Document:

Exhibit 10.4

 

 

 

LOAN
AND SECURITY AGREEMENT

 

 

by
and among

 

 

MSC.SOFTWARE
CORPORATION

 

as
Borrower,

 

 

THE
LENDERS THAT ARE SIGNATORIES HERETO

 

as
the Lenders,

 

and

 

FOOTHILL
CAPITAL CORPORATION

 

as
the Arranger and Administrative Agent

 

 

Dated
as of November 18, 2002

 

 

 

 

TABLE OF CONTENTS

 

	
  1.

  	
  DEFINITIONS AND CONSTRUCTION.

  	
  1

  
	
   

  	
  1.1

  	
  Definitions

  	
  1

  
	
   

  	
  1.2

  	
  Accounting
  Terms

  	
  30

  
	
   

  	
  1.3

  	
  Code

  	
  30

  
	
   

  	
  1.4

  	
  Construction

  	
  30

  
	
   

  	
  1.5

  	
  Schedules and Exhibits

  	
  30

  
	
   

  	
   

  	
   

  
	
  2.

  	
  LOAN AND TERMS OF PAYMENT.

  	
  30

  
	
   

  	
  2.1

  	
  Revolver
  Advances

  	
  30

  
	
   

  	
  2.2

  	
  Term Loan

  	
  31

  
	
   

  	
  2.3

  	
  Borrowing Procedures and Settlements

  	
  33

  
	
   

  	
  2.4

  	
  Payments

  	
  40

  
	
   

  	
  2.5

  	
  Overadvances

  	
  43

  
	
   

  	
  2.6

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

  	
  43

  
	
   

  	
  2.7

  	
  Cash
  Management

  	
  45

  
	
   

  	
  2.8

  	
  Crediting Payments; Float Charge

  	
  46

  
	
   

  	
  2.9

  	
  Designated Account

  	
  47

  
	
   

  	
  2.10

  	
  Maintenance of Loan Account; Statements of
  Obligations

  	
  47

  
	
   

  	
  2.11

  	
  Fees

  	
  47

  
	
   

  	
  2.12

  	
  Letters
  of Credit

  	
  48

  
	
   

  	
  2.13

  	
  Registered
  Notes

  	
  51

  
	
   

  	
  2.14

  	
  Securitization

  	
  51

  
	
   

  	
   

  	
   

  
	
  3.

  	
  CONDITIONS; TERM OF AGREEMENT.

  	
  52

  
	
   

  	
  3.1

  	
  Conditions Precedent to the Initial
  Extension of Credit

  	
  52

  
	
   

  	
  3.2

  	
  Conditions Subsequent to the Initial
  Extension of Credit

  	
  56

  
	
   

  	
  3.3

  	
  Conditions Precedent to all Extensions of
  Credit

  	
  57

  
	
   

  	
  3.4

  	
  Term

  	
  57

  
	
   

  	
  3.5

  	
  Effect of Termination

  	
  58

  
	
   

  	
  3.6

  	
  Early Termination by Borrower

  	
  58

  
	
   

  	
   

  	
   

  
	
  4.

  	
  CREATION OF SECURITY INTEREST.

  	
  59

  
	
   

  	
  4.1

  	
  Grant of Security Interest

  	
  59

  
	
   

  	
  4.2

  	
  Negotiable Collateral

  	
  59

  
	
   

  	
  4.3

  	
  Collection of Accounts, General Intangibles, and Negotiable
  Collateral

  	
  59

  
	
   

  	
  4.4

  	
  Filing of Financing Statements; Commercial Tort Claims; Delivery of
  Additional Documentation Required

  	
  60

  
	
   

  	
  4.5

  	
  Power
  of Attorney

  	
  61

  
	
   

  	
  4.6

  	
  Right
  to Inspect

  	
  61

  
	
   

  	
  4.7

  	
  Control Agreements

  	
  61

  
					

 

 

	
  5.

  	
  REPRESENTATIONS AND WARRANTIES.

  	
  62

  
	
   

  	
  5.1

  	
  No
  Encumbrances

  	
  62

  
	
   

  	
  5.2

  	
  Eligible
  Accounts

  	
  62

  
	
   

  	
  5.3

  	
  [Intentionally Omitted]

  	
  62

  
	
   

  	
  5.4

  	
  Equipment

  	
  62

  
	
   

  	
  5.5

  	
  Location of Inventory and Equipment

  	
  62

  
	
   

  	
  5.6

  	
  [intentionally omitted]

  	
  62

  
	
   

  	
  5.7

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

  	
  62

  
	
   

  	
  5.8

  	
  Due Organization and Qualification;
  Subsidiaries

  	
  63

  
	
   

  	
  5.9

  	
  Due Authorization; No Conflict

  	
  64

  
	
   

  	
  5.10

  	
  Litigation

  	
  65

  
	
   

  	
  5.11

  	
  No Material Adverse Change

  	
  65

  
	
   

  	
  5.12

  	
  Fraudulent Transfer

  	
  65

  
	
   

  	
  5.13

  	
  Employee
  Benefits

  	
  65

  
	
   

  	
  5.14

  	
  Environmental Condition

  	
  66

  
	
   

  	
  5.15

  	
  Brokerage
  Fees

  	
  66

  
	
   

  	
  5.16

  	
  Intellectual Property

  	
  66

  
	
   

  	
  5.17

  	
  Leases

  	
  66

  
	
   

  	
  5.18

  	
  DDAs and Securities Accounts

  	
  66

  
	
   

  	
  5.19

  	
  Complete Disclosure

  	
  66

  
	
   

  	
  5.20

  	
  Indebtedness

  	
  67

  
	
   

  	
   

  	
   

  
	
  6.

  	
  AFFIRMATIVE COVENANTS.

  	
  67

  
	
   

  	
  6.1

  	
  Accounting
  System

  	
  67

  
	
   

  	
  6.2

  	
  Collateral Reporting

  	
  67

  
	
   

  	
  6.3

  	
  Financial Statements, Reports, Certificates

  	
  69

  
	
   

  	
  6.4

  	
  Guarantor
  Reports

  	
  72

  
	
   

  	
  6.5

  	
  Returns

  	
  72

  
	
   

  	
  6.6

  	
  Maintenance of Properties

  	
  72

  
	
   

  	
  6.7

  	
  Taxes

  	
  72

  
	
   

  	
  6.8

  	
  Insurance

  	
  72

  
	
   

  	
  6.9

  	
  Location of Inventory and Equipment

  	
  73

  
	
   

  	
  6.10

  	
  Compliance with Laws

  	
  73

  
	
   

  	
  6.11

  	
  Leases

  	
  74

  
	
   

  	
  6.12

  	
  Brokerage Commissions

  	
  74

  
	
   

  	
  6.13

  	
  Existence

  	
  74

  
	
   

  	
  6.14

  	
  Environmental

  	
  74

  
	
   

  	
  6.15

  	
  Disclosure Updates

  	
  74

  
	
   

  	
  6.16

  	
  Copyrights

  	
  75

  
	
   

  	
   

  	
   

  
	
  7.

  	
  NEGATIVE COVENANTS.

  	
  75

  
	
   

  	
  7.1

  	
  Indebtedness

  	
  75

  
	
   

  	
  7.2

  	
  Liens

  	
  76

  
	
   

  	
  7.3

  	
  Restrictions on Fundamental Changes

  	
  76

  

 

 

	
   

  	
  7.4

  	
  Disposal of Assets

  	
  76

  
	
   

  	
  7.5

  	
  Change
  Name

  	
  76

  
	
   

  	
  7.6

  	
  Nature of Business

  	
  77

  
	
   

  	
  7.7

  	
  Prepayments and Amendments

  	
  77

  
	
   

  	
  7.8

  	
  Change
  of Control

  	
  77

  
	
   

  	
  7.9

  	
  [Intentionally
  Omitted]

  	
  77

  
	
   

  	
  7.10

  	
  Distributions

  	
  77

  
	
   

  	
  7.11

  	
  Accounting Methods

  	
  77

  
	
   

  	
  7.12

  	
  Investments

  	
  77

  
	
   

  	
  7.13

  	
  Transactions with Affiliates

  	
  78

  
	
   

  	
  7.14

  	
  Suspension

  	
  78

  
	
   

  	
  7.15

  	
  Compensation

  	
  78

  
	
   

  	
  7.16

  	
  Use
  of Proceeds

  	
  78

  
	
   

  	
  7.17

  	
  Inventory and Equipment with Bailees

  	
  78

  
	
   

  	
  7.18

  	
  Financial Covenants

  	
  78

  
	
   

  	
  7.19

  	
  Copyright Registrations

  	
  81

  
	
   

  	
   

  	
   

  
	
  8.

  	
  EVENTS
  OF DEFAULT.

  	
  81

  
	
   

  	
   

  	
   

  
	
  9.

  	
  THE LENDER GROUP’S RIGHTS AND REMEDIES.

  	
  83

  
	
   

  	
  9.1

  	
  Rights and Remedies

  	
  83

  
	
   

  	
  9.2

  	
  Remedies Cumulative

  	
  85

  
	
   

  	
   

  	
   

  
	
  10.

  	
  TAXES AND EXPENSES.

  	
  85

  
	
   

  	
   

  	
   

  
	
  11.

  	
  WAIVERS; INDEMNIFICATION.

  	
  86

  
	
   

  	
  11.1

  	
  Demand; Protest; etc.

  	
  86

  
	
   

  	
  11.2

  	
  The Lender Group’s Liability for Collateral

  	
  86

  
	
   

  	
  11.3

  	
  Indemnification

  	
  86

  
	
   

  	
   

  	
   

  
	
  12.

  	
  NOTICES.

  	
  87

  
	
   

  	
   

  	
   

  
	
  13.

  	
  CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

  	
  88

  
	
   

  	
   

  	
   

  
	
  14.

  	
  ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.

  	
  89

  
	
   

  	
  14.1

  	
  Assignments and Participations

  	
  89

  
	
   

  	
  14.2

  	
  Successors

  	
  92

  
	
   

  	
   

  	
   

  
	
  15.

  	
  AMENDMENTS; WAIVERS.

  	
  92

  
	
   

  	
  15.1

  	
  Amendments and Waivers

  	
  92

  
	
   

  	
  15.2

  	
  Replacement of Holdout Lender

  	
  93

  
	
   

  	
  15.3

  	
  No Waivers; Cumulative Remedies

  	
  94

  
	
   

  	
   

  	
   

  
	
  16.

  	
  AGENT; THE LENDER GROUP.

  	
  94

  
	
   

  	
  16.1

  	
  Appointment and Authorization of Agent

  	
  94

  
	
   

  	
  16.2

  	
  Delegation of Duties

  	
  95

  

 

 

	
   

  	
  16.3

  	
  Liability of Agent

  	
  95

  
	
   

  	
  16.4

  	
  Reliance
  by Agent

  	
  96

  
	
   

  	
  16.5

  	
  Notice of Default or Event of Default

  	
  96

  
	
   

  	
  16.6

  	
  Credit
  Decision

  	
  97

  
	
   

  	
  16.7

  	
  Costs and Expenses; Indemnification

  	
  97

  
	
   

  	
  16.8

  	
  Agent
  in Individual Capacity

  	
  98

  
	
   

  	
  16.9

  	
  Successor
  Agent

  	
  98

  
	
   

  	
  16.10

  	
  Lender in Individual Capacity

  	
  99

  
	
   

  	
  16.11

  	
  Withholding
  Taxes

  	
  99

  
	
   

  	
  16.12

  	
  Collateral Matters

  	
  101

  
	
   

  	
  16.13

  	
  Restrictions on Actions by Lenders; Sharing
  of Payments

  	
  102

  
	
   

  	
  16.14

  	
  Agency for Perfection

  	
  103

  
	
   

  	
  16.15

  	
  Payments by Agent to the Lenders

  	
  103

  
	
   

  	
  16.16

  	
  Concerning the Collateral and Related Loan
  Documents

  	
  103

  
	
   

  	
  16.17

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

  	
  103

  
	
   

  	
  16.18

  	
  Several Obligations; No Liability

  	
  104

  
	
   

  	
   

  	
   

  
	
  17.

  	
  GENERAL PROVISIONS.

  	
  105

  
	
   

  	
  17.1

  	
  Effectiveness

  	
  105

  
	
   

  	
  17.2

  	
  Section
  Headings

  	
  105

  
	
   

  	
  17.3

  	
  Interpretation

  	
  105

  
	
   

  	
  17.4

  	
  Severability of Provisions

  	
  105

  
	
   

  	
  17.5

  	
  Amendments in Writing

  	
  105

  
	
   

  	
  17.6

  	
  Counterparts; Telefacsimile Execution

  	
  105

  
	
   

  	
  17.7

  	
  Revival and Reinstatement of Obligations

  	
  106

  
	
   

  	
  17.8

  	
  Confidentiality

  	
  106

  
	
   

  	
  17.9

  	
  Integration

  	
  106

  

 

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND
SECURITY AGREEMENT (this “Agreement”), is
entered into as of November 18, 2002, by and among, on the one hand, the
lenders identified on the signature pages hereof (such lenders, together with
their respective successors and assigns, are referred to hereinafter each
individually as a “Lender” and collectively as the “Lenders”) and
FOOTHILL
CAPITAL CORPORATION, a California corporation, as the arranger and
administrative agent for the Lenders (“Agent”), and, on the other hand, MSC.SOFTWARE
CORPORATION, a Delaware corporation (“Borrower”).

 

The parties
agree as follows:

 

1.             DEFINITIONS AND CONSTRUCTION.

 

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

 

“Ableco”
means Ableco Finance LLC, a Delaware limited liability company.

 

“Account
Debtor” means any Person who is obligated under, with respect to, or on
account of, an Account, chattel paper, or a General Intangible.

 

“Accounts”
means accounts (as that term is defined in the Code), and any and all
supporting obligations in respect thereof.

 

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

 

“Additional
Documents” has the meaning set forth in Section 4.4(c).

 

“Advances”
has the meaning set forth in Section 2.1.

 

“AES
Documents” means the AES Notes and all other agreements or documents
executed or delivered and relating to the AES Notes, as such agreements and
other documents may be amended, restated, supplemented or otherwise modified
from time to time.

 

“AES Notes”
means those certain Subordinated Promissory Notes executed and delivered by
Borrower and dated as of August 1, 2002, as amended, restated, supplemented or
otherwise modified from time to time.

 

“Affiliate”
means, as applied to any Person, any other Person who, directly or indirectly,
controls, is controlled by, or is under common control with, such Person.  For

 

1

 

purposes of this definition,
“control” means the possession, directly or indirectly, of the power to direct
the management and policies of a Person, whether through the ownership of
Stock, by contract, or otherwise; provided,
however, that, for purposes of the definition of Eligible Accounts and Section
7.13 hereof: (a) any Person which owns directly or indirectly 20% or more
of the securities 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 control such Person, and (b) each
director (or comparable manager) of a Person shall be deemed to be an Affiliate
of such Person.

 

“Agent”
means Foothill, solely in its capacity as agent for the Lenders hereunder, and
any successor thereto.

 

“Agent’s
Account” means the deposit account identified on Schedule A-1.

 

“Agent
Advances” has the meaning set forth in Section 2.3(e)(i).

 

“Agent’s
Liens” means the Liens granted by Borrower or a Guarantor to Agent under
this Agreement or the other Loan Documents.

 

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

 

“Agreement”
has the meaning set forth in the preamble hereto.

 

“Aircrafts”
means the interest of MSC.Flyer, LLC, a Delaware limited liability company, in
and to (a) a Challenger 601 bearing FAA Registration Number N653CW, and (b) a
Citation III bearing FAA Registration Number N364CW.

 

“Applicable
Prepayment Premium” means, as of any date of determination, an amount equal
to (a) during the period of time from and after the date of the execution and
delivery of this Agreement up to the date that is the first anniversary of the
Closing Date, 4.0% times the sum of (i) the Maximum Revolver
Amount, plus
(ii) the outstanding principal amount of the Term Loan as of such date of
determination, plus (iii) the aggregate amount of unscheduled payments on
account of the Term Loan during the thirty day period ending on such date of
determination, (b) during the period of time from and including the date that
is the first anniversary of the Closing Date up to the date that is the second
anniversary of the Closing Date, 3.0% times the sum of (i) the Maximum Revolver
Amount, plus
(ii) the outstanding principal amount of the Term Loan as of such date of
determination, plus (iii) the aggregate amount of unscheduled payments on
account of the Term Loan during the thirty day period ending on such date of
determination, (c) during the period of time from and including the date that
is the second anniversary of the Closing Date up to the date that is the third
anniversary of the Closing Date, 2.0% times the sum of (i) the Maximum Revolver
Amount, plus
(ii) the outstanding principal amount of the Term Loan as of such date of
determination, plus (iii) the aggregate amount of unscheduled payments on
account of the Term Loan during the thirty day period ending on such date of
determination, and (d) during

 

2

 

the period of time from and
including the date that is the third anniversary of the Closing Date up to the
Maturity Date, 1.0% times the sum of (i) the Maximum Revolver
Amount, plus
(ii) the outstanding principal amount of the Term Loan as of such date of
determination, plus (iii) the aggregate amount of unscheduled payments on
account of the Term Loan during the thirty day period ending on such date of
determination.

 

“Assignee”
has the meaning set forth in Section 14.1.

 

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

 

“Australia
Acquisition Documents” means the purchase and sale documents evidencing the
acquisition described in clause (a) of the definition of Permitted
Acquisitions.

 

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

 

“Availability”
means, as of any date of determination, if such date is a Business Day, and
determined at the close of business on the immediately preceding Business Day,
if such date of determination is not a Business Day, the amount that Borrower
is entitled to borrow as Advances under Section 2.1 (after giving effect
to all then outstanding Obligations (other than Bank Product Obligations) and
all sublimits and reserves then applicable hereunder).

 

“Availability
Block” means (a) from and after the Closing Date until December 31, 2002,
zero, (b) from and after December 31, 2002 up to but not including January 31,
2003, $1,000,000, (c) from and after January 31, 2003 up to but not including
February 28, 2003, $2,250,000, (d) from and after February 28, 2003 up to but
not including March 31, 2003, $3,500,000, and (e) from and after March 31,
2003, $5,000,000.

 

“Bank
Product Agreements” means those agreements entered into from time to time
by 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 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 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 Borrower or its Subsidiaries.

 

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

 

3

 

“Bank
Products” means any financial accommodations extended to Borrower or its
Subsidiaries by a Bank Product Provider (other than pursuant to this 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) Hedge Agreements.

 

“Bank
Product Reserves” means, as of any date of determination, the lesser of (a)
$3,000,000, and (b) the amount of reserves that Agent has established (based
upon the applicable Bank Product Providers’ reasonable determination of the
credit exposure in respect of then extant Bank Products) for Bank Products then
provided or outstanding; provided, however, that in order to
qualify as Bank Products Reserves, such reserves must be established at or
about the time that the Bank Product Provider first provides the applicable
Bank Product.

 

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

 

“Base Rate”
means, the rate of interest announced 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 each portion of an Advance or the Term Loan that bears interest
at a rate determined by reference to the Base Rate.

 

“Base Rate
Margin” means 2.25 percentage points.

 

“Base Rate
Term Loan Margin” means 5.00 percentage points.

 

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

 

“Books”
means Borrower’s and its Subsidiaries’ now owned or hereafter acquired books
and records (including all of their Records indicating, summarizing, or
evidencing their assets (including the Collateral) or liabilities, all of
Borrower’s or its Subsidiaries’ Records relating to their business operations
or financial condition, and all of their goods or General Intangibles related
to such information).

 

“Borrower”
has the meaning set forth in the preamble to this Agreement.

 

4

 

“Borrower
Stock Pledge Agreement” means a stock pledge agreement, in form and
substance satisfactory to Agent, executed and delivered by Borrower to Agent
with respect to the pledge of the Stock owned by Borrower; provided, however,
that in the case of Stock of one of Borrower’s Subsidiaries which is not a
Guarantor, the applicable debtor shall not be required to pledge more than 65%
of the total combined voting power of all classes of Stock of such CFC entitled
to vote.

 

“Borrowing”
means a borrowing hereunder consisting of Advances (or term loans, in the case
of the Term Loan) 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 an Agent Advance.

 

“Borrowing
Base” has the meaning set forth in Section 2.1.

 

“Borrowing
Base Participants” means (a) Borrower, (b) Mechanical Dynamics, Inc., a
Michigan corporation, and (c) from and after the date on which the condition
set forth in Section 3.2(a) has been satisfied, Canadian Guarantor.

 

“Business
Day” means any day that is not a Saturday, Sunday, or other day on which
national banks are authorized or required to close in the state of New York.

 

“Canadian
Dollars”  means the lawful money of
Canada.

 

“Canadian
Guarantor” means MSC Software Ltd., an Ontario company.

 

“Canadian
Guarantor Security Agreement” means a general security agreement executed
and delivered by the Canadian Guarantor in favor of Agent, in form and
substance reasonably satisfactory to Agent.

 

“Capital
Expenditure” means a capital expenditure as determined under GAAP, except
that capitalized software costs shall not be deemed to be “Capital
Expenditures” hereunder.

 

“Capital
Lease” means a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.

 

“Capitalized
Lease Obligation” means any Indebtedness represented by obligations under a
Capital Lease.

 

“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

 

5

 

maturing no more than 270 days
from the date of acquisition thereof and, at the time of acquisition, having a
rating of A-1 or P-1, 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 that are either (i) issued by any
bank organized under the laws of the United States or any state thereof which
bank has a rating of A or A2, or better, from S&P or Moody’s, or
(ii) in an amount less than or equal to $100,000 in the aggregate issued
by any other bank insured by the Federal Deposit Insurance Corporation.

 

“Cash
Management Bank” has the meaning set forth in Section 2.7(a).

 

“Cash
Management Account” has the meaning set forth in Section 2.7(a).

 

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

 

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

 

“Change of
Control” means (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 30%, or more,
of the Stock of Borrower 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, or (c) except as a result of
Permitted Reorganization Transactions or Permitted Dispositions, Borrower or
any of its Subsidiaries ceases to directly own and control 100% of the
outstanding capital Stock of each of its respective Subsidiaries that it owns
as of the Closing Date.

 

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

 

“Closing
Date Business Plan” means the set of Projections of Borrower for the 3 year
period following the Closing Date (on a year by year basis, and for the 1 year
period following the Closing Date, on a quarter by quarter basis), in form and
substance (including as to scope and underlying assumptions) satisfactory to
Agent.

 

“Closing
Date Enterprise Valuation” means a final appraisal of the net present
value, as of the Closing Date, of the enterprise valuation of Borrower and its
Subsidiaries, prepared by a third party valuation firm acceptable to Agent, the
results of which are satisfactory to Agent.

 

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

 

6

 

“Collateral”
means all of Borrower’s now owned or hereafter acquired right, title, and
interest in and to each of the following:

 

(a)  Accounts,

 

(b)  Books,

 

(c)  Equipment,

 

(d)  General Intangibles,

 

(e)  Inventory,

 

(f)  Investment Property,

 

(g)  Negotiable Collateral,

 

(h)  money or other assets of Borrower that now
or hereafter come into the possession, custody, or control of any member of the
Lender Group, and

 

(i)  the proceeds and products, whether tangible
or intangible, of any of the foregoing, including proceeds of insurance
covering any or all of the foregoing, and any and all Accounts, Books,
Equipment, General Intangibles, Inventory, Investment Property, Negotiable
Collateral, Real Property (other than leased Real Property), money, deposit
accounts, or other tangible or intangible property (other than leased Real
Property) resulting from the sale, exchange, collection, or other disposition
of any of the foregoing, or any portion thereof or interest therein, and the
proceeds thereof.

 

Anything
contained in this Agreement to the contrary notwithstanding, the term
“Collateral” shall not include (1) Investment Property constituting Stock of
one of Borrower’s Subsidiaries which is not a Guarantor, solely to the extent
that such Investment Property represents more than 65% of the total combined
voting power of all classes of Stock of such CFC entitled to vote, or (2) any
General Intangibles that are now or hereafter held by Borrower in the event
that: (a) as a result of the grant of a security interest therein, Borrower’s
rights in or with respect to such asset would be forfeited or Borrower would be
deemed to have breached or defaulted under the applicable agreement that
governs such asset pursuant to restrictions contained in the applicable
agreement or implied in such agreement by applicable law; and (b) any such
restriction is effective and enforceable under applicable law (including,
without limitation, Sections 9-406, 9-407, 9-408 or 9-409 of the Uniform
Commercial Code of any relevant jurisdiction); provided, however,
that in no event shall the foregoing be construed to exclude from the security
interest created by this Agreement: (X) any and all proceeds of such assets,
and (Y) such assets at any time that the restrictions in the agreement are no
longer effective and enforceable or at any time that the consent of the other
party to the agreement is obtained to the grant of a security interest in and
to such asset in favor of Agent.

 

7

 

“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 or its Subsidiaries’ Equipment or Inventory, in each
case, in form and substance reasonably 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 the Borrower and each Guarantor; provided, however,
that the term “Collections” shall not include identifiable proceeds of the
Advances or Swing Loans.

 

“Commercial
Tort Claim Assignments” has the meaning set forth in Section 4.4(b).

 

“Commitment”
means, with respect to each Lender, its Revolver Commitment, its Term Loan
Commitment, or its Total Commitment, as the context requires, and, with respect
to all Lenders, their Revolver Commitments, their Term Loan Commitments, or
their Total Commitments, as the context requires, in each case as such Dollar
amounts are set forth beside such Lender’s name under the applicable heading on
Schedule C-1 or on the signature page of the Assignment and Acceptance
pursuant to which such Lender became a Lender hereunder in accordance with the
provisions of Section 14.1.

 

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

 

“Consolidated
Excess Availability” means the amount, as of the date any determination
thereof is to be made, equal to Availability minus the aggregate amount, if
any, of all trade payables of Borrower and its Subsidiaries aged in excess of
historical levels with respect thereto and all book overdrafts of Borrower and
its Subsidiaries in excess of historical practices with respect thereto, in
each case as determined by Agent in its Permitted Discretion.

 

“Continuing
Director” means (a) any member of the Board of Directors who was a director
of Borrower 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 Borrower (as such terms are used in Rule
14a-11 under the Exchange Act) and whose initial assumption of office resulted
from such contest or the settlement thereof.

 

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

 

8

 

“Copyright
Security Agreements” means one or more copyright security agreements
executed and delivered by Borrower, the Guarantors and Agent, the form and
substance of which is satisfactory to Agent.

 

“Daily
Balance” means, with respect to each day during the term of this Agreement,
the amount of an Obligation owed at the end of such day.

 

“Dassault
Documents” means the Dassault Stock Purchase Agreement, the Dassault Note,
and all other agreements or documents executed or delivered and relating to the
Dassault Notes, as such agreements and other documents may be amended,
restated, supplemented or otherwise modified from time to time.

 

“Dassault
Note” means that certain Senior Secured Promissory Note by Tyra
Technologies, Inc., a California corporation, and assumed by Borrower pursuant
to the Dassault Stock Purchase Agreement, in the original principal amount of
$7,000,000, dated as of June 22, 1999, as amended, restated, supplemented or
otherwise modified from time to time.

 

“Dassault
Stock Purchase Agreement” means that certain Stock Purchase Agreement by
and among Borrower, Dassault Systemes of America Corp., a California
corporation, and Dassault Systemes, a societe anonyme organized and existing
under the laws of France, and dated as of May 2, 2001, as amended, restated,
supplemented or otherwise modified from time to time.

 

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

 

“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, at the interest
rate then applicable to Advances that are Base Rate Loans (inclusive of the
Base Rate Margin applicable thereto).

 

“Designated
Account” means that certain DDA of Borrower identified on Schedule D-1.

 

“Designated
Account Bank” has the meaning set forth on Schedule D-1.

 

“Dilution”
means, as of any date of determination, a percentage, based upon the experience
of the immediately prior 180 days, that is the result of dividing the Dollar
amount of (a) bad debt write-downs, discounts, advertising allowances, credits,
or other

 

9

 

dilutive items with respect to
the Borrowing Base Participants’ Accounts during such period, by (b) the
Borrowing Base Participants’ 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 one percentage point for
each percentage point by which Dilution is in excess of 5%.

 

“Disbursement
Letter” means an instructional letter executed and delivered by Borrower to
Agent regarding the extensions of credit to be made on the Closing Date, the
form and substance of which is satisfactory to Agent.

 

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

 

“Dollar
Equivalents” means, in respect of Canadian dollars, as of any date of
determination, the Dollar equivalent thereof determined by Agent in accordance
with Agent’s customary practices.

 

“Domestic
Subsidiary” means, with respect to any Person, a Subsidiary of such Person
that is organized under the laws of a state of the United States or under the
laws of a jurisdiction of Canada.

 

“Due
Diligence Letter” means the due diligence letter sent by Agent’s counsel to
Borrower, together with Borrower’s completed responses to the inquiries set
forth therein, the form and substance of such responses to be satisfactory to
Agent.

 

“EBITDA”
means, with respect to any fiscal period, Borrower’s and its Subsidiaries
consolidated net income (or loss), minus the sum of extraordinary gains and
the expenses relative to the development of software that have been
capitalized, plus, without duplication and only to the extent reflected
as a charge or reduction in the statement of such consolidated net income (or
loss), the sum of interest expense, income taxes, depreciation, amortization (including
amortization of the expenses relative to the development of software that have
been capitalized), and goodwill impairment required by FASB 141-142 for such
period, as determined in accordance with GAAP.

 

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

 

10

 

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

 

(b)  Accounts owed by an Account Debtor (or its
Affiliates) where 50% or more of all Accounts owed by that Account Debtor (or
its Affiliates) are deemed ineligible under clause (a) above,

 

(c)  Accounts with respect to which the Account
Debtor is an employee, Affiliate, or agent of any Borrowing Base Participant,

 

(d)  Accounts arising in a transaction wherein
goods or software 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 or
Canadian Dollars,

 

(f)  Accounts with respect to which the Account
Debtor either (i) does not maintain its chief executive office in the United
States or Canada, or (ii) is not organized under the laws of the United States
or Canada or any state or province 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,

 

(g)  Accounts with respect to which the Account
Debtor is either (i) the United States or any department, agency, or
instrumentality of the United States (exclusive, however, of Accounts with
respect to which the applicable Borrowing Base Participant has complied, to the
reasonable satisfaction of Agent, with the Assignment of Claims Act, 31 USC §
3727), or (ii) any state of the United States,

 

(h)  Accounts with respect to which the Account
Debtor is a creditor of the applicable Borrowing Base Participant, has or has
asserted a right of setoff, has disputed its liability, or has disputed its
obligation to pay all or any portion of the Account, solely to the extent of
such claim, right of setoff, or dispute,

 

(i)  Accounts with respect to an Account Debtor
whose total obligations owing to Borrowing Base Participants exceed 15% (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 Accounts, to the extent of the obligations
owing by such Account Debtor in excess of such percentage,

 

11

 

(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 Borrowing Base Participant 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 the states of New Jersey, Minnesota, or West Virginia (or
any other state that requires a creditor to file a business activity report or
similar document in order to bring suit or otherwise enforce its remedies
against such Account Debtor in the courts or through any judicial process of
such state), unless the applicable Borrowing Base Participant has qualified to
do business in New Jersey, Minnesota, West Virginia, or such other states, or
has filed a business activities report with the applicable division of
taxation, the department of revenue, or with such other state offices, as
appropriate, for the then-current year, is exempt from such filing requirement,
or such filing requirement is no longer in force and effect with respect to
such Borrowing Base Participant,

 

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

 

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

 

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

 

(o)  Accounts that represent the right to receive
progress payments or other advance billings that are due prior to the
completion of performance by the applicable Borrowing Base Participant of the
subject contract for goods or software or services.

 

“Eligible
Transferee” means (a) a commercial bank organized under the laws of
the United States, or any state thereof, and having total assets in excess of
$250,000,000, (b) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development or a political subdivision of any such country and which has total
assets in excess of $250,000,000, provided that such bank is acting through a
branch or agency located in the United States, (c) a finance company,
insurance company, 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 that was party hereto as of the Closing Date including a fund, money
market account, investment account or other account managed by such Lender or
an Affiliate of such Lender or its investment manager (a “Related Fund”),
(e) so long as no Event of Default has occurred and is continuing, any other
Person approved by Agent and Borrower (which approval of Borrower shall not be
unreasonably withheld,

 

12

 

delayed, or conditioned), and
(f) 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 from (a) any assets, properties, or businesses of Borrower,
its Subsidiaries, 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 Borrower or its Subsidiaries 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, to the extent binding on Borrower or its Subsidiaries,
relating to the environment, employee health and safety, or Hazardous
Materials, including CERCLA; RCRA; the Federal Water Pollution Control Act, 33
USC § 1251 et  seq; the Toxic Substances Control Act, 15 USC
§ 2601 et  seq; the Clean Air Act, 42 USC § 7401 et  seq.;
the Safe Drinking Water Act, 42 USC § 3803 et  seq.; the Oil
Pollution Act of 1990, 33 USC § 2701 et  seq.; the Emergency
Planning and the Community Right-to-Know Act of 1986, 42 USC § 11001 et
seq.; the Hazardous Material Transportation Act, 49 USC § 1801 et
seq.; and the Occupational Safety and Health Act, 29 USC §651 et  seq.
(to the extent it regulates occupational exposure to Hazardous Materials); any
state and local or foreign counterparts or equivalents, in each case as amended
from time to time.

 

“Environmental
Liabilities and Costs” means all liabilities, monetary obligations,
Remedial Actions, 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 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 and Costs.

 

“Equipment”
means equipment (as that term is defined in the Code) and includes machinery,
machine tools, motors, furniture, furnishings, fixtures, vehicles (including
motor vehicles), tools, parts, and goods (other than consumer goods, farm
products, or Inventory), wherever located, including all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing.

 

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

 

13

 

“ERISA
Affiliate” means (a) any Person subject to ERISA whose employees are
treated as employed by the same employer as the employees of Borrower or its
Subsidiaries under IRC Section 414(b), (b) any trade or business subject to
ERISA whose employees are treated as employed by the same employer as the
employees of Borrower or its Subsidiaries under IRC Section 414(c), (c) solely
for purposes of Section 302 of ERISA and Section 412 of the IRC, any
organization subject to ERISA that is a member of an affiliated service group
of which Borrower or any of its Subsidiaries is a member under IRC Section
414(m), or (d) solely for purposes of Section 302 of ERISA and Section 412 of
the IRC, any Person subject to ERISA that is a party to an arrangement with
Borrower or any of its Subsidiaries and whose employees are aggregated with the
employees of Borrower or its Subsidiaries under IRC Section 414(o).

 

“Event of
Default” has the meaning set forth in Section 8.

 

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

 

“Existing
Lender” means Comerica Bank and each of the other lenders that are parties
to the credit agreement with Borrower that is agented by Comerica Bank.

 

“Extraordinary
Receipts” means any cash or Cash Equivalents received by Borrower or any of
its Subsidiaries not in the ordinary course of business including (a) foreign,
United States, state or local tax refunds, (b) pension plan reversions, (c)
proceeds of insurance (other than from liability, workers’ compensation,
business interruption, larceny, embezzlement, or criminal misappropriation
insurance policies), (d) proceeds of judgments, settlements or other consideration
of any kind in connection with any cause of action, (e) proceeds of
condemnation awards, (f) indemnity payments, and (g) any purchase price
adjustments received in connection with any purchase agreement.

 

“Fee Letter” means that certain fee letter, dated as of even
date herewith, between Borrower and Agent, in form and substance satisfactory
to Agent.

 

“FEIN”
means Federal Employer Identification Number.

 

“Foothill”
means Foothill Capital Corporation, a California corporation.

 

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

 

“FTC Order”
means the Decision and Order of the Federal Trade Commission issued on October
29, 2002 in the matter of MSC.Software Corporation, and identified as Docket
Number 9299.

 

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

 

14

 

“GE Access”
means MRA Systems, Inc., doing business as General Electric Access.

 

“GE
Security Agreement” means a Security Agreement between GE Access and
Borrower, the form and substance of which is reasonably satisfactory to Agent.

 

“GE
Transactional Documents” means the GE Access Customer Terms &
Conditions (Agreement) between GE Access and Borrower, the GE Security
Agreement, and all other agreements or other documents executed or delivered in
connection therewith.

 

“General
Intangibles” means general intangibles (as that term is defined in the
Code), including payment intangibles, contract rights, rights to payment,
rights arising under common law, statutes, or regulations, choses or things in
action, goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements, infringement claims, computer
programs, information contained on computer disks or tapes, software,
literature, reports, catalogs, money, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims, and any and all supporting
obligations in respect thereof, and any other personal property other than
goods, Accounts, Investment Property, and Negotiable Collateral.

 

“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, department, or agency or any court,
tribunal, administrative hearing body, arbitration panel, commission, or other
similar dispute-resolving panel or body.

 

“Guarantors”
means, individually and collectively, (a) MSC International Company, a California
corporation, Advanced Enterprise Solutions, Inc., a Delaware corporation, Tyra
Technologies, Inc., a California corporation, Knowledge Revolution, a
California corporation, Mechanical Dynamics, Inc., a Michigan corporation, MDI
International, Inc., a Michigan corporation, and MSC.Flyer, LLC, a Delaware
limited liability company, and (b) each other Domestic Subsidiary of Borrower,
and (c) Canadian Guarantor, and “Guarantor” means any one of them.

 

“Guarantor
Security Agreement” means one or more security agreements executed and
delivered by each Guarantor in favor of Agent, in each case, in form and
substance satisfactory to Agent.

 

“Guarantor
Stock Pledge Agreement” means a stock pledge agreement governed by New York
law, in form and substance satisfactory to Agent, executed and delivered by
each Guarantor to Agent with respect to the pledge of the Stock owned by such
Guarantor; provided, however, that in the case of Stock of a
Subsidiary of a Guarantor which

 

15

 

is not a Guarantor, the
applicable debtor shall not be required to pledge more than 65% of the total
combined voting power of all classes of Stock of such CFC entitled to vote.

 

“Guaranty”
means that certain general continuing guaranty executed and delivered by each
Guarantor in favor of Agent, for the benefit of the Lender Group and the Bank
Product Providers, in form and substance satisfactory to Agent.

 

“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 transactions, agreements, or documents now
existing or hereafter entered into between Borrower or its Subsidiaries and any
Bank Product Provider, which 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 Borrower’s or its Subsidiaries’ exposure to fluctuations in interest or
exchange rates, loan, credit exchange, security or currency valuations or
commodity prices.

 

“Holdout
Lender” has the meaning set forth in Section 15.2(a).

 

“Indebtedness”
means (a) all obligations for borrowed money, (b) all obligations evidenced by
bonds, debentures, notes, or other similar instruments and all reimbursement or
other obligations in respect of letters of credit, bankers acceptances,
interest rate swaps, or other financial products, (c) all obligations as a
lessee under Capital Leases, (d) in the case of Borrower and its Subsidiaries,
all obligations or liabilities of others secured by a Lien on any asset of a
Person or its Subsidiaries, irrespective of whether such obligation or
liability is assumed, (e) all obligations to pay the deferred purchase price of
assets (other than trade payables incurred in the ordinary course of business
and repayable in accordance with customary trade practices; it being expressly
understood and agreed that the creation of a Permitted Lien in favor of GE
Access shall not disqualify the amounts owed to it as an exclusion under the
foregoing provision), and (f) any obligation guaranteeing or intended to
guarantee (whether directly or indirectly guaranteed, endorsed, co-made,
discounted, or sold with recourse) any obligation of any other Person that
constitutes Indebtedness under any of clauses (a) through (d) above.

 

“Indemnified
Liabilities” has the meaning set forth in Section 11.3.

 

16

 

“Indemnified Person” has the meaning set forth in Section
11.3.

 

“Indenture” means that certain Indenture by and between Borrower
and Chase Manhattan Bank & Trust Company N.A., as Trustee and dated as of
June 17, 1999, as amended, restated, supplemented or otherwise modified from
time to time.

 

“Indenture Documents” means the Indenture, all promissory notes
executed in connection therewith, and all other agreements or documents
executed or delivered in connection therewith, as such promissory notes,
agreements, and other documents may be amended, restated, supplemented or
otherwise modified from time to time.

 

“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.

 

“Intercompany Advances” means loans or advances of cash or Cash
Equivalents or the repayment of loans or advances cash or Cash Equivalents by
Borrower or one of its Subsidiaries to Borrower or one of its Subsidiaries; provided,
however, that the deferral of receipt of royalty revenues shall not be
deemed to be a loan or advance by the Person entitled to receive such revenue.

 

“Intercompany Note” means that certain promissory note issued by
Borrower and each of its Subsidiaries evidencing any Intercompany Advances made
from time to time, which is in form and substance satisfactory to Agent in its
discretion.

 

“Intercompany Subordination Agreement” means a subordination
agreement executed and delivered by Borrower, its Domestic Subsidiaries,
Canadian Guarantor, and Agent, the form and substance of which is satisfactory
to Agent.

 

“Intercreditor Agreement” means an intercreditor agreement
executed and delivered by GE Access, Agent, Borrower and the Guarantors, the
form and substance of which is reasonably satisfactory to Agent.

 

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

 

“Investment” means, with respect to any Person, any investment
by such Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) bona fide Accounts arising in the ordinary
course of business consistent with past practice), purchases or other
acquisitions for consideration of Indebtedness or Stock or all or substantially
all of the assets 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.

 

17

 

“Investment Property” means investment property (as that term is
defined in the Code), and any and all supporting obligations in respect
thereof.

 

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

 

“Issuing Lender” means Foothill or any other Lender that, at the
request of 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.

 

“Japan Acquisition Documents” means the purchase and sale
documents evidencing the acquisition described in clause (c) of the definition
of Permitted Acquisitions.

 

“Korea Acquisition Documents” means the purchase and sale
documents evidencing the acquisition described in clause (b) of the definition
of Permitted Acquisitions.

 

“L/C” has the meaning set forth 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 set forth in Section
2.12(a).

 

“Lender” and “Lenders” have the respective meanings set
forth in the preamble to this Agreement, and shall include any other Person
made a party to this Agreement in accordance with the provisions of Section
14.1.

 

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

 

“Lender Group Expenses” means all (a) the actual costs or
expenses (including taxes, and insurance premiums) required to be paid by
Borrower or the Guarantors under any of the Loan Documents that are paid or
incurred by the Lender Group, (b) the actual fees or charges paid or incurred
by Agent in connection with the Lender Group’s transactions with Borrower or
the Guarantors, 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 to the extent of the fees and charges (and up
to the amount of any limitation) contained in this Agreement), real estate
surveys, real estate title policies and endorsements, and environmental audits,
(c) costs and expenses incurred by Agent in the disbursement of funds to
Borrower (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,

 

18

 

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 audit examinations of the Books to the extent
of the fees and charges (and up to the amount of any limitation) contained in
this 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 Borrower or any of its
Subsidiaries or any guarantor of the Obligations, (h) Agent’s and Ableco’s
reasonable fees 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 fees and expenses
(including attorneys fees) incurred in terminating, enforcing (including
attorneys fees and expenses incurred in connection with a “workout,” a
“restructuring,” or an Insolvency Proceeding concerning 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, and the officers, directors,
employees, and agents of such Lender.

 

“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.

 

“Liabilities” has the meaning set forth in Section 2.14.

 

“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, whether
such interest shall be based on the common law, statute, or contract, whether
such interest shall be recorded or perfected, and whether such interest shall
be contingent upon the occurrence of some future event or events or the
existence of some future circumstance or circumstances, including 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 including 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 set forth in Section 2.10.

 

“Loan Documents” means this Agreement, the Bank Product
Agreements, the Cash Management Agreements, the Control Agreements, the
Copyright Security Agreement, the Disbursement Letter, the Due Diligence
Letter, the Fee Letter, the Guarantor Security Agreement, the Guaranty, the
Intercompany Note, the Intercompany Subordination

 

19

 

Agreement, the Letters of Credit, the Officers’
Certificate, the Patent Security Agreement, the Principal Officers Certificate,
the Stock Pledge Agreement, the Trademark Security Agreement, any note or notes
executed by Borrower in connection with this Agreement and payable to a member
of the Lender Group, and any other agreement entered into, now or in the
future, by Borrower and the Lender Group in connection with this 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) of Borrower and its
Subsidiaries, taken as a whole, (b) a material impairment of the ability
of Borrower and the Guarantors, taken as a whole, to perform their respective
obligations under the Loan Documents 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
Borrower or any Guarantor.

 

“Maturity Date” has the meaning set forth in Section 3.4.

 

“Maximum Revolver Amount” means $15,000,000.

 

“Negotiable Collateral” means letters of credit, letter of
credit rights, instruments, promissory notes, drafts, documents, and chattel
paper (including electronic chattel paper and tangible chattel paper), and any
and all supporting obligations in respect thereof.

 

“Net Cash Proceeds” means (i) with respect to any disposition
(whether voluntary or involuntary) by any Person, the amount of cash received
(directly or indirectly) from time to time (whether as initial consideration or
through the payment or disposition of deferred consideration, but with respect
to deferred consideration only as and when received) by or on behalf of such
Person, in connection therewith after deducting therefrom only (A) the amount
of any Indebtedness secured by any Permitted Lien on any asset (other than
Indebtedness assumed by the purchaser of such asset) which is required to be,
and is, repaid in connection with such disposition (other than Indebtedness
under this Agreement), (B) reasonable expenses related thereto incurred by such
Person in connection therewith, (C) transfer taxes paid to any taxing
authorities by such Person in connection therewith, and (D) net income taxes to
be paid in connection with such disposition (after taking into account any tax
credits or deductions and any tax sharing arrangements), and (ii) with respect
to the issuance or incurrence of any Indebtedness by any Person or the sale or
issuance by any Person of any shares of its Stock, the aggregate amount of cash
received (directly or indirectly) from time to time (whether as initial
consideration or through the payment or disposition of deferred consideration,
but with respect to deferred consideration only as and when received) by or on
behalf of such Person in connection therewith, after deducting therefrom only
(A) reasonable expenses related thereto incurred by such Person in connection therewith,
(B) transfer taxes paid by such Person in connection therewith, (C) the amount
of any Indebtedness that is being refinanced with the proceeds of such
Indebtedness in accordance with the provisions of this Agreement, and (D) net
income taxes to be paid in

 

20

 

connection therewith (after taking into account any
tax credits or deductions and any tax sharing arrangements); in each case of
clauses (i) and (ii) to the extent, but only to the extent, that the amounts so
deducted are (x) actually paid to a Person that, except in the case of
reasonable out-of-pocket expenses, is not an Affiliate of such Person and (y)
properly attributable to such transaction or to the asset that is the subject
thereof.

 

“Obligations” means (a) all loans (including the Term Loan),
Advances, debts, principal, interest (including any interest that, but for the
provisions of the Bankruptcy Code, would have accrued), contingent
reimbursement obligations with respect to outstanding Letters of Credit,
premiums, liabilities (including all amounts charged to Borrower’s Loan Account
pursuant hereto), obligations, fees (including the fees provided for in the Fee
Letter), charges, costs, Lender Group Expenses (including any fees or expenses
that, but for the provisions of the Bankruptcy Code, would have accrued), lease
payments, guaranties, covenants, and duties of any kind and description owing
by Borrower 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 Borrower is required to pay or reimburse by the Loan
Documents, by law, or otherwise, and (b) all Bank Product Obligations.  Any reference in this Agreement or in the
Loan Documents to the Obligations shall include all amendments, changes, extensions,
modifications, renewals replacements, substitutions, and supplements, thereto
and thereof, as applicable, both prior and subsequent to any Insolvency
Proceeding.

 

“Obligor Excess Availability” means the amount, as of the date
any determination thereof is to be made, equal to Availability minus the
aggregate amount, if any, of all trade payables of Borrower and the Guarantors
aged in excess of historical levels with respect thereto and all book
overdrafts of Borrower and the Guarantors in excess of historical practices
with respect thereto, in each case as determined by Agent in its Permitted
Discretion.

 

 “Officers’ Certificate”
means the representations and warranties of officers form submitted by Agent to
Borrower, together with Borrower’s completed responses to the inquiries set
forth therein, the form and substance of such responses to be satisfactory to
Agent.

 

“Originating Lender” has the meaning set forth in Section
14.1(e).

 

“Overadvance” has the meaning set forth in Section 2.5.

 

“Participant” has the meaning set forth in Section 14.1(e).

 

“Participant Register” has the meaning set forth in Section
14.1(i).

 

“Patent Security Agreements” means one or more patent security
agreements executed and delivered by Borrower, the Guarantors and Agent, the
form and substance of which is satisfactory to Agent.

 

21

 

“Pay-Off Letter” means a letter, in form and substance
satisfactory to Agent, from Existing Lender to Agent respecting the amount
necessary to repay in full all of the obligations of Borrower and its
Subsidiaries owing to Existing Lender and obtain a release of all of the Liens
existing in favor of Existing Lender in and to the assets of Borrower and its
Subsidiaries.

 

“Permitted Acquisition” means the acquisition of all of the
outstanding Stock of (a) MSC.Software Australia Pty Ltd. (formerly known as
Compumod), to the extent that such Stock was not owned by Borrower or any of
its Subsidiaries as of the Closing Date, and in accordance with the Australia
Acquisition Documents, (b) MSC.Software Korea Corporation (formerly known as
MacSoft), to the extent that such Stock was not owned by Borrower or any of its
Subsidiaries as of the Closing Date, and in accordance with the Korea
Acquisition Documents, and (c) Mechanical Dynamics Japan K.K., to the extent
that such Stock was not owned by Borrower or any of its Subsidiaries as of the
Closing Date, and in accordance with the Japan Acquisition Documents, so long
as (x) no Default or Event of Default has occurred and is continuing at the
time of each such acquisition or would result therefrom, (y) the aggregate
consideration paid by Borrower or any of its Subsidiaries (whether in cash or
otherwise) in connection with the acquisitions described in clauses (a) and (b)
of this definition does not exceed $4,500,000, and (z) the aggregate
consideration paid by Borrower or any of its Subsidiaries (whether in cash or
otherwise) in connection with the acquisition described in clause (c) of this
definition does not exceed $1,500,000.

 

“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 this 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 sale or disposition of Permitted Investments in the ordinary
course of business, (f) the sale or other disposition of property or assets to
the extent required by the terms and conditions of the FTC Order, (g) the sale
or other disposition of the Aircraft, or either of them, provided that (i) no
Default has occurred and is continuing or would result therefrom, and (ii) such
disposition is consummated at fair market value, in good faith, and pursuant to
an arm’s length transaction, and (h) the sale or other disposition of property
or assets (other than Accounts) not otherwise permitted by another clause of
this definition in an aggregate amount during any fiscal year not in excess of
$250,000, provided that (i) no Default has occurred and is continuing or would
result therefrom, and (ii) such disposition is consummated at fair market value,
in good faith, and pursuant to an arm’s length transaction.

 

“Permitted Distributions” means purchases, redemptions,
retirements or acquisitions of Stock of Borrower or options or warrants to
purchase such Stock, held by

 

22

 

officers, directors or employees of Borrower or any
Guarantor, pursuant to a compensation plan or other arrangement in connection
with the death, disability or termination of employment of any such officer,
director or employee, in each such case, so long as (a) the aggregate amount of
all such payments made in cash or Cash Equivalents after the Closing Date does
not exceed $1,000,000, and (b) no Default or Event of Default has occurred and
is continuing as of the date of any such payment, or would result therefrom.

 

“Permitted Guarantees” means guarantees made or issued by
Borrower or any of its Subsidiaries with respect to the obligations of any of
Borrower or any of its Subsidiaries, so long as the underlying obligation is
not prohibited by the terms of this Agreement.

 

“Permitted Intercompany Advance” means an Intercompany Advance,
so long as, if a Subsidiary of Borrower that is not a Guarantor is the Person
acting as the borrower with respect to such Intercompany Advance and Borrower
or a Guarantor is the Person acting as the lender with respect to such
Intercompany Advance, (a) no Default or Event of Default exists at the time of
the making of such Intercompany Advance or would exist after giving effect
thereto, (b) the Intercompany Subordination
Agreement is in full force and effect with respect to the proposed Intercompany
Advance, (c) after giving effect to the making of such Intercompany Advance,
the Person that is acting as the lender with respect thereto is Solvent, (d) after
giving effect to the making of such Intercompany Advance, the Person that is
acting as the borrower with respect thereto is Solvent, and (e) after
giving effect to such Intercompany Advance, (i) the Subsidiary of Borrower that
is receiving the proceeds of such Intercompany Advance does not have
unrestricted cash and Cash Equivalents in excess of $100,000 (or the Dollar
equivalent thereof) in the aggregate, (ii) Obligor Excess Availability plus
Qualified Cash equals or exceeds $6,000,000 after giving effect thereto, and
(iii) the aggregate amount of all unrestricted cash and Cash Equivalents (or
their foreign counterparts) of the CFCs (other than Canadian Guarantor) does
not exceed $5,000,000.

 

“Permitted Investments” means (a) Investments in Cash Equivalents,
(b) Investments in negotiable instruments for collection, (c) advances made in
connection with purchases of goods or services or the acquisition of
intellectual property licenses in the ordinary course of business, (d)
Permitted Intercompany Advances, (e) Permitted Acquisitions, (f) Investments
received in connection with the bankruptcy or reorganization of, or settlement
of delinquent Accounts and disputes with, customers and suppliers, in each case
in the ordinary course of business, and (g) loans and advances to employees,
officers and directors of Borrower or any Guarantor in connection with
incentive arrangements, so long as (i) no Default or Event of Default has
occurred and is continuing or would result therefrom, (ii) all of the proceeds
of such loans and advances are simultaneously paid to Borrower or any
Guarantor, as applicable, in connection with such equity incentive
arrangements, and (iii) the aggregate amount of all such Investments does not
exceed $5,000,000.

 

“Permitted Liens” means (a) Liens held by Agent, (b) Liens
for unpaid taxes that either (i) are not yet delinquent, or (ii) do
not constitute an Event of Default hereunder

 

23

 

and are the subject of Permitted Protests, (c) Liens
set forth on Schedule P-1, (d) the interests of lessors or sublessors
under operating leases, (e) purchase money Liens or the interests of lessors
under Capital Leases to the extent that such Liens or interests secure all or a
part of Permitted Purchase Money Indebtedness and so long as such Lien attaches
only to the asset purchased or acquired and the proceeds thereof, (f) Liens
arising by operation of law in favor of warehousemen, landlords, carriers,
mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course
of business and not in connection with the borrowing of money, and which Liens
either (i) are for sums not yet delinquent, or (ii) are the subject
of Permitted Protests, (g) Liens arising from deposits made in connection with
obtaining worker’s compensation or other unemployment insurance and other types
of social security, (h) Liens or deposits to secure performance of bids,
tenders, government contracts, or leases incurred in the ordinary course of
business and not in connection with the borrowing of money, (i) Liens granted
as security for surety or appeal bonds in connection with obtaining such bonds
in the ordinary course of business, (j) Liens resulting from any judgment,
attachment, or award that is not an Event of Default hereunder, (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 customs and revenue authorities arising as a matter of
law to secure payment of customs duties in connection with the importation of
goods, (m) Liens in favor of an insurance carrier (or such carrier’s
third-party financing Affiliate) encumbering Borrower’s directors and officers
insurance policy and any proceeds thereof, premium refunds and policy
dividends, to the extent that such Liens secure Indebtedness which is permitted
pursuant to Section 7.1(f), (n) from and after the date of the execution
and delivery of the Intercreditor Agreement, Liens created under the GE
Security Agreement in favor of GE Access in order to secure amounts owed to it
under the GE Transactional Documents, and (o) interests of a licensor of
patents, trademarks, copyrights, and other intellectual property rights arising
from the licensing of such intellectual property rights in the ordinary course
of business.

 

“Permitted Protest” means the right of Borrower or any of its
Subsidiaries, as applicable, to protest any Lien (other than any such Lien that
secures the Obligations), taxes, assessments, government charges (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 the Books in such amount as is required under
GAAP, (b) any such protest is instituted promptly and prosecuted
diligently by 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
$12,000,000.

 

“Permitted Reorganization Transaction” means (a) the merger of
(i) a wholly owned Subsidiary of Borrower with and into another Guarantor or
into Borrower (so long as Borrower is the surviving entity in such merger), or
(ii) a Subsidiary of Borrower (other than

 

24

 

the Guarantors) with and into another Subsidiary of
Borrower (other than the Guarantors), or (b) the dissolution and transfer of
all assets or properties (i) by a Subsidiary of Borrower to a Guarantor or to
Borrower, or (ii) by a Subsidiary of Borrower that is not a Guarantor to
another Subsidiary of Borrower that is not a Guarantor.

 

“Permitted Subordinated Debt” means unsecured Indebtedness of
Borrower or any of its Subsidiaries in an aggregate outstanding amount at any
one time not in excess of $15,000,000, the principal of which will not mature,
amortize, or be subject to a sinking fund within two years, or less, of the
Maturity Date and the subordination provisions of which are satisfactory to
Agent in its discretion, so long as no Default or Event of Default shall have
occurred and be continuing as of the date of the incurrence thereof or shall
result therefrom.

 

“Person” means natural persons, corporations, limited liability
companies, limited partnerships, general partnerships, limited liability
partnerships, joint ventures, trusts, land trusts, business trusts, or other
organizations, irrespective of whether they are legal entities, and governments
and agencies and political subdivisions thereof.

 

“Personal Property Collateral” means all Collateral.

 

“Principal Officers Certificate”  means a certificate substantially in the form of Exhibit P-1
delivered by the principal executive officer and principal financial officer of
Borrower to Agent.

 

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

 

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

 

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

 

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

 

25

 

aggregate outstanding principal amount of such
Lender’s Advances by (z) the aggregate outstanding principal amount of all
Advances,

 

(c)  with respect to a Lender’s
obligation to make the Term Loan and receive payments of interest, fees, and
principal with respect thereto, (i) prior to the making of the Term Loan, the
percentage obtained by dividing (y) such Lender’s Term Loan Commitment, by (z)
the aggregate amount of all Lenders’ Term Loan Commitments, and (ii) from and
after the making of the Term Loan, the percentage obtained by dividing (y) the
principal amount of such Lender’s portion of the Term Loan by (z) the principal
amount of the Term Loan, and

 

(d)  with respect to all other
matters as to a particular Lender (including the indemnification obligations
arising under Section 16.7), the percentage obtained by dividing (i)
such Lender’s Revolver Commitment plus the outstanding principal amount of such
Lender’s portion of the Term Loan, by (ii) the aggregate amount of Revolver
Commitments of all Lenders plus the outstanding principal amount of the Term
Loan; provided, however, that in the event the Revolver
Commitments have been terminated or reduced to zero, Pro Rata Share under this
clause shall be the percentage obtained by dividing (A) the outstanding
principal amount of such Lender’s Advances plus such Lender’s Risk
Participation Liability with respect to outstanding Letters of Credit plus the
outstanding principal amount of such Lender’s portion of the Term Loan by (B)
the outstanding principal amount of all Advances plus the aggregate amount of
all Lenders’ Risk Participation Liability with respect to outstanding Letters
of Credit plus the outstanding principal amount of the Term Loan.

 

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

 

“Qualified Cash” means, as of any date of determination, the
amount of unrestricted cash and Cash Equivalents of Borrower and the Guarantors
that is in DDAs or in Securities Accounts, or any combination thereof, and
which such DDA or Securities Account is the subject of a Control Agreement and
is maintained by a branch office of the bank or securities intermediary located
within the United States.

 

“Rating Agency” has the meaning set forth in Section 2.14.

 

“Real Property” means any estates or interests in real property
now owned or hereafter acquired by Borrower or any Guarantor and the
improvements thereto.

 

“Recurring Revenues” means, with respect to any period, the
revenues of the Borrower and its Subsidiaries for such period that are derived
from contractual provisions providing for an agreed upon periodic payment (as
opposed to a episodic payment, e.g., move-add-change and maintenance-per-call)
for the provision of maintenance services or 
ongoing support relative to software as reflected in such Borrower’s
financial statements prepared in accordance with its historical practices.

 

26

 

“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.

 

“Rent Reserve” means, as of any date of determination, with
respect to each leased location which is identified on Schedule R-1 and as to
which a Collateral Access Agreement has not been received by Agent as of such
date, a reserve in an amount equal to three months rent under the lease with
respect to such location.

 

“Register” has the meaning set forth in Section 14.1(h).

 

“Registered Loan” has the meaning set forth in Section 2.13.

 

“Registered Note” has the meaning set forth in Section 2.13.

 

“Related Fund” has the meaning ascribed thereto in the
definition of “Eligible Transferee”.

 

“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 authorized by 42 USC § 9601.

 

“Replacement Lender” has the meaning set forth in Section
15.2(a).

 

“Report” has the meaning set forth in Section 16.17.

 

“Required Availability” means (a) Obligor Excess Availability
and Qualified Cash in an amount of not less than $5,000,000, and (b)
unrestricted cash and Cash Equivalents of Borrower’s Subsidiaries other than
the Guarantors, Consolidated Excess Availability and Qualified Cash in an
amount not less than $20,000,000.

 

“Required Lenders” means, at any time, Lenders whose aggregate
Pro Rata Shares (calculated under clause (d) of the definition of Pro Rata
Shares) exceed 50% and, in addition (a) Required Lenders shall include Foothill
so long as Foothill or its Affiliates and Related Funds hold not less than 35%
of the sum of (i) the Revolver Commitments (or, if the Revolver Commitments
have been terminated, the aggregate principal amount of outstanding Advances),
and (ii) the outstanding principal amount of the Term Loan, and (b) Required
Lenders also shall include Ableco so long as Ableco or its Affiliates and
Related Funds hold not less than 35% of the sum of (i) the Revolver Commitments
(or, if the Revolver Commitments have been terminated, the aggregate principal
amount of outstanding Advances) and (ii) the outstanding principal amount of
the Term Loan.

 

27

 

“Revolver Commitment” means, with respect to each Lender, its
Revolver Commitment, and, with respect to all Lenders, their Revolver
Commitments, in each case as such Dollar amounts are set forth beside such
Lender’s name under the applicable heading on Schedule C-1 or on the
signature page of the Assignment and Acceptance pursuant to which such Lender
became a Lender hereunder in accordance with the provisions of Section 14.1.

 

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

 

“Risk Participation Liability” means, as to each Letter of
Credit, all reimbursement obligations of Borrower 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 Borrower, whether by the making of an Advance or otherwise, and (c) all
accrued and unpaid interest, fees, and expenses payable with respect thereto.

 

“Royalty Reserve” means, as of any date of determination, an
amount equal to accrued royalties (or other remuneration) payable by Borrower
or any of the Guarantors to a licensor for the license (or other right to use)
by Borrower or any of the Guarantors of intellectual property of such licensor.

 

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

 

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

 

“Securitization” has the meaning set forth in Section 2.14.

 

“Securitization Parties” has the meaning set forth in Section
2.14.

 

“Settlement” has the meaning set forth in Section 2.3(f)(i).

 

“Settlement Date” has the meaning set forth in Section
2.3(f)(i).

 

“Solvent” means, with respect to any Person on a particular
date, that such Person is not insolvent (as such term is defined in the Uniform
Fraudulent Transfer Act).

 

“SSB” means Salomon Smith Barney Inc.

 

“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).

 

28

 

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

 

“Swing Lender” means Foothill or any other Lender that, at the
request of Borrower and with the consent of Agent agrees, in such Lender’s sole
discretion, to become the Swing Lender hereunder.

 

“Swing Loan” has the meaning set forth in Section 2.3(d)(i).

 

“Taxes” has the meaning set forth in Section 16.11.

 

“Term Loan” has the meaning set forth in Section 2.2.

 

“Term Loan Amount” means $55,000,000.

 

“Term Loan Commitment” means, with respect to each Lender, its
Term Loan Commitment, and, with respect to all Lenders, their Term Loan
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 on the
signature page of the Assignment and Acceptance pursuant to which such Lender
became a Lender hereunder in accordance with the provisions of Section 14.1.

 

“Total Commitment” means, with respect to each Lender, its Total
Commitment, and, with respect to all Lenders, their Total Commitments, in each
case as such Dollar amounts are set forth beside such Lender’s name under the
applicable heading on Schedule C-1 attached hereto or on the signature
page of the Assignment and Acceptance pursuant to which such Lender became a
Lender hereunder in accordance with the provisions of Section 14.1.

 

“Trademark Security Agreements” means one or more trademark
security agreements executed and delivered by Borrower, the Guarantors and
Agent, the form and substance of which is satisfactory to Agent.

 

“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 Borrower.

 

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

 

“Voidable Transfer” has the meaning set forth in Section 17.7.

 

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

 

29

 

1.2 Accounting Terms.  All accounting terms not specifically
defined herein shall be construed in accordance with GAAP.  When used herein, the term “financial
statements” shall include the notes and schedules thereto.  Whenever the term “Borrower” is used in
respect of a financial covenant or a related definition, it shall be understood
to mean Borrower and its Subsidiaries on a consolidated basis unless the
context clearly requires otherwise.

 

1.3 Code.  Any terms used in
this Agreement that are defined in the Code shall be construed and defined as
set forth in the Code unless otherwise defined herein.

 

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 term “including” is not limiting, and the term
“or” has, except where otherwise indicated, the inclusive meaning represented
by the phrase “and/or.”  The words
“hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement
or any other Loan Document refer to this Agreement or such other Loan Document,
as the case may be, as a whole and not to any particular provision of this
Agreement or such other Loan Document, as the case may be.  Section, subsection, clause, schedule, and
exhibit references herein are to this Agreement unless otherwise
specified.  Any reference in this
Agreement or in 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 repayment in
full of the Obligations shall mean the repayment in full 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 Revolver
Commitment agrees (severally, not jointly or jointly and severally) to make
advances (“Advances”) to Borrower in an amount at any one time
outstanding not to exceed such Lender’s Pro Rata Share of an amount equal to the lesser
of (i) the Maximum Revolver Amount less the Letter of Credit
Usage, or (ii) the

 

30

 

Borrowing
Base less
the Letter of Credit Usage.  For
purposes of this Agreement, “Borrowing Base,” as of any date of
determination, shall mean the result of:

 

(y)       the
lesser of

 

(i)  85% of the amount of Eligible Accounts (in
the case of Eligible Accounts owed to the Canadian Guarantor, determined by
reference to the Dollar Equivalent thereof), less the amount, if any, of
the Dilution Reserve, and

 

(ii)  an amount equal to Borrowing Base
Participants’ Collections with respect to Accounts for the immediately
preceding 30 day period, minus

 

(z)       the
sum of (i) the Bank Product Reserve, (ii) the Royalty Reserve, (iii) the
Availability Block, (iv) commencing with the date that is 31 days after the
Closing Date, the Rent Reserve, and (v) the aggregate amount of reserves, if
any, established by Agent under  Section
2.1(b).

 

(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 (i) sums that Borrower is required to pay (such as taxes,
assessments, insurance premiums, or, in the case of leased assets, rents or
other amounts payable under such leases) and has failed to pay under any
Section of this Agreement or any other Loan Document, and (ii) amounts owing by
Borrower to any Person to the extent secured by a Lien on, or trust over, any
of the Collateral, 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.

 

(c)  The Lenders with Revolver Commitments shall
have no obligation to make additional Advances hereunder to the extent such
additional Advances would cause the Revolver Usage to exceed the Maximum
Revolver Amount.

 

(d)  Amounts borrowed pursuant to this Section
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 Term Loan.

 

(a) 
Subject to the terms and conditions of this Agreement, on the Closing
Date each Lender with a Term Loan Commitment agrees (severally, not jointly or

 

31

 

jointly and severally) to make term loans (collectively, the
“Term Loan”) to Borrower in an amount equal to such Lender’s Pro Rata
Share of the Term Loan Amount.  The Term
Loan shall be repaid on the first day of each month following the Closing Date
in an amount equal to $1,145,833.33. 
The outstanding unpaid principal balance and all accrued and unpaid
interest under the Term Loan shall be due and payable on the earlier to occur
of (i) the Maturity Date, and (ii) the date of termination of this Agreement,
whether by its terms, by prepayment, or by acceleration.  All amounts outstanding under the Term Loan
shall constitute Obligations.

 

(b) 
If, as of any date, the outstanding principal balance of the Term Loan
exceeds the Borrowing Base Participants’ Collections with respect to Accounts
for the immediately preceding 120 day period, Borrower shall make an immediate
prepayment of the Term Loan to the extent of such excess.

 

(c) 
In connection with any sale or other disposition (other than Permitted
Dispositions, exclusive of Permitted Dispositions under clauses (a) (exclusive
of the first $10,000 thereof in any 12 consecutive month period), (f), (g), or
(h) of such definition) of any assets by Borrower or any Guarantor, Borrower
shall prepay the outstanding principal amount of the Term Loan (or, if the Term
Loan has been repaid in full, such prepayment amount shall be applied to the
outstanding Advances and there shall be a commensurate permanent reduction in
the amount of the Revolver Commitments and the Maximum Revolver Amount and a
dollar-for-dollar permanent reserve against the Borrowing Base) in an amount
equal to 100% of the Net Cash Proceeds as and when received by such Person in
connection with such sale or other disposition.  Nothing contained in this Section shall be deemed to permit any
sale or other disposition otherwise prohibited by the terms and conditions of
this Agreement.

 

(d) 
Upon the issuance or incurrence by Borrower or any Guarantor of any
Indebtedness (other than Indebtedness incurred hereunder or Permitted Purchase
Money Indebtedness or Permitted Intercompany Advances) or the sale or issuance
by Borrower or any Guarantor of any shares of its Stock (other than to Borrower
or any Guarantor or pursuant to any options, warrants, or stock option or
employee incentive plans (or any successor plans) listed on Schedule 5.8(b)
hereto), Borrower shall prepay the outstanding principal amount of the Term
Loan (or, if the Term Loan has been repaid in full, such prepayment amount
shall be applied to the outstanding Advances and there shall be a commensurate
permanent reduction in the amount of the Revolver Commitments and the Maximum
Revolver Amount and a dollar-for-dollar permanent reserve against the Borrowing
Base) in an amount equal to 100% of the Net Cash Proceeds received by such
Person in connection therewith.  Nothing
contained in this Section shall be deemed to permit any such issuance,
incurrence or sale otherwise prohibited by the terms and conditions of this
Agreement.

 

(e) 
Except to the extent Borrower or any Guarantor is permitted to use
insurance proceeds pursuant to Section 6.8 hereof, upon the receipt by
Borrower or any Guarantor of any Extraordinary Receipts (exclusive of the first
$10,000 thereof in any 12

 

32

 

consecutive month period), Borrower shall prepay the
outstanding principal amount of the Term Loan (or, if the Term Loan has been
repaid in full, such prepayment amount shall be applied to the outstanding
Advances and there shall be a commensurate permanent reduction in the amount of
the Revolver Commitments and the Maximum Revolver Amount and a
dollar-for-dollar permanent reserve against the Borrowing Base) in an amount
equal to 100% of the Net Cash Proceeds of such Extraordinary Receipts.

 

(f) 
All prepayments of the Term Loan made pursuant to this Section shall be
applied to the remaining installments due with respect to the Term Loan in the
inverse order of their maturity; provided, however, that if the
amount of any prepayment of the Term Loan made pursuant to this section exceeds
$500,000, such prepayment shall be applied ratably to each remaining
installment due with respect to the Term Loan.

 

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 (which 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 in the case of a request for Swing Loan in an amount of $5,000,000, or
less, such notice will be timely received if it is 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.  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, with such telephonic notice to be confirmed in writing within 24
hours of the giving of such notice.

 

(b)  Agent’s Election.  Promptly after receipt of a request for a Borrowing pursuant to Section
2.3(a), Agent shall elect, in its discretion, (i) to have the terms of Section
2.3(c) apply to such requested Borrowing, or (ii) if the Borrowing is for
an Advance, to request Swing Lender to make a Swing Loan pursuant to the terms
of Section 2.3(d) in the amount of the requested Borrowing; provided,
however, that if Swing Lender declines in its sole discretion to make a
Swing Loan pursuant to Section 2.3(d), Agent shall elect to have the
terms of Section 2.3(c) apply to such requested Borrowing.

 

(c)  Making of
Loans.

 

(i)            In the event that
Agent shall elect to have the terms of this Section 2.3(c) apply to a
requested Borrowing as described in Section 2.3(b), 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

 

33

 

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 (or the Term Loan, as applicable),
Agent shall make the proceeds thereof available to Borrower on the applicable
Funding Date by transferring immediately available funds equal to such proceeds
received by Agent to Borrower’s Designated Account; provided, however,
that, subject to the provisions of Section 2.3(i), Agent shall not
request any Lender to make, and no Lender shall have the obligation to make,
any Advance (or its portion of the Term Loan) 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 on or prior to the Closing Date or, with respect
to any Borrowing after the Closing Date, prior to 9:00 a.m. (California time)
on the date of such Borrowing, that such Lender will not make available as and
when required hereunder to Agent for the account of Borrower 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 Borrower 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 Borrower such amount,
that Lender shall on the Business Day following such Funding Date make such
amount available to Agent, together with interest at the Defaulting Lender Rate
for each day during such period.  A
notice submitted by Agent to any Lender with respect to amounts owing under
this subsection shall be conclusive, absent manifest error.  If such amount is so made available, such
payment to Agent shall constitute such Lender’s Advance (or portion of the Term
Loan, as applicable) 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 Borrower of such failure to fund and, upon demand by Agent, Borrower
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 (or
portion of the Term Loan, as applicable) composing such Borrowing.  The failure of any Lender to make any
Advance (or portion of the Term Loan, as applicable) on any Funding Date shall
not relieve any other Lender of any obligation hereunder to make an Advance (or
portion of the Term Loan, as applicable) on such Funding Date, but no Lender
shall be responsible for the failure of any other Lender to make the Advance
(or portion of the Term Loan, as applicable) to be made by such other Lender on
any Funding Date.

 

34

 

(iii)          Agent shall not be
obligated to transfer to a Defaulting Lender any payments made by Borrower 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
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 Borrower as if such Defaulting
Lender had made Advances to Borrower. 
Subject to the foregoing, Agent may hold and, in its Permitted
Discretion, re-lend to Borrower for the account of such Defaulting Lender the
amount of all such payments received and retained by it 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
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 Borrower of its 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
Borrower (in addition to any other rights and remedies of Borrower hereunder at
law or in equity) at Borrower’s option, upon written notice to Agent, to
arrange for a substitute Lender to assume the Commitment of such Defaulting
Lender, such substitute Lender to be acceptable to Agent.  In connection with the arrangement of such a
substitute Lender, the Defaulting Lender shall have no right to refuse to be
replaced hereunder, and agrees to execute and deliver a completed form of
Assignment and Acceptance Agreement 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) (including an assumption of
its Pro Rata Share of the Risk Participation Liability) without any premium or
penalty of any kind whatsoever; provided  further, however,
that any such assumption of the Commitment of such Defaulting Lender shall not
be deemed to constitute a waiver of any of the Lender Groups’ or Borrower’s
rights or

 

35

 

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

 

(d)  Making of Swing Loans.

 

(i)            In the event Agent
shall elect, with the consent of Swing Lender, as a Lender, to have the terms
of this Section 2.3(d) apply to a requested Borrowing as described in Section
2.3(b), Swing Lender as a Lender shall make such Advance in the amount of
such Borrowing (any such Advance made solely by Swing Lender as a Lender
pursuant to this Section 2.3(d) being referred to as a “Swing Loan”
and such Advances being referred to collectively as “Swing Loans”)
available to Borrower on the Funding Date applicable thereto by transferring
immediately available funds to Borrower’s Designated Account.  Each Swing Loan is 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 (and for the account of the holder of any
participation interest with respect to such Swing Loan).  Subject to the provisions of Section
2.3(i), Agent shall not request Swing Lender as a Lender to make, and Swing
Lender as a Lender shall not make, any Swing Loan if Agent has actual knowledge
that (i) one or more of the applicable conditions precedent set forth in Section
3 will not be satisfied on the requested Funding Date for the applicable
Borrowing unless such condition has been waived, or (ii) 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, in its sole discretion, any Swing Loan.

 

(ii)           The Swing Loans
shall be secured by the Agent’s Liens, shall constitute Advances and
Obligations hereunder.

 

(e)  Agent Advances.

 

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

 

36

 

Section 2.3(e) shall be referred to as “Agent
Advances”).  Each Agent Advance is
an Advance hereunder and shall be subject to all of the terms and conditions
applicable to other Advances, except that all payments thereon shall be payable
to Agent solely for its own account (and for the account of the holder of any
participation interest with respect to such Agent Advance).

 

(ii)           The Agent Advances
shall be repayable on demand and secured by the Agent’s Liens granted to Agent
under the Loan Documents, shall constitute Advances and Obligations hereunder,
and shall bear interest at the rate applicable from time to time to Advances
that are Base Rate Loans.

 

(f)  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 or enforceable by Borrower)
that in order to facilitate the administration of this Agreement and the other
Loan Documents, settlement among them as to the Advances, the Swing Loans, and
the Agent 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
each Agent Advance, and (3) with respect to Borrower’s or its Subsidiaries’
Collections received, as to each by notifying the Lenders by telecopy,
telephone, or other similar form of transmission, of such requested Settlement,
no later than 2:00 p.m. (California time) on the Business Day immediately prior
to the date of such requested Settlement (the date of such requested Settlement
being the “Settlement Date”). 
Such notice of a Settlement Date shall include a summary statement of
the amount of outstanding Advances, Swing 
Loans, and Agent Advances for the period since the prior Settlement
Date.  Subject to the terms and
conditions contained herein (including Section 2.3(c)(iii)):  (y) if a Lender’s balance of the Advances,
Swing Loans, and Agent Advances exceeds such Lender’s Pro Rata Share of the
Advances, Swing Loans, and Agent 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 DDA 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, Swing Loans, and Agent Advances, and (z) if a Lender’s balance of the
Advances, Swing Loans, and Agent Advances is less than such Lender’s Pro Rata
Share of the Advances, Swing Loans, and Agent 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

 

37

 

Share of the Advances,
Swing Loans, and Agent 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 Loan or
Agent Advance and, together with the portion of such Swing Loan or Agent
Advance 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 Agent Advances is
less than, equal to, or greater than such Lender’s Pro Rata Share of the
Advances, Swing Loans, and Agent Advances as of a Settlement Date, Agent shall,
as part of the relevant Settlement, apply to such balance the portion of
payments actually received in good funds by Agent with respect to principal,
interest, fees payable by Borrower 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 Agent 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 Borrower or its Subsidiaries received since the then
immediately preceding Settlement Date have been applied to Swing Lender’s Pro
Rata Share of the Advances other than to Swing Loans, as provided for in the
previous sentence, Swing Lender shall pay to Agent for the accounts of the
Lenders, and Agent shall pay to the Lenders, to be applied to the outstanding
Advances of such Lenders, an amount such that each Lender shall, upon receipt
of such amount, have, as of such Settlement Date, its Pro Rata Share of the
Advances.  During the period between
Settlement Dates, Swing Lender with respect to Swing Loans, Agent with respect
to Agent Advances, and each Lender (subject to the effect of letter agreements
between Agent and individual Lenders) with respect to the Advances other than
Swing Loans and Agent 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.

 

(g)  Notation. 
Agent shall record on its books the principal amount of the Advances (or
portion of the Term Loan, as applicable) owing to each Lender, including the
Swing Loans owing to Swing Lender, and Agent Advances owing to Agent, and the

 

38

 

interests therein of each
Lender, from time to time.  In addition,
each Lender is authorized, at such Lender’s option, to note the date and amount
of each payment or prepayment of principal of such Lender’s Advances in its
books and records, including computer records.

 

(h)  Lenders’ Failure to Perform.  All Advances (other than Swing Loans and
Agent 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.

 

(i)  Optional Overadvances.  Any contrary provision of this Agreement
notwithstanding, the Lenders hereby authorize Agent or Swing Lender, as
applicable, and Agent or Swing Lender, as applicable, may, but is not obligated
to, knowingly and intentionally, continue to make Advances (including Swing
Loans) to Borrower notwithstanding that an Overadvance exists or thereby would
be created, so long as (i) after giving effect to such Advances (including a
Swing Loan), the outstanding Revolver Usage does not exceed the Borrowing Base
by more than $3,000,000, (ii) after giving effect to such Advances (including a
Swing Loan), 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, and (iii) at the time of the making of
any such Advance (including any Swing Loan), Agent does not believe, in good
faith, that the Overadvance created by such Advance will be outstanding for
more than 90 days.  The foregoing
provisions are for the exclusive benefit of Agent, Swing Lender, and the Lenders
and are not intended to benefit Borrower in any way.  The Advances and Swing Loans, as applicable, that are made
pursuant to this Section 2.3(i) shall be subject to the same terms and
conditions as any other Advance or Swing Loan, as applicable, except that the
rate of interest applicable thereto shall be the rate applicable to Advances
that are Base Rate Loans under Section 2.6(c) hereof without regard
to the presence or absence of a Default or Event of Default.

 

(A)          In the event Agent obtains actual
knowledge that the Revolver Usage exceeds the amounts permitted by the
preceding paragraph, 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 Borrower intended to reduce, within a reasonable
time, the outstanding principal amount of the Advances to Borrower to

 

39

 

an amount permitted by
the preceding paragraph.  In the event
Agent or any Lender disagrees over the 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.

 

(B)           Each Lender with a Revolver
Commitment shall be obligated to settle with Agent as provided in Section
2.3(f) 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(i), and any Overadvances
resulting from the charging to the Loan Account of interest, fees, or Lender
Group Expenses.

 

2.4 Payments.

 

(a)  Payments by Borrower.

 

(i)            Except as otherwise
expressly provided herein, all payments by Borrower shall be made to Agent’s
Account for the account of the Lender Group and shall be made in immediately
available funds, no later than 11:00 a.m. (California time) on the date
specified herein.  Any payment received
by Agent later than 11:00 a.m. (California time) shall be deemed to have been
received on the following Business Day and any applicable interest or fee shall
continue to accrue until such following Business Day.

 

(ii)           Unless Agent
receives notice from Borrower prior to the date on which any payment is due to
the Lenders that Borrower will not make such payment in full as and when
required, Agent may assume that Borrower has 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 Borrower
does 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 of Payments.

 

(i)            Except as otherwise
provided with respect to Defaulting Lenders and except as otherwise provided in
the Loan Documents (including letter 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

 

40

 

(other than fees
or expenses that are for Agent’s separate account, after giving effect to any
letter agreements between Agent and individual Lenders) shall be apportioned
ratably among the Lenders having a Pro Rata Share of the type of Commitment or
Obligation to which a particular fee relates. 
All payments shall be remitted to Agent and all such payments (other
than payments received while no Event of Default has occurred and is continuing
and which relate to the payment of principal or interest of specific
Obligations or which relate to the payment of specific fees or other amounts),
and all proceeds of Collateral received by Agent, shall be applied as follows:

 

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

 

(B)           second, to pay any Lender
Group Expenses then due to the Lenders under the Loan Documents, on a ratable
basis, until paid in full,

 

(C)           third, to pay any fees then
due to Agent (for its separate account, after giving effect to any letter
agreements between Agent and individual Lenders) under the Loan Documents until
paid in full,

 

(D)          fourth, to pay any fees then
due to any or all of the Lenders (after giving effect to any letter agreements
between Agent and individual Lenders) under the Loan Documents, on a ratable
basis, until paid in full,

 

(E)           fifth, to pay interest due in
respect of all Agent Advances until paid in full,

 

(F)           sixth, ratably to pay interest
due in respect of the Advances (other than Agent Advances), the Swing Loans,
and the Term Loan until paid in full,

 

(G)           seventh, to pay the principal
of all Agent Advances until paid in full,

 

(H)          eighth, ratably to pay all
principal amounts then due and payable (other than as a result of an
acceleration thereof) with respect to the Term Loan until paid in full,

 

(I)            ninth, to pay the principal
of all Swing Loans until paid in full,

 

(J)            tenth, 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

 

41

 

amounts then due and
owing by Borrower or its Subsidiaries in respect of Bank Products until paid in
full,

 

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

 

(L)           twelfth, if an Event of
Default has occurred and is continuing, ratably (i) to pay the principal of all
Advances until paid in full, and (ii) to Agent, to be held by Agent, for the
benefit of the Bank Product Providers, as applicable, 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
Borrower’s and its Subsidiaries’ obligations in respect of the then extant Bank
Products have been paid in full or the cash collateral amount has been
exhausted,

 

(M)         thirteenth, if an Event of
Default has occurred and is continuing, to pay the outstanding principal
balance of the Term Loan (in the inverse order of the maturity of the
installments due thereunder) until the Term Loan is paid in full,

 

(N)          fourteenth, if an Event of
Default has occurred and is continuing, to Agent, to be held by Agent, for the
ratable benefit of Issuing Lender and those Lenders having a Revolver
Commitment, as cash collateral in an amount up to 105% of the then extant
Letter of Credit Usage until paid in full,

 

(O)          fifteenth, to pay any other
Obligations (including Bank Product Obligations) until paid in full, and

 

(P)           sixteenth, to Borrower (to be
wired promptly 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(f).

 

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

 

42

 

(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, whether or not the same 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 amount of Obligations (other than
Bank Product Obligations) owed by Borrower to the Lender Group pursuant to Sections
2.1 and 2.12 is greater than either the Dollar or percentage limitations
set forth in Sections 2.1 or 2.12 (an “Overadvance”), Borrower
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, Borrower hereby promises 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 and except for Bank Product Obligations) that
have been charged to the Loan Account pursuant to the terms hereof shall bear
interest on the Daily Balance thereof as follows (i) if the relevant Obligation
is the Term Loan, at a per annum rate equal to the Base Rate plus the Base Rate
Term Loan 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
Obligations (other than Bank Product Obligations) bear interest on the Daily
Balance thereof at a per annum rate less than 7.00%.  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.  Borrower shall pay Agent (for the ratable
benefit of the Lenders with a Revolver Commitment, subject to any letter
agreement 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

 

43

 

3.00% 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 4
percentage points above the per annum rate otherwise applicable hereunder, and

 

(ii)           the Letter of
Credit fee provided for above shall be increased to 4 percentage points above
the per annum rate otherwise applicable hereunder.

 

(d)  Payment. 
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.  Borrower hereby authorizes Agent, from time to time without prior
notice to Borrower, to charge such interest and fees, all Lender Group Expenses
(as and when incurred), the charges, commissions, fees, and costs provided for
in Section 2.12(e) (as and when accrued or incurred), the 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
the amounts due and payable with respect to the Term Loan and including any
amounts due and payable to the Bank Product Providers in respect of Bank
Products up to the amount of the then extant Bank Product Reserve) to
Borrower’s Loan Account, which amounts thereafter shall constitute Advances
hereunder and shall accrue interest at the rate then applicable to Advances
hereunder; provided, however, that if, at the time that any
amounts due in respect of interest on the Term Loan are charged to Borrower’s
Loan Account an Event of Default or Overadvance exists, such amounts shall not
constitute Advances but instead shall continue to remain outstanding as amounts
due in respect of the Term Loan and such amounts shall be compounded and added
to the outstanding principal balance of the Term Loan.  Any interest not paid when due shall be
compounded by being charged to Borrower’s 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; provided, however,
that if, at the time that any amounts due in respect of interest on the Term
Loan are charged to Borrower’s Loan Account an Event of Default or Overadvance
exists, such amounts shall not constitute Advances but instead shall continue
to remain outstanding as amounts due in respect of the Term Loan and such
amounts shall be compounded and added to the outstanding principal balance of
the Term Loan.

 

(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

 

44

 

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.  Borrower 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, Borrower is and shall be liable only for the payment of such maximum
as allowed by law, and payment received from Borrower in excess of such legal
maximum, whenever received, shall be applied to reduce the principal balance of
the Obligations to the extent of such excess.

 

2.7 Cash Management.

 

(a)  Borrower shall and shall cause each
Guarantor to (i) establish and maintain cash management services of a type and
on terms satisfactory to Agent at one or more of the banks set forth on Schedule
2.7(a) (each, a “Cash Management Bank”), and shall request in
writing and otherwise take such reasonable steps to ensure that all of its and
its Subsidiaries’ Account Debtors forward payment of the amounts owed by them
directly to such Cash Management Bank, and (ii) deposit or cause to be
deposited promptly, and in any event no later than the first Business Day after
the date of receipt thereof, all of their Collections (including those sent
directly by their Account Debtors to a Cash Management Bank) 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 Borrower, in form and
substance acceptable to Agent.  Each
such Cash Management Agreement shall provide, among other things, that (i) all
items of payment deposited in such Cash Management Account and proceeds thereof
are held by such Cash Management Bank as agent or bailee-in-possession for
Agent, (ii) the Cash Management Bank has no rights of setoff or recoupment or
any other claim against the applicable Cash Management Account other than for
payment of its service fees and other charges directly related to the
administration of such Cash Management Account and for returned checks or other
items of payment, and (iii) it immediately will forward by daily sweep all
amounts in the applicable Cash Management Account to the Agent’s Account.

 

(c)  So long as no Default or Event of Default
has occurred and is continuing, 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
satisfactory to Agent and Agent shall have consented in writing in advance to
the opening of such Cash Management Account with the prospective Cash

 

45

 

Management Bank, and (ii) prior
to the time of the opening of such Cash Management Account, Borrower (or its
Subsidiary, as applicable) and such prospective Cash Management Bank shall have
executed and delivered to Agent a Cash Management Agreement.  Borrower (or its Subsidiaries, as
applicable) shall close any of its Cash Management Accounts (and establish
replacement cash management accounts in accordance with the foregoing sentence)
promptly and in any event within 30 days of notice from Agent that the
creditworthiness of any Cash Management Bank is no longer acceptable in Agent’s
reasonable judgment, or as promptly as practicable and in any event within 60
days of notice from Agent that the operating performance, funds transfer, or
availability procedures or performance of the Cash Management Bank with respect
to Cash Management Accounts or Agent’s liability under any Cash Management
Agreement with such Cash Management Bank is no longer acceptable in Agent’s
reasonable judgment.

 

(d)  The Cash Management Accounts shall be cash
collateral accounts, with all cash, checks and similar items of payment in such
accounts securing payment of the Obligations, and in which Borrower is hereby
deemed to have granted a Lien to Agent. Anything contained herein or in the
Cash Management Agreements to the contrary notwithstanding, (A) at any time
that there are no outstanding Obligations (other than undrawn Letters of
Credit) owing in respect of Advances and so long as at such time there is no
Event of Default that has occurred and is continuing, Agent agrees to promptly
remit to Borrower’s Designated Account the amount of any and all collected
funds that are swept from the Cash Management Accounts to the Agent’s Account,
and (B) at any time that there are no outstanding Obligations (other than
undrawn Letters of Credit) owing in respect of Advances and so long as at such
time there is no Event of Default that has occurred and is continuing, any and
all collected funds that are received into the Cash Management Accounts, and
any proceeds thereof remitted to the Agent’s Account, are and shall remain the
property of Borrower (or the Guarantors’ as applicable) subject to the
perfected security interests of Agent created therein under the Loan Documents.

 

2.8 Crediting
Payments; Float 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 Borrower 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.  From and after the Closing Date,
Agent shall be entitled to charge Borrower for two Business Days of `clearance’
or `float’ at the rate then applicable under Section 2.6(a)(ii) on all
Collections that are received by Borrower and the Guarantors (regardless of whether
forwarded by the Cash Management

 

46

 

Banks to Agent).  This across-the-board two Business Day
clearance or float charge on all Collections of Borrower and the Guarantors is
acknowledged by the parties to constitute an integral aspect of the pricing of
the financing of Borrower and shall apply irrespective of whether or not there
are any outstanding monetary Obligations; the effect of such clearance or float
charge being the equivalent of charging two Business Days of interest on such
Collections.  The parties acknowledge
and agree that the economic benefit of the foregoing provisions of this Section
2.8 shall be for the ratable benefit of the Lenders.

 

2.9
Designated Account.  Agent is authorized to make
the Advances and the Term Loan, 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).  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 Borrower and made by Agent
or the Lenders hereunder.  Unless
otherwise agreed by Agent and Borrower, any Advance, Agent Advance, or Swing
Loan requested by Borrower and made by Agent or the Lenders hereunder shall be
made to the Designated Account.

 

2.10 Maintenance of Loan Account;
Statements of Obligations.  Agent shall maintain an account on its books
in the name of Borrower (the “Loan Account”) on which Borrower will be
charged with the Term Loan, all Advances (including Agent Advances and Swing
Loans) made by Agent, Swing Lender, or the Lenders to Borrower or for
Borrower’s account, the Letters of Credit issued by Issuing Lender for
Borrower’s 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 Borrower
or for Borrower’s account, including all amounts received in the Agent’s
Account from any Cash Management Bank. 
Agent shall render statements regarding the Loan Account to Borrower,
including principal, interest, fees, and including an itemization of all
charges and expenses constituting Lender Group Expenses owing, and such
statements shall be conclusively presumed to be correct and accurate and
constitute an account stated between Borrower and the Lender Group unless,
within 30 days after receipt thereof by Borrower, Borrower shall deliver to
Agent written objection thereto describing the error or errors contained in any
such statements.

 

2.11 Fees. 
Borrower shall pay to Agent the following fees and charges, which fees
and charges shall be non-refundable when paid (irrespective of whether this
Agreement is terminated thereafter) and shall be apportioned among the Lenders
in accordance with the terms of letter agreements between Agent and individual
Lenders:

 

(a)  [Intentionally Omitted]

 

(b)  Fee Letter Fees.  As and when due and payable under the terms of the Fee Letter,
the fees set forth in the Fee Letter, and

 

47

 

(c)  Audit, Appraisal, and Valuation Charges.
Audit, appraisal, and valuation fees and charges as follows (i) a fee of $850
per day, per auditor, plus out-of-pocket expenses for each financial audit of
Borrower performed by personnel employed by Agent, (ii) if implemented, a one
time charge of $5,000 for each reporting entity or unit, plus out-of-pocket
expenses for expenses for the establishment of electronic collateral reporting
systems, (iii) a fee of $1,500 per day per appraiser, plus out-of-pocket
expenses, for each appraisal of the collateral hypothecated under the Loan
Documents performed by personnel employed by Agent, and (iv) the actual charges
paid or incurred by Agent if it elects to employ the services of one or more
third Persons to perform financial audits of Borrower or its Subsidiaries, to
appraise the collateral hypothecated under the Loan Document, or any portion
thereof, or to assess Borrower’s or its Subsidiaries’ business valuation. The
foregoing notwithstanding, so long as no Event of Default is continuing,
Borrower shall not be required to pay the fees and charges of more than 4
audits per fiscal year.

 

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
Borrower (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 Borrower. 
To request the issuance of an L/C or an L/C Undertaking (or the
amendment, renewal, or extension of an outstanding L/C or L/C Undertaking),
Borrower shall hand deliver or telecopy (or transmit by electronic
communication, if arrangements for doing so have been approved by the Issuing
Lender) to the Issuing Lender and Agent (reasonably in advance of the requested
date of issuance, amendment, renewal, or extension) a notice requesting the
issuance of an L/C or L/C Undertaking, or identifying the L/C or L/C
Undertaking to be amended, renewed, or extended, the date of issuance,
amendment, renewal, or extension, the date on which such L/C or L/C Undertaking
is to expire, the amount of such L/C or L/C Undertaking, the name and address
of the beneficiary thereof (or the beneficiary of the Underlying Letter of
Credit, as applicable), and such other information as shall be necessary to
prepare, amend, renew, or extend such L/C or L/C Undertaking.  If requested by the Issuing Lender, Borrower
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 requested Letter of Credit:

 

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

 

(ii)           the Letter of
Credit Usage would exceed $5,000,000, or

 

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

 

48

 

Borrower and the Lender Group acknowledge and agree that certain
Underlying Letters of Credit may be issued to support letters of credit that
already are outstanding as of the Closing Date.  Each Letter of Credit (and corresponding Underlying Letter of
Credit) shall be in form and substance acceptable to the Issuing Lender (in the
exercise of its Permitted Discretion), including the requirement that the
amounts payable thereunder must be payable in Dollars.  If Issuing Lender is obligated to advance
funds under a Letter of Credit, Borrower 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 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 Borrower prior to such time
on such date, then not later than 11:00 a.m., California time, on the Business
Day that 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, Borrower’s 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 Borrower 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(c) to reimburse the Issuing Lender, then to
such Lenders and the Issuing Lender as their interest may appear.

 

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

 

49

 

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, 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)  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 Borrower shall not 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.  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 Borrower’s account, even though this interpretation
may be different from Borrower’s own, and 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 Borrower’s instructions or
those contained in the Letter of Credit or any modifications, amendments, or
supplements thereto.  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
Borrower against such Underlying Issuer. 
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 Borrower shall not 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.

 

(d)  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 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 Borrower to Agent for the account of the Issuing
Lender; it being acknowledged and agreed by Borrower that, as of the Closing
Date, the issuance charge imposed by the prospective Underlying Issuer is .825%
per annum times the face amount of each Underlying Letter of Credit, that such
issuance charge may be changed from time to time, and that the Underlying
Issuer also imposes a schedule of charges for amendments, extensions, drawings,
and renewals.

 

50

 

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

 

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

 

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

 

and the result of the foregoing is to increase, directly or indirectly,
the cost to the Lender Group of issuing, making, guaranteeing, or maintaining
any Letter of Credit or to reduce the amount receivable in respect thereof by
the Lender Group, then, and in any such case, Agent may, at any time within 180
days after the additional cost is incurred or the amount received is reduced,
notify Borrower, and Borrower shall pay on demand such amounts as Agent may
specify to be necessary to compensate the Lender Group for such additional cost
or reduced receipt, together with interest on such amount from the date of such
demand until payment in full thereof at the rate then applicable to Base Rate
Loans hereunder.  The determination by
Agent of any amount due pursuant to this Section, as set forth in a certificate
setting forth the calculation thereof in reasonable detail, shall, in the
absence of manifest or demonstrable error, be final and conclusive and binding
on all of the parties hereto.

 

2.13 Registered
Notes.  Agent, acting for these purposes solely as
agent of Borrower, shall maintain the Register referred to in Section 14.1.  The Borrowings recorded on the Register (a “Registered
Loan”) may not be evidenced by promissory notes other than Registered Notes
(as defined below).  Upon the
registration of the Borrowings, Borrower agrees, at the request of any Lender,
to execute and deliver to such Lender a promissory note, in conformity with the
terms of this Agreement, in registered form to evidence such Registered Loan,
in form and substance reasonably satisfactory to such Lender, and registered as
provided in Section 14.1 (a “Registered Note”), payable to
the order of such Lender and otherwise duly completed.  Once recorded on the Register, the
Borrowings evidenced by such Registered Note may not be removed from the
Register so long as they remain outstanding, and a Registered Note may not be
exchanged for a promissory note that is not a Registered Note.

 

2.14 Securitization. 
Borrower hereby acknowledges that the Lenders and each of their
Affiliates may sell or securitize the Borrowings (a “Securitization”)
through the pledge of the Borrowings as collateral security for loans to such
Lenders or their Affiliates or through the sale of the Borrowings or the
issuance of direct or indirect interests in the Borrowings, which loans to such
Lenders or their Affiliate or direct or indirect interests will be rated by
Moody’s, Standard & Poor’s or one or more other rating agencies (the “Rating

 

51

 

Agencies”).
Borrower shall undertake commercially reasonable efforts with such Lenders and
their Affiliates to effect the Securitization including, without limitation, by
(a) amending this Agreement and the other Loan Documents, and executing such
additional documents, as reasonably requested by such Lenders in connection
with the Securitization, provided that (i) any such amendment or additional
documentation does not impose costs on Borrower and the Lender that elects to
securitize its Borrowings shall pay for costs and expenses associated
therewith, and (ii) any such amendment or additional documentation does not
materially adversely affect the rights, or materially increase the obligations,
of Borrower under the Loan Documents or change or affect in a manner adverse to
Borrower the financial terms of the Borrowings, (b) providing such information
as may be reasonably requested by such Lenders in connection with the rating of
the Borrowings or the Securitization, and (c) providing in connection with any
rating of the Borrowings a certificate (i) agreeing to indemnify such Lenders
and any of their Affiliates, any of the Rating Agencies, or any party providing
credit support or otherwise participating in the Securitization (collectively,
the “Securitization Parties”) for any losses, claims, damages or
liabilities (the “Liabilities”) to which such Lenders, their Affiliates
or such Securitization Parties may become subject insofar as the Liabilities
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any Loan Document or in any writing delivered
by or on behalf of Borrowers or its Affiliates to the Lender Group in
connection with any Loan Document or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary in order to make the statements therein, in light
of the circumstances under which they were made not misleading, and such
indemnity shall survive any transfer by any Lender or its successors or assigns
of the Borrowings, and (ii) agreeing to reimburse such Lenders and any of their
Affiliates for any legal or other expenses reasonably incurred by such Persons
in connection with defending the Liabilities. Notwithstanding the foregoing, it
is understood that Borrower and its Affiliates shall not be obligated to incur
any increased cost or administrative burden in connection with any
Securitization and that the Lender or its Affiliates or Related Funds that
consummates a Securitization will retain all rights to approve any amendment
to, or any consent or waiver with respect to, this Agreement or any other Loan
Document to the same extent as would be required under Section 14.1(e)
hereof as if such Lender was an Originating Lender and the transferee was a
Participant.

 

3.                   CONDITIONS; TERM OF AGREEMENT.

 

3.1 Conditions Precedent to the Initial
Extension of Credit. 
The obligation of the Lender Group (or any member thereof) to make the
initial Advance (or otherwise to extend any credit provided for hereunder), is
subject to the fulfillment, to the satisfaction of Agent, of each of the
conditions precedent set forth below:

 

(a)  the Closing Date shall occur on or before
November 19, 2002;

 

(b)  Agent shall have received all financing
statements required by Agent, duly authorized by Borrower or its Subsidiaries;

 

52

 

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

 

(i)            the Borrower Stock
Pledge Agreement, together with all certificates representing the shares of
Stock pledged thereunder previously pledged to the Existing Lender, as well as
Stock powers with respect thereto endorsed in blank,

 

(ii)           the Cash Management
Agreements,

 

(iii)          the Control
Agreements,

 

(iv)          the Copyright
Security Agreements,

 

(v)           the Disbursement
Letter,

 

(vi)          the Due Diligence
Letter,

 

(vii)         the Fee Letter,

 

(viii)        the Guarantor
Security Agreement,

 

(ix)           the Guarantor Stock
Pledge Agreement, together with all certificates representing the shares of
Stock pledged thereunder and previously pledged to the Existing Lender, as well
as Stock powers with respect thereto endorsed in blank,

 

(x)            the Guaranty,

 

(xi)           the Intercompany
Note,

 

(xii)          the Intercompany
Subordination Agreement,

 

(xiii)         the Officers’
Certificate,

 

(xiv)        the Patent Security
Agreements,

 

(xv)         the Pay-Off Letter,
together with UCC termination statements and other documentation evidencing the
termination by Existing Lender of its Liens in and to the properties and assets
of Borrower and its Subsidiaries, and

 

(xvi)        the Trademark
Security Agreements;

 

(d)  Agent shall have received a certificate from
the Secretary of Borrower attesting to the resolutions of Borrower’s Board of
Directors authorizing its

 

53

 

execution, delivery, and
performance of this Agreement and the other Loan Documents to which Borrower is
a party and authorizing specific officers of Borrower to execute the same;

 

(e)  Agent shall have received copies of
Borrower’s Governing Documents, as amended, modified, or supplemented to the
Closing Date, certified by the Secretary of Borrower;

 

(f)  Agent shall have received a certificate of
status with respect to Borrower, dated within 10 days of the Closing Date, such
certificate to be issued by the appropriate officer of the jurisdiction of
organization of Borrower, which certificate shall indicate that Borrower is in
good standing in such jurisdiction;

 

(g)  Agent shall have received certificates of
status with respect to Borrower, each dated within 30 days of the Closing Date,
such certificates to be issued by the appropriate officer of the jurisdictions
(other than the jurisdiction of organization of Borrower) in which its failure
to be duly qualified or licensed would constitute a Material Adverse Change,
which certificates shall indicate that Borrower is in good standing in such
jurisdictions;

 

(h)  Agent shall have received a certificate from
the Secretary of each Guarantor attesting to the resolutions of such
Guarantor’s Board of Directors authorizing its execution, delivery, and
performance of the Loan Documents to which such Guarantor is a party and authorizing
specific officers of such Guarantor to execute the same;

 

(i)  Agent shall have received copies of each
Guarantor’s Governing Documents, as amended, modified, or supplemented to the
Closing Date, certified by the Secretary of such Guarantor;

 

(j)  Agent shall have received a certificate of
status with respect to each Guarantor, dated within 10 days of the Closing
Date, such certificate to be issued by the appropriate officer of the
jurisdiction of organization of such Guarantor, which certificate shall
indicate that such Guarantor is in good standing in such jurisdiction;

 

(k)  Agent shall have received certificates of
status with respect to each Guarantor, each dated within 30 days of the Closing
Date, such certificates to be issued by the appropriate officer of the
jurisdictions (other than the jurisdiction of organization of such Guarantor)
in which its failure to be duly qualified or licensed would constitute a
Material Adverse Change, which certificates shall indicate that such Guarantor
is in good standing in such jurisdictions;

 

(l)  Agent shall have received a certificate of
insurance, together with the endorsements thereto, as are required by Section
6.8, the form and substance of which shall be satisfactory to Agent;

 

(m)  Agent shall have received an opinion of
Borrower’s and Guarantors’ counsel in form and substance satisfactory to Agent;

 

54

 

(n)  Agent shall have received satisfactory
evidence (including a certificate of the chief financial officer of Borrower)
that all tax returns required to be filed by Borrower and its Subsidiaries have
been timely filed and all taxes upon Borrower and its Subsidiaries or their
properties, assets, income, and franchises (including Real Property taxes and payroll
taxes) have been paid prior to delinquency, except such taxes that are the
subject of a Permitted Protest;

 

(o)  Borrower and its Subsidiaries shall have the
Required Availability after giving effect to the initial extensions of credit
hereunder and the payment of all fees and expenses required to be paid by
Borrower on the Closing Date under this Agreement or the other Loan Documents;

 

(p)  Agent shall have completed its business,
legal, and collateral due diligence, including a collateral audit and review of
Borrower’s and its Subsidiaries books and records, a verification of Borrower’s
and its Subsidiaries’ cash balances, Accounts, accounts payable, and taxes, and
verification of Borrower’s representations and warranties to the Lender Group,
the results of which shall be satisfactory to Agent;

 

(q)  Agent shall have received bank statements
with respect to substantially all cash and Cash Equivalents of Borrower’s
Subsidiaries other than the Guarantors, and Agent shall have verified, based on
such bank statements, that as of the Closing Date such Subsidiaries have
unrestricted cash and Cash Equivalents in an amount which is satisfactory to
Agent in its discretion,

 

(r)  Agent shall have received completed
reference checks with respect to Borrower’s senior management, the results of
which are satisfactory to Agent in its sole discretion;

 

(s)  Agent shall have received the Closing Date
Enterprise Valuation, the results of which shall be satisfactory to Agent;

 

(t)  Agent shall have received Borrower’s Closing
Date Business Plan;

 

(u)  Agent shall have received Borrower’s and its
Subsidiaries October 31, 2002 profit and loss statement and calculation of
EBITDA, all prepared on a basis consistent with Borrower’s historical financial
statements, together with appropriate supporting details and a statement of
underlying assumptions;

 

(v)  Borrower shall have paid all Lender Group
Expenses incurred in connection with the transactions evidenced by this
Agreement;

 

(w)  Agent shall have received copies of each of the
AES Documents, the Dassault Documents, the GE Transactional Documents, the
Indenture Documents, the FTC Order, the Australia Acquisition Documents, the
Japan Acquisition Documents, and the Korea Acquisition Documents, together with
a certificate of the Secretary of Borrower certifying each such document as
being a true, correct, and complete copy thereof;

 

55

 

(x)  Borrower and each of that Guarantors shall
have received all licenses, approvals or evidence of other actions required by
any Governmental Authority in connection with the execution and delivery by
Borrower or the Guarantors of the Loan Document or with the consummation of the
transactions contemplated thereby; and

 

(y)  all other documents and legal matters in
connection with the transactions contemplated by this Agreement shall have been
delivered, executed, or recorded and shall be in form and substance
satisfactory to Agent.

 

3.2 Conditions 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
Borrower to so perform or cause to be performed constituting an Event of
Default):

 

(a)  on or before the later of (i) 5 days after
the date when Agent delivers to Borrower a draft of the Canadian Documents, and
(ii) 10 days after the Closing Date, Agent shall have received the Canadian
Documents, in form and substance reasonably satisfactory to Agent, duly
executed, and each such document shall be in full force and effect, together
with such evidence as Agent shall require in its discretion that the PPSA
filings have been duly filed with the appropriate filing office,

 

(b)  on or before November 22, 2002, Agent shall
have received an opinion of Borrower’s and Guarantors’ counsel relative to the
enforceability of the Loan Documents, assuming that California law is the
governing law with respect thereto, in form and substance reasonably
satisfactory to Agent,

 

(c)  within 35 days of the Closing Date, deliver
to Agent certified copies of the policies of insurance, together with the
endorsements thereto, as are required by Section 6.8, the form and
substance of which shall be satisfactory to Agent and its counsel;

 

(d)  within 35 days of the Closing Date, deliver
to Agent a set of Projections of Borrower for the 3 year period following the
Closing Date (on a year by year basis, and for the 1 year period following the
Closing Date, on a quarter by quarter basis), in form and substance (including
as to scope and underlying assumptions) satisfactory to Agent;

 

(e)  for the period of 30 days after the Closing
Date, Borrower shall use its reasonable commercial efforts to obtain Collateral
Access Agreements with respect to the following locations: Santa Ana,
California, Los Angeles, California, and Ann Arbor, Michigan;

 

(f) 
within 30 days of the receipt by Borrower of a written request by Agent,
Borrower shall retain a financial consultant who is acceptable to Agent, which
financial consultant shall perform such services as Agent shall require in its
discretion, and

 

56

 

(g)  on or before December 31, 2003, deliver to
Agent with respect to the CFC’s that are direct Subsidiaries of Borrower or a
Guarantor either (a) evidence that the Subsidiary has been dissolved and its
assets transferred in a Permitted Restructuring Transaction, (b) the original
certificates representing the shares of Stock of such CFC that are hypothecated
pursuant to the Borrower Stock Pledge Agreement or the Guarantor Stock Pledge
Agreement (with stock powers with respect thereto endorsed in blank), or (c)
evidence that the jurisdiction of organization of the CFC does not provide for
the issuance of certificated securities,

 

(h)  within 5 Business Days of the Closing Date,
Agent shall have received a copy of the written agreement between Borrower and
Kirkland & Ellis regarding the payment terms with respect to Borrower’s
Indebtedness to Kirkland & Ellis, which agreement shall provide (among
other things) that such Indebtedness shall be payable in biweekly installments
of not more than $125,000, and which shall otherwise be in form and substance
reasonably satisfactory to Agent,

 

(i)  within 10 days of the Closing Date, Agent
shall have received searches reflecting the filing of all financing statements
filed by Agent on or before the Closing Date, the results of which shall be
satisfactory to Agent, and

 

(j)  within 10 days of the Closing Date, Agent
shall have received a duly executed Control Agreement relative to Borrower’s
Securities Account maintained with SSB, in form and substance satisfactory to
Agent.

 

3.3 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 and 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 prohibiting, directly or indirectly, the extending of
such credit shall have been issued and remain in force by any Governmental
Authority against Borrower, Agent, any Lender, or any of their Affiliates, and

 

(d)  no Material Adverse Change shall have
occurred.

 

3.4 Term.  This
Agreement shall continue in full force and effect for a term ending on November
18, 2006 (the “Maturity Date”). 
The foregoing notwithstanding, the Lender

 

57

 

Group, upon the election of the Required Lenders,
shall have the right to terminate its obligations under this Agreement
immediately and without notice upon the occurrence and during the continuation
of an Event of Default.

 

3.5 Effect of Termination.  On the date
of termination of this Agreement, all Obligations (including contingent
reimbursement obligations of Borrower 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 Revolver
Commitment in an amount equal to 105% of the then extant Letter of Credit
Usage, or (ii) causing the original Letters of Credit to be returned to the
Issuing Lender, and (b) providing cash collateral to be held by Agent for the
benefit of the Bank Product Providers with respect to the then extant Bank
Product Obligations).  No termination of
this Agreement, however, shall relieve or discharge Borrower of its duties,
Obligations, or covenants hereunder 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 Borrower’s sole
expense, execute and deliver any UCC 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.

 

3.6 Early Termination by Borrower.  Borrower has
the option, at any time upon 90 days prior written notice to Agent, to
terminate this Agreement by paying to Agent, for the benefit of the Lender
Group, in cash, the Obligations (including (a) either (i) providing cash
collateral to be held by Agent for the benefit of those Lenders with a Revolver
Commitment in an amount equal to 105% of the then extant Letter of Credit
Usage, or (ii) causing the original Letters of Credit to be returned to the
Issuing Lender, and (b) providing cash collateral to be held by Agent for the
benefit of the Bank Product Providers with respect to the then extant Bank
Product Obligations), in full, together with the Applicable Prepayment Premium
(to be allocated based upon letter agreements between Agent and individual
Lenders).  If Borrower has sent a notice
of termination pursuant to the provisions of this Section, then the Commitments
shall terminate and Borrower shall be obligated to repay the Obligations
(including (a) either (i) providing cash collateral to be held by Agent for the
benefit of those Lenders with a Revolver Commitment in an amount equal to 105%
of the then extant Letter of Credit Usage, or (ii) causing the original Letters
of Credit to be returned to the Issuing Lender, and (b) providing cash
collateral to be held by Agent for the benefit of the Bank Product Providers
with respect to the then extant Bank Product Obligations), in full, together
with the Applicable Prepayment Premium, on the date set forth as the date of termination
of this Agreement in such notice.  In
the event of the termination of this Agreement and repayment of the Obligations
at any time prior to the Maturity Date, for any other reason, including (a)
termination upon the election of the Required Lenders to

 

58

 

terminate after the occurrence and during the
continuation of an Event of Default, (b) foreclosure and sale of Collateral,
(c) sale of the Collateral in any Insolvency Proceeding, or (d) restructure,
reorganization, or compromise of the Obligations by the confirmation of a plan
of reorganization or any other plan of compromise, restructure, or arrangement
in any Insolvency Proceeding, then, in view of the impracticability and extreme
difficulty of ascertaining the actual amount of damages to the Lender Group or
profits lost by the Lender Group as a result of such early termination, and by
mutual agreement of the parties as to a reasonable estimation and calculation
of the lost profits or damages of the Lender Group, Borrower shall pay the
Applicable Prepayment Premium to Agent (to be allocated based upon letter
agreements between Agent and individual Lenders), measured as of the date of
such termination.  The foregoing to the
contrary notwithstanding, in the event that any termination of this Agreement
by Borrower pursuant to the first sentence of this Section 3.6 occurs as
a proximate result of or in proximate connection with a refinancing of the
Obligations provided by a commercial banking unit of Wells Fargo, then the
Applicable Prepayment Premium shall equal zero.

 

4.                   CREATION OF SECURITY INTEREST.

 

4.1 Grant of Security Interest.  Borrower
hereby grants to Agent, for the benefit of the Lender Group and any Bank
Product Provider, a continuing security interest in all of its right, title,
and interest in all currently existing and hereafter acquired or arising
Personal Property Collateral in order to secure prompt repayment of any and all
of the Obligations in accordance with the terms and conditions of the Loan
Documents and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. 
The Agent’s Liens in and to the Personal Property Collateral shall
attach to all Personal Property Collateral without further act on the part of
Agent or Borrower.  Anything contained
in this Agreement or any other Loan Document to the contrary notwithstanding,
except for Permitted Dispositions, Borrower has no authority, express or
implied, to dispose of any item or portion of the Collateral.

 

4.2 Negotiable Collateral.  In the event
that any Collateral, including proceeds, is evidenced by or consists of
Negotiable Collateral, and if and to the extent that perfection or priority of
Agent’s security interest is dependent on or enhanced by possession, Borrower,
immediately upon the request of Agent, shall endorse and deliver physical
possession of such Negotiable Collateral to Agent.

 

4.3 Collection of Accounts, General
Intangibles, and Negotiable Collateral.  At any time
after the occurrence and during the continuation of an Event of Default, Agent
or Agent’s designee may (a) notify Account Debtors of Borrower that Borrower’s
Accounts, chattel paper, or General Intangibles have been assigned to Agent or
that Agent has a security interest therein, or (b) collect Borrower’s Accounts,
chattel paper, or General Intangibles directly and charge the collection costs
and expenses to the Loan Account. 
Borrower agrees that it will hold in trust for the Lender Group, as the
Lender Group’s trustee, any of its or its Subsidiaries’ Collections that it
receives and immediately will deliver such

 

59

 

Collections to Agent or a Cash Management Bank in
their original form as received by Borrower.

 

4.4 Filing
of Financing Statements; Commercial Tort Claims; Delivery of
Additional Documentation Required.

 

(a)  Borrower authorizes Agent to file any
financing statement required hereunder, and any continuation statement or
amendment with respect thereto, in any appropriate filing office without the
signature of Borrower where permitted by applicable law. Borrower hereby
ratifies the filing of any financing statement filed without the signature of
Borrower prior to the date hereof.

(b)  If Borrower or any Guarantor acquires any
commercial tort claims after the date hereof involving a claim of $500,000, or
greater, Borrower shall promptly (but in any event when Borrower delivers its
next quarterly financial statements) deliver to Agent a written description of
such commercial tort claim and shall deliver a written agreement, in form and
substance satisfactory to Agent, pursuant to which Borrower or the applicable
Guarantor, as applicable, shall pledge and collaterally assign all of its
right, title and interest in and to such commercial tort claim to Agent, as
security for the Obligations (a “Commercial Tort Claim Assignment”).

 

(c)  At any time upon the request of Agent,
Borrower shall execute or deliver to Agent, and shall cause the Guarantors to
execute or deliver to Agent, any and all financing statements, original
financing statements in lieu of continuation statements, fixture filings,
security agreements, pledges, assignments, Commercial Tort Claim Assignments,
endorsements of certificates of title, and all other documents (collectively,
the “Additional Documents”) that Agent may request in its Permitted
Discretion, in form and substance satisfactory to Agent, to create, perfect,
and continue perfected or to better perfect the Agent’s Liens in the assets of
Borrower and the Guarantors (whether now owned or hereafter arising or
acquired, tangible or intangible, real (other than real property leases) or
personal), to create and perfect Liens in favor of Agent in any fee title to
Real Property acquired after the Closing Date, and in order to fully consummate
all of the transactions contemplated hereby and under the other Loan
Documents.  To the maximum extent
permitted by applicable law, Borrower authorizes Agent to execute any such
Additional Documents in Borrower’s name and authorizes Agent to file such
executed Additional Documents in any appropriate filing office.  In addition, on a quarterly basis, Borrower
shall (i) provide Agent with a report of all new material patentable,
copyrightable, or trademarkable materials acquired or generated by Borrower or
the Guarantors during the prior period, (ii) solely at the request of Agent
(but not otherwise), cause all material patents, copyrights, and trademarks
acquired or generated by Borrower or the Guarantors that are not already the
subject of a registration with the appropriate filing office (or an application
therefor diligently prosecuted) to be registered with such appropriate filing
office in a manner sufficient to impart constructive notice of Borrower’s or
the applicable Guarantor’s ownership thereof, and (iii) cause to be prepared,
executed, and delivered to Agent supplemental schedules to

 

60

 

the applicable Loan Documents to
identify such patents, copyrights, and trademarks as being subject to the
security interests created thereunder.

 

4.5 Power of
Attorney.  Borrower hereby irrevocably makes,
constitutes, and appoints Agent (and any of Agent’s officers, employees, or
agents designated by Agent) as Borrower’s true and lawful attorney, with power
to (a) if Borrower refuses to, or fails timely to execute and deliver any of
the documents described in Section 4.4, sign the name of Borrower on any
of the documents described in Section 4.4, (b) at any time that an Event
of Default has occurred and is continuing, sign Borrower’s name on any invoice
or bill of lading relating to the Collateral, drafts against Account Debtors,
or notices to Account Debtors, (c) send requests for verification of Borrower’s
or the Guarantors’ Accounts, (d) endorse Borrower’s name on any payment item
that may come into the Lender Group’s possession, (e) at any time that an Event
of Default has occurred and is continuing, make, settle, and adjust all claims
under Borrower’s policies of insurance and make all determinations and
decisions with respect to such policies of insurance, and (f) at any time that
an Event of Default has occurred and is continuing, settle and adjust disputes
and claims respecting Borrower’s or the Guarantors’ Accounts, chattel paper, or
General Intangibles directly with Account Debtors, for amounts and upon terms
that Agent determines to be reasonable, and Agent may cause to be executed and
delivered any documents and releases that Agent determines to be necessary.  The appointment of Agent as Borrower’s
attorney, and each and every one of its rights and powers, being coupled with
an interest, is irrevocable until all of the Obligations have been fully and
finally repaid and performed and the Lender Group’s obligations to extend
credit hereunder are terminated.

 

4.6 Right to
Inspect.  Agent and each Lender (through any of their
respective officers, employees, or agents) shall have the right, from time to
time, so long as no Default or Event of Default has occurred and is continuing,
during normal business hours, or if a Default or an Event of Default has
occurred and is continuing, at any time, to inspect the Books and make copies
or abstracts thereof and to check, test, and appraise the assets hypothecated
under the Loan Documents in order to verify Borrower’s and its Subsidiaries’
financial condition or the amount, quality, value, condition of, or any other
matter relating to, the assets hypothecated under the Loan Documents.

 

4.7 Control
Agreements.  Borrower agrees that it will not, and will
not permit the Guarantors to, transfer assets out of any of their DDAs or
Securities Accounts; provided, however, that so long as no Event
of Default has occurred and is continuing or would result therefrom, Borrower
and the Guarantors may use such assets (and the proceeds thereof) to the extent
not prohibited by this Agreement or the other Loan Documents and, if the
transfer is to another bank or securities intermediary, so long as Borrower (or
the Guarantor, as applicable), Agent, and the substitute bank or securities
intermediary have entered into a Control Agreement.  Borrower agrees that it will and will cause the Guarantors to
take any or all reasonable steps that Agent requests in order for Agent to
obtain control in accordance with Sections 9-104, 9-105, 9-106, and 9-107 of
the Code with respect to any of its or their Securities Accounts, DDAs,
electronic chattel paper, Investment Property, and letter-of-credit
rights.  No arrangement contemplated
hereby or by any Control Agreement in respect

 

61

 

of any Securities Accounts or other Investment
Property shall be modified by Borrower without the prior written consent of
Agent.  Upon the occurrence and during
the continuance of a Default or Event of Default, Agent may notify any bank or
securities intermediary to liquidate the applicable DDA or Securities Account
or any related Investment Property maintained or held thereby and remit the
proceeds thereof to the Agent’s Account.

 

5.                   REPRESENTATIONS AND WARRANTIES.

 

In order to induce the Lender Group to enter into this Agreement,
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 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:

 

5.1 No Encumbrances.  Borrower and its Subsidiaries
have good and indefeasible title to their personal property assets free and
clear of Liens except for Permitted Liens.

 

5.2 Eligible Accounts.  The Eligible
Accounts are bona fide existing payment obligations of Account Debtors
created by the sale and delivery of Inventory or the licensing of software or
the rendition of services to such Account Debtors in the ordinary course of a
Borrowing Base Participant’s business, owed to such Borrowing Base Participant
without known defenses, disputes, offsets, counterclaims, or rights of return
or cancellation.  As to each Account
that is identified by Borrower as an Eligible Account in a borrowing base
report submitted to Agent, such Account is not excluded as ineligible by virtue
of one or more of the excluding criteria set forth in the definition of
Eligible Accounts.

 

5.3 [Intentionally Omitted].

 

5.4 Equipment.  All of the Equipment of Borrower and its
Subsidiaries is used or held for use in their business and is fit for such purposes
in all material respects.

 

5.5 Location of Inventory and Equipment.  The
Inventory and Equipment of Borrower and the Guarantors are not stored with a
bailee, warehouseman, or similar party and are located only at, or in-transit
between, the locations identified on Schedule 5.5 (as such Schedule may
be updated pursuant to Section 6.9).

 

5.6 [intentionally omitted].

 

5.7 State of Incorporation; Location of
Chief Executive Office; FEIN; Organizational ID Number; Commercial Tort Claims.

 

(a) The state of
organization of Borrower and each of its Subsidiaries Subsidiary is set forth
on Schedule 5.7(a).

 

62

 

(b) The chief executive
office of Borrower and each Guarantor is located at the address indicated on Schedule
5.7(b) (as such Schedule may be updated pursuant to Section 6.9).

 

(c) Borrower’s and each
of the Guarantors’ FEIN and organizational identification number, if any, are
identified on Schedule 5.7(c).

 

(d) As of the Closing
Date, to Borrower’s knowledge, Borrower and the Guarantors do not hold any
commercial tort claims involving claims of $500,000, or more, except as set
forth on Schedule 5.7(d).

 

5.8 Due
Organization and Qualification; Subsidiaries.

 

(a)  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 have a Material Adverse Change.

 

(b)  Set forth on Schedule 5.8(b), is a complete
and accurate description of the authorized capital Stock of 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 5.8(b), there are no
subscriptions, options, warrants, or calls relating to any shares of Borrower’s
capital Stock, including any right of conversion or exchange under any
outstanding security or other instrument. 
Borrower is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital Stock or
any security convertible into or exchangeable for any of its capital Stock.

 

(c)  Set forth on Schedule 5.8(c), is a
complete and accurate list of Borrower’s direct and indirect Subsidiaries,
showing: (i) the jurisdiction of their organization, (ii) with respect to each
Domestic Subsidiary of Borrower, the number of shares of each class of common
and preferred Stock authorized for each of such Subsidiaries, (iii) the number
(with respect to the Domestic Subsidiaries of Borrower) and the percentage
(with respect to all of Borrower’s Subsidiaries) of the outstanding shares of
each such class owned directly or indirectly by Borrower, and (iv) the direct
owner or owners of such shares.  All of
the outstanding capital Stock of each Domestic Subsidiary of Borrower has been
validly issued and is fully paid and non-assessable.

 

(d)  Except as set forth on Schedule 5.8(c),
there are no subscriptions, options, warrants, or calls relating to any shares
of Borrower’s Domestic Subsidiaries’ capital Stock, including any right of
conversion or exchange under any outstanding security or other instrument.  Except as set forth on Schedule 5.8(c),
neither Borrower nor any of its Subsidiaries is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of Borrower’s Subsidiaries’ capital Stock or any security convertible
into or exchangeable for any such capital Stock.

 

63

 

5.9 Due
Authorization; No Conflict.

 

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

 

(b)  The execution, delivery, and performance by
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 Borrower, the Governing Documents of Borrower,
or any order, judgment, or decree of any court or other Governmental Authority
binding on Borrower, (ii) materially conflict with, result in a material
breach of, or constitute (with due notice or lapse of time or both) a default
under any material contractual obligation of 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 Borrower’s interestholders or any approval or
consent of any Person under any material contractual obligation of 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, the execution, delivery, and performance by Borrower of this
Agreement and the Loan Documents to which 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)  This Agreement and the other Loan Documents
to which Borrower is a party, and all other documents contemplated hereby and
thereby, when executed and delivered by Borrower will be the legally valid and
binding obligations of Borrower, enforceable against 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, and first priority Liens, subject only to Permitted Liens.

 

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

 

(g)  The execution, delivery, and performance by
each Guarantor of the 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 such Guarantor, the Governing Documents of such Guarantor, or any
order, judgment, or decree of any court or other Governmental Authority binding
on such Guarantor, (ii) materially conflict with, result in a material
breach of, or constitute (with due notice or lapse of time or both) a default
under any material contractual obligation of such Guarantor, (iii) result
in or require the creation or imposition of any Lien of any nature whatsoever
upon any properties or assets of such Guarantor, other than Permitted Liens, or
(iv) require any approval of such Guarantor’s interestholders or any
approval or consent of any Person under any material contractual obligation of
such 

 

64

 

Guarantor, other than consents
or approvals that have been obtained and that are still in force and effect.

 

(h)  Other than the filing of financing statements,
the execution, delivery, and performance by each Guarantor of the Loan
Documents to which such Guarantor 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.

 

(i)  The Loan Documents to which each Guarantor
is a party, and all other documents contemplated hereby and thereby, when
executed and delivered by such Guarantor will be the legally valid and binding
obligations of such Guarantor, enforceable against such Guarantor 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.

 

5.10 Litigation. 
Other than those matters disclosed on Schedule 5.10, there are no
actions, suits, or proceedings pending or, to the best knowledge of Borrower,
threatened against Borrower, or any of its 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 Borrower, or any of its Subsidiaries, as applicable, reasonably
could not be expected to result in a Material Adverse Change.

 

5.11 No
Material Adverse Change.  All
financial statements relating to Borrower and its Subsidiaries that have been
delivered by Borrower 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, Borrower’s and its Subsidiaries’ 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 Borrower and its Subsidiaries since the date of
the latest financial statements submitted to the Lender Group on or before the
Closing Date.

 

5.12 Fraudulent
Transfer.

 

(a)  Each of Borrower and each of the Guarantors
is Solvent.

 

(b)  No transfer of property is being made by
Borrower or any Guarantor and no obligation is being incurred by Borrower or
any of the Guarantors 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 Borrower or such Guarantors.

 

5.13 Employee
Benefits.  None of Borrower, any of its Subsidiaries,
or any of their ERISA Affiliates maintains or contributes to any Benefit Plan.

 

65

 

5.14 Environmental
Condition.  Except as set forth on Schedule 5.14,
(a) to Borrower’s knowledge, none of Borrower’s or its Subsidiaries’ assets has
ever been used by Borrower, its Subsidiaries, or by previous owners or
operators in the disposal of, or to produce, store, handle, treat, release, or
transport, any Hazardous Materials, where such production, storage, handling,
treatment, release or transport was in violation, in any material respect, of
applicable Environmental Law, (b) to Borrower’s knowledge, none of Borrower’s
or its Subsidiaries’ properties or assets has ever been designated or
identified in any manner pursuant to any environmental protection statute as a
Hazardous Materials disposal site, (c) neither Borrower nor any of its
Subsidiaries has received notice that a Lien arising under any Environmental
Law has attached to any revenues or to any Real Property owned or operated by
Borrower or its Subsidiaries, and (d) neither Borrower nor its  Subsidiaries has received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal or state governmental agency concerning any action or omission by
Borrower or its Subsidiaries resulting in the releasing or disposing of
Hazardous Materials into the environment.

 

5.15 Brokerage Fees. 
Neither Borrower nor any of its Subsidiaries has utilized the services
of any broker or finder in connection with Borrower’s obtaining financing from
the Lender Group under this Agreement and no brokerage commission or finders
fee is payable by Borrower or its Subsidiaries in connection herewith.

 

5.16 Intellectual
Property.  Borrower and its Subsidiaries own, or hold
licenses in, all trademarks, trade names, copyrights, patents, patent rights,
and licenses that are necessary to the conduct of its business as currently
conducted.  Attached hereto as Schedule
5.16 (as updated from time to time) is a true, correct, and complete
listing of all material registered patents, patent applications, registered
trademarks, trademark applications, registered copyrights, and copyright
registrations as to which Borrower or one of its Subsidiaries is the owner or
is an exclusive licensee.  Each such
material patent, patent application, trademark, trademark application,
copyright, and copyright registration is owned or held by Borrower or one of
the Guarantors.

 

5.17 Leases. 
Borrower and its Subsidiaries enjoy peaceful and undisturbed possession
under all leases material to their business and to which they are parties or
under which they are operating.  All of
such leases are valid and subsisting and no material default by Borrower or its
Subsidiaries exists under any of them.

 

5.18 DDAs
and Securities Accounts.  Set
forth on Schedule 5.18 are all of Borrower’s and the Guarantors’ DDAs
and Securities Accounts, including, with respect to each bank or securities
intermediary (i) the name and address of such Person, and (ii) the account
numbers of the DDAs or Securities Accounts maintained with such Person.

 

5.19 Complete
Disclosure.  All factual information (taken as a whole)
furnished by or on behalf of Borrower or its Subsidiaries in writing to Agent
or any Lender (including all information contained in the Schedules hereto or
in the other Loan Documents) for purposes of or in connection with this
Agreement, the other Loan Documents, or any transaction

 

66

 

contemplated herein or therein is, and all other such
factual information (taken as a whole) hereafter furnished by or on behalf of
Borrower or its Subsidiaries in writing to Agent or any Lender will be, true
and accurate, in all material respects, on the date as of which such
information is dated or certified and not incomplete by omitting to state any
fact necessary to make such information (taken as a whole) not misleading in
any material respect at such time in light of the circumstances under which
such information was provided.  On the
Closing Date, the Closing Date Projections represent, and as of the date on
which any other Projections are delivered to Agent, such additional Projections
represent Borrower’s good faith best estimate of its future performance for the
periods covered thereby.

 

5.20 Indebtedness. 
Set forth on Schedule 5.20 is a true and complete list of all
Indebtedness of Borrower and its Subsidiaries 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 and the principal terms thereof.

 

6.                   AFFIRMATIVE COVENANTS.

 

Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations,
Borrower shall and shall cause each of its Subsidiaries to do all of the
following:

 

6.1 Accounting
System.  Maintain a system of accounting that enables
Borrower 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. 
Borrower also shall, and shall cause its Subsidiaries to, maintain their
billing systems and/or practices as approved by Agent prior to the Closing
Date, which billing systems and/or practices shall not be modified in any
material respect without Agent’s prior written consent; provided, that
updates in such billing software in the ordinary course of business shall not
constitute a material modification to such billing software.

 

6.2 Collateral
Reporting.  Provide Agent (and if so requested by Agent,
with copies for each Lender) with the following documents at the following times
in form satisfactory to Agent:

 

67

 

	
  Weekly

  	
   

  	
  (a) a sales
  journal, collection journal, and credit register since the last such
  schedule, a report regarding credit memoranda that have been issued regarding
  Borrowing Base Participants since the last such report, and a calculation of
  the Borrowing Base as of such date,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b) notice
  of all returns, disputes, or claims regarding Borrowing Base Participants, 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (c) a
  detailed calculation of the Borrowing Base (including detail regarding those
  Accounts of a Borrowing Base Participant that are not Eligible Accounts),

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (d) a
  detailed aging, by total and by Account Debtor, of the Accounts of Borrowing
  Base Participants, together with a reconciliation to the detailed calculation
  of the Borrowing Base previously provided to Agent, and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (e) a
  summary aging, by vendor, of the Borrowing Base Participants’ accounts
  payable  and any book overdraft.

  
	
   

  	
   

  	
   

  
	
  Monthly (not
  later than the 10th day of each month)

  	
   

  	
  (f) a
  calculation of Dilution for the prior month.

  
	
   

  	
   

  	
   

  
	
  Quarterly

  	
   

  	
  (g) a report
  identifying all known Commercial Tort Claims which have not been previously
  been reported to Agent in writing, if any, of Borrower or any Guarantor
  involving claims of $500,000, or more,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (h) a
  detailed list of each Borrowing Base Participant’s customers, and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i) a report
  regarding each Borrowing Base Participant’s accrued, but unpaid, ad valorem
  taxes.

  
	
   

  	
   

  	
   

  
	
  Upon request
  by Agent

  	
   

  	
  (j) copies
  of invoices in connection with the Borrowing Base Participants’ Accounts,
  credit memos, remittance advices, deposit slips, shipping and delivery
  documents in connection with their Accounts and, for Inventory and Equipment
  acquired by Borrowing Base Participants, purchase orders and invoices, and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (k) such
  other reports as to the collateral hypothecated under the Loan Documents, or
  the financial condition of Borrower and its Subsidiaries, as Agent may
  request.

  

 

68

 

In addition, Borrower agrees to cooperate fully with Agent to
facilitate and implement a system of electronic collateral reporting in order
to provide electronic reporting of each of the items set forth above.

 

6.3 Financial
Statements, Reports, Certificates.  Deliver to Agent, with copies to each
Lender:

 

(a)  as soon as available, but in any event
within 30 days after the end of each month during each of Borrower’s fiscal
years,

 

(i)            a company prepared income statement
and calculation of EBITDA covering Borrower’s and its Subsidiaries’ operations
during such period,

 

(ii)           commencing with March, 2003, a
company prepared balance sheet, income statement, and statement of cash flow
covering Borrower’s and the Guarantors’ operations during such period,

 

(iii)          a certificate signed by the chief
financial officer of Borrower to the effect that:

 

(A)          the financial statements delivered
hereunder fairly present in all material respects the financial condition of
Borrower and its Subsidiaries,

 

(B)           the representations and warranties of
Borrower contained in this Agreement and the other Loan Documents are true and
correct in all material respects on and as of the date of such certificate, as
though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date), and

 

(C)           there does not exist any condition or
event that constitutes a Default or Event of Default (or, to the extent of any
non-compliance, describing such non-compliance as to which he or she may have
knowledge and what action Borrower has taken, is taking, or proposes to take
with respect thereto), and

 

(iv)          a certificate signed by the chief
financial officer of Borrower which sets forth (A) Borrower’s detailed
calculation of Obligor Excess Availability and Qualified Cash as of the last
day of the month immediately preceding the delivery thereof, together with bank
statements dated on or about the last day of such month evidencing the amount
of Qualified Cash set forth therein, and (B) Borrower’s detailed calculation of
Consolidated Excess Availability and unrestricted cash and Cash Equivalents of
Borrower and its Subsidiaries as of the last day of the month immediately
preceding the delivery thereof, together with bank statements dated on or about
the last day of such

 

69

 

month
evidencing substantially all of the cash and Cash Equivalents set forth
therein, and

 

(b)  as soon as available, but in any event
within 45 days after the end of each of the first 3 fiscal quarters during each
of Borrower’s fiscal years,

 

(i)            a company prepared consolidated
balance sheet, income statement, and statement of cash flow covering Borrower’s
and its Subsidiaries’ operations during such period,

 

(ii)           a certificate signed by the chief
financial officer of Borrower to the effect that:

 

(A)          the financial statements delivered
hereunder have been prepared in accordance with GAAP (except for the lack of
footnotes and being subject to year-end audit adjustments) and fairly present
in all material respects the financial condition of Borrower and its
Subsidiaries,

 

(B)           the representations and warranties of
Borrower contained in this Agreement and the other Loan Documents are true and
correct in all material respects on and as of the date of such certificate, as
though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date), and

 

(C)           there does not exist any condition or
event that constitutes a Default or Event of Default (or, to the extent of any
non-compliance, describing such non-compliance as to which he or she may have
knowledge and what action Borrower has taken, is taking, or proposes to take
with respect thereto), and

 

(iii)          a Compliance Certificate
demonstrating, in reasonable detail, compliance at the end of such period with
the applicable financial covenants contained in Section 7.18, and

 

(iv)          a Principal Officers Certificate, and

 

(c)  as soon as available, but in any event
within 90 days after the end of each of Borrower’s fiscal years,

 

(i)            financial statements of Borrower and
its Subsidiaries for each such fiscal year, audited by independent certified
public accountants reasonably acceptable to Agent and certified, without any
qualifications, by such accountants to have been prepared in accordance with
GAAP (such audited financial statements to include a balance sheet, income
statement, and

 

70

 

statement of
cash flow and, if prepared, such accountants’ letter to management),

 

(ii)           To the extent such statements
continue to be given by certified public accountants generally, a written
statement by Borrower’s independent certified public accountants stating
whether, in connection with their audit examination, any condition or event
that constitutes a Default or Event of Default under Section 7.18 has
come to their attention and, if such a condition or event has come to their
attention, specifying the nature and period thereof,

 

(d)  as soon as available, but in any event
within 30 days prior to the start of each of Borrower’s first and third fiscal
quarters,

 

(i)            copies of Borrower’s Projections, in
form and substance (including as to scope and underlying assumptions)
satisfactory to Agent, in its sole discretion, for the forthcoming 3 years,
year by year, and for the forthcoming twelve months, month by month, certified
by the chief financial officer of Borrower as being such officer’s good faith
best estimate of the financial performance of Borrower during the period covered
thereby,

 

(e)  if and when filed by Borrower,

 

(i)            Form 10-Q quarterly reports, Form
10-K annual reports, and Form 8-K current reports,

 

(ii)           any other filings made by Borrower
with the SEC,

 

(iii)          copies of Borrower’s federal income
tax returns, and any amendments thereto, filed with the Internal Revenue
Service, and

 

(iv)          any other information that is provided
by Borrower to its shareholders generally,

 

(f)  if and when filed by Borrower or its
Subsidiaries and as requested by Agent, satisfactory evidence of payment of
applicable excise taxes in each jurisdictions in which (i) Borrower or its
Subsidiaries conducts business or is required to pay any such excise tax, (ii)
where Borrower’s or its Subsidiaries’ failure to pay any such applicable excise
tax would result in a Lien on the properties or assets of Borrower or its
Subsidiaries, or (iii) where Borrower’s or its Subsidiaries’ failure to pay any
such applicable excise tax reasonably could be expected to result in a Material
Adverse Change,

 

(g)  as soon as Borrower has knowledge of any
event or condition that constitutes a Default or an Event of Default, notice
thereof and a statement of the curative action that Borrower proposes to take
with respect thereto, and

 

71

 

(h)  upon the request of Agent, any other report
reasonably requested relating to the financial condition of Borrower or its
Subsidiaries.

 

In addition to the financial statements referred to above, Borrower
agrees to deliver financial statements prepared on both a consolidated and
consolidating basis and agrees that no Subsidiary of Borrower will have a
fiscal year different from that of Borrower. Borrower agrees to cooperate with
Agent to allow Agent to consult with its independent certified public
accountants if Agent reasonably requests the right to do so and that, in such
connection, its independent certified public accountants are authorized to
communicate with Agent and to release to Agent whatever financial information
concerning Borrower or its Subsidiaries Agent reasonably may request.

 

6.4 Guarantor
Reports.  Cause each Guarantor to deliver its annual
financial statements at the time when Borrower provides its audited financial
statements to Agent and copies of all federal income tax returns as soon as the
same are available and in any event no later than 30 days after the same are
required to be filed by law.

 

6.5 Returns. 
Cause returns and allowances, as between Borrower and its Subsidiaries
and their Account Debtors, to be on the same basis and in accordance with the
usual customary practices of Borrower and its Subsidiaries, as they exist at
the time of the execution and delivery of this Agreement.

 

6.6 Maintenance
of Properties.  Maintain and preserve all of its properties which
are necessary or useful in the proper conduct to its business in good working
order and condition, ordinary wear and tear excepted, 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 loss or forfeiture thereof
or thereunder.

 

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

 

6.8 Insurance.

 

(a)  At Borrower’s expense, maintain insurance
respecting its and its Subsidiaries assets wherever located, covering loss or
damage by fire, theft, explosion, and all other hazards and risks as ordinarily
are insured against by other Persons engaged in the same or similar businesses.
Borrower also shall maintain business interruption, public liability, and
product liability insurance, as well as insurance against larceny,
embezzlement,

 

72

 

and criminal misappropriation.  All such policies of insurance shall be in
such amounts and with such insurance companies as are reasonably satisfactory
to Agent. Borrower shall deliver copies of all such policies with respect to
Borrower and the Guarantors to Agent with a satisfactory lender’s loss payable
endorsement naming Agent as sole loss payee or additional insured, as
appropriate.  Each such policy of
insurance or endorsement shall contain a clause requiring the insurer to give
not less than 30 days prior written notice to Agent in the event of
cancellation of the policy for any reason whatsoever.

 

(b)  Borrower shall give Agent prompt notice of
any loss in excess of $500,000 which is covered by such insurance with respect
to Borrower and the Guarantors.  Agent
shall have the exclusive right to adjust any losses payable under any such
insurance policies in excess of $500,000, without any liability to Borrower
whatsoever in respect of such adjustments. 
Any monies received as payment for any loss under any insurance policy
mentioned above (other than liability insurance policies) or as payment of any
award or compensation for condemnation or taking by eminent domain, shall be
paid over to Agent to be applied at the option of the Required Lenders either
to the prepayment of the Obligations or shall be disbursed to Borrower under
staged payment terms reasonably satisfactory to the Required Lenders for
application to the cost of repairs, replacements, or restorations. Any such
repairs, replacements, or restorations shall be effected with reasonable
promptness and shall be of a value at least equal to the value of the items of
property destroyed prior to such damage or destruction.

 

(c)  Borrower will not and will not suffer or
permit the Guarantors to take out separate insurance concurrent in form or
contributing in the event of loss with that required to be maintained under
this Section 6.8, unless Agent is included thereon as named insured with
the loss payable to Agent under a lender’s loss payable endorsement or its
equivalent.  Borrower immediately shall
notify Agent whenever such separate insurance is taken out, specifying the
insurer thereunder and full particulars as to the policies evidencing the same,
and copies of such policies promptly shall be provided to Agent.

 

6.9 Location of
Inventory and Equipment.  Keep
Borrower’s and the Guarantors’ Inventory and Equipment only at the locations
identified on Schedule 5.5 and their chief executive offices only at the
locations identified on Schedule 5.7(b); provided, however,
that Borrower may amend Schedule 5.5 and Schedule 5.7 so long as
such amendment occurs by written notice to Agent not less than 30 days prior to
the date on which such Inventory or Equipment is moved to such new location or
such chief executive office is relocated, so long as such new location is
within the continental United States, and so long as, at the time of such
written notification, Borrower provides Agent a Collateral Access Agreement
with respect thereto.

 

6.10 Compliance
with Laws.  Comply with the requirements of all
applicable laws, rules, regulations, and orders of any Governmental Authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act,
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.

 

73

 

6.11 Leases. 
Pay when due all rents and other amounts payable under any material
leases to which Borrower or any Guarantor is a party or by which Borrower’s or
any such Guarantors’ properties and assets are bound, unless such payments are
the subject of a Permitted Protest.

 

6.12 Brokerage
Commissions.  Pay any and all brokerage commission or
finders fees incurred in connection with or as a result of Borrower’s obtaining
financing from the Lender Group under this Agreement.  Borrower agrees and acknowledges that payment of all such
brokerage commissions or finders fees shall be the sole responsibility of
Borrower, and Borrower agrees to indemnify, defend, and hold Agent and the
Lender Group harmless from and against any claim of any broker or finder
arising out of Borrower’s obtaining financing from the Lender Group under this
Agreement.

 

6.13 Existence. Except for the consummation of
Permitted Reorganization Transactions, at all times preserve and keep in full
force and effect (a) Borrower’s and the Guarantors’ valid existence and good
standing and any rights and franchises material to their businesses, and (b)
Borrower’s Subsidiaries’ (other than the Guarantors) valid existence and good standing
and any rights and franchises material to their businesses, except to the
extent that such failure could not reasonably be expected to result in a
Material Adverse Change.

 

6.14 Environmental.

 

(a)  Keep any property either owned or operated
by Borrower or its Subsidiaries 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 Borrower or its Subsidiaries and take any
Remedial Actions required to abate said release or otherwise to come into
compliance with applicable Environmental Law, and (d) promptly provide Agent
with written notice within 10 days of the receipt of any of the following:  (i) notice that an Environmental Lien has
been filed against any of the real or personal property of Borrower or its
Subsidiaries, (ii) commencement of any Environmental Action or notice that an
Environmental Action will be filed against Borrower or its Subsidiaries, and
(iii) notice of a violation, citation, or other administrative order which
reasonably could be expected to result in a Material Adverse Change.

 

6.15 Disclosure
Updates.  Promptly and in no event later than 5
Business Days after obtaining knowledge thereof, (a) notify Agent if any
written information, exhibit, or report furnished to the Lender Group contained
any untrue statement of a material fact or omitted to state any material fact
necessary to make the statements contained therein not misleading in light of the
circumstances in which made, and (b) correct any defect or error that may be
discovered therein or in any Loan Document or in the execution,
acknowledgement, filing, or recordation thereof.

 

74

 

6.16 Copyrights. 
Maintain copies of all source and object code for the material software
in which Borrower or a Guarantor has an interest at safe and secure offsite
locations reasonably acceptable to Agent and shall, at the request of Agent,
advise the operators of such locations of Agent’s security interest in such
software, shall keep Agent fully informed of each such location, and shall
maintain the currency of all such software stored offsite.

 

7.                   NEGATIVE COVENANTS.

 

Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations,
Borrower will not and will not permit any of its Subsidiaries to do any of the
following:

 

7.1 Indebtedness. 
Create, incur, assume, permit, 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 5.20,

 

(c)  Permitted Purchase Money Indebtedness,

 

(d)  refinancings, renewals, or extensions of
Indebtedness permitted under clauses (b) and (c) of this Section 7.1
(and continuance or renewal of any Permitted Liens associated therewith) so
long as: (i) the terms and conditions of such refinancings, renewals, or
extensions do not, in Agent’s judgment, materially impair the prospects of
repayment of the Obligations by Borrower and the Guarantors or materially
impair Borrower’s and the Guarantors’ creditworthiness, (ii) 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, (iii) 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 Borrower and
the Guarantors, (iv) if the Indebtedness that is refinanced, renewed, or
extended was contractually or structurally 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 favorable to the Lender Group as those that were applicable to the
refinanced, renewed, or extended Indebtedness, and (v) the refinancing
Indebtedness 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,

 

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

 

(f)  Indebtedness in respect of outstanding
insurance premiums relating to Borrower’s directors and officers insurance
coverage payable to the applicable insurance

 

75

 

carrier (or its third-party financing
Affiliate), in the ordinary course of business, in an aggregate outstanding
amount at any one time not in excess of $2,500,000,

 

(g)  Indebtedness composing taxes, assessments or
governmental charges to the extent the payment thereof shall not at the time be
required to be made,

 

(h)  Indebtedness arising from judgments or
decrees in circumstances not constituting an Event of Default under Section
8.8,

 

(i)  Permitted Subordinated Debt,

 

(j)  Permitted Guarantees, and

 

(k)  Indebtedness composing Permitted Investments.

 

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

 

7.3 Restrictions
on Fundamental Changes.

 

(a)  Except in connection with the consummation
of Permitted Reorganization Transactions, or Permitted Acquisitions, enter into
any merger, consolidation, reorganization, or recapitalization, or reclassify
its Stock.

 

(b)  Except in connection with the consummation
of Permitted Reorganization Transactions, liquidate, wind up, or dissolve
itself (or suffer any liquidation or dissolution).

 

(c)  Except in connection with the consummation
of Permitted Reorganization Transactions or Permitted Dispositions, convey,
sell, lease, license, assign, transfer, or otherwise dispose of, in one
transaction or a series of transactions, all or any substantial part of its
assets.

 

7.4 Disposal of
Assets.  Other than Permitted Dispositions or
Permitted Reorganization Transactions, convey, sell, lease, license, assign,
transfer, or otherwise dispose of any of Borrower’s or its Subsidiaries assets.

 

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

 

76

 

7.6
Nature of Business.  Make
any material change in the principal nature of its or their business.

 

7.7
Prepayments and Amendments.

 

(a)  Except in connection with a refinancing
permitted by Section 7.1(d) and except for Permitted Intercompany
Advances, prepay, redeem, defease, purchase, or otherwise acquire any
Indebtedness of Borrower or its Subsidiaries, other than the Obligations in
accordance with this Agreement, and

 

(b) 
Except in connection with a refinancing permitted by Section 7.1(d),
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 Sections
7.1(b) or (c) (including without limitation the AES Documents, the
Dassault Documents, the GE Transactional Documents or the Indenture Documents),
in each case as in effect as of the Closing Date) if any such amendment,
modification, alteration, increase or change could reasonably be expected to
have an adverse effect on the Lender Group, Borrower or any of its
Subsidiaries.

 

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

 

7.9 [Intentionally Omitted].

 

7.10
Distributions.  Other
than Permitted Distributions, make any distribution or declare or pay any
dividends (in cash or other property, other than common Stock) on, or purchase,
acquire, redeem, or retire any of Borrower’s Stock, of any class, whether now
or hereafter outstanding.

 

7.11
Accounting Methods.  Without Agent’s prior written consent, modify or change
its method of accounting (other than as may be required to conform to GAAP) or
enter into, modify, or terminate any agreement currently existing, or at any
time hereafter entered into with any third party accounting firm or service
bureau for the preparation or storage of Borrower’s or its Subsidiaries’
accounting records without said accounting firm or service bureau agreeing to
provide Agent information regarding Borrower’s and its Subsidiaries’ financial
condition.

 

7.12
Investments.  Except
for Permitted Investments, directly or indirectly, make or acquire any
Investment or incur any liabilities (including contingent obligations) for or
in connection with any Investment; provided, however, that
Borrower and the Guarantors shall not have Permitted Investments in DDAs or
Securities Accounts in an aggregate amount in excess of $250,000 at any one
time (calculated, for the first 10 days following the Closing Date, exclusive
of the Permitted Investments maintained by Borrower in its Securities Account
maintained with SSB) unless Borrower or the Guarantor, as applicable, 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

 

77

 

such Permitted
Investments.  Subject to the foregoing
proviso, Borrower shall not and shall not permit the Guarantors to establish or
maintain any DDA or Securities Account unless Agent shall have received a
Control Agreement in respect of such DDA or Securities Account.  So long as any Permitted Intercompany Advance made on or after the
Closing Date is outstanding with respect to any Subsidiary of Borrower that is
not a Guarantor, all such Subsidiaries shall not have Permitted Investments in
DDAs or Securities Accounts in an aggregate amount in excess of $17,000,000 at
any one time.

 

7.13
Transactions with Affiliates. 
Other than in connection with a Permitted
Intercompany Advance and other than the deferral of royalty revenues to address
temporary working capital needs, directly or indirectly enter into or permit to
exist any transaction with any Affiliate of Borrower except for transactions
that are in the ordinary course of business, upon fair and reasonable terms,
that are fully disclosed to Agent, and that are no less favorable than would be
obtained in an arm’s length transaction with a non-Affiliate.

 

7.14
Suspension.  Suspend
or go out of a substantial portion of its or their business.

 

7.15
Compensation.  Fail to cause the compensation
of the members of Borrower’s Board of Directors and officers to be reviewed on
an annual basis by an independent committee of Borrower’s Board of Directors.

 

7.16
Use of Proceeds.  Use the proceeds of the
Advances and the Term Loan for any purpose other than (a) on the Closing Date,
(i) to repay, in full, the outstanding principal, accrued interest, and accrued
fees and expenses owing to Existing Lender, and (ii) to pay transactional fees, costs, and expenses incurred in
connection with this Agreement, the other Loan Documents, and the transactions
contemplated hereby and thereby, and (b) thereafter, consistent with the terms
and conditions hereof, for its lawful and permitted purposes.

 

7.17
Inventory and Equipment
with Bailees.  Store the Inventory or Equipment of Borrower or its Subsidiaries
at any time now or hereafter with a bailee, warehouseman, or similar party
without Agent’s prior written consent.

 

7.18
Financial Covenants.

 

(a)  Fail to maintain or achieve:

 

(i)            Minimum
EBITDA.  EBITDA, measured on
a fiscal quarter-end basis, of at least the required amount set forth in the
following table for the applicable period set forth opposite thereto:

 

78

 

	
  Applicable
  Amount

  	
   

  	
  Applicable Period

  
	
  $

  	
  12,750,000

  	
   

  	
  For the 3 month period

  ending December 31, 2002

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  20,500,000

  	
   

  	
  For the 6 month period

  ending March 31, 2003

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  29,500,000

  	
   

  	
  For the 9 month period

  ending June 30, 2003

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  40,500,000

  	
   

  	
  For the 12 month period

  ending September 30, 2003

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  43,000,000

  	
   

  	
  For the 12 month period

  ending December 31, 2003

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  45,000,000

  	
   

  	
  For the 12 month period

  ending March 31, 2004

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  48,000,000

  	
   

  	
  For the 12 month period

  ending June 30, 2004

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  50,500,000

  	
   

  	
  For the 12 month period

  ending September 30, 2004

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  54,000,000

  	
   

  	
  For the 12 month period

  ending December 31, 2004 and each fiscal quarter

  ended thereafter

  

 

(ii)           Minimum
Recurring Revenues.
Recurring Revenues, measured on the last day of each of Borrower’s fiscal
quarters of at least the required amount set forth in the following table for
the applicable period set forth opposite thereto:

 

	
  Applicable
  Amount

  	
   

  	
  Applicable Period

  
	
  $

  	
  20,000,000

  	
   

  	
  For the 3 month period

  ending December 31, 2002

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  21,000,000

  	
   

  	
  For the 3 month period

  ending March 31, 2003

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  22,000,000

  	
   

  	
  For the 3 month period

  ending June 30, 2003

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  22,000,000

  	
   

  	
  For the 3 month period

  ending September 30, 2003

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  23,000,000

  	
   

  	
  For the 3 month period

  ending December 31, 2003

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  24,000,000

  	
   

  	
  For the 3 month period

  ending March 31, 2004 and each fiscal quarter ended

  thereafter

  

 

79

 

(iii)          Minimum
Liquidity.  (A) from and after the Closing
Date until December 31, 2003, (I) Obligor Excess Availability plus Qualified
Cash at any time of at least $5,000,000, and (II) unrestricted cash and Cash
Equivalents of Borrower’s Subsidiaries other than the Guarantors, Consolidated
Excess Availability and Qualified Cash in an amount not less than $20,000,000,
(B) from and after January 1, 2004 until December 31, 2004, (I) Obligor Excess
Availability plus Qualified Cash at any time of at least $12,500,000, and (II)
unrestricted cash and Cash Equivalents of Borrower’s Subsidiaries other than
the Guarantors, Consolidated Excess Availability and Qualified Cash in an
amount not less than $40,000,000, and (C) from and after January 1, 2005, (I)
Obligor Excess Availability plus Qualified Cash at any time of at least
$15,000,000, and (II) unrestricted cash and Cash Equivalents of Borrower’s
Subsidiaries other than the Guarantors, Consolidated Excess Availability and
Qualified Cash in an amount not less than $50,000,000.

 

(b) 
Make:

 

(i)            Capital
Expenditures.  Capital Expenditures in any
fiscal period in excess of the amount set forth in the following table for the
applicable period set forth opposite thereto:

 

	
  Applicable
  Amount

  	
   

  	
  Applicable Period

  
	
  $

  	
  3,150,000

  	
   

  	
  For the 3 month period 

  ending December 31, 2002

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  12,100,000

  	
   

  	
  For the 12 month period 

  ending December 31, 2003

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  14,000,000

  	
   

  	
  For the 12 month period 

  ending December 31, 2004

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  16,100,000

  	
   

  	
  For the 12 month period 

  ending December 31, 2005

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  18,500,000

  	
   

  	
  For the 12 month period 

  ending December 31, 2006 

  

 

80

 

If any amount
so permitted to be expended for Capital Expenditures during any such Fiscal
Year is not expended during any such fiscal period of Borrower, the Borrower
and its Subsidiaries may make additional Capital Expenditures in the succeeding
fiscal year so long as the amount of such additional Capital Expenditures does
not exceed $250,000 with respect to the fiscal period ending December 31, 2002,
or $1,000,000 with respect to any fiscal year thereafter.

 

7.19 Copyright Registrations.  Other than copyrights registered with the
United States Copyright Office on or before the Closing Date, register any
copyrights or permit any copyrights in which Borrower or a Guarantor has in
interest to be registered, in each case with the United States Copyright
Office, unless Borrower gives Agent 30 days prior written notice thereof, and
concurrent with such registration, executes and delivers such amendments or
supplements to the Copyright Security Agreement, or such additional copyright
security agreements, in each case as Agent shall require in its discretion.

 

8.                   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:

 

8.1 If Borrower fails to pay when due and
payable, or when declared due and payable, all or any portion of the
Obligations (whether of principal, interest (including any interest which, but
for the provisions of the Bankruptcy Code, would have accrued on such amounts),
fees and charges due the Lender Group, reimbursement of Lender Group Expenses,
or other amounts constituting Obligations);

 

8.2  If
Borrower or any of its Subsidiaries fail to (a) perform, keep, or observe any
covenant or other provision contained in Sections 6.2, 6.3, 6.4, 6.7, 6.10,
or 6.11 hereof and such failure or neglect continues for a period of 5 days
after the date on which such failure or neglect first occurs, or (b) perform,
keep, or observe any covenant or other provision contained in Sections 6.1,
6.5, 6.6, 6.9, 6.12, or 6.14 hereof or any other Section of this Agreement
(other than a Section that is expressly dealt with elsewhere in this Section
8) or the other Loan Documents (other than a Section of such other Loan
Documents dealt with elsewhere in this Section 8) and such failure or
neglect is not cured within 15 days after the date on which such failure or
neglect first occurs, (c) perform, keep, or observe any covenant or other
provision contained in Section 3.2, Section 6 (other than a
subsection of Section 6 that is dealt with elsewhere in this Section
8), or Section 7 of this Agreement or any comparable provision
contained in any of the other Loan Documents;

 

8.3 If any material portion of Borrower’s or
its Subsidiaries’ assets is attached, seized, subjected to a writ or distress
warrant, levied upon, or comes into the possession of any third Person;

 

81

 

8.4 If an Insolvency Proceeding is commenced
by Borrower or any of its Subsidiaries;

 

8.5 If an Insolvency Proceeding is commenced
against Borrower, or any of its Subsidiaries, and any of the following events
occur:  (a) Borrower or the
Subsidiary consents to the institution of such Insolvency Proceeding against
it, (b) the petition commencing the Insolvency Proceeding is not timely
controverted, (c) the petition commencing the Insolvency Proceeding is not
dismissed within 45 calendar days of the date of the filing thereof; provided,
however, that, during  the pendency of such period, Agent (including any
successor agent) and each other member of the Lender Group shall be relieved of
their obligations to extend credit hereunder, (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, Borrower or any of its Subsidiaries, or (e) an order for
relief shall have been entered therein;

 

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

 

8.7 If a notice of Lien, levy, or assessment is filed of
record with respect to any of Borrower’s or any of its Subsidiaries’ assets by
the United States, or any department, agency, or instrumentality thereof, or by
any state, county, municipal, or governmental agency, or if any taxes or debts
owing at any time hereafter to any one or more of such entities becomes a Lien,
whether choate or otherwise, upon any of Borrower’s or any of its Subsidiaries’
assets and the same is not paid before such payment is delinquent;

 

8.8 If a judgment or other claim in excess of $250,000
becomes a Lien or encumbrance upon any material portion of Borrower’s or any of
its Subsidiaries’ assets;

 

8.9 If (a) there is a default under or with respect to the
AES Documents, the Dassault Documents, the GE Transactional Documents, the
Indenture Documents, or any agreement or document evidencing Indebtedness for
borrowed money, which when aggregated with all other such defaults of Borrower
and its Subsidiaries or any of them equals or exceeds $250,000, if the effect
of such default (i) occurs at the final maturity of the obligations thereunder,
or (ii) results in a right by the other party thereto, irrespective of whether
exercised, to accelerate the maturity of Borrower’s or its Subsidiaries’
obligations thereunder, unless such right is waived, or (b) there is a default
in any other agreement to which Borrower or any of its Subsidiaries is a party the
loss of which could reasonably be expected to result in a Material Adverse
Effect and such default results in a right by the other party thereto,
irrespective of whether exercised, to terminate such agreement, or to refuse to
renew such agreement pursuant to an automatic renewal right therein, unless
such right is waived;

 

8.10 If Borrower or any of its Subsidiaries makes any
payment on account of Indebtedness that has been contractually subordinated in
right of payment to the payment of the Obligations, except to the extent such
payment is permitted (or not prohibited) by the terms of the subordination
provisions applicable to such Indebtedness;

 

82

 

8.11 If any material misstatement or misrepresentation exists
now or hereafter in any warranty, representation, statement, or Record made to
the Lender Group by Borrower, any Guarantor, or any officer, employee, agent,
or director of Borrower or any Guarantor;

 

8.12 If the obligation of a Guarantor under the Guaranty is limited or
terminated by operation of law or by such Guarantor thereunder; or

 

8.13 If this Agreement or any other Loan Document that purports to create a
Lien, shall, for any reason, fail or cease to create a valid and perfected 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 (other
than the failure of this Agreement or any other Loan Document to create a
perfected Lien in and to property and assets having an aggregate value of less
than $50,000); or

 

8.14 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 Borrower or its Subsidiaries, or a proceeding
shall be commenced by Borrower or its Subsidiaries, or by any Governmental
Authority having jurisdiction over Borrower or its Subsidiaries, seeking to
establish the invalidity or unenforceability thereof, or Borrower or its
Subsidiaries shall deny that Borrower or its Subsidiaries has any liability or
obligation purported to be created under any Loan Document.

 

9.                   THE LENDER GROUP’S RIGHTS AND
REMEDIES.

 

9.1
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 Borrower:

 

(a)  Declare all 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 Borrower under this Agreement, under any of the Loan
Documents, or under any other agreement between Borrower 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;

 

(d)  Settle or adjust disputes and claims
directly with Borrower’s Account Debtors for amounts and upon terms which Agent
considers advisable, and in such cases, Agent will credit Borrower’s Loan
Account with only the net amounts received by

 

83

 

Agent in
payment of such disputed Accounts after deducting all Lender Group Expenses
incurred or expended in connection therewith;

 

(e)  Cause Borrower to hold all of its returned
Inventory in trust for the Lender Group and segregate all such Inventory from
all other assets of Borrower or in Borrower’s possession;

 

(f)  Without notice to or demand upon Borrower or
any Guarantor, make such payments and do such acts as Agent considers necessary
or reasonable to protect its security interests in the Collateral.  Borrower agrees to assemble the Personal
Property Collateral if Agent so requires, and to make the Personal Property
Collateral available to Agent at a place that Agent may designate which is
reasonably convenient to both parties. 
Borrower authorizes Agent to enter the premises where the Personal
Property Collateral is located, to take and maintain possession of the Personal
Property Collateral, or any part of it, and to pay, purchase, contest, or
compromise any Lien that in Agent’s determination appears to conflict with the
Agent’s Liens and to pay all expenses incurred in connection therewith and to
charge Borrower’s Loan Account therefor. 
With respect to any of Borrower’s owned or leased premises, Borrower
hereby grants Agent a license to enter into possession of such premises and to
occupy the same, without charge, in order to exercise any of the Lender Group’s
rights or remedies provided herein, at law, in equity, or otherwise;

 

(g)  Without notice to Borrower (such notice
being expressly waived), and without constituting a retention of any collateral
in satisfaction of an obligation (within the meaning of the Code), set off and
apply to the Obligations any and all (i) balances and deposits of Borrower held
by the Lender Group (including any amounts received in the Cash Management
Accounts), or (ii) Indebtedness at any time owing to or for the credit or the
account of Borrower held by the Lender Group;

 

(h)  Hold, as cash collateral, any and all
balances and deposits of Borrower held by the Lender Group, and any amounts
received in the Cash Management Accounts, to secure the full and final
repayment of all of the Obligations;

 

(i)  Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Personal Property Collateral.  Borrower hereby grants to Agent a license or
other right to use, without charge, Borrower’s labels, patents, copyrights,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any property of a similar nature, as it pertains to the Personal Property
Collateral, in completing production of, advertising for sale, and selling any
Personal Property Collateral and Borrower’s rights under all licenses and all
franchise agreements shall inure to the Lender Group’s benefit;

 

(j)  Sell the Personal Property Collateral at
either a public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places
(including Borrower’s premises) as Agent determines is commercially
reasonable.  It is not necessary that
the Personal Property Collateral be present at any such sale;

 

84

 

(k)  Agent shall give notice of the disposition
of the Personal Property Collateral as follows:

 

(i)            Agent shall give
Borrower a notice in writing of the time and place of public sale, or, if the
sale is a private sale or some other disposition other than a public sale is to
be made of the Personal Property Collateral, the time on or after which the
private sale or other disposition is to be made; and

 

(ii)           The notice shall be
personally delivered or mailed, postage prepaid, to Borrower as provided in Section
12, at least 10 days before the earliest time of disposition set forth in
the notice; no notice needs to be given prior to the disposition of any portion
of the Personal Property Collateral that is perishable or threatens to decline
speedily in value or that is of a type customarily sold on a recognized market;

 

(l)  Agent, on behalf of the Lender Group, may
credit bid and purchase at any public sale; and

 

(m)  Agent may seek the appointment of a receiver
or keeper to take possession of all or any portion of the Collateral or to
operate same and, to the maximum extent permitted by law, may seek the
appointment of such a receiver without the requirement of prior notice or a
hearing;

 

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

 

(o) 
Any deficiency that exists after disposition of the Personal Property
Collateral as provided above will be paid immediately by Borrower.  Any excess will be returned, without
interest and subject to the rights of third Persons, by Agent to Borrower.

 

9.2
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.

 

10.            TAXES AND EXPENSES.

 

If Borrower or any of its Subsidiaries 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 Borrower, may do any or all of the
following:  (a) make payment of the same
or any part thereof, (b) set up such

 

85

 

reserves in Borrower’s Loan Account 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 6.8
hereof, obtain and maintain insurance policies of the type described in Section
6.8 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.

 

11.            WAIVERS; INDEMNIFICATION.

 

11.1
Demand; Protest; etc.  Except to the extent specifically and expressly provided
for herein, Borrower waives demand, protest, notice of protest, notice of
default or dishonor, notice of payment and nonpayment, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of documents,
instruments, chattel paper, and guarantees at any time held by the Lender Group
on which Borrower may in any way be liable.

 

11.2
The Lender Group’s
Liability for Collateral.  Borrower hereby agrees that:  (a) so long as Agent complies with its obligations, if any, under
the Code, the Lender Group shall not in any way or manner be liable or
responsible for:  (i) the safekeeping of
the Collateral, (ii) any loss or damage thereto occurring or arising in any
manner or fashion from any cause, (iii) any diminution in the value thereof, or
(iv) any act or default of any carrier, warehouseman, bailee, forwarding
agency, or other Person, and (b) all risk of loss, damage, or destruction of
the Collateral shall be borne by Borrower.

 

11.3
Indemnification. 
Borrower shall pay, indemnify, defend, and hold the Agent-Related
Persons, the Lender-Related Persons with respect to each Lender, each
Participant, and each of their respective officers, directors, employees,
agents, and attorneys-in-fact (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 (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
of this Agreement, any of the other Loan Documents, or the transactions
contemplated hereby or thereby, 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 contrary notwithstanding, Borrower shall have no
obligation to any Indemnified Person under this Section 11.3 with
respect to any Indemnified Liability that a court of competent jurisdiction
finally determines to have resulted from the gross negligence or willful

 

86

 

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 Borrower was required to indemnify the
Indemnified Person receiving such payment, the Indemnified Person making such
payment is entitled to be indemnified and reimbursed by Borrower 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, TO
THE EXTENT THAT A COURT OF COMPETENT JURISDICTION HAS NOT FINALLY DETERMINED
THAT SUCH NEGLIGENT ACT OR OMISSION CONSTITUTES GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT BY SUCH INDEMNIFIED PERSON.

 

12.            NOTICES.

 

Unless otherwise provided in this Agreement, all notices or demands by
Borrower 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 Borrower or Agent, as applicable, may designate to each
other in accordance herewith), or telefacsimile to Borrower or Agent, as the
case may be, at its address set forth below:

 

	
   

  	
   

  	
  If to Borrower:

  	
  MSC.SOFTWARE
  CORPORATION

  	
   

  
	
   

  	
   

  	
   

  	
  2 MacArthur Place

  	
   

  
	
   

  	
   

  	
   

  	
  Santa Ana, California 92707-5924

  	
   

  
	
   

  	
   

  	
   

  	
  Attn: Louis Greco

  	
   

  
	
   

  	
   

  	
   

  	
  Fax No.
  714.784.4155

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with copies to:

  	
  O’MELVENY &
  MYERS

  	
   

  
	
   

  	
   

  	
   

  	
  400 South Hope Street

  	
   

  
	
   

  	
   

  	
   

  	
  Los Angeles, California 90071-2899

  	
   

  
	
   

  	
   

  	
   

  	
  Attn:  Ann C. Menard, Esq.

  	
   

  
	
   

  	
   

  	
   

  	
  Fax No.
  213.430.6407

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If to Agent:

  	
  FOOTHILL CAPITAL
  CORPORATION

  	
   

  
	
   

  	
   

  	
   

  	
  2450 Colorado Avenue

  	
   

  
	
   

  	
   

  	
   

  	
  Suite 3000 West

  	
   

  
	
   

  	
   

  	
   

  	
  Santa Monica, California 
  90404

  	
   

  
	
   

  	
   

  	
   

  	
  Attn: Business Finance Division Manager

  	
   

  
	
   

  	
   

  	
   

  	
  Fax No. 310.453.7413

  	
   

  

 

87

 

	
   

  	
   

  	
  with copies to:

  	
  BROBECK, PHLEGER
  & HARRISON LLP

  	
   

  
	
   

  	
   

  	
   

  	
  550 South Hope Street, 24th Floor

  	
   

  
	
   

  	
   

  	
   

  	
  Los Angeles, California 90071

  	
   

  
	
   

  	
   

  	
   

  	
  Attn:  John Francis Hilson,
  Esq.

  	
   

  
	
   

  	
   

  	
   

  	
  Fax No.
  213.745.3345

  	
   

  

 

Agent and Borrower may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other party.  All notices or demands
sent in accordance with this Section 12, 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.  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.

 

13.            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 NEW YORK.

 

(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 FEDERAL COURTS LOCATED IN THE COUNTY
OF NEW YORK, STATE OF NEW YORK, 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.  BORROWER AND THE LENDER GROUP WAIVE, TO THE
EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE
DOCTRINE OF FORUM  NON  CONVENIENS OR TO OBJECT TO VENUE TO
THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b).

 

88

 

(c)  BORROWER AND THE LENDER GROUP HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.  BORROWER AND 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.

 

14.            ASSIGNMENTS AND PARTICIPATIONS;
SUCCESSORS.

 

14.1
Assignments and
Participations.

 

(a)  Any Lender may, with the written consent of
Agent and Borrower (provided that no written consent of Agent or Borrower shall
be required in connection with any assignment and delegation by a Lender to an
Eligible Transferee), 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 (except such minimum amount shall
not apply to any Affiliate of a Lender or to a Related Fund or account managed
by a Lender); provided, however, that Borrower 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 Borrower and Agent
by such Lender and the Assignee, (ii) such Lender and its Assignee have
delivered to Borrower and Agent an Assignment and Acceptance in form and
substance satisfactory to Agent, and (iii) the assignor Lender or Assignee has
paid to Agent for Agent’s separate account a processing fee in the amount of
$5,000.  Anything contained herein to
the contrary notwithstanding, the consent of Agent or Borrower shall not be
required (and payment of any fees shall not be required) if (y) 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 such Lender or (z) the Assignee is an Affiliate of a Lender or a Related
Fund.

 

(b)  From and after the date that Agent notifies
the assignor Lender (with a copy to 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 assignor Lender shall, to the extent
that rights and obligations hereunder and under the other Loan Documents have
been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights (except with respect to

 

89

 

Section
11.3 hereof) and be released from its 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
Borrower and the Assignee.

 

(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 Borrower or the
performance or observance by Borrower of any of its 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 each Assignee’s making its
processing fee payment under the Assignment and Acceptance and receipt and
acknowledgment by Agent of such 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, with the written
consent of Agent, sell to one or more commercial banks, financial institutions,
or other Persons not Affiliates of such Lender (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 that no written consent of Agent
shall be required in connection with any sale of any such participating
interests by a Lender to an Eligible Transferee); 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

 

90

 

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) Borrower, Agent, and the Lenders shall continue to deal solely and
directly with the Originating Lender in connection with the Originating
Lender’s rights and obligations under this Agreement and the other Loan
Documents, (iv) no Lender shall transfer or grant any participating
interest under which the Participant has the right to approve any amendment to,
or any consent or waiver with respect to, this Agreement or any other Loan
Document, except to the extent such amendment to, or consent or waiver with
respect to this Agreement or of any other Loan Document would (A) extend the
final maturity date of the Obligations hereunder in which such Participant is
participating, (B) reduce the interest rate applicable to the Obligations
hereunder in which such Participant is participating, (C) release all or a
material portion 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 Borrower hereunder shall be determined as if such Lender had not
sold such participation, except that, if amounts outstanding under this
Agreement are due and unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of set–off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement.  The rights
of any Participant only shall be derivative through the Originating Lender with
whom such Participant participates and no Participant shall have any rights
under this Agreement or the other Loan Documents or any direct rights as to the
other Lenders, Agent, Borrower, the Collections of Borrower or its
Subsidiaries, the Collateral, or otherwise in respect of the Obligations.  No Participant shall have the right to participate
directly in the making of decisions by the Lenders among themselves.

 

(f)  In connection with any such assignment or
participation or proposed assignment or participation, a Lender may, subject to
the provisions of Section 17.8, disclose all documents and information
which it now or hereafter may have relating to Borrower or Borrower’s business.

 

(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 §203.14, and such Federal Reserve Bank may enforce such
pledge or security interest in any manner permitted under applicable law.

 

(h) 
Agent, in its capacity as agent for the Borrower, shall maintain, or
cause to be maintained, a register (the “Register”) on which it enters
the name of a Lender

 

91

 

as the registered owner of the Borrowings held by such
Lender.  A Registered Loan (and the
Registered Note, if any, evidencing the same) may be assigned or sold in whole
or in part only by registration of such assignment or sale on the Register (and
each Registered Note shall expressly so provide).  Any assignment or sale of all or part of such Registered Loan
(and the Registered Note, if any, evidencing the same) may be effected only by
registration of such assignment or sale on the Register, together with the
surrender of the Registered Note, if any, evidencing the same duly endorsed by
(or accompanied by a written instrument of assignment or sale duly executed by)
the holder of such Registered Note, whereupon, at the request of the designated
assignee(s) or transferee(s), one or more new Registered Notes in the same
aggregate principal amount shall be issued to the designated assignee(s) or
transferee(s).  Prior to the
registration of assignment or sale of any Registered Loan (and the Registered
Note, if any, evidencing the same), Agent shall treat the Person in whose name
such Registered Loan (and the Registered Note, if any, evidencing the same) is
registered as the owner thereof for the purpose of receiving all payments
thereon and for all other purposes, notwithstanding notice to the
contrary.  In the case of an assignment
or delegation covered by Section 14.1(a)(z), the Lender that is the
assignee shall maintain a comparable Register on behalf of Borrower.

(i) 
In the event that a Lender sells participations in the Registered Loan,
such Lender shall maintain a register on which it enters the name of all
participants in the Registered Loans held by it (the “Participant Register”).  A Registered Loan (and the Registered Note,
if any, evidencing the same) may be participated in whole or in part only by
registration of such participation on the Participant Register (and each
Registered Note shall expressly so provide). 
Any participation of such Registered Loan (and the Registered Note, if
any, evidencing the same) may be effected only by the registration of such
participation on the Participant Register.

 

14.2
Successors.  This Agreement shall bind and
inure to the benefit of the respective successors and assigns of each of the
parties; provided, however, that Borrower 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 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 14.1
hereof and, except as expressly required pursuant to Section 14.1
hereof, no consent or approval by Borrower is required in connection with any
such assignment.

 

15.            AMENDMENTS; WAIVERS.

 

15.1
Amendments and Waivers.  No amendment
or waiver of any provision of this Agreement or any other Loan Document, and no
consent with respect to any departure by Borrower therefrom, shall be effective
unless the same shall be in writing and signed by the Required Lenders (or by
Agent at the written request of the Required Lenders) and Borrower and then any
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given; provided, however, that no
such waiver,

 

92

 

amendment, or consent
shall, unless in writing and signed by all of the Lenders affected thereby and
Borrower, 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 percentage of the Commitments
that is required to take any action hereunder,

 

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

 

(f)  release Collateral other than as permitted
by Section 16.12,

 

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

 

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

 

(i)  release any Borrowing Base Participant or
any other Guarantor (unless the Required Lenders approve the sale of the Stock
of a Guarantor) from any obligation for the payment of money, or

 

(j)  amend any of the provisions of Section 16.

 

(k) 
and, provided further, however, that no amendment, waiver
or consent shall, unless in writing and signed by the holders of a majority of
the Revolver Commitments and the Required Lenders, change the definition of
Borrowing Base or the definitions of Eligible Accounts, Maximum Revolver
Amount, Term Loan Amount, or change Section 2.1(b), 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 Borrower, shall not require
consent by or the agreement of Borrower.

 

93

 

15.2 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 Agreement, 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 Agreement prior to the effective date of such
replacement, the Holdout Lender shall be deemed to have executed and delivered
such Assignment and Acceptance Agreement. 
The replacement of any Holdout Lender shall be made in accordance with
the terms of Section 14.1.  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.

 

15.3
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 Borrower 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.

 

16.            AGENT; THE LENDER GROUP.

 

16.1
Appointment and
Authorization of Agent.  Each Lender hereby designates and appoints Foothill 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.

 

94

 

Agent agrees to act as such on
the express conditions contained in this Section 16.  The provisions of this Section 16 are
solely for the benefit of Agent, and the Lenders, and Borrower shall have no
rights as a third party beneficiary of any of the provisions contained
herein.  Any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document
notwithstanding, Agent shall not have any duties or responsibilities, except
those expressly set forth herein, nor shall Agent have or be deemed to have any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against Agent; it being
expressly understood and agreed that the use of the word “Agent” is for
convenience only, that Foothill 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 Borrower and the Guarantors,
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 Borrower and the Guarantors as provided in the Loan
Documents, (e) open and maintain such bank accounts and cash management
arrangements as Agent deems necessary and appropriate in accordance with the
Loan Documents for the foregoing purposes with respect to the Collateral and
the Collections of Borrower and the Guarantors, (f) perform, exercise, and
enforce any and all other rights and remedies of the Lender Group with respect
to Borrower, the Obligations, the Collateral, the Collections of Borrower and
the Guarantors, 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.

 

16.2 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.

 

16.3 Liability of
Agent.  None of the Agent-Related Persons shall (i)
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 (ii) be responsible in any manner to any

 

95

 

of the Lenders
for any recital, statement, representation or warranty made by Borrower or any
Subsidiary or Affiliate of 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 Borrower or any other party to any Loan Document to perform
its obligations hereunder or thereunder. 
No Agent-Related Person shall be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the Books or properties of Borrower or the books or
records or properties of any of Borrower’s Subsidiaries or Affiliates.

 

16.4 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, facsimile, 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 Borrower 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 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 Lenders and such request and any action taken or
failure to act pursuant thereto shall be binding upon all of the Lenders.

 

16.5 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, except with
respect to Events of Default of which Agent has actual knowledge, unless Agent
shall have received written notice from a Lender or 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 16.4, 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 9; provided,
however, that unless and until Agent has received any such request,
Agent may (but shall not be

 

96

 

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.

 

16.6 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
Borrower and its Subsidiaries or Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender.  Each Lender represents to Agent that it has,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of Borrower and
any other Person (other than the Lender Group) party to a Loan Document, and
all applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to Borrower.  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 Borrower and any other
Person (other than the Lender Group) 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 Borrower and any
other Person party to a Loan Document that may come into the possession of any
of the Agent-Related Persons.

 

16.7 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, costs of collection by outside collection agencies and auctioneer
fees and costs of security guards or insurance premiums paid to maintain the
Collateral, whether or not Borrower is obligated to reimburse Agent or Lenders
for such expenses pursuant to the Loan Agreement or otherwise.  Agent is authorized and directed to deduct
and retain sufficient amounts from the Collections of Borrower and its
Subsidiaries received by Agent to reimburse Agent for such out-of-pocket costs
and expenses prior to the distribution of any amounts to Lenders.  In the event Agent is not reimbursed for
such costs and expenses from the Collections of Borrower and its 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 Borrower and without limiting the obligation of Borrower 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

 

97

 

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
ratable share of any costs or out-of-pocket expenses (including attorneys 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 Borrower.  The undertaking in this Section shall
survive the payment of all Obligations hereunder and the resignation or
replacement of Agent.

 

16.8 Agent
in Individual Capacity. 
Foothill 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 Borrower and its Subsidiaries and Affiliates
and any other Person (other than the Lender Group) party to any Loan Documents
as though Foothill 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, Foothill or its Affiliates may receive
information regarding Borrower or its Affiliates and any other Person (other
than the Lender Group) party to any Loan Documents that is subject to
confidentiality obligations in favor of Borrower 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 Foothill in its individual capacity.

 

16.9 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, which successor Agent, so long as a Default or Event of Default
has not occurred and is not continuing, shall be reasonably satisfactory to
Borrower.  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, which successor
Agent, so long as a Default or Event of Default has not occurred and is not
continuing, shall be reasonably satisfactory to Borrower.  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 16
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this

 

98

 

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.

 

16.10 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 Borrower and its Subsidiaries and
Affiliates and any other Person (other than the Lender Group) 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 Borrower or its Affiliates and any other Person (other
than the Lender Group) party to any Loan Documents that is subject to
confidentiality obligations in favor of Borrower 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 not shall be under any obligation to
provide such information to them.  With
respect to the Swing Loans and Agent Advances, Swing Lender shall have the same
rights and powers under this Agreement as any other Lender and may exercise the
same as though it were not the sub-agent of Agent.

 

16.11 Withholding
Taxes.

 

(a)  If any Lender is a “foreign person” within
the meaning of the IRC and such Lender claims exemption from, or a reduction
of, U.S. withholding tax under Sections 1441 or 1442 of the IRC, such Lender
agrees with and in favor of Agent and Borrower, to deliver to Agent and
Borrower:

 

(i)            if such Lender claims an exemption
from 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 Borrower (within the meaning of Section 871(h)(3)(B) of the
IRC), or (III) a controlled foreign corporation related to Borrower within the
meaning of Section 864(d)(4) of the IRC, and (B) a properly completed and
executed IRS Form W-8BEN, before the first payment of any interest under this
Agreement and at any other time reasonably requested by Agent or Borrower;

 

(ii)           if such Lender claims an exemption
from, or a reduction of, withholding tax under a United States tax treaty,
properly completed and executed IRS Form W-8BEN before the first payment of any
interest under

 

99

 

this Agreement and at any
other time reasonably requested by Agent or Borrower;

 

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

 

(iv)          such other form or forms 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 tax.

 

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

 

(b)  If any Lender claims exemption from, or reduction
of, withholding tax under a United States tax treaty by providing IRS Form
W-8BEN and such Lender sells, assigns, grants a participation in, or otherwise
transfers all or part of the Obligations of Borrower to such Lender, such
Lender agrees to notify Agent of the percentage amount in which it is no longer
the beneficial owner of Obligations of Borrower to such Lender.  To the extent of such percentage amount,
Agent will treat such Lender’s IRS Form W-8BEN as no longer valid.

 

(c)  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 (a) of this Section 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.

 

(d)  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 (because the appropriate form was not delivered, was not properly executed,
or because such Lender failed to notify Agent of a change in circumstances
which rendered the exemption from, or reduction of, withholding tax
ineffective, or for any other reason) such Lender shall indemnify and hold
Agent harmless for all amounts paid, directly or indirectly, by Agent as tax or
otherwise, including penalties and interest, and including any taxes imposed by
any jurisdiction on the amounts payable to Agent under this Section, 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.

 

(e)  All payments made by Borrower hereunder or
under any note will be made without setoff, counterclaim, or other defense,
except as required by applicable law

 

100

 

other than for Taxes (as defined
below).  All such payments will be made
free and clear of, and without deduction or withholding for, any present or
future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature now or hereafter imposed by any jurisdiction (other than the
United States) or by any political subdivision or taxing authority thereof or
therein (other than of the United States) 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 the Lender, including a change in the
residence, place of organization, or principal place of business of the Lender,
or 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 (all such non-excluded taxes, levies, imposts,
duties, fees, assessments or other charges being referred to collectively as “Taxes”).  If any Taxes are so levied or imposed,
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 or under any note, including any amount paid pursuant to this Section 16.11(e)
after withholding or deduction for or on account of any Taxes, will not be less
than the amount provided for herein; provided, however, that
Borrower 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
16.11, or (ii) if the increase in such amount payable results from Agent’s
or such Lender’s own willful mis­conduct or gross negligence.  Borrower will furnish to Agent as promptly
as possible after the date the payment of any Taxes is due pursuant to
applicable law certified copies of tax receipts evidencing such payment by
Borrower.

 

16.12 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 Borrower of all Obligations, (ii) constituting
property being sold or disposed of if a release is required or desirable in
connection therewith and if Borrower certifies to Agent that the sale or
disposition is permitted under Section 7.4 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 Borrower
owned no interest at the time the security interest was granted or at any time
thereafter, or (iv) constituting property leased to Borrower 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 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 16.12; 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,

 

101

 

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
Borrower in respect of) all interests retained by Borrower, 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 Borrower
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.

 

16.13 Restrictions on Actions by Lenders;
Sharing of Payments.

 

(a)  Each of the Lenders agrees that it shall
not, without the express consent of Agent, and that it shall, to the extent it
is lawfully entitled to do so, upon the request of Agent, set off against the
Obligations, any amounts owing by such Lender to Borrower or any deposit
accounts of Borrower now or hereafter maintained with such Lender.  Each of the Lenders further agrees that it
shall not, unless specifically requested to do so 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 the purpose of which is, or could be, to
give such Lender any preference or priority against the other Lenders with
respect to 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 arising under, or relating to,
this Agreement or the other Loan Documents, 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 if all or part of 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

 

102

 

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.

 

16.14 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 9 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.

 

16.15 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, or interest of the Obligations.

 

16.16 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 relating to the Collateral,
for the benefit of the Lender Group. 
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.

 

16.17 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 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 Borrower and will rely significantly upon the Books, as well as on
representations of Borrower’s personnel,

 

(d)  agrees to keep all Reports and other material,
non-public information regarding Borrower and its Subsidiaries and their
operations, assets, and existing

 

103

 

and contemplated business plans in a
confidential manner; it being understood and agreed by Borrower that in any
event such Lender may make disclosures (a) to counsel for and other advisors,
accountants, and auditors to such Lender, (b) subject to compliance with Section
17.8, reasonably required by any bona  fide potential or actual Assignee or
Participant in connection with any contemplated or actual assignment or
transfer by such Lender of an interest herein or any participation interest in
such Lender’s rights hereunder, (c) of information that has become public by
disclosures made by Persons other than such Lender, its Affiliates, assignees,
transferees, or Participants, or (d) as required or requested by any court,
governmental or administrative agency, pursuant to any subpoena or other legal
process, or by any law, statute, regulation, or court order; provided, however,
that, unless prohibited by applicable law, statute, regulation, or court order,
such Lender shall notify 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

 

(e)  without limiting the generality of any other
indemnification provision contained in this Agreement, agrees:  (i) to hold Agent and any other Lender
preparing a Report harmless from any action the indemnifying Lender may take or
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 Borrower, or the indemnifying Lender’s
participation in, or the indemnifying Lender’s purchase of, a loan or loans of
Borrower, 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 Borrower to Agent that has not been
contemporaneously provided by Borrower 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 Borrower, 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 in writing of Borrower the additional reports or information reasonably
specified by such Lender, and, upon receipt thereof from Borrower, Agent
promptly shall provide a copy of same to such Lender, and (z) any time that
Agent renders to Borrower a statement regarding the Loan Account, Agent shall
send a copy of such statement to each Lender.

 

16.18 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

 

104

 

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 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.

 

17.          GENERAL PROVISIONS.

 

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

 

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

 

17.3 Interpretation. 
Neither this Agreement nor any uncertainty or ambiguity herein shall be
construed against the Lender Group or Borrower, whether under any rule of
construction or otherwise.  On the
contrary, this Agreement has been reviewed by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used
so as to accomplish fairly the purposes and intentions of all parties hereto.

 

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

 

17.5 Amendments
in Writing.  This Agreement only can be amended by a
writing signed by Agent (on behalf of the requisite Lenders) and Borrower.

 

17.6 Counterparts; Telefacsimile
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 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 also shall deliver an original executed counterpart of this
Agreement but the failure to deliver an original executed

 

105

 

counterpart
shall not affect the validity, enforceability, and binding effect of this
Agreement.  The foregoing shall apply to
each other Loan Document mutatis mutandis.

 

17.7 Revival and Reinstatement of
Obligations.  If the incurrence or payment of the
Obligations by Borrower or a Guarantor 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 Borrower or a Guarantor automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made.

 

17.8 Confidentiality. 
The Agent and the Lenders each individually agree that material,
non-public information regarding Borrower and its Subsidiaries, their
operations, assets, and existing and contemplated business plans shall be
treated by them in a confidential manner, and shall not be disclosed by it to
Persons who are not parties to this Agreement, except:  (a) to counsel for and other advisors,
accountants, and auditors 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 hereof,
(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 Borrower, (e)
as to any such information that is or becomes generally available to the public
(other than as a result of prohibited disclosure by the Lender Group), and (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 hereof.  The provisions of this Section 17.8
shall survive for 2 years after the full and final repayment of the Obligations
(other contingent indemnification Obligations and other than any Bank Product
Obligations that remain outstanding after the termination of this Agreement and
the repayment of all other Obligations).

 

17.9 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.

 

[Signature pages to follow.]

 

106

 

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

 

	
   

  	
  MSC.SOFTWARE
  CORPORATION,

  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By: /s/ Louis A. Greco

  	
   

  
	
   

  	
  Title: Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FOOTHILL CAPITAL
  CORPORATION,
a California corporation, as Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
  By: /s/ Thomas E. Lane

  	
   

  
	
   

  	
  Title: Senior Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ABLECO FINANCE LLC,
a Delaware limited liability company, as a Lender

  
	
   

  	
   

  
	
   

  	
  By: /s/ Kevin Genda

  	
   

  
	
   

  	
  Title: Senior Vice President

  

 

S-1

 

EXHIBITS AND SCHEDULES

 

	
  Exhibit A-1

  	
   

  	
  Form of
  Assignment and Acceptance

  
	
  Exhibit C-1

  	
   

  	
  Form of
  Compliance Certificate

  
	
  Exhibit P-1

  	
   

  	
  Form of
  Principal Officers Certificate

  
	
   

  	
   

  	
   

  
	
  Schedule
  A-1

  	
   

  	
  Agent’s
  Account

  
	
  Schedule
  C-1

  	
   

  	
  Commitments

  
	
  Schedule
  D-1

  	
   

  	
  Designated Account

  
	
  Schedule P-1

  	
   

  	
  Permitted
  Liens

  
	
  Schedule R-1

  	
   

  	
  Collateral
  Access Agreement Locations

  
	
  Schedule
  2.7(a)

  	
   

  	
  Cash
  Management Banks

  
	
  Schedule 5.5

  	
   

  	
  Locations of
  Inventory and Equipment

  
	
  Schedule
  5.7(a)

  	
   

  	
  States of
  Organization

  
	
  Schedule
  5.7(b)

  	
   

  	
  Chief
  Executive Offices

  
	
  Schedule
  5.7(c)

  	
   

  	
  FEINs

  
	
  Schedule
  5.7(d)

  	
   

  	
  Commercial
  Tort Claims

  
	
  Schedule
  5.8(c)

  	
   

  	
  Capitalization
  of Borrower’s Subsidiaries

  
	
  Schedule
  5.10

  	
   

  	
  Litigation

  
	
  Schedule
  5.14

  	
   

  	
  Environmental
  Matters

  
	
  Schedule
  5.16

  	
   

  	
  Intellectual
  Property

  
	
  Schedule
  5.18

  	
   

  	
  DDAs and
  Securities Accounts

  
	
  Schedule
  5.20

  	
   

  	
  Permitted
  Indebtedness

  

 

 

Schedule A-1

Agent’s Account

 

An account at
a bank designated by Agent from time to time as the account into which Borrower
shall make all payments to Agent for the benefit of the Lender Group and into
which the Lender Group shall make all payments to Agent under this Agreement
and the other Loan Documents; unless and until Agent notifies Borrower and the
Lender Group to the contrary, Agent’s Account shall be that certain deposit
account bearing account number 323-266193 and maintained by Agent with JPMorgan
Chase Bank, 4 New York Plaza, 15th Floor, New York, New York 10004, ABA  #021000021.

 

 

Schedule C-1

Commitments

 

	
  Lender

  	
   

  	
  Revolver

  Commitment

  	
   

  	
  Term Loan

  Commitment

  	
   

  	
  Total
  Commitment

  	
   

  
	
  Foothill Capital Corporation

  	
   

  	
  $

  	
  6,428,571

  	
   

  	
  $

  	
  23,571,429

  	
   

  	
  $

  	
  30,000,000

  	
   

  
	
  Ableco Finance LLC

  	
   

  	
  $

  	
  8,571,429

  	
   

  	
  $

  	
  31,428,571

  	
   

  	
  $

  	
  40,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  All Lenders

  	
   

  	
  $

  	
  15,000,000

  	
   

  	
  $

  	
  55,000,000

  	
   

  	
  $

  	
  70,000,000

  	
   

  

 

 

Schedule D-1

Designated Account

 

Account number 1891152074 of Borrower maintained with Borrower’s
Designated Account Bank, or such other deposit account of Borrower (located
within the United States) that has been designed as such, in writing, by
Borrower to Agent.

 

“Designated Account Bank” means Comerica Bank, whose office is
located at 10900 Wilshire Blvd., Los Angeles, California  90024-4594 and whose ABA number is
121137522.QuickLinks
 -- Click here to rapidly navigate through this document

 
 

EXHIBIT 10.7    
  

 
 

AMENDED AND RESTATED STOCKHOLDERS AGREEMENT    
  

        THIS AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (the "Agreement") is entered into and effective as of
December 1, 1998 by and among Heftel Broadcasting Corporation, a Delaware corporation (the "Company"), and each of the stockholders listed on the
signature pages hereto, and each other holder of record of Common Stock (as defined below), who may hereafter execute a separate agreement to be bound by the terms hereof. The stockholders listed on
the signature pages hereto and each other Person (as defined below) that may become a party hereto as contemplated hereby being hereinafter referred to individually as a
"Stockholder" and collectively as the "Stockholders." 

RECITALS:

        A.    The
parties hereto are parties to that certain Stockholders Agreement dated as of February 14, 1997 (the "Original Agreement"). 

        B.    Prime
II Management, L.P., PrimeComm, L.P. and Alta Subordinated Debt Partners III, L.P. were each parties to the Original Agreement and as of the date hereof have
performed all of their obligations under the Original Agreement and therefor are not parties to this Agreement. 

        C.    Ricardo
A. del Castillo, Jeffrey Hinson, David Lykes and McHenry T. Tichenor, Sr. were each parties to the Original Agreement but are not parties to this Agreement
because each of them beneficially owns Common Stock representing less than one percent of the total number of shares of Common Stock outstanding as of the date of this Agreement. 

        D.    The
Company and the Stockholders desire to amend and restate the Original Agreement in its entirety to (i) delete Prime II Management, L.P., PrimeComm, L.P., Alta
Subordinated Debt Partners
III, L.P., and Messrs. del Castillo, Hinson, Lykes and Tichenor, (ii) restrict the sale, assignment, transfer, encumbrance or other disposition of the Common Stock of the Company which
may be now owned or hereafter acquired by the Stockholders, and (iii) provide for certain rights and obligations in respect thereof and certain other matters as hereinafter provided. 

        NOW,
THEREFORE, in consideration of the mutual covenants and obligations hereinafter set forth, the parties hereto, intending to be legally bound, hereby agree as follows: 

 
 

ARTICLE I
  
    GENERAL PROVISIONS;
  REPRESENTATIONS AND WARRANTIES    
  

        1.1  Certain Terms.    In addition to the terms defined elsewhere herein, when used herein the following terms shall
have the meanings indicated: 

        "Accredited Investor" shall have the meaning set forth for such term in Regulation D. 

        An
"Affiliate" means, with respect to any Person, any other Person controlling, controlled by or under common control with the first
Person. For purposes of this definition and this Agreement, the term "control" (and correlative terms) means the power, whether by contract, equity ownership or otherwise, to direct the policies or
management of a Person. 

        With
respect to any stock, "beneficial ownership" or "beneficially owned" shall have the
same meaning as in Rule 13d-3 under the Exchange Act, or any successor provision. 

        "Board" means the board of directors of the Company. 

        "CCC" means Clear Channel Communications, Inc., a Texas corporation. 

        "CCR" means Clear Channel Radio, Inc., a Nevada corporation. 

 

        "Class A Common Stock" means shares of the Class A Common Stock, par value $.001 per share, of the Company. 

        "Class B Common Stock" means shares of the Class B Common Stock, par value $.001 per share, of the Company. 

        "Clear Channel Registration Rights Agreement" means that certain Registration Rights Agreement dated as of February 14, 1997, by
and among the Company and the Clear Channel Stockholders, as amended from time to time. 

        "Clear Channel Stockholders" means CCC and CCR and the transferees of such Stockholders (other than a Tichenor Stockholder) authorized
under this Agreement, excluding, however, a transferee in an Exempt Transfer or a Third-Party Sale. 

        "Common Stock" means, collectively, the Class A Common Stock, the Class B Common Stock and any securities that the
Class A Common Stock or the Class B Common Stock may be converted into or exchanged for, including pursuant to any Permitted Transfer in connection with a merger, consolidation, share
exchange or other similar transaction. 

        "Common Stock Equivalents" means (without duplication with any other Class A Common Stock, Class B Common Stock or Common
Stock Equivalents) rights, warrants, options, convertible securities, or exchangeable securities or indebtedness, or other rights, exercisable for or convertible or exchangeable into, directly or
indirectly, Class A Common Stock or securities convertible or exchangeable into Class A Common Stock, whether at the time of issuance or upon the passage of time or the occurrence of
some future event. 

        "Conversion Date" means the date on which the Clear Channel Stockholders collectively beneficially own a greater number of shares of
Class A Common Stock than the number of shares of Class A Common Stock collectively beneficially owned by the Tichenor Stockholders. 

        "Covered Shares" means shares of Class A Common Stock and Class B Common Stock held by Stockholders that are subject to the
provisions of Article II. 

        "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, and any successor statute. 

        "Exempt Transfer" means (a) one or more Transfers by a Stockholder, whether or not related, within a 12-month period
which in the aggregate do not exceed five percent of the number of shares of Common Stock owned by such Stockholder on the date of the Merger (as set forth on the signature pages hereto (reflecting
the Company's 100% stock dividend of December 1, 1997), and as adjusted for any further stock splits, stock dividends payable in Common Stock or securities exercisable or exchangeable for
Common Stock, or reverse stock splits), (b) sales of Common Stock by a Stockholder in an offering registered under the Securities Act pursuant to such Stockholder's rights under the Tichenor
Registration Rights Agreement or the Clear Channel Registration Rights Agreement, (c) a Transfer to the equity interest owners of a Clear Channel Stockholder in a pro rata distribution or upon
a partial or complete liquidation or dissolution of such Clear Channel Stockholder (other than from a wholly-owned subsidiary to its sole stockholder), (d) a Transfer by a Stockholder pursuant
to the exercise of such Stockholder's rights to Transfer in a Participation Offer (as defined herein) pursuant to Section 2.4, (e) a Transfer in response to a tender or exchange offer
for all of the outstanding Common Stock of the Company or (f) one or more Transfers by a Stockholder pursuant to a bona fide gift to any charitable trust, foundation or other charitable or
non-profit organization or entity within a 12-month period which in the aggregate do not exceed five percent of the number of shares of Common Stock owned by such Stockholder
on the date of the Merger (as adjusted for any stock splits, stock dividends payable in Common Stock or securities exercisable or exchangeable for Common Stock, or reverse stock splits). 

2

 

        "Fully-Diluted Common Stock" means, at any time, the then outstanding Common Stock of the Company plus (without duplication) all shares of
Common Stock issuable, whether at such time or upon the passage of time or the occurrence of future events, upon the exercise, conversion or exchange of all then outstanding Common Stock Equivalents.
For purposes of this definition, each share of Class B Common Stock shall be deemed exchanged for one share of Class A Common Stock notwithstanding any restriction or prohibition
relating to such exchange. 

        "Immediate Family" means the spouse of an individual and the grandparents, parents, siblings and children (and children and spouses of any
of the foregoing) of the individual or his or her spouse. An adopted child will be treated as the child of his or her adoptive parent or parents if (but only if) he or she was adopted before he or she
reached 21 years of age. 

        "Market Price" means the average closing sale price of the Class A Common Stock for the five trading days prior to the date in
question on the principal securities exchange on which the Class A Common Stock is then traded. 

        "Margin Call" means a Transfer of Covered Shares pledged to a lender in connection with a Permitted Transfer, which Transfer is required
by the lender pursuant to an exercise of the lender's rights and remedies under the applicable loan documents or applicable law. 

        "Merger" means the merger of a subsidiary of the Company with and into TMS on February 14, 1997, pursuant to which TMS became a
wholly-owned subsidiary of the Company. 

        "Permitted Transfer" means any Transfer (a) with respect to a Stockholder who is an individual, to a member of the Immediate Family
of the Stockholder or a trust whose sole beneficiaries are the Stockholder and/or members of the Immediate Family of the Stockholder, (b) with respect to a Stockholder that is a corporation,
partnership or other entity (other than a trust), to an equity owner of the corporation, partnership or other legal entity, (c) with respect to a Stockholder that is a trust, to any beneficiary
of the trust or any member of the Immediate Family of a beneficiary of the trust, (d) to any wholly-owned Affiliate of a Stockholder, (e) pursuant to a pledge to secure indebtedness
provided that the pledgee agrees in writing that the shares of Common Stock subject to such Transfer shall be subject to the terms hereof, (f) to any charitable trust, foundation or other
charitable or non-profit organization or entity, (g) to a Stockholder pursuant to the provisions of Section 2.3 and (h) pursuant to a merger, consolidation, share
exchange or other similar transaction in which the holders of a majority of the outstanding shares of Common Stock continue to own a majority of the common equity interests of the surviving entity. 

        "Person" means any natural person, corporation, limited partnership, general partnership, joint stock company, joint venture, association,
company, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, and any government or agency or political subdivision thereof. 

        "Regulation D" means Regulation D as promulgated under the Securities Act, as amended from time to time, and any successor
provision. 

        "SEC" means the Securities and Exchange Commission or any successor governmental agency. 

        "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations thereunder, and any successor statute. 

        "Third-Party Sale" means any Transfer other than an Exempt Transfer or a Permitted Transfer. 

        "Tichenor Registration Rights Agreement" means that certain Registration Rights Agreement dated as of February 14, 1997 by and
among the Company and the Tichenor Stockholders, as amended from time to time. 

3

 

        "Tichenor Stockholders" means the Stockholders, other than the Clear Channel Stockholders, listed on the signature pages of this Agreement
and the transferees of such Stockholders (other than a Clear Channel Stockholder) authorized under this Agreement, excluding, however, a transferee in an Exempt Transfer or a Third-Party Sale. 

        "TMS" means Tichenor Media System, Inc., a Texas corporation and a wholly-owned subsidiary of the Company. 

        "Transfer" means any direct or indirect sale, transfer, pledge or other disposition of Covered Shares. 

        1.2  Representations and Warranties.

        (a)  Each
of the Stockholders (as to itself only) represents and warrants to the Company and the other Stockholders that; 

        (i)    it
has full power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby, and the execution, delivery and
performance by it of this Agreement and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action; 

        (ii)  this
Agreement has been duly and validly executed and delivered by such Stockholder and constitutes the binding obligation of such Stockholder enforceable against such
Stockholder in accordance with its terms; and 

        (iii)  the
execution, delivery and performance by such Stockholder of this Agreement and the consummation by such Stockholder of the transactions contemplated hereby will
not, with or without
the giving of notice or the lapse of time, or both, (A) violate any provision of law, statute, rule or regulation to which it is subject, (B) violate any order, judgment or decree
applicable to it, or (C) conflict with, or result in a breach or default under, any term or condition of its certificate of incorporation or by-laws, certificate of limited
partnership or partnership agreement, as applicable, or any agreement or other instrument to which such Stockholder is a party or by which such Stockholder is bound, other than such violations,
conflicts, breaches and defaults which individually or in the aggregate would not affect the Stockholder's ability to perform its obligations hereunder. 

        (b)  The
Company hereby represents and warrants to each Stockholder that: 

        (i)    it
is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, it has full corporate power and authority under its
certificate of incorporation to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby, and the execution, delivery and performance by it of this Agreement
and the consummation of the transactions contemplated hereby have been duly authorized by any necessary action; 

        (ii)  this
Agreement has been duly and validly executed and delivered by the Company and constitutes the binding obligation thereof enforceable against the Company in
accordance with its terms; and 

        (iii)  the
execution, delivery and performance by the Company of this Agreement will not, with or without the giving of notice or the lapse of time, or both,
(A) violate any provision of law, statute, rule or regulation to which the Company is subject, (B) violate any order, judgment or decree applicable to the Company, or (C) conflict
with, or result in a breach or default under, any term or condition of its certificate of incorporation or by-laws or any agreement or other instrument to which the Company is a party or
by which it is bound, other than such violations, conflicts, breaches and defaults which individually or in the aggregate 

4

 

would not (x) affect the Company's ability to perform its obligations hereunder or (y) have a material adverse effect on the Company and its subsidiaries, taken as a whole. 

 
 

ARTICLE II
  
    TRANSFERS OF SECURITIES    
  

        2.1  General.    Any Third-Party Sale shall be subject to compliance with provisions of this Article II. For
purposes of this Agreement, as to any Stockholder which is a legal entity and does not have assets valued, on a cost basis, equal to or in excess of the greater of (a) $5 million or
(b) the value of Common
Stock held thereby (valued at the Market Price), in each case other than Common Stock, any Transfer of any equity interest in such Stockholder which, in one or a series of Transfers, involves in the
aggregate more than a 50% equity interest in such Stockholder will be a Transfer unless such Transfer is solely to other existing equity holders of such entity. Any Permitted Transfer will require the
execution and delivery of an instrument in form and substance satisfactory to the Board pursuant to which the Transferee agrees to be bound by this Agreement. 

        2.2  Transfer Restrictions.    McHenry T. Tichenor, Jr. agrees with the Company not to Transfer any Covered Shares
(other than (a) pursuant to Permitted Transfers, (b) with respect to Covered Shares having a Market Price not to exceed $3 million, pursuant to the exercise of rights granted
under the Tichenor Registration Rights Agreement, (c) pursuant to the exercise of his rights to Transfer in a Participation Offer under Section 2.4, or (d) pursuant to a Transfer
in response to a tender or exchange offer for all of the outstanding Common Stock of the Company) until February 14, 1999. 

        2.3  Right of First Offer.    (a) Prior to consummating any Third-Party Sale, the Stockholder proposing to
effect the Third-Party Sale (the "Offering Stockholder") will deliver to each of the other Stockholders a written notice (an
"Offer Notice") specifying (i) the aggregate amount of cash consideration (the "Offer Price") for
which the Offering Stockholder proposes in good faith to sell the Shares to be offered in such Third-Party Sale (the "Offered Shares"), (ii) the
identity of the purchaser in such Third-Party Sale (if then known), and (iii) all other material terms of the proposed Third-Party Sale. For purposes of this Section 2.3, the Tichenor
Stockholders only (collectively and as they may allocate among themselves as set forth below) will be the "Non-Offering Stockholder" with
respect to a proposed Third-Party Sale by any Clear Channel Stockholder, and the Clear Channel Stockholders only (collectively and as they may allocate among themselves as set forth below) will be the
Non-Offering Stockholder with respect to a proposed Third-Party Sale by any Tichenor Stockholder. 

        (b)  Rights to Purchase Offered Shares.    If the Non-Offering Stockholder delivers to the Offering
Stockholder a written notice (an "Acceptance Notice") within 30 days following delivery of the Offer Notice
(provided that if such offer relates to a proposed Transfer of Common Stock representing more than 10% of the Common Stock owned by such Offering
Stockholder on the date hereof and more than two percent of the then outstanding Common Stock such Non-Offering Stockholder shall have 60 days in which to deliver such Acceptance
Notice (either such period being referred to herein as the "ROFO Acceptance Period")), stating that such Non-Offering Stockholder is willing
to purchase all of the Offered Shares for the Offer Price and on the other terms set forth in the Offer Notice, the Offering Stockholder will sell all (but not less than all) of the Offered Shares to
such Non-Offering Stockholder, and such Non-Offering Stockholder will purchase such Offered Shares from the Offering Stockholder, on the proposed terms and subject to the
conditions set forth below. In such case, the Tichenor Stockholders only, with the Offered Shares allocated (unless otherwise agreed by the Tichenor Stockholders requesting to purchase Offered Shares)
based on the number of Offered Shares requested to be purchased by each of the Tichenor Stockholders, will be the "Purchasing Stockholder" with respect
to a proposed Third-Party Sale by any Clear Channel Stockholder, and the Clear Channel Stockholders only, with the Offered Shares allocated (unless otherwise agreed by the Clear Channel Stockholders
requesting to 

5

 

purchase Offered Shares) based on the number of Shares owned by each of the Clear Channel Stockholders who request to purchase Offered Shares (but in no event so as to require any Stockholder
to purchase in excess of the number of Offered Shares requested by such Stockholder), will be the Purchasing Stockholder with respect to a proposed Third-Party Sale by any Tichenor Stockholder. 

        (c)  The ROFO Closing.    The consummation of any purchase of the Offered Shares by the Purchasing Stockholder
pursuant to this Section 2.3 (the "ROFO Closing") will occur no more than five Business Days following the delivery of the Acceptance Notice
(such five Business Day period being referred to herein as the "ROFO Closing Period") at such time and place as may be agreed upon by the Offering
Stockholder and the Purchasing Stockholder or, if such parties fail to agree to such time and place, at the principal executive offices of the Company at 10:00 a.m. (Central Time) on the fifth
Business Day following the expiration of the ROFO Acceptance Period. At the ROFO Closing, (i) the Purchasing Stockholder will deliver to the Offering Stockholder by certified or official bank
check or wire transfer to an account designated by the Offering Stockholder an amount in immediately available funds equal to the Offer Price, (ii) the Offering Stockholder will deliver one or
more certificates evidencing the Offered Shares, together with such other duly executed instruments or documents (executed by the Offering Stockholder) as may be reasonably requested by the Purchasing
Stockholder to acquire the Offered Shares free and clear of any and all claims, liens, pledges, charges, encumbrances, security interests, options, trusts, commitments and other restrictions of any
kind whatsoever (collectively, "Encumbrances"), except for Encumbrances created by this Agreement, federal or state securities law or the Purchasing
Stockholder or as specified in the Offer Notice, and (iii) the Offering Stockholder will be deemed to represent and warrant to the Purchasing Stockholder that, upon the ROFO Closing, the
Offering Stockholder will convey and the Purchasing Stockholder will acquire the entire record and beneficial ownership of, and good and valid title to, the Offered Shares, free and clear of any and
all Encumbrances, except for Encumbrances created by this Agreement, federal or state securities laws or the Purchasing Stockholder or as described in the Offer Notice. 

        (d)  Right to Consummate Third-Party Sale.    Subject to the provisions of Section 2.4 below, if no
Acceptance Notice relating to the proposed Third-Party Sale is delivered to the Offering Stockholder prior to the expiration of the ROFO Acceptance Period, or an Acceptance Notice is so delivered to
the Offering Stockholder but the ROFO Closing fails to occur prior to the expiration of the ROFO Closing Period (unless the Purchasing Stockholder was ready, willing and able prior to the expiration
of the ROFO Closing Period to consummate the transactions to be consummated by the Purchasing Stockholder at the ROFO Closing), the Offering Stockholder may (without affecting its rights, if any,
arising out of such failure) consummate the Third-Party Sale, but only (i) during the 180 calendar day period immediately following the expiration of the ROFO Acceptance Period (in the event
that no Acceptance Notice was timely delivered to the Offering Stockholder) or the 180 calendar day period immediately following the expiration of the ROFO Closing Period (in the event that an
Acceptance Notice was timely delivered to the Offering Stockholder but the ROFO Closing failed timely to occur), (ii) at a price at least equal to 95% of the Offer Price, and (iii) upon
other terms not materially less favorable to the Offering Stockholder than those set forth in the Offer Notice. 

        2.4  Participation Offer.    Prior to consummating any Third-Party Sale and after complying with the provisions of
Section 2.3 above, the Stockholder proposing to complete such Third-Party Sale (the "Transferor") shall offer (the
"Participation Offer") to include in the proposed Third-Party Sale a number of shares of Stock (regardless of whether such shares are of the same class
being sold by the Transferor) designated by any of the other Stockholders, not to exceed, in respect of any such other Stockholder, the number of shares equal to the product of (a) the
aggregate number of shares to be sold by the Transferor to the proposed transferee and (b) a fraction with a numerator equal to the 

6

 

number of shares of Fully-Diluted Common Stock held by such other Stockholder and a denominator equal to the number of shares of Fully-Diluted Common Stock held by all Stockholders;  provided that if the
consideration to be received by the Transferor includes any securities, only Stockholders who are Accredited Investors shall be
entitled to include their shares in such sale (but in such a case, each Stockholder shall be entitled to include in such sale a number of its shares, without duplication, equal to the total number of
shares held by its Affiliates which are excluded from such sale by the operation of this proviso). The Transferor shall give written notice to each other non-transferring Stockholder of
the Participation Offer (the "Transferor's Notice") at least 20 days prior to the proposed Third-Party Sale. The Transferor's Notice shall
specify (a) the Offer Price for which the Transferor proposes in good faith to sell the shares to be offered in such Third-Party Sale (the "Sale
Shares"), (b) the identity of the purchaser in such Third-Party Sale (if then known), (c) the place and date on which the Third-Party Sale is to be consummated
and (d) all other material terms of the proposed Third-Party Sale. Each Stockholder who wishes to include shares of Common Stock in the proposed Third-Party Sale in accordance with the terms of
this Section 2.4 shall so notify the Transferor not more than 10 days after the date of the Transferor's Notice. The Participation Offer shall be conditioned upon the Transferor's sale
of Common Stock pursuant to the transactions contemplated in the Transferor's Notice with the transferee named therein. If any other Stockholder or other Stockholders have accepted the Participation
Offer, the Transferor shall reduce to the extent necessary the number of shares of Common Stock it otherwise would have sold in the proposed sale so as to permit other Stockholders who have accepted
the Participation Offer to sell the number of shares that they are entitled to sell under this Section 2.4, and the Transferor and such other Stockholder or other Stockholders shall sell the
number of shares of Common Stock specified in the Participation Offer to the proposed transferee in accordance with the terms of such sale set forth in the Transferor's Notice. Clear Channel
Stockholders will not be entitled to participate in a Participation Offer made by any other Clear Channel Stockholder. The provisions of this Section 2.4 shall not apply to any Third Party
Sales of 100,000 Covered Shares or less in the aggregate in any 90-day period that are made at then current market prices in a "broker's transaction" as defined in Section 4(4) of
the Securities Act. 

        2.5  Conversion of Common Stock.    Neither a conversion of shares of Class B Common Stock held by the Clear
Channel Stockholders into Class A Common Stock, nor a conversion of Class A Common Stock held by the Clear Channel Stockholders into Class B Common Stock shall be deemed a
Transfer if the shares of Class A Common Stock or Class B Common Stock, as the case may be, issuable upon such conversion are held by a Clear Channel Stockholder. After the Conversion
Date the obligations of each of the Stockholders to make a Participation Offer pursuant to Section 2.4 shall terminate and be of no further force or effect. In addition, after the Conversion
Date the ROFO Acceptance Period with respect to any Third-Party Sales shall be reduced to ten days regardless of the number of shares of Common Stock that are the subject of the Offer Notice. 

        2.6  Transfers Subject to Compliance with Securities Act.    No shares of Common Stock may be transferred by a
Stockholder (other than pursuant to an effective registration statement under the Securities Act) unless such Stockholder first delivers to the Company an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to the Company, to the effect that such Transfer is not required to be registered under the Securities Act. 

        2.7  Transfers in Violation Void.    Any purported Transfer by a Stockholder which is not permitted by the
provisions of this Article II, or which is in violation of such provisions, shall be void and of no force and effect whatsoever. 

7

 

 
 

ARTICLE III
  
    TERMINATION    
  

        The provisions of this Agreement shall terminate in respect of all Stockholders (a) upon the written consent of (i) Stockholders who then hold
Common Stock representing at least seventy-five percent of the Fully-Diluted Common Stock then held by all of the Stockholders (other than CCC or its Affiliates, if CCC or one of its
Affiliates then holds 25% or more of the outstanding Common Stock) and (ii) CCC, if CCC or any of its Affiliates then holds 25% or more of the outstanding Common Stock, and
(b) immediately prior to the consummation of a merger, consolidation, share exchange or other similar transaction in which the holders of a majority of the outstanding Common Stock of the
Company shall cease to hold a majority of the common equity interests in the surviving entity. A Person who ceases to beneficially own shares of Common Stock in an amount equal to or greater than one
percent of the number of shares of Common Stock then outstanding shall cease to be a Stockholder and shall have no further rights and shall be released from all obligations under this Agreement. 

 
 

ARTICLE IV
  
    MISCELLANEOUS    
  

        4.1  Margin Transactions.    Notwithstanding any provisions of this Agreement to the contrary, the following
Transfers shall not be subject to the provisions of Sections 2.3 and 2.4: 

        (a)  A
Transfer in a Margin Call of Common Stock owned by any Tichenor Stockholder in an amount of up to 25% of the number of shares of Common Stock owned by such Tichenor
Stockholder as of the effective time of the Merger (as set forth on the signature pages hereto (which number reflects the Company's one for one stock dividend of December 1, 1997), and as
adjusted for any stock splits, stock dividends payable in Common Stock or securities exercisable or exchangeable for Common Stock, or reverse stock splits). 

        (b)  A
Transfer in a Margin Call of Common Stock owned by any Clear Channel Stockholder; provided, that, immediately after such transfer, the transferee of such shares of
Common Stock does not beneficially own more than 50% of the number of shares of Common Stock collectively owned by the Clear Channel Stockholders as of the effective time of the Merger (as set forth
on the signature pages hereto (which number reflects the Company's one for one stock dividend of December 1, 1997), and as adjusted for any stock splits, stock dividends payable in Common Stock
or securities exercisable or exchangeable for Common Stock, or reverse stock splits). 

        4.2  Amendment.    Any provision of this Agreement may be altered, supplemented, amended or waived by the written
consent of each of (a) the Company, (b) the holders of a majority of the Covered Shares then held by the Clear Channel Stockholders and (c) the holders of a majority of the
Covered Shares then held by the Tichenor Stockholders, and such alteration, supplement, amendment or waiver shall be binding upon all Stockholders including nonconsenting Stockholders. 

        4.3  Specific Performance.    The Stockholders and the Company recognize that the obligations imposed on them in
this Agreement are special, unique, and of extraordinary character, and that in the event of breach by any party, damages will be an insufficient remedy; consequently, it is agreed that the
Stockholders and the Company may have specific performance and injunctive relief (in addition to damages) as a remedy for the enforcement hereof, without proving damages. 

        4.4  Assignment.    Except as otherwise expressly provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective heirs, legatees, legal representatives, successors and assigns of the Stockholders and the Company. No such assignment shall 

8

 

relieve the assignor from any liability hereunder. Any purported assignment made in violation of this Section 4.4 shall be void and of no force and effect. 

        4.5  Shares Subject to this Agreement.    The provisions of Article II of this Agreement restricting the
Transfer of shares of Common Stock will apply to all shares of Common Stock owned by the Stockholders on the date hereof and any shares of Common Stock acquired after the date hereof until they are
Transferred in an Exempt Sale or Third-Party Sale to a Person other than a Stockholder. 

        4.6  Legend.    (a) Each certificate for Common Stock shall include a legend in substantially the following
form: 

        THIS
SECURITY IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, AND OTHER TERMS AND CONDITIONS SET FORTH IN THAT CERTAIN AMENDED AND RESTATED STOCKHOLDERS AGREEMENT DATED AS OF DECEMBER 1,
1998, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES. 

        (b)  A
restriction on Transfer of shares of Common Stock set forth in such legend (a "Restriction") shall cease and terminate as to any particular shares of Common Stock
when: (i) in the opinion of the Company and counsel reasonably satisfactory to the Company (which opinion shall be delivered to the Company in writing), such Restriction is no longer required
under the provisions hereof; or (ii) such shares of Common Stock are Transferred in a Margin Call exempted from the provisions of Sections 2.3 and 2.4 by Section 4.1. Whenever such
Restriction shall cease and terminate as to any shares of Common Stock, the holder thereof shall be entitled to receive from the Company, without expense to such holder, new certificates not bearing a
legend stating such Restriction. 

        4.7  Notices.    Any and all notices, designations, consents, offers, acceptances or other communications provided
for herein (each "Notice") shall be given in writing by overnight courier, telegram, or telecopy which shall be addressed, or sent, to the respective
addresses as follows (or such other address as the Company or any Stockholder may specify to the Company and all other Stockholders by Notice): 

        The
Company: 

Heftel
Broadcasting Corporation

100 Crescent Court, Suite 1777

Dallas, Texas 75201 

        Each
Stockholder: 

To
such address or telecopy number of such Stockholder as is set forth on the signature pages hereto or as such Stockholder provides by Notice to the Company and all other Stockholders or, if such
address is not so provided, to such Stockholder's address as is reflected on the stock transfer records of the Company at such time. 

        All
Notices shall be deemed effective upon receipt. No Stockholder shall be entitled to receive a Notice hereunder (or a copy of a Notice delivered to the Company) if, at the time such
Notice is to be sent, such Stockholder (including its Affiliates) no longer owns any shares of Common Stock. 

        4.8  Counterparts.    This Agreement may be executed in two or more counterparts and each counterpart shall be
deemed to be an original and which counterparts together shall constitute one and the same agreement of the parties hereto. 

        4.9  Section Headings.    Headings contained in this Agreement are inserted only as a matter of convenience and in
no way define, limit or extend the scope or intent of this Agreement or any provisions hereof. 

9

 

        4.10 Choice of Law.    This Agreement shall be governed by the internal laws of the State of Texas without regard
to the principles of conflicts of laws thereof. 

        4.11 Entire Agreement.    This Agreement contains the entire understanding of the parties hereto respecting the
subject matter hereof and supersedes all prior agreements, discussions and understandings with respect thereto. 

        4.12 Cumulative Rights.    The rights of the Stockholders and the Company under this Agreement are cumulative and
in addition to all similar and other rights of the parties under other agreements. 

        4.13 Severability.    If any term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no
way be affected, impaired, or invalidated. 

10

 

        IN
WITNESS WHEREOF the parties have caused this Agreement to be executed by their duly authorized representatives, effective as of the date first written above. 

	 	 	HEFTEL BROADCASTING CORPORATION
	

 	
 	

By:	

/s/  MCHENRY T. TICHENOR, JR.      

	 	 	Name:	McHenry T. Tichenor, Jr.

	 	 	Title:	Chief Executive Office

	

260,828 shares of Class B Common Stock	
 	

CLEAR CHANNEL COMMUNICATIONS, INC.
	

 	
 	

By:	

/s/  RANDALL MAYS      

	 	 	Name:	Randall Mays

	 	 	Title:	CFO

	

13,895,642 shares of Class B Common Stock	
 	

CLEAR CHANNEL RADIO, INC.
	

 	
 	

By:	

/s/  RANDALL MAYS      

	 	 	Name:	Randall Mays

	 	 	Title:	CFO

	

 	
 	

/s/  MCHENRY T. TICHENOR, JR.      

	1,918,798 shares of Class A Common Stock	 	McHenry T. Tichenor, Jr.
	

809,020 shares of Class A Common Stock	
 	

U.S. BANK, TRUSTEE OF THE DAVID T. TICHENOR TRUST
	

 	
 	

By:	

/s/  CRAIG MCGARRY      

	 	 	Name:	Craig McGarry

	 	 	Title:	Sr. VP

	

 	
 	

/s/  WARREN W. TICHENOR      

	2,180,314 shares of Class A Common Stock	 	Warren W. Tichenor
	

 	
 	

/s/  WILLIAM E. TICHENOR      

	1,917,098 shares of Class A Common Stock	 	William E. Tichenor
	

 	
 	

/s/  JEAN T. RUSSELL      

	1,828,112 shares of Class A Common Stock	 	Jean T. Russell

11

QuickLinks

EXHIBIT 10.7

AMENDED AND RESTATED STOCKHOLDERS AGREEMENT

ARTICLE I GENERAL PROVISIONS; REPRESENTATIONS AND WARRANTIES

ARTICLE II TRANSFERS OF SECURITIES

ARTICLE III TERMINATION

ARTICLE IV MISCELLANEOUS

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