrowers and any other Person party to a Loan Document that may come into the
possession of any of the Agent Related Persons.


 


15.7                           Costs and
Expenses; Indemnification.  Agent
may incur and pay Lender Group Expenses to the extent Agent reasonably deems
necessary or appropriate for the performance and fulfillment of its functions,
powers, and obligations pursuant to the Loan Documents, including court costs,
reasonable attorneys fees and expenses, fees and expenses of financial
accountants, advisors, consultants, and appraisers, costs of collection by
outside collection agencies, auctioneer fees and expenses, and costs of
security guards or insurance premiums paid to maintain the Collateral, whether
or not Borrowers are obligated to reimburse Agent or Lenders for such expenses
pursuant to this Agreement or otherwise. 
Agent is authorized and directed to deduct and retain sufficient amounts
from the Collections of Borrowers and their Subsidiaries received by Agent to
reimburse Agent for such out-of-pocket costs and expenses prior to the
distribution of any amounts to Lenders. 
In the event Agent is not reimbursed for such costs and expenses from
the Collections of Borrowers and their Subsidiaries received by Agent, each
Lender hereby agrees that it is and shall be obligated to pay to or reimburse
Agent for the amount of such Lender’s Pro Rata Share thereof.  Whether or not the transactions contemplated
hereby are consummated, the Lenders shall indemnify upon demand the Agent
Related Persons (to the extent not reimbursed by or on behalf of Borrowers and
without limiting the obligation of Borrowers to do so), according to their Pro
Rata Shares, from and against any and all Indemnified Liabilities; provided,
however, that no Lender shall be liable for the payment to any Agent Related
Person of any portion of such Indemnified Liabilities resulting solely from
such Person’s gross negligence or willful misconduct nor shall any Lender be
liable for the obligations of any Defaulting Lender in failing to make an
Advance or other extension of credit hereunder. 
Without limitation of the foregoing, each Lender shall reimburse Agent
upon demand for such Lender’s Pro Rata Share of any costs or out of pocket
expenses (including reasonable fees and expenses of attorneys, accountants,
advisors, and consultants fees and expenses) incurred by Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment, or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement, any other Loan Document, or any document contemplated by or
referred to herein, to the extent that Agent is not reimbursed for such
expenses by or on behalf of Borrowers. 
The undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of Agent.


 


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15.8                           Agent in
Individual Capacity.  WFF
and its Affiliates may make loans to, issue letters of credit for the account
of, accept deposits from, acquire equity interests in, and generally engage in
any kind of banking, trust, financial advisory, underwriting, or other business
with Borrowers and their Subsidiaries and Affiliates and any other Person party
to any Loan Documents as though WFF were not Agent hereunder, and, in each
case, without notice to or consent of the other members of the Lender
Group.  The other members of the Lender
Group acknowledge that, pursuant to such activities, WFF or its Affiliates may
receive information regarding Borrowers or their Affiliates and any other
Person party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrowers or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge
that, in such circumstances (and in the absence of a waiver of such
confidentiality obligations, which waiver Agent will use its reasonable best
efforts to obtain), Agent shall not be under any obligation to provide such
information to them.  The terms “Lender”
and “Lenders” include WFF in its individual capacity.


 


15.9                           Successor Agent.  Agent may resign as Agent upon 45 days
notice to the Lenders.  If Agent resigns
under this Agreement, the Required Lenders shall appoint a successor Agent for
the Lenders.  If no successor Agent is
appointed prior to the effective date of the resignation of Agent, Agent may
appoint, after consulting with the Lenders, a successor Agent.  If Agent has materially breached or failed to
perform any material provision of this Agreement or of applicable law, the
Required Lenders may agree in writing to remove and replace Agent with a
successor Agent from among the Lenders. 
In any such event, upon the acceptance of its appointment as successor
Agent hereunder, such successor Agent shall succeed to all the rights, powers,
and duties of the retiring Agent and the term “Agent” shall mean such successor
Agent and the retiring Agent’s appointment, powers, and duties as Agent shall
be terminated.  After any retiring Agent’s
resignation hereunder as Agent, the provisions of this Section 15
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement. 
If no successor Agent has accepted appointment as Agent by the date
which is 45 days following a retiring Agent’s notice of resignation, the
retiring Agent’s resignation shall nevertheless thereupon become effective and
the Lenders shall perform all of the duties of Agent hereunder until such time,
if any, as the Lenders appoint a successor Agent as provided for above.


 


15.10                     Lender in
Individual Capacity.  Any
Lender and its respective Affiliates may make loans to, issue letters of credit
for the account of, accept deposits from, acquire equity interests in and
generally engage in any kind of banking, trust, financial advisory,
underwriting or other business with Borrowers and their Subsidiaries and
Affiliates and any other Person party to any Loan Documents as though such
Lender were not a Lender hereunder without notice to or consent of the other
members of the Lender Group.  The other
members of the Lender Group acknowledge that, pursuant to such activities, such
Lender and its respective Affiliates may receive information regarding Borrowers
or their Affiliates and any other Person party to any Loan Documents that is
subject to confidentiality obligations in favor of Borrowers or such other
Person and that prohibit the disclosure of such information to the Lenders, and
the Lenders acknowledge that, in such circumstances (and in the absence of a
waiver of such confidentiality obligations, which waiver such Lender will use
its reasonable best efforts to obtain), such Lender shall not be under any
obligation to provide such information to them. 
With respect to the Swing Loans and Protective Advances, Swing Lender
shall have the same rights and powers under this


 


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Agreement as any other Lender and may exercise the same as though it
were not the sub-agent of Agent.


 


15.11                     Withholding
Taxes.


 


(a)  All payments made by any
Borrower hereunder or under any note or other Loan Document will be made
without setoff, counterclaim, or other defense. 
In addition, all such payments will be made free and clear of, and
without deduction or withholding for, any present or future Taxes, and in the
event any deduction or withholding of Taxes is required, each Borrower shall
comply with the penultimate sentence of this Section 15.11(a).  “Taxes” shall mean, any taxes, levies,
imposts, duties, fees, assessments or other charges of whatever nature now or
hereafter imposed by any jurisdiction or by any political subdivision or taxing
authority thereof or therein with respect to such payments (but excluding any tax
imposed by any jurisdiction or by any political subdivision or taxing authority
thereof or therein (i) measured by or based on the net income or net profits of
a Lender, or (ii) to the extent that such tax results from a change in the
circumstances of a Lender, including a change in the branch or lending office
of the Lender participating in the transactions set forth herein) and all
interest, penalties or similar liabilities with respect thereto.  If any Taxes are so levied or imposed, each
Borrower agrees to pay the full amount of such Taxes and such additional
amounts as may be necessary so that every payment of all amounts due under this
Agreement, any note, or Loan Document, including any amount paid pursuant to
this Section 15.11(a) after withholding or deduction for or on
account of any Taxes, will not be less than the amount provided for herein;
provided, however, that Borrowers shall not be required to increase any such
amounts payable to Agent or any Lender (i) that is not organized under the laws
of the United States, if such Person fails to comply with the other
requirements of this Section 15.11, or (ii) if the increase in such amount
payable results from Agent’s or such Lender’s own willful misconduct or gross
negligence.  Each Borrower will furnish
to such 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 any Borrower.


 


(b)  If a Lender claims an
exemption from United States withholding tax, such Lender agrees with and in
favor of Agent and any Borrower, to deliver to Agent:


 


(i)                                     if
such Lender claims an exemption from United States withholding tax pursuant to
its portfolio interest exception, (A) a statement of the Lender, signed under
penalty of perjury, that it is not a (I) a “bank” as described in Section 881(c)(3)(A)
of the IRC, (II) a 10% shareholder of any Borrower (within the meaning of Section 871(h)(3)(B)
of the IRC), or (III) a controlled foreign corporation related to any Borrower
within the meaning of Section 864(d)(4) of the IRC, and (B) a properly
completed and executed IRS Form W-8BEN (or any successor form), before
receiving its first payment under this Agreement and at any other time
reasonably requested by Agent or any Borrower;


 


(ii)                                  if
such Lender claims an exemption from, or a reduction of, withholding tax under
a United States tax treaty, properly completed and executed IRS Form W-8BEN (or
any successor form) before receiving its first payment under this Agreement and
at any other time reasonably requested by Agent or any Borrower;


 


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(iii)                               if
such Lender claims that interest paid under this Agreement is exempt from
United States withholding tax because it is effectively connected with a United
States trade or business of such Lender, two properly completed and executed
copies of IRS Form W-8ECI (or any successor form) before receiving its first
payment under this Agreement and at any other time reasonably requested by
Agent or any Borrower; or


 


(iv)                              such other form or forms, including IRS Form W-9, as may be
required under the IRC or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding or backup
withholding tax before receiving its first payment under this Agreement and at
any other time reasonably requested by Agent or any Borrower.


 


Such Lender agrees promptly to notify Agent and Administrative Borrower
of any change in circumstances which would modify or render invalid any claimed
exemption or reduction.


 


(c)  If a Lender claims an
exemption from withholding tax in a jurisdiction other than the United States,
such Lender agrees with and in favor of Agent and Borrowers, to deliver to
Agent any such form or forms, as may be required under the laws of such
jurisdiction as a condition to exemption from, or reduction of, foreign
withholding or backup withholding tax before receiving its first payment under
this Agreement and at any other time reasonably requested by Agent or
Administrative Borrower.


 


Such Lender agrees promptly to notify Agent and Administrative Borrower
of any change in circumstances which would modify or render invalid any claimed
exemption or reduction.


 


(d)  If any Lender claims
exemption from, or reduction of, withholding tax and such Lender sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of Borrowers to such Lender, such Lender agrees to notify Agent and
Administrative Borrower of 
the percentage amount in which it is no longer the beneficial
owner of Obligations of Borrowers to such Lender.  To the extent of such percentage amount,
Agent and Borrowers will treat such Lender’s documentation provided pursuant to
Sections 15.11(b) or 15.11(c) as no longer valid.  With respect to such percentage amount,
Lender may provide new documentation, pursuant to Sections 15.11(b) or 15.11(c),
if applicable.


 


(e)  If any Lender is entitled to
a reduction in the applicable withholding tax, Agent may withhold from any
interest payment to such Lender an amount equivalent to the applicable
withholding tax after taking into account such reduction.  If the forms or other documentation required
by subsection (b) or (c) of this Section 15.11 are not
delivered to Agent, then Agent may withhold from any interest payment to such
Lender not providing such forms or other documentation an amount equivalent to
the applicable withholding tax.


 


(f)  If the IRS or any other
Governmental Authority of the United States or other jurisdiction asserts a
claim that Agent did not properly withhold tax from amounts paid to or for the
account of any Lender due to a failure on the part of the Lender (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Lender shall indemnify and hold Agent


 


56





















 


harmless for all amounts paid, directly or indirectly, by Agent, as tax
or otherwise, including penalties and interest, and including any taxes imposed
by any jurisdiction on the amounts payable to Agent under this Section 15.11,
together with all costs and expenses (including attorneys fees and
expenses).  The obligation of the Lenders
under this subsection shall survive the payment of all Obligations and the
resignation or replacement of Agent.


 


15.12                     Collateral
Matters.


 


(a)  The Lenders hereby irrevocably
authorize Agent, at its option and in its sole discretion, to release any Lien
on any Collateral (i) upon the termination of the Commitments and payment and
satisfaction in full by Borrowers of all Obligations, (ii) constituting
property being sold or disposed of if a release is required or desirable in
connection therewith and if Administrative Borrower certifies to Agent that the
sale or disposition is permitted under Section 6.4 of this
Agreement or the other Loan Documents (and Agent may rely conclusively on any
such certificate, without further inquiry), (iii) constituting property in
which no Borrower or its Subsidiaries owned any interest at the time the Agent’s
Lien was granted nor at any time thereafter, or (iv) constituting property
leased to a Borrower or its Subsidiaries under a lease that has expired or is
terminated in a transaction permitted under this Agreement.  Except as provided above, Agent will not
execute and deliver a release of any Lien on any Collateral without the prior
written authorization of (y) if the release is of all or substantially all of
the Collateral, all of the Lenders, or (z) otherwise, the Required
Lenders.  Upon request by Agent or
Administrative Borrower at any time, the Lenders will confirm in writing Agent’s
authority to release any such Liens on particular types or items of Collateral
pursuant to this Section 15.12; provided, however,
that (1) Agent shall not be required to execute any document necessary to
evidence such release on terms that, in Agent’s opinion, would expose Agent to
liability or create any obligation or entail any consequence other than the
release of such Lien without recourse, representation, or warranty, and (2)
such release shall not in any manner discharge, affect, or impair the
Obligations or any Liens (other than those expressly being released) upon (or
obligations of Borrowers in respect of) all interests retained by Borrowers,
including, the proceeds of any sale, all of which shall continue to constitute
part of the Collateral.


 


(b)  Agent shall have no
obligation whatsoever to any of the Lenders to assure that the Collateral
exists or is owned by Borrowers or is cared for, protected, or insured or has
been encumbered, or that the Agent’s Liens have been properly or sufficiently
or lawfully created, perfected, protected, or enforced or are entitled to any
particular priority, or to exercise at all or in any particular manner or under
any duty of care, disclosure or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to Agent pursuant to any of
the Loan Documents, it being understood and agreed that in respect of the
Collateral, or any act, omission, or event related thereto, subject to the
terms and conditions contained herein, Agent may act in any manner it may deem
appropriate, in its sole discretion given Agent’s own interest in the
Collateral in its capacity as one of the Lenders and that Agent shall have no
other duty or liability whatsoever to any Lender as to any of the foregoing,
except as otherwise provided herein.


 


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15.13                     Restrictions on
Actions by Lenders; Sharing of Payments.


 


(a)  Each of the Lenders agrees
that it shall not, without the express written consent of Agent, and that it shall,
to the extent it is lawfully entitled to do so, upon the written request of
Agent, set off against the Obligations, any amounts owing by such Lender to
Borrowers or any Deposit Accounts of Borrowers now or hereafter maintained with
such Lender.  Each of the Lenders further
agrees that it shall not, unless specifically requested to do so in writing by
Agent, take or cause to be taken any action, including, the commencement of any
legal or equitable proceedings, to foreclose any Lien on, or otherwise enforce
any security interest in, any of the Collateral.


 


(b)  If, at any time or times any
Lender shall receive (i) by payment, foreclosure, setoff, or otherwise, any
proceeds of Collateral or any payments with respect to the Obligations, except
for any such proceeds or payments received by such Lender from Agent pursuant
to the terms of this Agreement, or (ii) payments from Agent in excess of such
Lender’s ratable portion of all such distributions by Agent, such Lender
promptly shall (1) turn the same over to Agent, in kind, and with such
endorsements as may be required to negotiate the same to Agent, or in
immediately available funds, as applicable, for the account of all of the
Lenders and for application to the Obligations in accordance with the applicable
provisions of this Agreement, or (2) purchase, without recourse or warranty, an
undivided interest and participation in the Obligations owed to the other
Lenders so that such excess payment received shall be applied ratably as among
the Lenders in accordance with their Pro Rata Shares; provided, however, that
to the extent that such excess payment received by the purchasing party is
thereafter recovered from it, those purchases of participations shall be
rescinded in whole or in part, as applicable, and the applicable portion of the
purchase price paid therefor shall be returned to such purchasing party, but
without interest except to the extent that such purchasing party is required to
pay interest in connection with the recovery of the excess payment.


 


15.14                     Agency for
Perfection.  Agent hereby
appoints each other Lender as its agent (and each Lender hereby accepts such
appointment) for the purpose of perfecting the Agent’s Liens in assets which,
in accordance with Article 8 or Article 9, as applicable, of the Code
can be perfected only by possession or control. 
Should any Lender obtain possession or control of any such Collateral,
such Lender shall notify Agent thereof, and, promptly upon Agent’s request
therefor shall deliver possession or control of such Collateral to Agent or in
accordance with Agent’s instructions.


 


15.15                     Payments by
Agent to the Lenders.  All
payments to be made by Agent to the Lenders shall be made by bank wire transfer
of immediately available funds pursuant to such wire transfer instructions as
each party may designate for itself by written notice to Agent.  Concurrently with each such payment, Agent
shall identify whether such payment (or any portion thereof) represents
principal, premium, fees, or interest of the Obligations.


 


15.16                     Concerning the
Collateral and Related Loan Documents.  Each member of the Lender Group
authorizes and directs Agent to enter into this Agreement and the other Loan
Documents.  Each member of the Lender
Group agrees that any action taken by Agent in accordance with the terms of
this Agreement or the other Loan Documents relating to the Collateral and the
exercise by Agent of its powers set forth therein or herein, together with such
other powers that are reasonably incidental thereto, shall be binding upon all
of the Lenders.


 


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15.17                     Field Audits and
Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports and
Information.  By becoming
a party to this Agreement, each Lender:


 


(a)  is
deemed to have requested that Agent furnish such Lender, promptly after it
becomes available, a copy of each field audit or examination report (each a “Report”
and collectively, “Reports”) prepared by or at the request of Agent, and Agent
shall so furnish each Lender with such Reports,


 


(b)  expressly
agrees and acknowledges that Agent does not (i) make any representation or
warranty as to the accuracy of any Report, and (ii) shall not be liable for any
information contained in any Report,


 


(c)  expressly agrees and
acknowledges that the Reports are not comprehensive audits or examinations,
that Agent or other party performing any audit or examination will inspect only
specific information regarding Borrowers and will rely significantly upon the
books and records of Borrowers and their Subsidiaries, as well as on
representations of Borrowers’ personnel,


 


(d)  agrees to keep all Reports
and other material, non-public information regarding Borrowers and their
Subsidiaries and their operations, assets, and existing and contemplated
business plans in a confidential manner in accordance with Section 16.7,
and


 


(e)  without limiting the
generality of any other indemnification provision contained in this Agreement,
agrees:  (i) to hold Agent and any such
other Lender preparing a Report harmless from any action the indemnifying
Lender may take or fail to take or any conclusion the indemnifying Lender may
reach or draw from any Report in connection with any loans or other credit
accommodations that the indemnifying Lender has made or may make to Borrowers,
or the indemnifying Lender’s participation in, or the indemnifying Lender’s
purchase of, a loan or loans of Borrowers; and (ii) to pay and protect, and
indemnify, defend and hold Agent, and any such other Lender preparing a Report
harmless from and against, the claims, actions, proceedings, damages, costs,
expenses, and other amounts (including, attorneys fees and costs) incurred by
Agent and any such other Lender preparing a Report as the direct or indirect
result of any third parties who might obtain all or part of any Report through
the indemnifying Lender.


 


In addition to the foregoing: 
(x) any Lender may from time to time request of Agent in writing that
Agent provide to such Lender a copy of any report or document provided by
Borrowers to Agent that has not been contemporaneously provided by Borrowers to
such Lender, and, upon receipt of such request, Agent promptly shall provide a
copy of same to such Lender, (y) to the extent that Agent is entitled, under
any provision of the Loan Documents, to request additional reports or
information from Borrowers, any Lender may, from time to time, reasonably
request Agent to exercise such right as specified in such Lender’s notice to
Agent, whereupon Agent promptly shall request of Administrative Borrower the
additional reports or information reasonably specified by such Lender, and,
upon receipt thereof from Administrative Borrower, Agent promptly shall provide
a copy of same to such Lender, and (z) any time that Agent renders


 


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to Administrative
Borrower a statement regarding the Loan Account, Agent shall send a copy of
such statement to each Lender.


 


15.18                     Several
Obligations; No Liability.  Notwithstanding
that certain of the Loan Documents now or hereafter may have been or will be
executed only by or in favor of Agent in its capacity as such, and not by or in
favor of the Lenders, any and all obligations on the part of Agent (if any) to
make any credit available hereunder shall constitute the several (and not
joint) obligations of the respective Lenders on a ratable basis, according to
their respective Commitments, to make an amount of such credit not to exceed,
in principal amount, at any one time outstanding, the amount of their
respective Commitments.  Nothing
contained herein shall confer upon any Lender any interest in, or subject any
Lender to any liability for, or in respect of, the business, assets, profits,
losses, or liabilities of any other Lender. 
Each Lender shall be solely responsible for notifying its Participants
of any matters relating to the Loan Documents to the extent any such notice may
be required, and no Lender shall have any obligation, duty, or liability to any
Participant of any other Lender.  Except as
provided in Section 16.7, no member of the Lender Group shall have
any liability for the acts of any other member of the Lender Group.  No Lender shall be responsible to any
Borrower or any other Person for any failure by any other Lender to fulfill its
obligations to make credit available hereunder, nor to advance for it or on its
behalf in connection with its Commitment, nor to take any other action on its
behalf hereunder or in connection with the financing contemplated herein.


 


15.19                     Bank Product
Providers.  Each Bank
Product Provider shall be deemed a party hereto for purposes of any reference
in a Loan Document to the parties for whom Agent is acting; it being understood
and agreed that the rights and benefits of such Bank Product Provider under the
Loan Documents consist exclusively of such Bank Product Provider’s right to
share in payments and collections out of the Collateral as more fully set forth
herein.  In connection with any such
distribution of payments and collections, Agent shall be entitled to assume no
amounts are due to any Bank Product Provider unless such Bank Product Provider
has notified Agent in writing of the amount of any such liability owed to it
prior to such distribution.


 


15.20                     Disclosure of
Classified Material. 
Borrowers and the Lender Group acknowledge that due to the nature of
Borrowers’  business and their customers,
certain items comprising the Collateral contain “classified” information and/or
data (“Classified Material”) which may not be legally disclosed without proper
authorization and/or security clearance (a “Security Clearance”).  The 
Lender Group agrees that to the extent any representation, warranty, or
covenant of either Borrower or right or remedy of the Lender Group contained in
this Agreement or the other Loan Documents would otherwise require any Borrower
to disclose Classified Material without a proper Security Clearance, such
representation, warranty, covenant, right or remedy shall not apply with
respect to obligations which would lead to such illegal disclosure; provided
that any time a Borrower  refuses,
declines or otherwise fails to fulfill an obligation under this Agreement or
the other Loan Documents due to an invocation of this provision or the
substance thereof, such Borrower shall promptly provide written notice to Agent
of that fact certifying that it has complied with its obligations hereunder or
under the other Loan Documents to the fullest extent possible without illegally
disclosing Classified Material and, upon the reasonable request of Agent, such
Borrower shall provide evidence reasonably satisfactory to Agent that the
requested items of Collateral or information are in fact “classified.”


 


60





















 


16.       GENERAL
PROVISIONS.


 


16.1                           Effectiveness.  This Agreement shall be binding and
deemed effective when executed by Borrowers, Agent, and each Lender whose
signature is provided for on the signature pages hereof.


 


16.2                           Section Headings.  Headings and numbers have been set forth
herein for convenience only.  Unless the
contrary is compelled by the context, everything contained in each Section applies
equally to this entire Agreement.


 


16.3                           Interpretation.  Neither this Agreement or any of the
other Loan Documents nor any uncertainty or ambiguity herein or therein shall
be construed or resolved against the Lender Group or Borrowers, whether under
any rule of construction or otherwise. 
On the contrary, this Agreement and the other Loan Documents have 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 and thereto. 
Time is of the essence in Borrowers’ payment and performance of the
Obligations.


 


16.4                           Severability
of Provisions.  Each
provision of this Agreement shall be severable from every other provision of
this Agreement for the purpose of determining the legal enforceability of any
specific provision.


 


16.5                           Counterparts;
Electronic Execution.  This
Agreement may be executed in any number of counterparts and by different
parties on separate counterparts, each of which, when executed and delivered,
shall be deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement. 
Delivery of an executed counterpart of this Agreement by telefacsimile
or other electronic method of transmission shall be equally as effective as
delivery of an original executed counterpart of this Agreement.  Any party delivering an executed counterpart
of this Agreement by telefacsimile or other electronic method of transmission
also shall deliver an original executed counterpart of this Agreement but the
failure to deliver an original executed counterpart shall not affect the
validity, enforceability, and binding effect of this Agreement.  The foregoing shall apply to each other Loan
Document mutatis mutandis.


 


16.6                           Revival and
Reinstatement of Obligations. 
If the incurrence or payment of the Obligations by any Borrower or
the transfer to the Lender Group of any property should for any reason
subsequently be declared to be void or voidable under any state or federal law
relating to creditors’ rights, including provisions of the Bankruptcy Code
relating to fraudulent conveyances, preferences, or other voidable or
recoverable payments of money or transfers of property (collectively, a “Voidable
Transfer”), and if the Lender Group is required to repay or restore, in whole
or in part, any such Voidable Transfer, or elects to do so upon the reasonable
advice of its counsel, then, as to any such Voidable Transfer, or the amount
thereof that the Lender Group is required or elects to repay or restore, and as
to all reasonable costs, expenses, and attorneys fees of the Lender Group
related thereto, the liability of Borrowers automatically shall be revived,
reinstated, and restored and shall exist as though such Voidable Transfer had
never been made.


 


61





















 


16.7                           Confidentiality.  Agent and Lenders each individually (and
not jointly or jointly and severally) agree that material, non-public
information regarding Borrowers and their Subsidiaries, their operations,
assets, and existing and contemplated business plans shall be treated by Agent
and the Lenders in a confidential manner, and shall not be disclosed by Agent
and the Lenders to Persons who are not parties to this Agreement, except:  (a) to attorneys for and other advisors,
accountants, auditors, and consultants to any member of the Lender Group, (b)
to Subsidiaries and Affiliates of any member of the Lender Group (including the
Bank Product Providers), provided that any such Subsidiary or Affiliate shall
have agreed to receive such information hereunder subject to the terms of this Section 16.7,
(c) as may be required by statute, decision, or judicial or administrative
order, rule, or regulation, (d) as may be agreed to in advance by
Administrative Borrower or its Subsidiaries or as requested or required by any
Governmental Authority pursuant to any subpoena or other legal process, (e) as
to any such information that is or becomes generally available to the public
(other than as a result of prohibited disclosure by Agent or the Lenders), (f)
in connection with any assignment, prospective assignment, sale, prospective sale,
participation or prospective participations, or pledge or prospective pledge of
any Lender’s interest under this Agreement, provided that any such assignee,
prospective assignee, purchaser, prospective purchaser, participant,
prospective participant, pledgee, or prospective pledgee shall have agreed in
writing to receive such information hereunder subject to the terms of this
Section, and (g) in connection with any litigation or other adversary
proceeding involving parties hereto which such litigation or adversary
proceeding involves claims related to the rights or duties of such parties
under this Agreement or the other Loan Documents; provided, however, that,
unless prohibited by applicable law, statute, regulation, or court order, such
Lender or Agent shall:  (y) notify
Administrative Borrower of any request by any court, governmental or
administrative agency, or pursuant to any subpoena or other legal process for
disclosure of any such non-public material information concurrent with, or
where practicable, prior to the disclosure thereof, and (z) notify all other
Persons described in clause (a) above that they are bound by, the provisions of
this 16.7.  The provisions of this Section 16.7
shall survive the payment in full of the Obligations.


 


16.8                           Integration.  This Agreement, together with the other
Loan Documents, reflects the entire understanding of the parties with respect
to the transactions contemplated hereby and shall not be contradicted or
qualified by any other agreement, oral or written, before the date hereof.


 


16.9                           Parent as
Agent for Borrowers.  Each
Borrower hereby irrevocably appoints Parent as the borrowing agent and
attorney-in-fact for all Borrowers (the “Administrative Borrower”) which
appointment shall remain in full force and effect unless and until Agent shall
have received prior written notice signed by each Borrower that such
appointment has been revoked and that another Borrower has been appointed
Administrative Borrower.  Each Borrower
hereby irrevocably appoints and authorizes the Administrative Borrower (i) to
provide Agent with all notices with respect to Advances and Letters of Credit
obtained for the benefit of any Borrower and all other notices and instructions
under this Agreement and (ii) to take such action as the Administrative
Borrower deems appropriate on its behalf to obtain Advances and Letters of
Credit and to exercise such other powers as are reasonably incidental thereto
to carry out the purposes of this Agreement. 
It is understood that the handling of the Loan Account and Collateral of
Borrowers in a combined fashion, as more fully set forth herein, is done solely
as an accommodation to Borrowers in order to utilize the collective borrowing
powers of Borrowers in


 


62





















 


the most
efficient and economical manner and at their request, and that Lender Group
shall not incur liability to any Borrower as a result hereof.  Each Borrower expects to derive benefit,
directly or indirectly, from the handling of the Loan Account and the
Collateral in a combined fashion since the successful operation of each
Borrower is dependent on the continued successful performance of the integrated
group.  To induce the Lender Group to do
so, and in consideration thereof, each Borrower hereby jointly and severally
agrees to indemnify each member of the Lender Group and hold each member of the
Lender Group harmless against any and all liability, expense, loss or claim of
damage or injury, made against the Lender Group by any Borrower or by any third
party whosoever, arising from or incurred by reason of (a) the handling of the
Loan Account and Collateral of Borrowers as herein provided, (b) the Lender
Group’s relying on any instructions of the Administrative Borrower, or (c) any
other action taken by the Lender Group hereunder or under the other Loan
Documents, except that Borrowers will have no liability to the relevant
Agent-Related Person or Lender-Related Person under this Section 16.9
with respect to any liability that has been finally determined by a court of
competent jurisdiction to have resulted solely from the gross negligence or
willful misconduct of such Agent-Related Person or Lender-Related Person, as
the case may be.


 


[Signature pages to follow.]


 


63





















 


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


 


	
   

  	
  SILICON GRAPHICS, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jean Furter

  	
   

  
	
   

  	
  Title:

  	
  Vice President, Treasurer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SILICON GRAPHICS FEDERAL, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey Zellmer

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO FOOTHILL, INC.,

  
	
   

  	
  a California corporation, as Agent and as a
  Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas P. Shughrue

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  



 


64





















 


EXHIBITS
AND SCHEDULES


 


	
  Exhibit A-1

  	
   

  	
  Form of Assignment and Acceptance

  
	
  Exhibit B-1

  	
   

  	
  Form of Borrowing Base Certificate

  
	
  Exhibit C-1

  	
   

  	
  Form of Compliance Certificate

  
	
  Exhibit L-1

  	
   

  	
  Form of LIBOR Notice

  
	
  Schedule A-1

  	
   

  	
  Agent’s Account

  
	
  Schedule C-1

  	
   

  	
  Commitments

  
	
  Schedule D-1

  	
   

  	
  Designated Account

  
	
  Schedule E-1

  	
   

  	
  Eligible Inventory Locations

  
	
  Schedule P-1

  	
   

  	
  Permitted Liens

  
	
  Schedule R-1

  	
   

  	
  Real Property

  
	
  Schedule 1.1

  	
   

  	
  Definitions

  
	
  Schedule 2.7(a)

  	
   

  	
  Cash Management Banks

  
	
  Schedule 3.1

  	
   

  	
  Conditions Precedent

  
	
  Schedule 4.5

  	
   

  	
  Locations of Inventory and Equipment

  
	
  Schedule 4.7(a)

  	
   

  	
  States of Organization

  
	
  Schedule 4.7(b)

  	
   

  	
  Chief Executive Offices

  
	
  Schedule 4.7(c)

  	
   

  	
  Organizational Identification Numbers

  
	
  Schedule 4.7(d)

  	
   

  	
  Commercial Tort Claims

  
	
  Schedule 4.8(b)

  	
   

  	
  Capitalization of Borrowers

  
	
  Schedule 4.8(c)

  	
   

  	
  Capitalization of Borrowers’ Subsidiaries

  
	
  Schedule 4.10

  	
   

  	
  Litigation

  
	
  Schedule 4.13

  	
   

  	
  Employee Benefits

  
	
  Schedule 4.14

  	
   

  	
  Environmental Matters

  
	
  Schedule 4.15

  	
   

  	
  Scheduled Intellectual Property Collateral

  
	
  Schedule 4.17

  	
   

  	
  Domestic Deposit Accounts and Securities Accounts

  
	
  Schedule 4.19

  	
   

  	
  Permitted Indebtedness

  
	
  Schedule 5.2

  	
   

  	
  Collateral Reporting

  
	
  Schedule 5.3

  	
   

  	
  Financial Statements, Reports, Certificates

  
	
  Schedule 6.10

  	
   

  	
  Distributions

  



 


iv





















 


SCHEDULE 1.1


 


As used in the
Agreement, the following terms shall have the following definitions:


 


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


 


“Account
Debtor” means any Person who is obligated on an Account, chattel paper, or
a general intangible.


 


“ACH
Transactions” means any cash management or related services (including the
Automated Clearing House processing of electronic fund transfers through the
direct Federal Reserve Fedline system) provided by a Bank Product Provider for
the account of Administrative Borrower or its Subsidiaries.


 


“Administrative
Borrower” has the meaning specified therefor in Section 16.9.


 


“Advances”
has the meaning specified therefor in Section 2.1(a).


 


“Affiliate”
means, as applied to any Person, any other Person who controls, is controlled
by, or is under common control with, such Person.  For purposes of this definition, “control”
means the possession, directly or indirectly through one or more
intermediaries, of the power to direct the management and policies of a Person,
whether through the ownership of Stock, by contract, or otherwise; provided,
however, that, for purposes of the definition of Eligible Accounts and Section
6.13 hereof: (a) any Person which owns directly or indirectly 20% or more
of the Stock having ordinary voting power for the election of directors or
other members of the governing body of a Person or 20% or more of the
partnership or other ownership interests of a Person (other than as a limited
partner of such Person) shall be deemed to be 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 or joint venture in which a
Person is a partner or joint venturer shall be deemed an Affiliate of such
Person.  For purposes of this definition,
SGI Japan shall not be deemed to be an Affiliate of Borrowers.


 


“Agent”
has the meaning specified therefor in the preamble to the Agreement.


 


“Agent-Related
Persons” means Agent, together with its Affiliates, officers, directors,
employees, attorneys, and agents.


 


“Agent’s
Account” means the Deposit Account of Agent identified on Schedule A-1.


 


“Agent’s
Liens” means the Liens granted by Borrowers or
their Subsidiaries to Agent under the Loan Documents.


 


“Agreement”
means the Second Amended and Restated Credit Agreement to which this Schedule
1.1 is attached.


 


“Assignee”
has the meaning specified therefor in Section 13.1(a).


 


1





















 


“Assignment
and Acceptance” means an Assignment and Acceptance Agreement substantially
in the form of Exhibit A-1.


 


“Authorized
Person” means any officer or employee of Administrative Borrower.


 


“Availability”
means, as of any date of determination, the amount that Borrowers are entitled
to borrow as Advances hereunder (after giving effect to all then outstanding
Obligations (other than Bank Product Obligations) and all sublimits and
reserves then applicable hereunder).


 


“Average
Daily Balance” means the average Daily Balance of all Revolver Usage during
a calendar month.


 


“Bank
Product” means any financial accommodation extended to Administrative
Borrower or its Subsidiaries by a Bank Product Provider (other than pursuant to
the Agreement) including:  (a) credit
cards, (b) credit card processing services, (c) debit cards, (d) purchase
cards, (e) ACH Transactions, (f) cash management, including controlled
disbursement, accounts or services, or (g) transactions under Hedge Agreements.


 


“Bank
Product Agreements” means those agreements entered into from time to time
by Administrative Borrower or its Subsidiaries with a Bank Product Provider in
connection with the obtaining of any of the Bank Products.


 


“Bank
Product Obligations” means all obligations, liabilities, contingent
reimbursement obligations, fees, and expenses owing by Administrative Borrower
or its Subsidiaries to any Bank Product Provider pursuant to or evidenced by
the Bank Product Agreements and irrespective of whether for the payment of
money, whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, and including all such amounts that
Administrative Borrower or its Subsidiaries are obligated to reimburse to Agent
or any member of the Lender Group as a result of Agent or such member of the
Lender Group purchasing participations from, or executing indemnities or
reimbursement obligations to, a Bank Product Provider with respect to the Bank
Products provided by such Bank Product Provider to Administrative Borrower or
its Subsidiaries.


 


“Bank
Product Provider” means Wells Fargo or any of its Affiliates.


 


“Bank
Product Reserve” means, as of any date of determination, the lesser of (a)
$4,000,000, and (b) the amount of reserves that Agent has established (based
upon the Bank Product Providers’ reasonable determination of the credit
exposure of Administrative Borrower and its Subsidiaries in respect of Bank
Products) in respect of Bank Products then provided or outstanding.


 


“Bankruptcy
Code” means title 11 of the United States Code, as in effect from time to
time.


 


“Base LIBOR
Rate” means the rate per annum, determined by Agent in accordance with its
customary procedures, and utilizing such electronic or other quotation sources
as it considers appropriate (rounded upwards, if necessary, to the next
1/100%), to be the rate at which Dollar deposits (for delivery on the first day
of the requested Interest Period) are offered to major banks


 


2





















 


in the London
interbank market on or about 11:00 a.m. (London time) 2 Business Days prior to
the commencement of the requested Interest Period, for a term and in an amount
comparable to the Interest Period and the amount of the LIBOR Rate Loan
requested (whether as an initial LIBOR Rate Loan or as a continuation of a
LIBOR Rate Loan or as a conversion of a Base Rate Loan to a LIBOR Rate Loan) by
Administrative Borrower in accordance with the Agreement, which determination
shall be conclusive in the absence of manifest error.


 


“Base Rate”
means, the rate of interest announced, from time to time, within Wells Fargo at
its principal office in San Francisco as its “prime rate”, with the
understanding that the “prime rate” is one of Wells Fargo’s base rates
(not necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement in
such internal publications as Wells Fargo may designate.


 


“Base Rate
Loan” means the portion of any Advance that bears interest at a rate
determined by reference to the Base Rate.


 


“Base Rate
Margin” means the following margin based upon the Average Daily Balance, to
be effective as of the first day of the calendar month immediately following
the end of the applicable calendar month for which the Average Daily Balance is
determined:


 


	
  Average Daily Balance

  	
   

  	
  Applicable Base Rate Margin

  	
   

  
	
  Less than $25,000,000

  	
   

  	
  0.00
  percentage points

  	
   

  
	
  Greater than or equal to $25,000,000 and
  less than $50,000,000

  	
   

  	
  0.25
  percentage points

  	
   

  
	
  Greater than or equal to $50,000,000

  	
   

  	
  0.50
  percentage points

  	
   

  



 


“Benefit
Plan” means a “defined benefit plan” (as defined in Section 3(35) of
ERISA) for which any Borrower or ERISA Affiliate of any Borrower 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 Parent
or any committee thereof duly authorized to act on behalf of the board of
directors (or comparable managers).


 


“Borrower”
and “Borrowers” have the respective meanings specified therefor in the
preamble to the Agreement.


 


“Borrowing”
means a borrowing hereunder consisting of Advances made on the same day by the
Lenders (or Agent on behalf thereof), or by Swing Lender in the case of a Swing
Loan, or by Agent in the case of a Protective Advance, in each case, to
Administrative Borrower.


 


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


 


3





















 


(a)                                  the lesser of


 


(i)                                     85%
of the amount of Eligible Accounts, less the
amount, if any, of the Dilution Reserve, provided that in no event shall the
amount of credit availability created by:


 


(A)                              Eligible
Canadian Accounts exceed $2,000,000,


 


(B)                                Eligible
Service Accounts exceed $15,000,000, or


 


(C)                                Eligible
SGI Solutions Finance Accounts exceed $3,000,000, and


 


(ii)                                  an amount equal to Borrowers’ Collections with respect to
Accounts for the immediately preceding 45 day period, plus


 


(b)                                 the lesser of: (i) 30% of the value of Eligible Inventory,
less the amount, if any of the Inventory Reserve, and (ii) $15,000,000, plus


 


(c)                                  the lesser of: (i) 100% of the Intellectual Property
Collateral Value, and (ii) $16,000,000, plus


 


(d)                                 the lesser of


 


(i)                                     $7,000,000
and


 


(ii)                                  60%
of the combined fair market value of the Real Property Collateral, as
determined by the most recent appraisal of the Real Property Collateral
approved by Agent in its Permitted Discretion, plus


 


(e)                                  100%
of the Held Cash Collateral, minus


 


(f)                                    the
sum of (i) the Bank Product Reserve, (ii) the aggregate amount of reserves, if
any, established by Agent under Section 2.1(b); and the Temporary
Availability Reserve.


 


“Borrowing
Base Certificate” means a certificate in the form of Exhibit B-1.


 


“Business
Day” means any day that is not a Saturday, Sunday, or other day on which
banks are authorized or required to close in the state of California, except
that, if a determination of a Business Day shall relate to a LIBOR Rate Loan,
the term “Business Day” also shall exclude any day on which banks are
closed for dealings in Dollar deposits in the London interbank market.


 


“Capital
Expenditures” means, with respect to any Person for any period, the
aggregate of all expenditures by such Person and its Subsidiaries during such
period that are capital expenditures as determined in accordance with GAAP.


 


4





















 


“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 or unconditionally guaranteed by the United States or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within 1 year from the date of acquisition thereof, (b)
marketable direct obligations issued by any state of the United States or any
political subdivision of any such state or any public instrumentality thereof
maturing within 1 year from the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either S&P or Moody’s,
(c) commercial paper or other money market instruments maturing no more than 1
year from the date of acquisition thereof and, at the time of acquisition,
having a short-term debt rating of A-1 or P-1, or better, or a long-term debt
rating of BBB or better, from S&P or Moody’s, and (d) certificates of
deposit or bankers’ acceptances maturing within 1 year from the date of
acquisition thereof either (i) issued by any bank which has a rating of A or
A2, or better, from S&P or Moody’s, or (ii) certificates of deposit less
than or equal to $100,000 in the aggregate issued by any other bank insured by
the Federal Deposit Insurance Corporation.


 


“Cash
Management Account” has the meaning specified therefor in Section 2.7(a).


 


“Cash
Management Agreements” means those certain cash management agreements, in
form and substance satisfactory to Agent, each of which is among Administrative
Borrower or one of its Subsidiaries, Agent, and one of the Cash Management
Banks.


 


“Cash
Management Bank” has the meaning specified therefor in Section 2.7(a).


 


“Change of
Control” means that (a) any “person” or “group” (within the
meaning of Sections 13(d) and 14(d) of the Exchange Act) becomes the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 35%, or more, of the Stock of Parent having the right to vote
for the election of members of the Board of Directors, or (b) a majority of the
members of the Board of Directors do not constitute Continuing Directors.


 


“Classified
Material” has the meaning specified therefor in Section 15.20.


 


“Closing
Date” means the date of the making of the initial Advance (or other
extension of credit) hereunder or the date on which Agent sends Administrative
Borrower a written notice that each of the conditions precedent set forth in Section
3.1 either have been satisfied or have been waived.


 


Closing Date
Projections” means the set of Projections of Parent
through the Borrowers’ fiscal year ending in June 2006 (on a quarter by quarter
basis), in form and substance (including as to scope and underlying
assumptions) reasonably satisfactory to Agent.


 


“Code”
means the California Uniform Commercial Code, as in effect from time to time.


 


5





















 


“Collateral”
means all assets and interests in assets and proceeds thereof now owned or
hereafter acquired by Borrowers in or upon which a Lien is granted under any of
the Loan Documents,.


 


“Collateral
Access Agreement” means a landlord waiver, bailee letter, or
acknowledgement agreement of any lessor, warehouseman, processor, consignee, or
other Person in possession of, having a Lien upon, or having rights or
interests in Borrower’s books and records, Equipment or Inventory, in each
case, in form and substance satisfactory to Agent.


 


“Collections”
means all cash, checks, notes, instruments,
and other items of payment (including insurance proceeds, proceeds of cash
sales, rental proceeds, and tax refunds) of Borrowers, but excluding any of the
foregoing directly arising out of the disposition of Real Property (other than
the Real Property Collateral) or any patent, copyright or trademark of any
Borrower.


 


“Commitment”
means, with respect to each Lender, its Commitment and, with respect to all
Lenders, their Commitments, in each case as such Dollar amounts are set forth
beside such Lender’s name under the applicable heading on Schedule C-1
or in the Assignment and Acceptance pursuant to which such Lender became a
Lender hereunder, as such amounts may be reduced or increased from time to time
pursuant to assignments made in accordance with the provisions of Section
13.1.


 


“Compliance
Certificate” means a certificate substantially in the form of Exhibit
C-1 delivered by the chief financial officer of Parent to Agent.


 


“Conditional
Waiver Period” means the period commencing on the Closing Date and
continuing to and including the Supplemental Compliance Termination Date.  


 


“Continuing
Director” means (a) any member of the Board of Directors who was a director
(or comparable manager) of Parent on the Closing Date, and (b) any individual
who becomes a member of the Board of Directors after the Closing Date if such
individual was appointed or nominated for election to the Board of Directors by
a majority of the Continuing Directors, but excluding any such individual
originally proposed for election in opposition to the Board of Directors in
office at the Closing Date in an actual or threatened election contest relating
to the election of the directors (or comparable managers) of Parent and whose
initial assumption of office resulted from such contest or the settlement
thereof.


 


“Control
Agreement” means a control agreement, in form and substance reasonably
satisfactory to Agent, executed and delivered by the Administrative Borrower or
one of its Subsidiaries, Agent, and the applicable securities intermediary
(with respect to a domestic Securities Account) or bank (with respect to a
domestic Deposit Account).


 


“Copyright”
has the meaning specified therefor in the Security Agreement.


 


“Copyright
Security Agreement” has the meaning specified therefor in the Security
Agreement.


 


6





















 


“Daily
Balance” means, as of any date of determination and with respect to any
Obligation, the amount of such Obligation owed at the end of such day.


 


“Default”
means an event, condition, or default that, with the giving of notice, the
passage of time, or both, would be an Event of Default.


 


“Defaulting
Lender” means any Lender that fails to make any Advance (or other extension
of credit) that it is required to make hereunder on the date that it is
required to do so hereunder.


 


“Defaulting
Lender Rate” means (a) for the first 3 days from and after the date the
relevant payment is due, the Base Rate, and (b) thereafter, the interest rate
then applicable to Advances that are Base Rate Loans (inclusive of the Base
Rate Margin applicable thereto).


 


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


 


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


 


“Designated
Account Bank” has the meaning specified therefor in Schedule D-1.


 


“Designated
Event of Default” means Borrowers’ breach of Section 6.16(a)(i) for Borrowers’ fiscal quarter ending March, 2005, and
Borrowers’ failure to comply with Section 6.16(a)(iii) during the
related EBITDA Waiver Period.


 


“Dilution”
means, as of any date of determination, a percentage, based upon the experience
of the immediately prior 90 consecutive days, that is the result of dividing
the Dollar amount of (a) bad debt write-downs, discounts, advertising
allowances, credits, or other dilutive items with respect to Borrowers’
Accounts during such period, by (b) Borrowers’ billings with respect to
Accounts during such period.


 


“Dilution
Reserve” means, as of any date of determination, an amount sufficient to
reduce the advance rate against Eligible Accounts by 1 percentage point for
each percentage point by which Dilution is in excess of 5%.


 


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


 


“EBITDA”
means, with respect to any fiscal period, Parent’s and its Subsidiaries’
consolidated net earnings (or loss), minus interest income and extraordinary
gains (including gains on sale of assets) plus interest expense, income taxes,
depreciation and amortization and non-cash restructuring charges for such
period as determined in accordance with GAAP.


 


“EBITDA
Waiver Period” means, with respect to Section 6.16(a), the period
commencing 10 days prior to the applicable date for reporting minimum EBITDA
pursuant to a Compliance Certificate and continuing up to (but not including)
the earlier of (a) the due date for the subsequent report of minimum
EBITDA and (b) the day on which such subsequent report of minimum EBITDA is
delivered to Agent.


 


7





















 


“Eligible
Accounts” means, without duplication, the Eligible Domestic Accounts, the
Eligible Canadian Accounts, the Eligible Service Accounts and the Eligible SGI
Solutions Finance Accounts.


 


“Eligible
Canadian Accounts” means those Accounts created by a Borrower in the
ordinary course of its business as to which the following is applicable: such
Account does not qualify as an Eligible Domestic Account solely because the
Account Debtor with respect to such Account maintains its chief executive
office in Canada (other than in the Province of Quebec) rather than in the
United States or is organized under the laws of Canada or a political
subdivision thereof (other than the Province of Quebec) rather than under the
laws of the United States or any state thereof.


 


“Eligible
Domestic Accounts” means those Accounts created by a Borrower in the
ordinary course of its business, that arise out of its sale of goods, that
comply with each of the representations and warranties respecting Eligible
Domestic Accounts made in the Loan Documents, and that are not excluded as
ineligible by virtue of one or more of the excluding criteria set forth below; provided,
however, that such criteria may be revised from time to time by Agent in
Agent’s Permitted Discretion to address the results of any audit performed by
Agent from time to time after the Closing Date. 
In determining the amount to be included, Eligible Domestic Accounts
shall be calculated net of customer deposits and unapplied cash.  Eligible Domestic Accounts shall not include
the following:


 


(a)                                  Accounts
that the Account Debtor has failed to pay within 90 days of original invoice
date or Accounts with selling terms of more than 60 days,


 


(b)                                 Accounts
owed by an Account Debtor (or any Person known by any Borrower to be an
Affiliate of such Account Debtor) where 50% or more of all Accounts owed by
that Account Debtor (or any such Affiliate) are deemed ineligible under clause
(a) above,


 


(c)                                  Accounts
with respect to which the Account Debtor is an employee, Affiliate or agent of
any Borrower (other than any Person that: (A) is not an Affiliate or employee
of any Borrower and (B) has entered into a written distribution agreement with
any Borrower),


 


(d)                                 Accounts
arising in a transaction wherein goods are placed on consignment or are sold
pursuant to a guaranteed sale, a sale or return, a sale on approval, a bill and
hold, or any other terms by reason of which the payment by the Account Debtor
may be conditional,


 


(e)                                  Accounts
that are not payable in Dollars,


 


(f)                                    Accounts
with respect to which the Account Debtor either (i) does not maintain its chief
executive office in the United States, or (ii) is not organized under the laws
of the United States or any state thereof, or (iii) is the government of any
foreign country or sovereign state, or of any state, province, municipality, or
other political subdivision thereof, or of any department, agency, public
corporation, or other instrumentality thereof, unless (y) the Account is supported
by an irrevocable letter of credit satisfactory to Agent (as to form,
substance, and issuer or domestic confirming bank) that has been delivered to
Agent and is directly drawable by Agent, or (z) the Account is covered by
credit insurance in form, substance, and amount, and by an insurer,
satisfactory to Agent,


 


8





















 


(g)                                 Accounts
that arise out of the rendering of services by any Person,


 


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


 


(i)                                     Accounts
with respect to an Account Debtor whose total obligations owing to Borrowers
exceed 10% (such percentage, as applied to a particular Account Debtor, being
subject to reduction by Agent in its Permitted Discretion if the
creditworthiness of such Account Debtor deteriorates) of all Eligible Domestic
Accounts, to the extent of the obligations owing by such Account Debtor in
excess of such percentage; provided, however, if Accounts with
respect to which the Account Debtor is (x) General Electric Capital
Corporation, the National Aeronautics and Space Administration (NASA), General
Services Administration or Maryland Procurement exceed 35% (or such other
percentage as Agent may determine in its reasonable discretion) of all Eligible
Domestic Accounts in the aggregate, to the extent of the obligations owing by
such Account Debtor in excess of such percentage, (y) Northrop Grumman,
Lockheed Martin or BAE Systems exceed 25% (or such other percentage as Agent
may determine in its reasonable discretion) of all Eligible Domestic Accounts
in the aggregate, to the extent of the obligations owing by such Account Debtor
in excess of such percentage, or (z) NEC Corporation or Raytheon Company exceed
20% (or such other percentage as Agent may determine in its reasonable
discretion) of all Eligible Domestic Accounts in the aggregate, to the extent
of the obligations owing by such Account Debtor in excess of such percentage, provided,
further  however, that, in each case, the amount of Eligible
Domestic Accounts that are excluded because they exceed the foregoing
percentage shall be determined by Agent based on all of the otherwise Eligible
Domestic Accounts prior to giving effect to any eliminations based upon the
foregoing concentration limit,


 


(j)                                     Accounts
with respect to which the Account Debtor is subject to an Insolvency Proceeding,
is not Solvent, has gone out of business, or as to which a Borrower has
received notice of an imminent Insolvency Proceeding or a material impairment
of the financial condition of such Account Debtor,


 


(k)                                  Accounts
with respect to which the Account Debtor is located in a state or jurisdiction
(e.g., New Jersey, Minnesota, and West Virginia) that requires, as a condition
to access to the courts of such jurisdiction, that a creditor qualify to
transact business, file a business activities report or other report or form,
or take one or more other actions, unless the applicable Borrower has so
qualified, filed such reports or forms, or taken such actions (and, in each
case, paid any required fees or other charges), except to the extent that the
applicable Borrower may qualify subsequently as a foreign entity authorized to
transact business in such state or jurisdiction and gain access to such courts,
without incurring any cost or penalty reasonably viewed by Agent to be
significant in amount, and such later qualification cures any limitation on
access to such courts to enforce payment of such Account,


 


(l)                                     Accounts,
the collection of which, Agent, in its Permitted Discretion, has notified
Administrative Borrower that Agent believes to be doubtful by reason of the
Account Debtor’s financial condition,


 


9





















 


(m)                               Accounts
that are not subject to a valid and perfected first priority Agent’s Lien,


 


(n)                                 Accounts
with respect to which (i) the goods giving rise to such Account have not been
shipped and billed to the Account Debtor, or (ii) the services giving rise to
such Account have not been performed and billed to the Account Debtor,


 


(o)                                 Accounts
that (i) represent the right to receive progress payments or other advance
billings that are due prior to the completion of performance by the applicable
Borrower of the subject contract for goods and (ii) the applicable Account
Debtor has failed to pay said Account within 60 days of the invoice date, or


 


(p)                                 Accounts
for which the applicable Borrower has executory performance obligations or
which have acceptance criteria, until such time as such performance obligations
or acceptance criteria have been completed, accepted or waived, as applicable.


 


“Eligible
Inventory” means Inventory of Borrowers consisting of first quality
finished goods held for sale in the ordinary course of Borrowers’ business,
that complies with each of the representations and warranties respecting
Eligible Inventory made in the Loan Documents, and that is not excluded as
ineligible by virtue of one or more of the excluding criteria set forth below;
provided, however, that such criteria may be revised from time to time by Agent
in Agent’s Permitted Discretion to address the results of any audit or
appraisal performed by Agent from time to time after the Closing Date.  In determining the amount to be so included,
Inventory shall be valued at the lower of cost or market on a basis consistent
with Borrowers’ historical accounting practices.  An item of Inventory shall not be included in
Eligible Inventory if:


 


(a)                                  a Borrower does not have good, valid, and marketable title
thereto,


 


(b)                                 it
is not located at one of the locations in the continental United States set
forth on Schedule E-1 (or in-transit from one such location to another
such location),


 


(c)                                  it
is located on real property leased by a Borrower or in a contract warehouse, in
each case, unless it is subject to a Collateral Access Agreement executed by
the lessor, or warehouseman, as the case may be, and unless it is segregated or
otherwise separately identifiable from goods of others, if any, stored on the
premises,


 


(d)                                 it is not subject to a valid and perfected first priority
Agent’s Lien,


 


(e)                                  it consists of goods returned or rejected by a Borrower’s customers,


 


(f)                                    it consists of goods that are encumbered by a purchase money
Lien,


 


(g)                                 it
consists of goods that are obsolete or slow moving, tailored or specialized
finished goods, restrictive or custom items, work-in-process, raw materials
other than component parts, or goods that constitute packaging and shipping
materials, supplies used or consumed in a Borrower’s business, bill and hold
goods, defective goods, “seconds,” or Inventory acquired on consignment,


 


10





















 


(h)                                 Borrowers
fail to cause Agent timely to receive an appraisal of the Borrowers’ Inventory
in accordance with the provisions of this Agreement, the results of which shall
be satisfactory to Agent in its sole discretion, or


 


(i)                                     Borrowers
fail to provide to Agent, in form and substance acceptable to the Agent in its
sole discretion, detailed reporting on Eligible Inventory such that it can be
distinguished from other Inventory that does not meet the criteria set forth
above; provided, however, if Borrowers fail to provide to Agent, in form and
substance acceptable to the Agent in its sole discretion, detailed reporting on
Eligible Inventory such that Eligible Inventory can be distinguished from other
Inventory as required by Section 5.2, then on the date that such report is due
and thereafter, the amount of the Eligible Inventory shall be zero.


 


“Eligible
Service Accounts” means those Service Accounts created by a Borrower in the
ordinary course of its business pursuant to an Eligible Service Contract as to
which the following is applicable: (a) such Account is acceptable to Agent in
its Permitted Discretion with respect to the size, payment history and credit
quality of the Account Debtor, (b) all services that are the basis for billings
with respect to such Account have been completed, and (c) such Account does not
qualify as an Eligible Domestic Account or Eligible Canadian Account solely
because the Account arises out of the rendering of services by a Borrower
rather than the sale of goods; provided, however, if Borrowers
fail to provide to Agent, in form and substance acceptable to the Agent in its
sole discretion, detailed reporting on Eligible Service Accounts such that
Eligible Service Accounts can be distinguished from other Service Accounts as
required by Section 5.2, then on the date that such report is due and
thereafter, the amount of the Eligible Service Accounts shall be zero.


 


“Eligible
Service Contract” means a written service contract between a Borrower and
an Account Debtor:  (a) a true, correct
and complete copy of which has been provided to Agent on or before any date of
determination of the Borrowing Base which contains the Eligible Service
Accounts pertaining thereto, (b) that is acceptable to Agent in its Permitted
Discretion, and (c) that does not contain: (i) any provision that allows
payments under such contract to be set-off against; (ii) any other terms by
reason of which the payment by the Account Debtor may be reduced or made
conditional; or (iii) any other terms which prohibit assignment thereof by
Borrower to Agent.


 


“Eligible
SGI Solutions Finance Accounts” means those Eligible Domestic Accounts or
Eligible Canadian Accounts due SGI Solutions Finance in the ordinary course of
its business from any Funding Partner, pursuant to a lease agreement,
pre-approved by such Funding Partner, as to which each of the following is
applicable: (a) such Account is in form and substance acceptable to Agent in
its Permitted Discretion, and (b) Administrative Borrower has provided Agent written
evidence, in form and substance acceptable to Agent in its Permitted
Discretion, of assignment to and acceptance of such lease agreement by a
Funding Partner, as applicable; provided, however, that any service portion of
such Accounts shall not be included in the calculation of the Borrowing Base.


 


“Eligible
Transferee” means (a) a commercial bank organized under the laws of the
United States, or any state thereof, and having total assets in excess of
$250,000,000, (b) a commercial bank organized under the laws of any other
country which is a member of the


 


11





















 


Organization
for Economic Cooperation and Development or a political subdivision of any such
country and which has total assets in excess of $250,000,000, provided that
such bank is acting through a branch or agency located in the United States,
(c) a finance company (other than an entity which is an Affiliate of IBM, Sun
Microsystems, Hewlett Packard, Dell, Inc. or Apple Computer, Inc.), insurance company,
or other financial institution or fund that is engaged in making, purchasing,
or otherwise investing in commercial loans in the ordinary course of its
business and having (together with its Affiliates) total assets in excess of
$250,000,000, (d) any Affiliate (other than individuals) of a Lender, and (e)
during the continuation of an Event of Default, any other Person approved by
Agent.


 


“Environmental
Actions” means any complaint, summons, citation, notice, directive, order,
claim, litigation, investigation, judicial or administrative proceeding,
judgment, letter, or other communication from any Governmental Authority, or
any third party involving violations of Environmental Laws or releases of
Hazardous Materials (a) from any assets, properties, or businesses of any
Borrower, 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 Borrower, 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
Borrower, relating to the environment, the effect of the environment on
employee health, or Hazardous Materials, in each case as amended from time to
time.


 


“Environmental
Liabilities” means all liabilities, monetary obligations, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts,
or consultants, and costs of investigation and feasibility studies), fines,
penalties, sanctions, and interest incurred as a result of any claim or demand,
or Remedial Action required, by any Governmental Authority or any third party,
and which relate to any Environmental Action.


 


“Environmental
Lien” means any Lien in favor of any Governmental Authority for
Environmental Liabilities.


 


“Equipment”
means equipment (as that term is defined in the Code).


 


“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and any
successor statute thereto.


 


“ERISA
Affiliate” means (a) any Person subject to ERISA whose employees are
treated as employed by the same employer as the employees of a Borrower 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 a Borrower
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 a Borrower is a member under


 


12





















 


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


 


“ERISA Event” means (a) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan, (b) the withdrawal of Borrower or ERISA
Affiliates from a Benefit Plan during a Plan year in which it was a “substantial
employer” (as defined in Section 4001(a)(2) of ERISA), (c) the providing of
notice of intent to terminate a Benefit Plan in a distress termination (as
described in Section 4041(c) of ERISA), (d) the institution by the PBGC of
proceedings to terminate a Benefit Plan or Multiemployer Plan, (e) any event or
condition (i) that provides a basis under Section 4042(a)(1), (2), or (3) of
ERISA for the termination of, or the appointment of a trustee to administer,
any Benefit Plan or Multiemployer Plan, or (ii) that may result in termination
of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the partial or
complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of
Borrower or ERISA Affiliates from a Multiemployer Plan, or (g) providing any
security to any plan under Section 401(a)(29) of the IRC by Borrower or its
Subsidiaries or any of their ERISA Affiliates.


 


“Event of
Default” has the meaning specified therefor in Section 7.


 


“Excess
Availability” means, as of any date of determination, the amount equal to
the sum of:  (i) Availability minus the aggregate amount, if any, of all trade payables of
Borrowers and their Subsidiaries aged in excess of their historical levels with
respect thereto and all book overdrafts of Borrowers and their Subsidiaries in
excess of their historical practices with respect thereto, in each case as
determined by Agent in its Permitted Discretion, plus (ii) Global
Unrestricted Cash.


 


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


 


“Fee Letter”
means that certain fee letter between Borrowers and Agent, in form and
substance satisfactory to Agent.


 


“First
Compliance Certificate” means the quarterly Compliance Certificate due in
May 2005 pursuant to clause (d) of Schedule 5.3.


 


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


 


“Funding
Losses” has the meaning specified therefor in Section 2.13(b)(ii).


 


“Funding
Partner” means Key Bank, Banc of America Leasing Global Vendor Finance,
(f/k/a Fleet Business Credit), National City Capital Credit Corporation (f/k/a
Information Leasing Corporation), or any other financial institution approved
by Agent and, in each case, party to a “without recourse purchase agreement”
(or any successor or assignee thereof).


 


“FX
Guaranty” means that certain General Continuing Guaranty,
dated as of July 14, 2004, by Parent in favor of WFF with respect to a foreign
exchange facility to Silicon Graphics Finance S.A.


 


“GAAP”
means generally accepted accounting principles as in effect from time to time
in the United States, consistently applied.


 


13





















 


“Global
Unrestricted Cash” means cash and Cash Equivalents of Borrowers and their
Subsidiaries, determined on a consolidated basis.


 


“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.


 


“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 any and all agreements, or documents now existing or
hereafter entered into by Administrative Borrower or any of its Subsidiaries
that provide for an interest rate, credit, commodity or equity swap, cap,
floor, collar, forward foreign exchange transaction, currency swap, cross
currency rate swap, currency option, or any combination of, or option with
respect to, these or similar transactions, for the purpose of hedging
Administrative Borrower’s or any of its Subsidiaries’ exposure to fluctuations
in interest or exchange rates, loan, credit exchange, security or currency
valuations or commodity prices.


 


“Held Cash
Collateral” means, as of any date of determination, the amount of cash and
Cash Equivalents of Borrowers and their Subsidiaries, determined on a
consolidated basis, that is (x) maintained by and in possession of Agent or (y)
at Agent’s election, maintained in Deposit Accounts or in Securities Accounts
held in the name of Agent and on terms acceptable to Agent; provided, however,
that any such Cash Equivalents shall be considered “Held Cash Collateral” only
under the following conditions:


 


(a)                                  subject
to clause (b) below, Cash Equivalents are invested for a term not exceeding 90
days, and


 


(b)                                 Agent
retains its Permitted Discretion, and without notice to Borrowers, to restrict
investments available for Held Cash Collateral and to change such restrictions
on investments concurrently with and based upon Agent’s determination of
Borrowers’ credit risk.


 


“Holdout
Lender” has the meaning specified therefor in Section 14.2(a).


 


14





















 


“Indebtedness”
means (a) all obligations of a Borrower for borrowed money, (b) all obligations
of a Borrower evidenced by bonds, debentures, notes, or other similar
instruments and all reimbursement or other obligations of a Borrower in respect
of letters of credit, bankers acceptances, interest rate swaps, or other
financial products, (c) all obligations of a Borrower 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 a Borrower for the deferred purchase price of assets (other
than trade debt incurred in the ordinary course of a Borrower’s business and
repayable in accordance with customary trade practices), (f) all obligations
owing under Hedge Agreements and (g) any obligation guaranteeing or intended to
guarantee (whether directly or indirectly guaranteed, endorsed, co-made,
discounted, or sold with recourse to a Borrower) any obligation of any other
Person that constitutes Indebtedness under any of clauses (a) through (f)
above.


 


“Indemnified
Liabilities” has the meaning specified therefor in Section 10.3.


 


“Indemnified
Person” has the meaning specified therefor in Section 10.3.


 


“Indentures”
means (a) the Indenture, with respect to 6.5% Senior Secured Convertible Notes
due 2009, and (b) the Indenture, with respect to 11.75% Senior Secured Notes
due 2009.


 


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


 


“Intellectual
Property Collateral” has the meaning specified therefor in the Security
Agreement.


 


“Intellectual
Property Value” means the value of the Intellectual Property Collateral
which, for purposes of this Agreement, in the absence of an appraisal
reasonably satisfactory to Agent, shall be deemed to be not less than
$16,000,000.


 


“Intercompany
Subordination Agreement” means a subordination agreement executed and
delivered by Borrowers and each of their Subsidiaries and Agent, the form and
substance of which is satisfactory to Agent.


 


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


 


“Interest
Period” means, with respect to each LIBOR Rate Loan, a period commencing on
the date of the making of such LIBOR Rate Loan (or the continuation of a LIBOR
Rate Loan or the conversion of a Base Rate Loan to a LIBOR Rate Loan) and
ending 1, 2, or 3 months thereafter; provided, however, that (a)
if any Interest Period would end on a day that is not a Business Day, such
Interest Period shall be extended (subject to clauses (c)-(e) below) to the
next succeeding Business Day, (b) interest shall accrue at the applicable rate
based upon the LIBOR Rate from and including the first day of each Interest
Period to, but excluding, the day on which


 


15





















 


any Interest
Period expires, (c) any Interest Period that would end on a day that is not a
Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in another calendar month, in which case such Interest
Period shall end on the next preceding Business Day, (d) with respect to an
Interest Period that begins on the last Business Day of a calendar month (or on
a day for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period), the Interest Period shall end on the last
Business Day of the calendar month that is 1, 2, or 3 months after the date on
which the Interest Period began, as applicable, and (e) Borrowers (or
Administrative Borrower on behalf thereof) may not elect an Interest Period
which will end after the Maturity Date.


 


“Inventory”
means inventory (as that term is defined in the Code).


 


“Inventory
Reserve” means, as of any date of determination, an amount sufficient to
reduce the advance rate against Eligible Inventory by 1 percentage point for
each percentage point by which the Net Orderly Liquidation Percentage is less
than 24.9%. 


 


“Investment”
means, with respect to any Person, any investment by such Person in any other
Person (including Affiliates) in the form of loans, guarantees, advances, or
capital contributions (excluding (a) commission, travel, relocation and similar
advances to officers and employees of such Person made in the ordinary course
of business, and (b) bona fide Accounts arising in the ordinary course of
business consistent with past practice), purchases or other acquisitions of
Indebtedness, Stock, or all or substantially all of the assets of such other
Person (or of any division or business line of such other Person), and any
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.


 


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


 


“IRS” means the Internal Revenue Service.


 


“Issuing
Lender” means Wells Fargo or any other Lender that, at the request of
Administrative Borrower and with the consent of Agent, agrees, in such Lender’s
sole discretion, to become an Issuing Lender for the purpose of issuing L/Cs or
L/C Undertakings pursuant to Section 2.12.


 


“L/C”
has the meaning specified therefor in Section 2.12(a).


 


“L/C
Disbursement” means a payment made by the Issuing Lender pursuant to a
Letter of Credit.


 


“L/C Undertaking”
has the meaning specified therefor in Section 2.12(a).


 


“Lender”
and “Lenders” have the respective meanings set forth in the preamble to
the Agreement, and shall include any other Person made a party to the Agreement
in accordance with the provisions of Section 13.1.


 


“Lender
Group” means, individually and collectively, each of the Lenders (including
the Issuing Lender) and Agent.


 


16





















 


“Lender
Group Expenses” means all (a) costs or expenses (including taxes, and
insurance premiums) required to be paid by a Borrower under any of the Loan
Documents that are paid, advanced, or incurred by the Lender Group, (b) fees or
charges reasonably paid or incurred by Agent in connection with the Lender
Group’s transactions with Borrowers, including, fees or charges for
photocopying, notarization, couriers and messengers, telecommunication, public
record searches (including tax lien, litigation, and UCC searches and including
searches with the patent and trademark office, the copyright office, or the
department of motor vehicles), filing, recording, publication, appraisal
(including periodic collateral appraisals or business valuations (including
real estate surveys, real estate title policies and endorsements, and
environmental audits) to the extent of the fees and charges (and up to the
amount of any limitation) authorized in the Agreement,  (c) costs and expenses incurred by Agent in
the disbursement of funds to or for the account of Borrowers or other members
of the Lender Group (by wire transfer or otherwise), (d) charges paid or
incurred by Agent resulting from the dishonor of checks, (e) reasonable costs
and expenses paid or incurred by the Lender Group to correct any default or
enforce any provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, or advertising to sell the Collateral, or any portion thereof,
irrespective of whether a sale is consummated, (f) audit fees and expenses of
Agent related to any inspections or audits to the extent of the fees and
charges (and up to the amount of any limitation) authorized in the Agreement,
(g) reasonable costs and expenses of third party claims or any other suit paid
or incurred by the Lender Group in enforcing or defending the Loan Documents or
in connection with the transactions contemplated by the Loan Documents or the
Lender Group’s relationship with any Borrower arising under the Loan Documents,
(h) Agent’s and each Lender’s reasonable costs and expenses (including
attorneys fees) incurred in advising, structuring, drafting, reviewing,
administering, syndicating, or amending the Loan Documents, and (i) Agent’s and
each Lender’s reasonable costs and expenses (including reasonable attorneys,
accountants, consultants, and other advisors fees and expenses) incurred in
terminating, enforcing (including reasonable fees and expenses of attorneys,
accountants, consultants, and other advisors incurred in connection with a “workout,”
a “restructuring,” or an Insolvency Proceeding concerning any Borrower
or in exercising rights or remedies under the Loan Documents), or defending the
Loan Documents, irrespective of whether suit is brought, or in taking any
Remedial Action concerning the Collateral.


 


“Lender-Related
Person” means, with respect to any Lender, such Lender, together with such
Lender’s Affiliates, officers, directors, employees, attorneys, and agents.


 


“Letter of
Credit” means an L/C or an L/C Undertaking, as the context requires.


 


“Letter of
Credit Usage” means, as of any date of determination, the aggregate undrawn
amount of all outstanding Letters of Credit.


 


“LIBOR
Deadline” has the meaning specified therefor in Section 2.13(b)(i).


 


“LIBOR
Notice” means a written notice in the form of Exhibit L-1.


 


“LIBOR
Option” has the meaning specified therefor in Section 2.13(a).


 


17





















 


“LIBOR Rate”
means, for each Interest Period for each LIBOR Rate Loan, the rate per annum
determined by Agent (rounded upwards, if necessary, to the next 1/100%) by dividing (a) the Base LIBOR Rate for such Interest Period,
by (b) 100% minus the Reserve Percentage.  The LIBOR Rate shall be adjusted on and as of
the effective day of any change in the Reserve Percentage.


 


“LIBOR Rate
Loan” means each portion of an Advance that bears interest at a rate
determined by reference to the LIBOR Rate.


 


“LIBOR Rate
Margin” means the following margin based upon the Average Daily Balance, to
be effective as of the first day of the calendar month immediately following
the end of the applicable calendar month for which the Average Daily Balance is
determined:


 


	
  Average Daily Balance

  	
   

  	
  Applicable LIBOR Rate Margin

  	
   

  
	
  Less than $25,000,000

  	
   

  	
  2.00
  percentage points

  	
   

  
	
  Greater than or equal to $25,000,000 and
  less than $50,000,000

  	
   

  	
  2.25
  percentage points

  	
   

  
	
  Greater than or equal to $50,000,000

  	
   

  	
  2.50
  percentage points

  	
   

  



 


“Lien”
means any interest in an asset securing an obligation owed to, or a claim by,
any Person other than the owner of the asset, irrespective of whether (a) such
interest is based on the common law, statute, or contract, (b) such interest is
recorded or perfected, and (c) such interest is contingent upon the occurrence
of some future event or events or the existence of some future circumstance or
circumstances.  Without limiting the
generality of the foregoing, the term “Lien” includes the lien or
security interest arising from a mortgage, deed of trust, encumbrance, ,
pledge, hypothecation, assignment, deposit arrangement, security agreement,
conditional sale or trust receipt, or from a lease, consignment, or bailment
for security purposes and also includes reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases, and other title exceptions and encumbrances affecting Real Property.


 


“Loan
Account” has the meaning specified therefor in Section 2.10.


 


“Loan
Documents” means the Agreement, the Bank Product Agreements, the Cash
Management Agreements, the Control Agreements, the Copyright Security
Agreement, the Fee Letter, the FX Guaranty, the Intercompany Subordination
Agreement, the Letters of Credit, the Mortgage, the Patent Security Agreement,
the Security Agreement, the Trademark Security Agreement, any note or notes
executed by a Borrower in connection with the Agreement and payable to a member
of the Lender Group, and any other agreement entered into, now or in the
future, by any Borrower and the Lender Group in connection with the Agreement.


 


“Material
Adverse Change” means (a) a material adverse change in the business,
prospects, operations, results of operations, assets, liabilities or condition
(financial or otherwise)


 


18





















 


of Borrowers
and their Subsidiaries, taken as a whole, (b) a material impairment of a
Borrower’s ability to perform its obligations under the Loan Documents to which
it is a party or of the Lender Group’s ability to enforce the Obligations or
realize upon the Collateral, or (c) a material impairment of the enforceability
or priority of the Agent’s Liens with respect to the Collateral as a result of
an action or failure to act on the part of a Borrower or a Subsidiary of a
Borrower.


 


“Maturity
Date” has the meaning specified therefor in Section 3.3.


 


“Maximum
Revolver Amount” means $60,000,000.


 


“Mortgage
Policy” has the meaning specified therefor in Section 3.6.


 


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


 


“Multiemployer
Plan” means a “multiemployer plan” (as defined in Section 3(37) of ERISA)
to which Borrower or any ERISA Affiliate is making, is obligated to make, has
made or has been obligated to make, contributions on behalf of participants who
are or were employed by any of them, other than a plan described in Section 4(b)(4) of ERISA.


 


“Net
Orderly Liquidation Percentage” means the percentage of the book value of
Borrowers’ Inventory, adjusted for custom finished goods and raw materials
inventory, that is estimated to be recoverable in an orderly liquidation of
such Inventory net of all associated costs and expenses of such liquidation,
such percentage to be as determined annually (but in Agent’s Permitted
Discretion, more frequently during such time as an Event of Default has
occurred and is continuing) by a qualified appraisal company selected by Agent.


 


“Obligations”
means (a) all loans, Advances, debts, principal, interest (including any
interest that accrues after the commencement of an Insolvency Proceeding
regardless of whether allowed or allowable in whole or in part as a claim in
any such Insolvency Proceeding), contingent reimbursement obligations with
respect to outstanding Letters of Credit, premiums, liabilities (including all
amounts charged to Borrowers’ Loan Account pursuant hereto), obligations
(including indemnification obligations), fees (including the fees provided for
in the Fee Letter), charges, costs, Lender Group Expenses (including any fees
or expenses that accrue after the commencement of an Insolvency Proceeding,
regardless of whether allowed or allowable in whole or in part as a claim in
any such Insolvency Proceeding), lease payments, guaranties, covenants, and
duties of any kind and description owing by Borrowers to the Lender Group
pursuant to or evidenced by the Loan Documents and irrespective of whether for
the payment of money, whether direct or indirect, absolute or contingent, due
or to become due, now existing or hereafter arising, and including all interest
not paid when due and all Lender Group Expenses that Borrowers are required to
pay or reimburse by the Loan Documents, by law, or otherwise, and (b) all Bank
Product Obligations.  Any reference in
the Agreement or in the other 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.


 


“Originating
Lender” has the meaning specified therefor in Section 13.1(e).


 


19





















 


“Overadvance”
has the meaning specified therefor in Section 2.5.


 


“Parent”
has the meaning specified therefor in the preamble to the Agreement.


 


“Participant”
has the meaning specified therefor in Section 13.1(e).


 


“Patent”
has the meaning specified therefor in the Security Agreement.


 


“Patent
Security Agreement” has the meaning specified therefor in the Security
Agreement.


 


“PBGC” means Pension Benefit Guaranty Corporation as defined in
Title IV of ERISA, or any successor entity.


 


“Permitted
Discretion” means a determination made in good faith and in the exercise of
reasonable (from the perspective of a secured asset-based lender) business
judgment.


 


“Permitted
Dispositions” means (a) sales 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
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, (d) the licensing,
on a non-exclusive basis, of patents, trademarks, copyrights, and other
intellectual property rights in the ordinary course of business, (e) the lease
or sublease (in a Borrower’s capacity as lessor or sublessor, as the case may
be) of real property in the ordinary course of business, so long as the annual
rent for such lease or sublease shall not exceed $250,000 and the term shall
not exceed five years, (f) sales and other dispositions of assets no longer
material to Borrower’s business, and (g) other sales and other
dispositions in an amount not greater than $10,000,000 in the aggregate in any
fiscal year ending after the Closing Date; provided, however,
that no Permitted Dispositions described in clauses (f) and (g) hereof may be
made if immediately prior to making any such Permitted Disposition, or after
giving effect thereto: (x) there shall occur an Event of Default which is
continuing; or (y) Borrower and its Subsidiaries, as determined on a
consolidated basis, shall have Excess Availability in an aggregate amount of
less than $35,000,000.


 


“Permitted
Investments” means (a) Investments in cash and Cash Equivalents, (b)
Investments in negotiable instruments for collection, (c) advances made in
connection with purchases of goods or services in the ordinary course of
business, (d) Investments received in settlement of amounts due to a Borrower
effected in the ordinary course of business or owing to a Borrower as a result
of Insolvency Proceedings involving an Account Debtor or upon the foreclosure
or enforcement of any Lien in favor of a Borrower, (e) Investments in the Stock
of any Subsidiary of Parent, (f) intercompany advances, guaranties, capital
contributions and other Investments made in the ordinary course of business
consistent with the written intercompany financing policy of Parent and its
Subsidiaries submitted to Agent prior to the Closing Date, (g) investments made
pursuant to participation in the Intel 64 Fund in an amount not greater than
the greater of the following in the aggregate in any fiscal year ending after
the Closing Date:  (A) $5,000,000; and
(B) the minimum amount required to be invested by Parent during such fiscal
year in the Intel 64 Fund, as certified by the chief financial officer of
Parent, (h) loans to employees made pursuant to a written employee
relocation program duly adopted by Parent or any of its Subsidiaries and
submitted to Agent prior to the Closing Date, (i) Investments reflected in
the Closing Date Projections, and (j) other Investments in an amount no
greater than $12,000,000 in the aggregate in any fiscal year ending after the
Closing Date; provided,


 


20





















 


however,
that no Permitted Investments described in clauses (e) through (j) hereof may
be made if immediately prior to making any such Permitted Investment, or after
giving effect thereto: (x) there shall occur an Event of Default which is
continuing; or (y) Borrower and its Subsidiaries, as determined on a
consolidated basis, shall have Excess Availability in an aggregate amount of
less than $35,000,000.


 


“Permitted
Liens” means (a) Liens held by Agent to secure the Obligations, (b) Liens
for unpaid taxes, assessments, or other governmental charges or levies that
either (i) are not yet delinquent, or (ii) do not constitute an Event of
Default hereunder and are the subject of Permitted Protests, (c) judgment Liens
that do not constitute an Event of Default under Section 7.7 of the Agreement,
(d) Liens set forth on Schedule P-1, (e) the interests of lessors under
operating leases, (f) purchase money Liens or the interests of lessors under
Capital Leases to the extent that such Liens or interests secure Permitted
Purchase Money Indebtedness and so long as such Lien attaches only to the asset
purchased or acquired and the proceeds thereof, (g) Liens arising by operation
of law in favor of warehousemen, landlords, carriers, mechanics, materialmen,
laborers, or suppliers, incurred in the ordinary course of Borrowers’ business
and not in connection with the borrowing of money, and which Liens either (i)
are for sums not yet delinquent, or (ii) are the subject of Permitted Protests,
(h) Liens on amounts deposited in connection with obtaining worker’s
compensation or other unemployment insurance, (i) Liens on amounts deposited in
connection with the making or entering into of bids, tenders, or leases in the
ordinary course of business and not in connection with the borrowing of money,
(j) Liens on amounts deposited as security for surety or appeal bonds in
connection with obtaining such bonds in the ordinary course of business, (k)
with respect to any Real Property, easements, rights of way, and zoning
restrictions that do not materially interfere with or impair the use or
operation thereof, (l) Liens in favor of the Trustee pursuant to the terms of
the Indentures, and (m) Liens on leases, installment sales agreements, chattel
paper and other instruments (collectively, the “Contracts”) assigned by
Borrowers to the Funding Partners and the goods, payments, guaranties and
proceeds related to the Contracts in favor of the Funding Partners pursuant to
certain program agreements among Borrowers and each separate Funding Partner..


 


“Permitted
Protest” means the right of Administrative Borrower or any of its
Subsidiaries to protest any Lien (other than any Lien that secures the
Obligations), taxes (other than payroll taxes or taxes that are the subject of
a United States federal tax lien), or rental payment, provided that (a) a
reserve with respect to such obligation is established on a Borrower’s or any
of its Subsidiaries’ books and records in such amount as is required under GAAP,
(b) any such protest is instituted promptly and prosecuted diligently by
Administrative Borrower or any of its Subsidiaries, as applicable, in good
faith, and (c) Agent is satisfied that, while any such protest is pending,
there will be no impairment of the enforceability, validity, or priority of any
of the Agent’s Liens.


 


“Permitted
Purchase Money Indebtedness” means, as of any date of determination,
Purchase Money Indebtedness incurred after the Closing Date in an aggregate
principal amount outstanding at any one time not in excess of $40,000,000.


 


“Person”
means natural persons, corporations, limited liability companies, limited
partnerships, general partnerships, limited liability partnerships, joint
ventures, trusts, land trusts,


 


21





















 


business trusts, or other organizations,
irrespective of whether they are legal entities, and governments and agencies
and political subdivisions thereof.


 


“Plan”
means any employee benefit plan, program, or arrangement maintained or
contributed to by Borrower or with respect to which it may incur liability.


 


“Projections”
means Parent’s forecasted (a) balance sheets, (b) profit and loss statements,
(c) cash flow statements and (d) a Borrowing Base availability forecast, all
prepared on a basis consistent with Parent’s historical financial statements,
in reasonable detail and accompanied by a statement of underlying assumptions.


 


“Pro Rata
Share” means, as of any date of determination:


 


(a)                                  with
respect to a Lender’s obligation to make Advances and right to receive payments
of principal, interest, fees, costs, and expenses with respect thereto, (i)
prior to the Commitments being terminated or reduced to zero, the percentage
obtained by dividing (y) such Lender’s Commitment, by (z) the aggregate
Commitments of all Lenders, and (ii) from and after the time that the
Commitments have been terminated or reduced to zero, the percentage obtained by
dividing (y) the aggregate outstanding principal amount of such Lender’s
Advances by (z) the aggregate outstanding principal amount of all Advances,


 


(b)                                 with
respect to a Lender’s obligation to participate in Letters of Credit, to
reimburse the Issuing Lender, and right to receive payments of fees with
respect thereto, (i) prior to the Commitments being terminated or reduced to
zero, the percentage obtained by dividing (y) such Lender’s Commitment, by (z)
the aggregate Commitments of all Lenders, and (ii) from and after the time that
the Commitments have been terminated or reduced to zero, the percentage
obtained by dividing (y) the aggregate outstanding principal amount of such
Lender’s Advances by (z) the aggregate outstanding principal amount of all
Advances, and


 


(c)                                  with
respect to all other matters as to a particular Lender (including the
indemnification obligations arising under Section 15.7), the percentage
obtained by dividing (i) such Lender’s Commitment by (ii) the aggregate amount
of Commitments of all Lenders; provided, however, that in the
event the Commitments have been terminated or reduced to zero, Pro Rata Share
under this clause shall be the percentage obtained by dividing (A) the
outstanding principal amount of such Lender’s Advances plus such Lender’s
ratable portion of the Risk Participation Liability with respect to outstanding
Letters of Credit, by (B) the outstanding principal amount of all Advances plus
the aggregate amount of the Risk Participation Liability with respect to
outstanding Letters of Credit.


 


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


 


“Purchase
Money Indebtedness” means Indebtedness (other than the Obligations, but
including Capitalized Lease Obligations), incurred at the time of, or within 20
days after, the acquisition of any fixed assets for the purpose of financing
all or any part of the acquisition cost thereof.


 


“Real
Property” means any real property identified on Schedule R-1 or
hereafter acquired by any Borrower and the improvements thereto.


 


22





















 


“Real
Property Collateral” means the Real Property that complies with each of the
representations and warranties respecting Real Property made in the Loan
Documents, and that is not excluded as ineligible by virtue of one or more of
the excluding criteria set forth below; provided, however, that such criteria
may be revised from time to time by Agent in Agent’s Permitted Discretion to
address the results of any audit or appraisal performed by Agent from time to
time after the Closing Date. An item of Real Property shall not be included in
Real Property Collateral if:


 


(a)                                  a Borrower does not have good, valid, and marketable title
thereto,


 


(b)                                 it is not subject to a valid and perfected first priority
Agent’s Lien,


 


(c)                                  Agent
shall not have received (i) an appraisal of such Real Property, and
(ii) phase-I (and if required by Lender in its Permitted Discretion, phase
II) environmental report, in each case, the results of which shall be
satisfactory to Agent in its reasonable discretion, or


 


(d)                                 Borrowers
fail to provide to Agent, in form and substance acceptable to the Agent in its
reasonable discretion, (i) a mortgagee title insurance policy (or marked
commitment to issue the same) for the Real Property issued by a title insurance
company reasonably satisfactory to Agent (“Mortgage Policy”) in an
amount equal to the appraised amount assuring Agent that the Mortgage on such
Real Property is a valid and enforceable first priority mortgage Lien on such
Real Property free and clear of all defects and encumbrances except Permitted
Liens, or (ii) a real estate survey with respect to each parcel comprising the
Real Property, or (iii) an opinion of counsel to Borrowers relating to the
enforceability of the mortgage in favor of Agent encumbering such Real
Property; or (iv) an environmental indemnity agreement executed by
Borrowers in favor of Agent.


 


“Record”
means information that is inscribed on a tangible medium or which is stored in
an electronic or other medium and is retrievable in perceivable form.


 


“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) perform any pre-remedial studies, investigations, or
post-remedial operation and maintenance activities, or (d) conduct any other
actions with respect to Hazardous Materials authorized by Environmental Laws.


 


“Replacement
Lender” has the meaning specified therefor in Section 14.2(a).


 


“Report”
has the meaning specified therefor in Section 15.17.


 


“Reportable
Event” means any of the events described in Section 4043(c) of ERISA or the
regulations thereunder other than a Reportable Event as to which the provision
of 30 days notice to the PBGC is waived under applicable regulations.


 


“Required
Lenders” means, at any time, Lenders whose aggregate Pro Rata Shares
(calculated under clause (c) of the definition of Pro Rata Shares) equal or
exceed 50.1%.


 


23





















 


“Reserve
Percentage” means, on any day, for any Lender, the maximum percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor Governmental Authority) for determining the reserve requirements
(including any basic, supplemental, marginal, or emergency reserves) that are
in effect on such date with respect to eurocurrency funding (currently referred
to as “eurocurrency liabilities”) of that Lender, but so long as such
Lender is not required or directed under applicable regulations to maintain
such reserves, the Reserve Percentage shall be zero.


 


“Retiree
Health Plan” means an “employee welfare benefit plan” within the meaning of
Section 3(1) of ERISA that provides benefits to individuals after termination
of their employment, other than as required by Section 601 of ERISA.


 


“Revolver
Usage” means, as of any date of determination, the sum of (a) the amount of
outstanding Advances, plus (b) the
amount of the Letter of Credit Usage.


 


“Risk
Participation Liability” means, as to each Letter of Credit, all
reimbursement obligations of Borrowers to the Issuing Lender with respect to an
L/C Undertaking, consisting of (a) the amount available to be drawn or which
may become available to be drawn, (b) all amounts that have been paid by the
Issuing Lender to the Underlying Issuer to the extent not reimbursed by
Borrowers, whether by the making of an Advance or otherwise, and (c) all
accrued and unpaid interest, fees, and expenses payable with respect thereto.


 


“Scheduled
Intellectual Property Collateral” has the meaning set forth in Section
4.15.


 


“SEC”
means the United States Securities and Exchange Commission and any successor
thereto.


 


“Second
Compliance Certificate” means the quarterly Compliance Certificate due in
August 2005 pursuant to clause (d) of Schedule 5.3.


 


“Securities
Account” means a “securities account” (as that term is defined in
the Code).


 


“Security
Agreement” means a security agreement, in form and substance satisfactory
to Agent, executed and delivered by Borrowers to Agent.


 


“Security
Clearance” has the meaning specified therefor in Section 15.20.


 


“Service
Accounts” means those Accounts created by a
Borrower in the ordinary course of its business pursuant to a service agreement
with an Account Debtor.


 


“Settlement”
has the meaning specified therefor in Section 2.3(e)(i).


 


“Settlement
Date” has the meaning specified therefor in Section 2.3(e)(i).


 


“SGI Japan”
shall mean Silicon Graphics Japan, Inc., a corporation organized under the laws
of Japan.


 


24





















 


“SGI
Solutions Finance” means SGI Solutions Finance, an unincorporated business
division of Parent.


 


“Solvent”
means, with respect to any Person on a particular date, that, at fair
valuations, the sum of such Person’s assets is greater than all of such Person’s
debts.


 


“Stock”
means all shares, options, warrants, interests, participations, or other
equivalents (regardless of how designated) of or in a Person, whether voting or
nonvoting, including common stock, preferred stock, or any other “equity
security” (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the SEC under the Exchange Act).


 


“Subsidiary”
of a Person means a corporation, partnership, limited liability company, or
other entity in which that Person directly or indirectly owns or controls the
shares of Stock having ordinary voting power to elect a majority of the board
of directors (or appoint other comparable managers) of such corporation,
partnership, limited liability company, or other entity.


 


“Supplemental
Compliance Termination Date” means the earlier of:  (a) the due date of the Second
Compliance Certificate; and (b) the date the Second Compliance Certificate
is actually delivered to Agent.


 


“Swing
Lender” means WFF or any other Lender that, at the request of
Administrative Borrower and with the consent of Agent agrees, in such Lender’s
sole discretion, to become the Swing Lender under Section 2.3(d).


 


“Swing Loan”
has the meaning specified therefor in Section 2.3(b).


 


“Taxes”
has the meaning specified therefor in Section 15.11.


 


“Temporary
Availability Reserve” means: 
(a) during the Conditional Waiver Period, $10,000,000; and
(b) thereafter, zero.


 


“Threshold
Equipment” means, as of the date of determination, no less than 80% of
Borrowers’ Equipment, as measured by book value, other than demonstration
systems.


 


“Threshold
Inventory” means, as of the date of determination, no less than 80% of
Borrowers’ Inventory, as measured by book value, other than demonstration
systems.


 


“Trademark”
has the meaning specified therefor in the Security Agreement.


 


“Trademark
Security Agreement” has the meaning specified therefor in the Security
Agreement.


 


“Trustee”
means U.S. Bank National Association, a national banking association organized
and existing under the laws of the United States of America.


 


“Underlying
Issuer” means a third Person which is the beneficiary of an L/C Undertaking
and which has issued a letter of credit at the request of the Issuing Lender
for the benefit of Borrowers.


 


“Underlying
Letter of Credit” means a letter of credit that has been issued by an
Underlying Issuer.


 


25





















 


“United
States” means the United States of America.


 


“Voidable
Transfer” has the meaning specified therefor in Section 16.6.


 


“Wells
Fargo” means Wells Fargo Bank, National Association, a national banking
association.


 


“WFF”
means Wells Fargo Foothill, Inc., a California corporation.


 


26