Document:

<PAGE>

                                                                   EXHIBIT 10.22

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

                      FOURTH AMENDMENT TO CREDIT AGREEMENT

                                     BETWEEN

                          CONTANGO OIL AND GAS COMPANY

                                       AND

                               GUARANTY BANK, FSB
                                    AS LENDER

                        Effective as of September 9, 2002

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

             REDUCING REVOLVING LINE OF CREDIT OF UP TO $50,000,000

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

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

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                        PAGE
                                                                        ----
<S>                                                                    <C>
ARTICLE I   DEFINITIONS ..............................................  1
 1.01       Terms Defined Above ......................................  1
 1.02       Terms Defined in Agreement ...............................  1
 1.03       References ...............................................  1
 1.04       Articles and Sections ....................................  1
 1.05       Number and Gender ........................................  2
ARTICLE II  AMENDMENTS ...............................................  2
 2.01       Amendment of Section 1.2 .................................  2
ARTICLE III CONSENT TO ASSIGNMENT ....................................  2
ARTICLE IV  CONDITIONS ...............................................  2
 4.01       Receipt of Documents .....................................  2
 4.02       Accuracy of Representations and Warranties ...............  3
 4.03       Matters Satisfactory to Lender ...........................  3
ARTICLE V   REPRESENTATIONS AND WARRANTIES ...........................  3
ARTICLE VI  RATIFICATION .............................................  4
ARTICLE VII MISCELLANEOUS ............................................  4
 7.01       Scope of Amendment .......................................  4
 7.02       Agreement as Amended .....................................  4
 7.03       Parties in Interest ......................................  4
 7.04       Rights of Third Parties ..................................  4
 7.05       ENTIRE AGREEMENT .........................................  4
 7.06       GOVERNING LAW ............................................  4
 7.07       JURISDICTION AND VENUE ...................................  5
</TABLE>

                                        i

<PAGE>

                      FOURTH AMENDMENT TO CREDIT AGREEMENT

     This FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Fourth Amendment") is made
and entered into effective as of September 9, 2002, between CONTANGO OIL AND GAS
COMPANY, a Delaware corporation, (the "Borrower"), and GUARANTY BANK, FSB, a
federal savings bank (the "Lender").

                               W I T N E S S E T H

     WHEREAS, the above named parties did execute and exchange counterparts of
that certain Credit Agreement dated June 29, 2001, as amended by First Amendment
to Credit Agreement dated January 8, 2002, Second Amendment to Credit Agreement
dated February 13, 2002, and Third Amendment to Credit Agreement dated April 26,
2002 (the "Agreement"), to which reference is here made for all purposes;

     WHEREAS, the parties subject to and bound by the Agreement are desirous of
amending the Agreement in the particulars hereinafter set forth;

     NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties to the Agreement, as set forth therein, and the mutual covenants and
agreements of the parties hereto, as set forth in this Fourth Amendment, the
parties hereto agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

     1.01  Terms Defined Above. As used herein, each of the terms "Agreement,"
"Borrower," "Fourth Amendment," and "Lender" shall have the meaning assigned to
such term hereinabove.

     1.02  Terms Defined in Agreement. As used herein, each term defined in the
Agreement shall have the meaning assigned thereto in the Agreement, unless
expressly provided herein to the contrary.

     1.03  References. References in this Fourth Amendment to Article or Section
numbers shall be to Articles and Sections of this Fourth Amendment, unless
expressly stated herein to the contrary. References in this Fourth Amendment to
"hereby," "herein," hereinafter," hereinabove," "hereinbelow," "hereof," and
"hereunder" shall be to this Fourth Amendment in its entirety and not only to
the particular Article or Section in which such reference appears.

     1.04  Articles and Sections. This Fourth Amendment, for convenience only,
has been divided into Articles and Sections and it is understood that the
rights, powers, privileges, duties, and other legal relations of the parties
hereto shall be determined from this Fourth Amendment as an entirety and without
regard to such division into Articles and Sections and without regard to
headings prefixed to such Articles and Sections.

                                        1

<PAGE>

     1.05 Number and Gender. Whenever the context requires, reference herein
made to the single number shall be understood to include the plural and likewise
the plural shall be understood to include the singular. Words denoting sex shall
be construed to include the masculine, feminine, and neuter, when such
construction is appropriate, and specific enumeration shall not exclude the
general, but shall be construed as cumulative. Definitions of terms defined in
the singular and plural shall be equally applicable to the plural or singular,
as the case may be.

                                   ARTICLE II
                                   AMENDMENTS

     The Borrower and the Lender hereby amend the Agreement in the following
particulars:

     2.01  Amendment of Section 1.2. Section 1.2 of the Agreement is hereby
amended as follows:

     The following definitions are added to read as follows:

     "Guarantors" shall mean Contango STEP I, Inc. and Contango STEP, LP.

     "Guaranties" shall mean the Guaranties executed by the Guarantors.

                                   ARTICLE III
                  CONSENT TO FORMATION OF CONTANGO STEP I, INC.
                           AND CONTANGO STEP II, INC.
                              CONSENT TO ASSIGNMENT

     The Lender hereby consents to the Borrower's investment in Contango STEP I,
Inc. and Contango STEP II, Inc., each a Delaware corporation and wholly-owned
subsidiary of the Borrower.

     The Lender hereby consents to the assignment of certain Oil and Gas
Properties by the Borrower to Contango STEP, LP as described in that certain
assignment dated September 9, 2002, wherein the Borrower assigns STEP LP, the
Oil and Gas Properties described therein and Contango STEP, LP assumes the
obligations described in the Mortgage executed by the Borrower for the benefit
of the Lender covering the Oil and Gas Properties described in such assignment.

                                   ARTICLE IV
                                   CONDITIONS

     The obligation of the Lender to amend the Agreement as provided herein is
subject to the fulfillment of the following conditions precedent:

     4.01  Receipt of Documents. The Lender shall have received, reviewed, and
approved the following documents and other items, appropriately executed when
necessary and in form and substance satisfactory to the Lender:

                                        2

<PAGE>

     (a)   multiple counterparts of this Fourth Amendment as requested by the
           Lender;

     (b)   Guaranty of Contango STEP I, Inc.;

     (c)   Guaranty of Contango STEP, LP;

     (d)   Security Agreement (Stock Pledge) by the Borrower pledging the stock
           of Contango STEP I, Inc. and Contango STEP II, Inc., together with
           blank stock powers;

     (e)   undated letters, in form and substance satisfactory to the Lender,
           from Contango STEP, LP to each purchaser of production and disburser
           of the proceeds of production from or attributable to the Oil and Gas
           Property described in the Assignment described in (f) below, together
           with additional letters with the addressees left blank, authorizing
           and directing the addressees to make future payments attributable to
           production from such properties directly to the Lender;

     (f)   Assignment dated September 9, 2002, from the Borrower to Contango
           STEP, LP;

     (g)   the opinion of Morgan, Lewis and Bockius, L.L.P., counsel to Contango
           STEP I, Inc., in substantially the same form as set forth in Exhibit
           IV of the Credit Agreement dated June 29, 2001, covering Contango
           STEP, LP, Contango STEP I, Inc. and Contango STEP II, Inc.; and

     (h)   such other agreements, documents, items, instruments, opinions,
           certificates, waivers, consents, and evidence as the Lender may
           reasonably request.

     4.02  Accuracy of Representations and Warranties. The representations and
warranties contained in Article IV of the Agreement and this Fourth Amendment
shall be true and correct.

     4.03  Matters Satisfactory to Lender. All matters incident to the
consummation of the transactions contemplated hereby shall be satisfactory to
the Lender.

                                    ARTICLE V
                         REPRESENTATIONS AND WARRANTIES

     The Borrower hereby expressly re-makes, in favor of the Lender, all of the
representations and warranties set forth in Article IV of the Agreement, and
represents and warrants that all such representations and warranties remain true
and unbreached.

                                        3

<PAGE>

                                   ARTICLE VI
                                  RATIFICATION

     Each of the parties hereto does hereby adopt, ratify, and confirm the
Agreement and the other Loan Documents, in all things in accordance with the
terms and provisions thereof, as amended by this Fourth Amendment.

                                   ARTICLE VII
                                  MISCELLANEOUS

     7.01  Scope of Amendment. The scope of this Fourth Amendment is expressly
limited to the matters addressed herein and this Fourth Amendment shall not
operate as a waiver of any past, present, or future breach, Default, or Event of
Default under the Agreement. except to the extent, if any, that any such breach,
Default, or Event of Default is remedied by the effect of this Fourth Amendment.

     7.02  Agreement as Amended. All references to the Agreement in any document
heretofore or hereafter executed in connection with the transactions
contemplated in the Agreement shall be deemed to refer to the Agreement as
amended by this Fourth Amendment.

     7.03  Parties in Interest. All provisions of this Fourth Amendment shall be
binding upon and shall inure to the benefit of the Borrower, the Lender and
their respective successors and assigns.

     7.04  Rights of Third Parties. All provisions herein are imposed solely and
exclusively for the benefit of the Lender and the Borrower, and no other Person
shall have standing to require satisfaction of such provisions in accordance
with their terms and any or all of such provisions may be freely waived in whole
or in part by the Lender at any time if in its sole discretion it deems it
advisable to do so.

     7.05  ENTIRE AGREEMENT. THIS FOURTH AMENDMENT CONSTITUTES THE ENTIRE
AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND
SUPERSEDES ANY PRIOR AGREEMENT, WHETHER WRITTEN OR ORAL, BETWEEN SUCH PARTIES
REGARDING THE SUBJECT HEREOF. FURTHERMORE IN THIS REGARD, THIS FOURTH AMENDMENT,
THE AGREEMENT, THE NOTE, THE SECURITY INSTRUMENTS, AND THE OTHER WRITTEN
DOCUMENTS REFERRED TO IN THE AGREEMENT OR EXECUTED IN CONNECTION WITH OR AS
SECURITY FOR THE NOTE REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE
PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

     7.06  GOVERNING LAW. THIS FOURTH AMENDMENT, THE AGREEMENT AND THE NOTE
SHALL BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE
WITH AND

                                        4

<PAGE>

GOVERNED BY THE LAWS OF THE STATE OF TEXAS. THE PARTIES ACKNOWLEDGE AND AGREE
THAT THIS AGREEMENT AND THE NOTE AND THE TRANSACTIONS CONTEMPLATED HEREBY BEAR A
NORMAL, REASONABLE, AND SUBSTANTIAL RELATIONSHIP TO THE STATE OF TEXAS.

     7.07  JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO,
ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM
THIS FOURTH AMENDMENT, THE AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED
IN COURTS HAVING SITUS IN HARRIS COUNTY, TEXAS. EACH OF THE BORROWER AND THE
LENDER HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT
LOCATED IN HARRIS COUNTY, TEXAS, AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO
TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST
IT BY THE BORROWER OR THE LENDER IN ACCORDANCE WITH THIS SECTION.

                                        5

<PAGE>

     IN WITNESS WHEREOF, this Fourth Amendment to Credit Agreement is executed
effective the date first hereinabove written.

                                            BORROWER

                                            CONTANGO OIL AND GAS COMPANY

                                            By: /s/ WILLIAM H. GIBBONS
                                                -----------------------------
                                                    William H. Gibbons
                                                    Vice President and Treasurer

                                        6

<PAGE>

                                     LENDER

                                     GUARANTY BANK, FSB

                                     By: /s/ JONATHAN GREGORY
                                         ------------------------
                                         Jonathan Gregory
                                         Vice President

                                        7Exhibit 10.15

 

AMENDED AND RESTATED

 

 

LOAN AND SECURITY AGREEMENT

 

 

by and among

 

 

SILICON GRAPHICS, INC.

 

and

 

EACH OF ITS SUBSIDIARIES THAT ARE
SIGNATORIES HERETO

 

as Borrowers,

 

 

THE LENDERS THAT ARE SIGNATORIES
HERETO

 

as the Lenders,

 

 

FOOTHILL CAPITAL CORPORATION

 

as the Arranger and Administrative
Agent,

 

and

 

BANK OF AMERICA, N.A.,

as the Documentation Agent

 

 

 

Dated as of September 24, 2002

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

 

	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  DEFINITIONS AND
  CONSTRUCTION.

  	
   

  	
  1

  
	
   

  	
  1.1

  	
  Definitions

  	
   

  	
  1

  
	
   

  	
  1.2

  	
  Accounting Terms

  	
   

  	
  26

  
	
   

  	
  1.3

  	
  Code

  	
   

  	
  26

  
	
   

  	
  1.4

  	
  Construction.

  	
   

  	
  26

  
	
   

  	
  1.5

  	
  Schedules and Exhibits

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  LOAN AND TERMS OF PAYMENT.

  	
   

  	
  27

  
	
   

  	
  2.1

  	
  Revolver Advances.

  	
   

  	
  27

  
	
   

  	
  2.2

  	
  [INTENTIONALLY OMITTED.]

  	
   

  	
  28

  
	
   

  	
  2.3

  	
  Borrowing
  Procedures and Settlements.

  	
   

  	
  28

  
	
   

  	
  2.4

  	
  Payments.

  	
   

  	
  35

  
	
   

  	
  2.5

  	
  Overadvances

  	
   

  	
  37

  
	
   

  	
  2.6

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

  	
   

  	
  37

  
	
   

  	
  2.7

  	
  Cash Management.

  	
   

  	
  39

  
	
   

  	
  2.8

  	
  Crediting Payments

  	
   

  	
  40

  
	
   

  	
  2.9

  	
  Designated Account.

  	
   

  	
  40

  
	
   

  	
  2.10

  	
  Maintenance
  of Loan Account; Statements of Obligations

  	
   

  	
  40

  
	
   

  	
  2.11

  	
  Fees.

  	
   

  	
  41

  
	
   

  	
  2.12

  	
  Letters of Credit

  	
   

  	
  41

  
	
   

  	
  2.13

  	
  LIBOR Option.

  	
   

  	
  44

  
	
   

  	
  2.14

  	
  Capital Requirements

  	
   

  	
  47

  
	
   

  	
  2.15

  	
  Joint and
  Several Liability of Borrowers

  	
   

  	
  47

  
	
   

  	
  2.16

  	
  Interpretation
  of Certain Aspects of Advances

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  CONDITIONS; TERM OF
  AGREEMENT.

  	
   

  	
  51

  
	
   

  	
  3.1

  	
  Conditions
  Precedent to the Initial Extension of Credit

  	
   

  	
  51

  
	
   

  	
  3.2

  	
  Conditions
  Subsequent to the Initial Extension of Credit.

  	
   

  	
  53

  
	
   

  	
  3.3

  	
  Conditions
  Precedent to all Extensions of Credit.

  	
   

  	
  54

  
	
   

  	
  3.4

  	
  Term.

  	
   

  	
  55

  
	
   

  	
  3.5

  	
  Effect of Termination.

  	
   

  	
  55

  
	
   

  	
  3.6

  	
  Early Termination by
  Borrowers.

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  CREATION OF SECURITY
  INTEREST.

  	
   

  	
  56

  
	
   

  	
  4.1

  	
  Grant of Security Interest

  	
   

  	
  56

  
	
   

  	
  4.2

  	
  Negotiable Property.

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.3

  	
  Collection
  of Accounts, General Intangibles Collateral, and Negotiable Property
  Collateral

  	
   

  	
  56

  
						

 

 

-i-

 

 

	
   

  	
  4.4

  	
  Delivery
  of Additional Documentation Required

  	
   

  	
  56

  
	
   

  	
  4.5

  	
  Power of Attorney.

  	
   

  	
  57

  
	
   

  	
  4.6

  	
  Right to Inspect

  	
   

  	
  57

  
	
   

  	
  4.7

  	
  [INTENTIONALLY OMITTED.

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  REPRESENTATIONS AND
  WARRANTIES.

  	
   

  	
  57

  
	
   

  	
  5.1

  	
  No Encumbrances.

  	
   

  	
  58

  
	
   

  	
  5.2

  	
  Eligible Accounts.

  	
   

  	
  58

  
	
   

  	
  5.3

  	
  Threshold Inventory.

  	
   

  	
  58

  
	
   

  	
  5.4

  	
  Threshold Equipment.

  	
   

  	
  58

  
	
   

  	
  5.5

  	
  Location
  of Threshold Inventory and Threshold Equipment

  	
   

  	
  58

  
	
   

  	
  5.6

  	
  Inventory Records.

  	
   

  	
  59

  
	
   

  	
  5.7

  	
  Location of
  Chief Executive Office; FEIN.

  	
   

  	
  59

  
	
   

  	
  5.8

  	
  Due
  Organization and Qualification; Subsidiaries

  	
   

  	
  59

  
	
   

  	
  5.9

  	
  Due Authorization; No
  Conflict.

  	
   

  	
  59

  
	
   

  	
  5.10

  	
  Litigation.

  	
   

  	
  60

  
	
   

  	
  5.11

  	
  No Material Adverse Change.

  	
   

  	
  60

  
	
   

  	
  5.12

  	
  Fraudulent Transfer.

  	
   

  	
  60

  
	
   

  	
  5.13

  	
  Employee Benefits

  	
   

  	
  60

  
	
   

  	
  5.14

  	
  Environmental Condition

  	
   

  	
  61

  
	
   

  	
  5.15

  	
  Brokerage Fees.

  	
   

  	
  61

  
	
   

  	
  5.16

  	
  Intellectual Property

  	
   

  	
  61

  
	
   

  	
  5.17

  	
  Leases.

  	
   

  	
  62

  
	
   

  	
  5.18

  	
  DDAs.

  	
   

  	
  62

  
	
   

  	
  5.19

  	
  Complete Disclosure

  	
   

  	
  62

  
	
   

  	
  5.20

  	
  Indebtedness.

  	
   

  	
  62

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  AFFIRMATIVE COVENANTS.

  	
   

  	
  63

  
	
   

  	
  6.1

  	
  Accounting System

  	
   

  	
  63

  
	
   

  	
  6.2

  	
  Collateral Reporting

  	
   

  	
  63

  
	
   

  	
  6.3

  	
  Financial
  Statements, Reports, Certificates.

  	
   

  	
  64

  
	
   

  	
  6.4

  	
  Intellectual
  Property; IP Collateral

  	
   

  	
  66

  
	
   

  	
  6.5

  	
  Return.

  	
   

  	
  66

  
	
   

  	
  6.6

  	
  Maintenance of Properties.

  	
   

  	
  66

  
	
   

  	
  6.7

  	
  Taxes.

  	
   

  	
  66

  
	
   

  	
  6.8

  	
  Insurance.

  	
   

  	
  67

  
	
   

  	
  6.9

  	
  Location
  of Threshold Inventory and Threshold Equipment.

  	
   

  	
  67

  
	
   

  	
  6.10

  	
  Compliance with Laws.

  	
   

  	
  68

  
	
   

  	
  6.11

  	
  Leases.

  	
   

  	
  68

  
	
   

  	
  6.12

  	
  Brokerage Commissions

  	
   

  	
  68

  
	
   

  	
  6.13

  	
  Existence.

  	
   

  	
  68

  
	
   

  	
  6.14

  	
  [INTENTIONALLY OMITTED]

  	
   

  	
  68

  
	
   

  	
  6.15

  	
  Disclosure Updates.

  	
   

  	
  68

  
	
   

  	
  6.16

  	
  Cash Collateral

  	
   

  	
  68

  
	
   

  	
  6.17

  	
  Assignment of Proceeds

  	
   

  	
  68

  

 

 

-ii-

 

 

	
  7.

  	
  NEGATIVE COVENANTS.

  	
   

  	
  69

  
	
   

  	
  7.1

  	
  Indebtedness.

  	
   

  	
  69

  
	
   

  	
  7.2

  	
  Liens.

  	
   

  	
  70

  
	
   

  	
  7.3

  	
  Restrictions on
  Fundamental Changes.

  	
   

  	
  70

  
	
   

  	
  7.4

  	
  Disposal of Assets

  	
   

  	
  70

  
	
   

  	
  7.5

  	
  Change Name.

  	
   

  	
  70

  
	
   

  	
  7.6

  	
  Guarantee

  	
   

  	
  70

  
	
   

  	
  7.7

  	
  Nature of Business

  	
   

  	
  70

  
	
   

  	
  7.8

  	
  Prepayments and Amendments.

  	
   

  	
  70

  
	
   

  	
  7.9

  	
  Change of Control.

  	
   

  	
  71

  
	
   

  	
  7.10

  	
  Consignments

  	
   

  	
  71

  
	
   

  	
  7.11

  	
  Distributions.

  	
   

  	
  71

  
	
   

  	
  7.12

  	
  Accounting Methods.

  	
   

  	
  71

  
	
   

  	
  7.13

  	
  Investments

  	
   

  	
  71

  
	
   

  	
  7.14

  	
  Transactions with
  Affiliates

  	
   

  	
  71

  
	
   

  	
  7.15

  	
  Suspension

  	
   

  	
  71

  
	
   

  	
  7.16

  	
  [INTENTIONALLY OMITTED].

  	
   

  	
  72

  
	
   

  	
  7.17

  	
  Use of Proceeds

  	
   

  	
  72

  
	
   

  	
  7.18

  	
  Change
  in Location of Chief Executive Office; Inventory and Equipment with Bailees

  	
   

  	
  72

  
	
   

  	
  7.19

  	
  [INTENTIONALLY OMITTED

  	
   

  	
  72

  
	
   

  	
  7.20

  	
  Financial Covenants.

  	
   

  	
  72

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  EVENTS OF DEFAULT

  	
   

  	
  73

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  THE LENDER
  GROUP’S RIGHTS AND REMEDIES.

  	
   

  	
  75

  
	
   

  	
  9.1

  	
  Rights and Remedies

  	
   

  	
  75

  
	
   

  	
  9.2

  	
  Remedies Cumulative.

  	
   

  	
  77

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  TAXES AND EXPENSES.

  	
   

  	
  78

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  WAIVERS; INDEMNIFICATION.

  	
   

  	
  78

  
	
   

  	
  11.1

  	
  Demand; Protest; etc.

  	
   

  	
  78

  
	
   

  	
  11.2

  	
  The Lender
  Group’s Liability for Collateral.

  	
   

  	
  78

  
	
   

  	
  11.3

  	
  Indemnification

  	
   

  	
  78

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  NOTICES.

  	
   

  	
  79

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  CHOICE OF
  LAW AND VENUE; JURY TRIAL WAIVER.

  	
   

  	
  80

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  ASSIGNMENTS
  AND PARTICIPATIONS; SUCCESSORS.

  	
   

  	
  81

  
	
   

  	
  14.1

  	
  Assignments and
  Participations.

  	
   

  	
  81

  

 

 

-iii-

 

 

	
   

  	
  14.2

  	
  Successors.

  	
   

  	
  84

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  AMENDMENTS; WAIVERS.

  	
   

  	
  84

  
	
   

  	
  15.1

  	
  Amendments and Waivers.

  	
   

  	
  84

  
	
   

  	
  15.2

  	
  Replacement of Holdout
  Lender

  	
   

  	
  85

  
	
   

  	
  15.3

  	
  No Waivers; Cumulative
  Remedies.

  	
   

  	
  86

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  AGENT; THE LENDER GROUP.

  	
   

  	
  86

  
	
   

  	
  16.1

  	
  Appointment and
  Authorization of Agent

  	
   

  	
  86

  
	
   

  	
  16.2

  	
  Delegation of Duties

  	
   

  	
  86

  
	
   

  	
  16.3

  	
  Liability of Agent

  	
   

  	
  86

  
	
   

  	
  16.4

  	
  Reliance by Agent

  	
   

  	
  86

  
	
   

  	
  16.5

  	
  Notice of
  Default or Event of Default

  	
   

  	
  88

  
	
   

  	
  16.6

  	
  Credit Decision

  	
   

  	
  88

  
	
   

  	
  16.7

  	
  Costs and
  Expenses; Indemnification

  	
   

  	
  88

  
	
   

  	
  16.8

  	
  Agent in Individual
  Capacity

  	
   

  	
  89

  
	
   

  	
  16.9

  	
  Successor Agent

  	
   

  	
  89

  
	
   

  	
  16.10

  	
  Lender in Individual
  Capacity

  	
   

  	
  90

  
	
   

  	
  16.11

  	
  Withholding Taxes.

  	
   

  	
  90

  
	
   

  	
  16.12

  	
  Collateral Matters.

  	
   

  	
  93

  
	
   

  	
  16.13

  	
  Restrictions
  on Actions by Lenders; Sharing of Payments.

  	
   

  	
  94

  
	
   

  	
  16.14

  	
  Agency for Perfection

  	
   

  	
  94

  
	
   

  	
  16.15

  	
  Payments by Agent to
  the Lenders

  	
   

  	
  94

  
	
   

  	
  16.16

  	
  Concerning
  the Collateral and Related Loan Documents.

  	
   

  	
  95

  
	
   

  	
  16.17

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

  	
   

  	
  95

  
	
   

  	
  16.18

  	
  Several Obligations;
  No Liability

  	
   

  	
  96

  
	
   

  	
  16.19

  	
  Legal Representation of
  Agent

  	
   

  	
  97

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
  GENERAL PROVISIONS.

  	
   

  	
  97

  
	
   

  	
  17.1

  	
  Effectiveness

  	
   

  	
  97

  
	
   

  	
  17.2

  	
  Section Headings.

  	
   

  	
  97

  
	
   

  	
  17.3

  	
  Interpretation

  	
   

  	
  97

  
	
   

  	
  17.4

  	
  Severability of Provisions

  	
   

  	
  97

  
	
   

  	
  17.5

  	
  Amendments in Writing.

  	
   

  	
  98

  
	
   

  	
  17.6

  	
  Counterparts;
  Telefacsimile Execution

  	
   

  	
  98

  
	
   

  	
  17.7

  	
  Revival and
  Reinstatement of Obligations

  	
   

  	
  98

  
	
   

  	
  17.8

  	
  Integration

  	
   

  	
  98

  
	
   

  	
  17.9

  	
  Parent as Agent for
  Borrowers

  	
   

  	
  98

  

 

 

-iv-

 

EXHIBITS AND SCHEDULES

 

	
  Exhibit A-1

  	
   

  	
  Form of Assignment and Acceptance

  
	
  Exhibit B-1

  	
   

  	
  Form of Borrowing Base Certificate

  
	
  Exhibit C-1

  	
   

  	
  Form of Compliance Certificate

  
	
  Exhibit L-1

  	
   

  	
  Form of LIBOR Notice

  
	
  Schedule C-1

  	
   

  	
  Commitments

  
	
  Schedule P-1

  	
   

  	
  Permitted Liens

  
	
  Schedule 1.1

  	
   

  	
  Closing Date Business Plan

  
	
  Schedule 2.7(a)

  	
   

  	
  Cash Management Banks

  
	
  Schedule 5.5

  	
   

  	
  Locations of Inventory and Equipment

  
	
  Schedule 5.7

  	
   

  	
  Chief Executive Office; FEIN

  
	
  Schedule 5.8(b)

  	
   

  	
  Capitalization of Borrowers

  
	
  Schedule 5.8(c)

  	
   

  	
  List of Borrowers’ Subsidiaries

  
	
  Schedule 5.10

  	
   

  	
  Litigation

  
	
  Schedule 5.13

  	
   

  	
  Benefit Plans

  
	
  Schedule 5.16A

  	
   

  	
  IP Collateral

  
	
  Schedule 5.16B

  	
   

  	
  Excluded Intellectual Property

  
	
  Schedule 5.18

  	
   

  	
  Demand Deposit Accounts

  
	
  Schedule 5.20

  	
   

  	
  Permitted Indebtedness

  

 

 

-v-

 

 

AMENDED
AND RESTATED LOAN AND SECURITY AGREEMENT

 

 

THIS
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”), is entered into as of September
20, 2002, between 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”), FOOTHILL CAPITAL CORPORATION, a California
corporation, as the arranger and administrative agent for the Lenders
(“Agent”), BANK OF AMERICA, N.A., as the documentation agent for the
Lenders (“Documentation Agent”) and, on the other hand, SILICON GRAPHICS, INC., a
Delaware corporation (“Parent”), and each of Parent’s Subsidiaries
identified on the signature pages hereof (such Subsidiaries, together with
Parent, are referred to hereinafter each individually as a “Borrower,” and
individually and collectively, jointly and severally, as “Borrowers”).  The purpose of this Agreement is to restate
the relationship which exists between the parties as established by that
certain Loan and Security Agreement, dated as of April 10, 2001 (“Initial
Agreement”), as amended by a letter agreement, dated as of May 15, 2001, a
letter agreement, dated June 8, 2001, a First Amendment to Loan and Security
Agreement, dated as of June 29, 2001, a letter agreement, dated July 25, 2001,
a Second Amendment to Loan and Security Agreement, dated as of September 27,
2001, a Third Amendment to Loan and Security Agreement, dated as of November 1,
2001, a Fourth Amendment to Loan and Security Agreement, dated as of November
23, 2001, a Fifth Amendment to Loan and Security Agreement, dated as of
February 11, 2002, a Sixth Amendment to Loan and Security Agreement, dated as
of April 11, 2002, a Seventh Amendment to Loan and Security Agreement, dated as
of May 10, 2002, a letter agreement, dated August 19, 2002, and other Loan
Documents.

 

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:

 

“Account Debtor” means any Person who is or who may become
obligated under, with respect to, or on account of, any Account, General
Intangible Collateral or Negotiable Property Collateral.

 

“Accounts” means all of Borrowers’ now owned or hereafter acquired
right, title, and interest with respect to “accounts” (as that term is defined
in the Code), and any and all supporting obligations in respect thereof, and as
for which the Account Debtor obligated thereon maintains its chief executive
office in the United States or is organized under the laws of the United States
or any state thereof.

 

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

 

“Administrative Borrower” has the meaning set forth in Section
17.9.

 

 

1

 

 

“Advances” means advances made by the Lenders, Swing Lender or
Agent, as the case may be, pursuant to Section 2.1(a), Section 2.3(d),
Section 2.3(e) or Section 2.3(i).

 

“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 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, in any event: (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; (b)
each director (or comparable manager) of a Person shall be deemed to be an
Affiliate of such Person; and (c) each partnership or joint venture in which a
Person is a partner or joint venturer shall be deemed to be an Affiliate of
such Person.  For purposes of this
definition, SGI Japan shall not be deemed to be an Affiliate of the Borrower.

 

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

 

“Agent’s Account” means an account at a bank designated by Agent
from time to time as the account into which Borrowers 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 Administrative 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 The
Chase Manhattan Bank, 4 New York Plaza, 15th Floor, New York, New York 10004,
ABA  #021000021.

 

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

 

“Agent’s Liens” means the Liens granted by Borrowers to Agent
for the benefit of the Lender Group 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.

 

“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, 1.0% times the Maximum Revolver
Amount, and (b) during the period of time from and including the date that is
the first anniversary of the Closing Date up to the Maturity Date, 0.5% times
the Maximum Revolver Amount.

 

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

 

 

2

 

 

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

 

“Authorized Person” means any officer or other employee of
Administrative 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 Borrowers are entitled to borrow as Advances
under Section 2.1 (after giving effect to all then outstanding
Obligations and all sublimits and reserves applicable hereunder).

 

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

 

“Bank of America” means Bank of America, N.A.

 

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

 

“Base LIBOR Rate” means the rate per annum, determined by Agent
in accordance with its customary procedures, and utilizing such electronic or
other quotation sources as it considers appropriate (rounded upwards, if
necessary, to the next 1/16%), on the basis of the rates at which Dollar
deposits are offered to major banks in the London interbank market on or about
11:00 a.m. (California time) 2 Business Days prior to the commencement of the
applicable Interest Period, for a term and in amounts comparable to the
Interest Period and amount of the LIBOR Rate Loan requested by Administrative
Borrower in accordance with this Agreement, which determination shall be
conclusive in the absence of manifest error.

 

“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 publication or publications as Wells Fargo may designate.

 

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

 

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

 

	
   

  	
  Average
  Daily Balance

  	
   

  	
  Applicable
  Base Rate Margin

  	
   

  
	
   

  	
  Less than $30,000,000

  	
   

  	
  0.25 percentage points

  	
   

  
	
   

  	
  Greater than or equal to $30,000,000 and less than or equal to $60,000,000

  	
   

  	
  1.00 percentage points

  	
   

  
	
   

  	
  Greater than $60,000,000

  	
   

  	
  2.00 percentage points

  	
   

  

 

 

3

 

 

“Benefit Plan” means a “defined benefit plan” (as defined in Section
3(35) of ERISA) for which any Borrower or any Subsidiary or ERISA Affiliate
of any Borrower has been an “employer” (as defined in Section 3(5) of
ERISA) within the past six years.

 

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

 

“Books” means all of each Borrower’s now owned or hereafter
acquired books and records (including all of its Records indicating,
summarizing, or evidencing its assets (including the Collateral) or
liabilities, all of its Records relating to its business operations or
financial condition, and all of its goods or General Intangibles related to
such information), excluding (y) books and records relating to (i) General
Intangibles other than General Intangibles described above in this definition
or in clause (f) of the definition of “Collateral” in this Section 1.1
or (ii) Real Property, or (z) any of the foregoing which is located outside of
the United States.

 

“Borrower” and “Borrowers” have the respective meanings set
forth in the preamble to this Agreement.

 

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

 

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

 

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

 

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

 

“Capital 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 Capital Lease.

 

 

4

 

 

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

 

“Cash Management 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 Administrative Borrower, Agent, and one of the Cash Management Banks.

 

“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 35%, or more, of the Stock of Parent having the right to vote
for the election of members of the Board of Directors, or (b) a majority of the
members of the Board of Directors do not constitute Continuing Directors.

 

“Classified Material” has the meaning set forth in Section
16.20.

 

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

 

“Closing Date Business Plan” means the set of Projections of
Parent 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, a copy of which is attached as Schedule
1.1.

 

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

 

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

 

 

5

 

 

(a)           Accounts,

 

(b)           Books,

 

(c)           Equipment,

 

(d)           IP Collateral,

 

(e)           Inventory,

 

(f)            Negotiable Property,

 

(g)           money or other assets of each such
Borrower that now or hereafter come into the possession, custody, or control of
Lender, and

 

(h)           the proceeds and products, whether
tangible or intangible, of any of the foregoing described in clauses (a)
through (g) above, including (x) proceeds of insurance covering any or all
of the foregoing, and (y) any and all Accounts, Books, Equipment, IP
Collateral, General Intangibles, Inventory, Investment Property, Negotiable
Property, Real Property, money, deposit accounts, or other tangible or
intangible property, solely to the extent, in the case of each of the foregoing
clauses (x) and (y), resulting from the sale, exchange, collection, or other
disposition of any of the foregoing described in clauses (a) through (g) above,
or any portion thereof or interest therein, and the proceeds thereof; provided,
however, that Collateral shall not include such General Intangibles:  (i) which cannot be subject to a
consensual security interest in favor of Agent without the consent of the
licensor or other party thereto, (ii) as to which any such restriction
described in clause (i) is effective and enforceable under applicable law
including Section 9318(4) of the Code or, from and after the effective date
thereof, Section 9408 of the revised Article 9 of the Code, and
(iii) to which such consent described in clause (i) has not been obtained
by the party granting the security interest.

 

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

 

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

 

“Commitment” means, with respect to each Lender, its Commitment,
and, with respect to all Lenders, their Commitments, in each case as such
Dollar amounts are set forth beside such Lender’s name under the applicable
heading on Schedule C-1 or 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.

 

 

6

 

 

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

 

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

 

“Copyrights” means all of Borrower’s right, title and interest
in and to copyrights in works of authorship of any kind, and all registration
applications, registrations and recordings thereof in the Office of the United
States Register of Copyrights, Library of Congress, or in any similar office or
agency of any country or political subdivision thereof throughout the world,
whether now owned or hereafter acquired by such Borrower, including those
described in Schedule 5.16A annexed hereto and made a part hereof, together
with all extensions, renewals, reversionary rights, and corrections thereof and
all licenses thereof or pertaining thereto.

 

“DDA” means any checking or other demand deposit account
maintained by any Borrower.

 

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

 

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

 

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

 

“Defaulting Lender Rate” means (a) the Base Rate for the first 3
days from and after the date the relevant payment is due, 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 account number 4173297425 of
Administrative Borrower maintained with the Designated Account Bank, or such
other deposit account of Administrative Borrower (located within the United
States) that has been designated as such, in writing, by Administrative
Borrower to Agent.

 

“Designated Account Bank” means Wells Fargo Bank, N.A., whose
office is located in  Palo Alto, CA
94301, and whose ABA number is 121 000 248.

 

 

7

 

 

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

 

“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 Administrative 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.

 

“Documentation Agent” means Bank of America, N.A., solely in its
capacity as documentation agent for the Lenders hereunder, and any successor
hereto.

 

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

 

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

 

“Eligible Accounts” means those Accounts created by one of
Borrowers in the ordinary course of its business, that arise out of its sale of
goods, that comply with each of the representations and warranties respecting
Eligible Accounts made by Borrowers under 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 Borrowers. 
Eligible Accounts shall not include the following:

 

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

 

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

 

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

 

 

8

 

 

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

 

(e)           Accounts that are
not payable in Dollars,

 

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

 

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

 

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

 

(i)            Accounts with respect to an Account
Debtor whose total obligations owing to Borrower exceed 10% of all Eligible
Accounts, to the extent of the obligations owing by such Account Debtor in
excess of such percentage; provided, however, if Accounts with
respect to which the Account Debtor is (y) General Electric Corporation exceed
35% (or such other percentage as Agent may determine in its sole discretion) of
all Eligible Accounts in the aggregate, to the extent of the obligations owing
by such Account Debtor in excess of such percentage, or (z) Raytheon Company or
Lockheed Martin exceed 20% (or such other percentage as Agent may determine in
its sole discretion) of all Eligible Accounts in the aggregate, to the extent
of the obligations owing by such Account Debtor in excess of such percentage;

 

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

 

(k)           Accounts with
respect to which the Account Debtor is located in 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 Borrower 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, or is exempt from such filing
requirement,

 

 

9

 

 

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

 

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

 

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

 

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

 

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

 

“Eligible 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, and
(e) during the continuation of an Event of Default, any other Person
approved by Agent.

 

“Environmental Actions” means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter, or other communication from any
Governmental Authority, or any third party involving violations of
Environmental Laws or releases of Hazardous Materials from (a) any assets,
properties, or businesses of any Borrower or any predecessor in interest, (b)
adjoining properties or businesses, or (c) or onto any facilities which
received Hazardous Materials generated by any Borrower or any predecessor 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
Borrowers, 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 

 

 

10

 

 

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 all of Borrowers’ now owned or hereafter
acquired right, title, and interest with respect to equipment, machinery,
machine tools, motors, furniture, furnishings, fixtures, vehicles (including
motor vehicles), tools, parts, spare parts, goods (other than consumer goods,
farm products, or Inventory), including all attachments, accessories,
accessions, replacements, substitutions, additions, and improvements to any of
the foregoing, in each case to the extent that any of the foregoing is located
anywhere within the United States.

 

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

 

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

 

“ERISA Event” means (a) a Reportable Event (as defined in
Section 4043 of ERISA) with respect to any Benefit Plan or Multiemployer Plan,
(b) the withdrawal of a Borrower or any of its Subsidiaries or ERISA
Affiliates from a Benefit Plan during a plan year in which it was a
“substantial employer” (as defined in Section 4001(a)(2) of ERISA),
(c) the providing of notice of intent to terminate a Benefit Plan in a
distress termination (as described in Section 4041(c) of ERISA),
(d) the institution by the PBGC of proceedings to terminate a Benefit Plan
or Multiemployer Plan, (e) any event or condition (i) that provides a
basis under Section 4042(a)(1), (2), or (3) of ERISA for the termination
of, or the appointment of a trustee to administer, any Benefit Plan or
Multiemployer Plan, or (ii) that may result in termination of a
Multiemployer Plan pursuant 

 

 

11

 

 

to
Section 4041A of ERISA, (f) the partial or complete withdrawal within
the meaning of Sections 4203 and 4205 of ERISA, of a Borrower, any of its
Subsidiaries or ERISA Affiliates from a Multiemployer Plan, or (g) providing
any security to any plan under Section 401(a)(29) of the IRC by a Borrower or
its Subsidiaries or any of their ERISA Affiliates.

 

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

 

“Excess Availability” means the amount, as of the date any
determination thereof is to be made, equal to the sum of: (i) Availability minus
the aggregate amount, if any, of all trade payables of Borrowers aged in excess
of their historical levels with respect thereto and all book overdrafts in
excess of their historical practices with respect thereto, in each case as
determined by Agent in its Permitted Discretion, plus (ii) unrestricted cash
and Cash Equivalents of Parent and its Subsidiaries on a consolidated basis.

 

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

 

“Excluded Intellectual Property” means each Patent, Trademark
and Copyright presently owned by the Borrowers and listed on Schedule 5.16B.

 

“Fee Letter” means that certain fee letter, dated as of even
date herewith, between Borrowers 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.

 

“Funding Losses” has the meaning set forth in Section
2.13(b)(ii).

 

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

 

“General Intangibles” means all of Borrowers’ now owned or
hereafter acquired right, title, and interest with respect to general
intangibles (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, Books, Inventory, Equipment Investment Property, and
Negotiable Property.

 

 

12

 

 

“General Intangibles Collateral” means that portion of the
General Intangibles which is included in the Collateral as proceeds of other
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.

 

“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.

 

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

 

“Indebtedness” means (a) all obligations of a Borrower for
borrowed money, (b) all obligations of a Borrower evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations of a Borrower in respect of letters of credit, bankers acceptances,
interest rate swaps, or other financial products, (c) all obligations of a
Borrower under Capital Leases, (d) all obligations or liabilities of others
secured by a Lien on any asset of a Borrower, irrespective of whether such
obligation or liability is assumed, (e) all obligations of a Borrower for the deferred
purchase price of assets (other than trade debt incurred in the ordinary course
of a Borrower’s business and repayable in accordance with customary trade
practices), and (f) any obligation of a Borrower guaranteeing or intended to
guarantee (whether directly or indirectly guaranteed, endorsed, co-made,
discounted, or sold with recourse to a Borrower) any obligation of any other
Person.

 

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

 

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

 

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

 

“Intellectual Property” means collectively, the Patents,
Trademarks and Copyrights.

 

 

13

 

 

“Intellectual Property
Security Agreement” means an intellectual property security agreement
executed and delivered by each Borrower and Agent, the form and substance of
which is satisfactory to Agent.

 

“Intercompany Subordination Agreement” means a subordination
agreement executed and delivered by Borrowers, Agent, and Borrowers’ Affiliates
party thereto, the form and substance of which is satisfactory to Agent.

 

“Intercreditor Agreement” means an intercreditor agreement
executed by Bank of America and Agent, the form and substance of which is
satisfactory to Agent.

 

“Interest Period” means, with respect to each LIBOR Rate Loan, a
period commencing on the date of the making of such LIBOR Rate Loan, or
designation thereof as a LIBOR Rate Loan, as the case may be, and ending 1, 2,
or 3 months thereafter; provided, however, that (a) if any
Interest Period would end on a day that is not a Business Day, such Interest
Period shall be extended (subject to clauses (c)-(e) below) to the next
succeeding Business Day, (b) interest shall accrue at the applicable rate based
upon the LIBOR Rate from and including the first day of each Interest Period
to, but excluding, the day on which any Interest Period expires, (c) any
Interest Period that would end on a day that is not a Business Day shall be
extended to the next succeeding Business Day unless such Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Business Day, (d) with respect to an Interest Period that begins
on the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period), the Interest Period shall end on the last Business Day of the calendar
month that is 1, 2, or 3 months after the date on which the Interest Period
began, as applicable, and (e) Borrowers (or Administrative Borrower on behalf
thereof) may not elect an Interest Period which will end after the Maturity Date.

 

“Inventory” means all Borrowers’ now owned or hereafter acquired
right, title, and interest with respect to inventory, including goods (and any
software embedded therein or otherwise included therewith and all rights to
such software) held for sale or lease or to be furnished under a contract of
service, goods that are leased by a Borrower as lessor, goods that are
furnished by a Borrower under a contract of service, and raw materials, work in
process, or materials used or consumed in a Borrower’s business, in each case
to the extent that any of the foregoing is located anywhere in the United
States.

 

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

 

 

14

 

“Investment
Property” means all of Borrowers’ now owned or hereafter acquired right,
title, and interest with respect to “investment property” as that term is
defined in the Code, and any and all supporting obligations in respect thereof.

 

“IP Collateral” means collectively, the Patent Collateral,
Trademarks and Copyrights.

 

“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
Administrative Borrower and with the consent of Agent agrees, in such Lender’s
sole discretion, to become an Issuing Lender for the purpose of issuing L/Cs or
L/C Undertakings pursuant to Section 2.12.

 

“L/C”
has the meaning 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, any and all of the Lenders
(including the Issuing Lender), Agent and Documentation Agent.

 

“Lender
Group Bank Products” means any one or more of the following types of
services or facilities extended to any Borrower by any member of the Lender
Group or any Affiliate of the Lender Group in reliance on the Borrower’s
agreement to indemnify such member of the Lender Group or such Affiliate: (i)
credit cards; (ii) cash management or related services, including the automatic
clearing house transfer of funds for the account of any Borrower pursuant to
agreement or overdrafts; (iii) foreign exchange contracts; and (iv) interest
rate protection agreements.

 

“Lender
Group Expenses” means all (a) costs or expenses (including taxes, and
insurance premiums) required to be paid by a Borrower under any of the Loan
Documents that are paid or incurred by the Lender Group, (b) fees or charges
reasonably paid or incurred by Agent in connection with the Lender Group’s
transactions with Borrowers, including, fees or charges for photocopying,
notarization, couriers and messengers, telecommunication, public record
searches (including tax lien, litigation, and UCC searches and including
searches with the patent and trademark office, the copyright office, or the
department of motor vehicles), filing, recording, publication, appraisal
(including periodic Collateral appraisals or business valuations to the extent
of the fees and charges (and up to the amount of any limitation) authorized in
this Agreement, (c) costs and expenses incurred by Agent in the disbursement of
funds to or for the account of Borrowers (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

 

 

15

 

 

or enforce any provision of
the Loan Documents, or in gaining possession of, maintaining, handling,
preserving, storing, shipping, selling, preparing for sale, or advertising to
sell the Collateral, or any portion thereof, irrespective of whether a sale is
consummated, (f) audit fees and expenses of Agent related to audit examinations
of the Books to the extent of the fees and charges (and up to the amount of any
limitation) authorized 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 any Borrower arising under the Loan Documents, (h) Agent’s
and each Lender’s reasonable fees and expenses (including attorneys fees)
incurred in advising, structuring, drafting, reviewing, administering, 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 any Borrower or in
exercising rights or remedies under the Loan Documents), or defending the Loan
Documents, irrespective of whether suit is brought, or in taking any Remedial
Action concerning the Collateral.

 

“Lender-Related
Person” means, with respect to any Lender, such Lender, together with such
Lender’s Affiliates, 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 plus 100% of the amount of
outstanding time drafts accepted by an Underlying Issuer as a result of
drawings under Underlying Letters of Credit.

 

“LIBOR
Deadline” has the meaning set forth in Section 2.13(b)(i).

 

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

 

“LIBOR
Option” has the meaning set forth in Section 2.13.

 

“LIBOR
Rate” means, for each Interest Period for each LIBOR Rate Loan, the rate
per annum determined by Agent (rounded upwards, if necessary, to the next
1/16%) by dividing
(a) the Base LIBOR Rate for such Interest Period, by (b) 100% minus the Reserve
Percentage.  The LIBOR Rate shall be
adjusted on and as of the effective day of any change in the Reserve
Percentage.

 

“LIBOR
Rate Loan” means each portion of Advances that bears interest at a rate
determined by reference to the LIBOR Rate for an Interest Period common to such
portion.

 

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

 

	
   

  	
  Average Daily Balance

  	
   

  	
  Applicable LIBOR Rate
  Margin

  	
   

  
	
   

  	
  Less
  than $30,000,000

  	
   

  	
  2.25
  percentage points

  	
   

  
	
   

  	
  Greater
  than or equal to

  $30,000,000
  and less than or

  equal
  to $60,000,000

  	
   

  	
  3.00
  percentage points

  	
   

  
	
   

  	
  Greater
  than $60,000,000

  	
   

  	
  3.75
  percentage points

  	
   

  

 

 

16

 

“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 Cash Management Agreements,  the Disbursement Letter, Intellectual
Property Security Agreement, the Fee Letter, the Letters of Credit, the
Intercompany Subordination Agreement, the Intercreditor Agreement, the Officers’
Certificate, any note or notes executed by a 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 any 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 Borrowers taken as a whole, (b) a material
impairment of a Borrower’s ability to perform its obligations under the Loan
Documents to which it is a party or of the Lender Group’s ability to enforce the
Obligations or realize upon the Collateral, or (c) a material impairment of the
enforceability or priority of the Agent’s Liens with respect to the Collateral
as a result of an action or failure to act on the part of a Borrower.

 

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

 

“Maximum
Revolver Amount” means $75,000,000.

 

“Multiemployer
Plan” means a “multiemployer plan” (as defined in Section 3(37) of ERISA)
to which a Borrower or any of its Subsidiaries organized under the laws of the
United States or any state thereof or any ERISA Affiliate is making, is
obligated to make, has made or has been obligated to make, contributions on
behalf of participants who are or were employed by any of them.

 

“Negotiable
Property” means all of Borrowers’ now owned and hereafter acquired right,
title, and interest with respect to letters of credit, letter of credit rights,
instruments, promissory

 

 

17

 

notes, drafts, documents, and chattel paper
(including electronic chattel paper and tangible chattel paper), and any and
all supporting obligations in respect thereof.

 

“Negotiable
Property Collateral” means that portion of the Negotiable Property which is
included in the Collateral as proceeds of other Collateral.

 

“Obligations”
means all loans, 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 Borrowers’ Loan
Account pursuant hereto or  arising
pursuant to Lender Group Bank Products), obligations (including indemnity
obligations arising pursuant to the Loan Documents or in connection with Lender
Group Bank Products), fees (including fees provided 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
Borrowers to the Lender Group pursuant to or evidenced by the Loan Documents
and irrespective of whether for the payment of money, whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including all interest not paid when due and all Lender
Group Expenses that Borrowers are required to pay or reimburse by the Loan
Documents, by law, or otherwise.  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.

 

“Officers’
Certificate” means the representations and warranties of officers form
submitted by Agent to Administrative Borrower, together with Borrowers’
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.

 

“PBGC”
means Pension Benefit Guaranty Corporation or any successor entity.

 

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

 

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

 

“Patent Collateral” means all of Borrower’s right, title and
interest in and to all registrations and recordings in the United States Patent
and Trademark Office described in Schedule 5.16A, together with all re-examinations,
reissues, continuations, continuations-in-part, divisions, improvements and
extensions thereof and all licenses thereof or pertaining thereto and all
licenses of patent rights to such Borrower now in effect or entered into during
the term of this Agreement and the rights to make, use and sell, and all other
rights with respect to, the inventions disclosed or claimed therein, all
inventions, designs, proprietary or technical information, know-how, other data
or information, software, databases, all embodiments or fixations thereof and
related documentation,

 

18

 

all information pertaining to the foregoing
having value in connection with such Borrower’s business and all other trade
secret pertaining to the foregoing rights not described above.

 

“Patents” means all of Borrower’s right, title and interest in
and to all inventions and letters patent and registration applications
therefor, and all registrations and recordings thereof, including, without
limitation, registration applications, registrations and recordings in the
United States Patent and Trademark Office or in any similar office or agency of
the United States or any state thereof, or in any similar office or agency of
any country or political subdivision thereof throughout the world, including
those described in Schedule 5.16A, together with all re-examinations,
reissues, continuations, continuations-in-part, divisions, improvements and
extensions thereof and all licenses thereof or pertaining thereto and all
licenses of patent rights to such Borrower now in effect or entered into during
the term of this Agreement and the rights to make, use and sell, and all other
rights with respect to, the inventions disclosed or claimed therein, all
inventions, designs, proprietary or technical information, know-how, other data
or information, software, databases, all embodiments or fixations thereof and
related documentation, all information pertaining to the foregoing having value
in connection with such Borrower’s business and all other trade secret
pertaining to the foregoing rights not described above.

 

“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 by Borrowers of
Equipment that is substantially worn, damaged, or obsolete in the ordinary
course of the applicable Borrower’s business, (b) sales by Borrowers of
Inventory to buyers in the ordinary course of business, (c) the use or transfer
of money or Cash Equivalents by Borrowers in a manner that is not prohibited by
the terms of this Agreement or the other Loan Documents, (d) the licensing by
Borrowers, on a non-exclusive basis, of patents, trademarks, copyrights, and
other intellectual property rights in the ordinary course of the applicable
Borrower’s business, (e) sales and other dispositions reflected in the Closing
Date Business Plan, (f) sales and other dispositions of assets no longer
material to Borrower’s business, (g) sales and other dispositions contemplated
by Parent and disclosed in a side letter relating thereto delivered by Parent
to Agent and dated the date of this Agreement, (h) dispositions pursuant
to or in connection with any full or partial termination, unwinding or
settlement, whether or not at the option of Parent, of the Structured Stock
Repurchase, and (i) other sales and other dispositions in an amount not
greater than $12,000,000 in the aggregate in any fiscal year ending after the
Closing Date; provided, however, that no Permitted Dispositions
described in clauses (e) through (i) hereof may be made if immediately prior to
making any such Permitted Disposition, or giving effect thereto: (x) there
shall occur an Event of Default which is continuing; or (y) Borrower and its
Subsidiaries, as determined on a consolidated basis, shall have Excess
Availability in an aggregate amount of less than $50,000,000.

 

“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 in the ordinary course of business, (d)
Investments in the Stock of any Subsidiary of Parent, (e) intercompany
advances, guaranties, capital contributions and other Investments made in the
ordinary course of business consistent with the written intercompany financing
policy of Parent and its Subsidiaries submitted to Agent prior to the Closing
Date, (f) investments made pursuant to

 

 

19

 

participation
in the Intel 64 Fund in an amount not greater than the greater of the following
in the aggregate in any fiscal year ending after the Closing Date:  (A) $5,000,000; and (B) the minimum amount
required to be invested by Parent during such fiscal year in the Intel 64 Fund,
as certified by the chief financial officer of Parent, (g) loans to employees
made pursuant to a written employee relocation program duly adopted by Parent
or any of its Subsidiaries and submitted to Agent prior to the Closing Date,
(h) Investments reflected in the Closing Date Business Plan,
(i) Investments pursuant to or in connection with any full or partial
termination, unwinding or settlement, whether or not at the option of Parent,
of the Structured Stock Repurchase, and (j) other Investments in an amount
no greater than $12,000,000 in the aggregate in any fiscal year ending after
the Closing Date; provided, however, that no Permitted
Investments described in clauses (d) through (j) hereof may be made if
immediately prior to making any such Permitted Investment, or giving effect
thereto: (x) there shall occur an Event of Default which is continuing; or (y)
Borrower and its Subsidiaries, as determined on a consolidated basis, shall
have Excess Availability in an aggregate amount of less than $50,000,000.

 

“Permitted
Liens” means (a) Liens held by Agent for the benefit of Agent and the
Lenders, (b) Liens for unpaid taxes that either (i) are not yet delinquent, or
(ii) do not constitute an Event of Default hereunder and are the subject of
Permitted Protests, (c) Liens set forth on Schedule P-1, (d) the
interests of lessors under operating leases, (e) purchase money Liens or the
interests of lessors under Capital Leases to the extent that such Liens or
interests secure Permitted Purchase Money Indebtedness and so long as such Lien
attaches only to the asset purchased or acquired and the proceeds thereof, (f)
Liens arising by operation of law in favor of warehousemen, landlords,
carriers, mechanics, materialmen, laborers, or suppliers, incurred in the
ordinary course of Borrowers’ business and not in connection with the borrowing
of money, and which Liens either (i) are for sums not yet delinquent, or (ii)
are the subject of Permitted Protests, (g) Liens arising from deposits made in
connection with obtaining worker’s compensation or other unemployment
insurance, (h) Liens or deposits to secure performance of bids, tenders, or
leases incurred in the ordinary course of Borrowers’ 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 Borrowers’ business, (j) Liens resulting from any judgment or award
that is not an Event of Default hereunder, and (k) any Lien with respect to any
Real Property.

 

“Permitted
Protest” means the right of the applicable Borrower to protest any Lien
(other than any such Lien that secures the Obligations), taxes (other than
payroll taxes or taxes that are the subject of a United States federal tax
lien), or rental payment, provided that (a) a reserve with respect to such
obligation is established on the Books in such amount as is required under
GAAP, (b) any such protest is instituted promptly and prosecuted diligently by
the applicable Borrower 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
amount outstanding at any one time not in excess of $50,000,000.

 

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

 

 

20

 

 

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

 

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

 

“Pro
Rata Share” means:

 

(a)           with respect to a Lender’s obligation
to make Advances and receive payments of principal, interest, fees, costs, and
expenses with respect thereto, the percentage obtained by dividing (i) such
Lender’s Commitment, by (ii) the aggregate Commitments of all Lenders,

 

(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, the percentage obtained by
dividing (i) such Lender’s Commitment, by (ii) the aggregate Commitments of all
Lenders, and

 

(c)           with respect to all other matters
(including the indemnification obligations arising under Section 16.7),
the percentage obtained by dividing (i) such Lender’s Commitment, by (ii) the
aggregate amount of Commitments of all Lenders;

 

provided, however,
that, in each case, in the event all Commitments have been terminated, Pro Rata
Share shall be determined according to the Commitments in effect immediately
prior to such termination.

 

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

 

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

 

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

 

“Remedial
Action” means all actions taken to (a) clean up, remove, remediate,
contain, treat, monitor, assess, evaluate, or in any way address Hazardous
Materials in the indoor or outdoor environment, (b) prevent or minimize a
release or threatened release of Hazardous Materials so they do not migrate or
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment, (c) perform any pre-remedial studies, investigations, or
post-remedial operation and maintenance activities, or (d) conduct any other
actions authorized by 42 USC § 9601.

 

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

 

 

21

 

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

 

“Required
Availability” means Excess Availability of not less than $125,000,000.

 

“Required
Lenders” means, at any time, (a) Agent, and (b) Lenders whose Pro Rata
Shares aggregate at least 51% of the Commitments, or if the Commitments have
been terminated irrevocably, at least 51% of the Obligations then outstanding.

 

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

 

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

 

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

 

“Security
Clearance” has the meaning set forth in Section 16.20.

 

“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).

 

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

 

“SGI
Loan” shall mean that certain loan made by SGI Japan to Parent and Silicon
Graphics World Trade B.V., a private limited company incorporated in the
Netherlands; pursuant to the terms of the documents attached hereto as Exhibit
A.

 

“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).

 

 

 

22

 

“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).

 

“Structured
Stock Repurchase” means the structured stock repurchases entered into by
Parent pursuant to the Structured Stock Repurchase Documents.

 

“Structured
Stock Repurchase Documents” means, collectively:

 

(i)            the ISDA Master Agreement dated as
of September 1, 1998 (the “BofA Master Agreement”) between Parent and Bank of
America, as amended by the First Amendment thereto dated as of March 4, 1999;

 

(ii)           that certain confirmation dated
September 1, 1998 between Parent and Bank of America relating to the BofA
Master Agreement together with any supplemental letters in the form of Appendix
1 thereto sent by Bank of America to Parent in connection therewith and the
Security Agreement entered into as of September 1, 1998 relating thereto;

 

(iii)          that certain confirmation dated March
8, 1999 between Parent and Bank of America relating to the BofA Master
Agreement together with any supplemental letters in the form of Appendix 1
thereto sent by Bank of America to Parent in connection therewith and the
Security Agreement entered into as of March 8, 1999 relating thereto;

 

(iv)          the ISDA Master Agreement dated as of
November 20, 1998 (the “1st Chicago Master Agreement”) between Parent and First
National Bank of Chicago (“1st Chicago”), together with the ISDA Credit Support
Annex relating thereto and dated the date thereof, each as amended by that
certain letter agreement dated October 26, 1999 (the “Bank One Amendment”)
between Parent and Bank One NA (as successor to 1st Chicago);

 

(v)           that certain confirmation dated
November 20, 1998 between Parent and 1st Chicago relating to the 1st Chicago
Master Agreement together with any supplemental letters in the form of Appendix
1 thereto sent by 1st Chicago to Parent in connection therewith, each as
amended by the Bank One Amendment;

 

(vi)          that certain confirmation dated
February 26, 1999 between Parent and 1st Chicago relating to the 1st Chicago
Master Agreement together with any supplemental letters in the form of Appendix
1 thereto sent by 1st Chicago to Parent in connection therewith, each as
amended by the Bank One Amendment; and

 

(vii)         that certain Amendment of Confirmation
dated as of April 10, 2001 between Parent and Bank of America.

 

“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

 

 

 

23

 

 

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
Administrative 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 2.2.

 

“Tax
Lender” has the meaning set forth in Section 16.11(g).

 

“Tax
Replacement Lender” has the meaning set forth in Section 16.11(g).

 

“Threshold
Equipment” means, as of the date of determination, no less than 75% of
Borrowers’ Equipment, as measured by book value, other than demonstration
systems.

 

“Threshold
Inventory” means, as of the date of determination, no less than 75% of
Borrowers’ Inventory, as measured by book value, other than demonstration
systems.

 

“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.

 

“Trademarks” means all of Borrower’s right, title and interest
in and to trademarks, trade names, trade styles, service marks, logos, emblems,
prints and labels, all elements of package or trade dress of goods, and all
general intangibles of like nature, now existing or hereafter adopted or
acquired by such Borrower, together with the goodwill of such Borrower’s
business connected with the use thereof and symbolized thereby, and all
registration applications, registrations and recordings thereof, including,
without limitation, registration applications, registrations and recordings in
the United States Patent and Trademark Office or in any similar office or
agency of the United States or in any office of the Secretary of State (or
equivalent) of any state thereof, or in any similar office or agency of any
country or political subdivision thereof throughout the world, whether now
owned or hereafter acquired by such Borrower, including those described in Schedule
5.16A annexed hereto and made a part hereof, together with all extensions,
renewals and corrections thereof and all licenses thereof or pertaining
thereto.

 

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

 

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

 

 

 

24

 

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

 

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

 

1.2          Accounting
Terms.  All accounting terms not specifically
defined herein shall be construed in accordance with GAAP.  When used herein, the term “financial
statements” shall include the notes and schedules thereto.  Whenever the term “Borrowers” or the term
“Parent” is used in respect of a financial covenant or a related definition, it
shall be understood to mean Parent 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, the
term “or” has, except where otherwise indicated, the inclusive meaning
represented by the phrase “and/or,” and any provision that is set forth herein
as part of a list or series is to be construed in a manner that does not result
in duplication of any other provision in such list or series.  The words “hereof,” “herein,” “hereby,”
“hereunder,” and similar terms in this Agreement or any other Loan Document
refer to this Agreement or such other Loan Document, as the case may be, as a
whole and not to any particular provision of this Agreement or such other Loan
Document, as the case may be.  Section,
subsection, clause, schedule, and exhibit references herein are to this
Agreement unless otherwise specified. 
Any reference in this Agreement or in the other Loan Documents to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
set forth herein).  Any reference herein
to any Person shall be construed to include such Person’s successors and
assigns.  Any requirement of a writing
contained herein or in the other Loan Documents shall be satisfied by the
transmission of a Record and any Record transmitted shall constitute a
representation and warranty as to the accuracy and completeness of the
information contained therein.

 

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

 

2.             LOAN
AND TERMS OF PAYMENT.

 

2.1          Revolver
Advances.

 

(a)           Subject to the terms and conditions
of this Agreement, and during the term of this Agreement, each Lender with a
Commitment agrees (severally, not

 

 

25

 

 

jointly
or jointly and severally) to make advances to Borrowers in an amount at any one
time outstanding not to exceed such Lender’s Pro Rata Share of an amount equal
to the
lesser of (i) the Maximum Revolver Amount less the Letter of Credit
Usage, or (ii) the 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)            85.0% of Eligible Accounts, less
the amount, if any, of the Dilution Reserve,  and

 

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

 

minus

 

(z)            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 Borrowers are 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 Borrowers to any Person to the extent secured by a Lien on, or
trust over, any of the Collateral (other than any existing Permitted Lien set
forth on Schedule P-1 which is specifically identified thereon as
entitled to have priority over the Agent’s Liens), 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  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          [INTENTIONALLY
OMITTED.]

 

 

 

26

 

 

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 prior to the date that is the requested Funding Date in the
case of a request for an Advance 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 Advances.

 

(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 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, upon satisfaction of the applicable conditions precedent set
forth in Section 3 hereof, Agent shall make the proceeds thereof
available to Administrative Borrower on the applicable Funding Date by
transferring immediately available funds equal to such proceeds received by
Agent to Administrative Borrower’s Designated Account; provided, however,
that, subject to the provisions of Section 2.3(i), Agent shall not
request any Lender to make, and no Lender shall have the obligation to make,
any Advance if Agent shall have actual knowledge that (1) one or more of the
applicable conditions precedent set forth in Section 3 will not be
satisfied on the requested Funding Date for the applicable Borrowing unless
such condition has been waived, or (2) the requested Borrowing would exceed the
Availability on such Funding Date.

 

 

 

27

 

(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, at least 1 Business Day prior to the
date of such Borrowing, that such Lender will not make available as and when
required hereunder to Agent for the account of Borrowers the amount of that Lender’s
Pro Rata Share of the Borrowing, Agent may assume that each Lender has made or
will make such amount available to Agent in immediately available funds on the
Funding Date and Agent may (but shall not be so required), in reliance upon
such assumption, make available to Borrowers on such date a corresponding
amount.  If and to the extent any Lender
shall not have made its full amount available to Agent in immediately available
funds and Agent in such circumstances has made available to Borrowers such amount,
that Lender shall on the Business Day following such Funding Date make such
amount available to Agent, together with interest at the Defaulting Lender Rate
for each day during such period.  A
notice submitted by Agent to any Lender with respect to amounts owing under
this subsection shall be conclusive, absent manifest error.  If such amount is so made available, such
payment to Agent shall constitute such Lender’s portion of the requested
Advance on the date of Borrowing for all purposes of this Agreement.  If such amount is not made available to
Agent on the Business Day following the Funding Date, Agent will notify
Administrative Borrower of such failure to fund and, upon demand by Agent,
Borrowers shall pay such amount to Agent for Agent’s account, together with
interest thereon for each day elapsed since the date of such Borrowing, at a
rate per annum equal to the interest rate applicable at the time to the
Advances composing such Borrowing.  The
failure of any Lender to make its portion of any Advance on any Funding Date
shall not relieve any other Lender of any obligation hereunder to make
available its portion of the requested Advance on such Funding Date, but no
Lender shall be responsible for the failure of any other Lender to make
available its portion of the requested Advance to be made by such other Lender
on any Funding Date.

 

(iii)          Agent shall not be
obligated to transfer to a Defaulting Lender any payments made by Borrowers to
Agent for the Defaulting Lender’s benefit, and, in the absence of such transfer
to the Defaulting Lender, Agent shall transfer any such payments to each other
non-Defaulting Lender member of the Lender Group ratably in accordance with
their Commitments (but only to the extent that such Defaulting Lender’s Advance
was funded by the other members of the Lender Group) or, if so directed by
Administrative Borrower and if no Default or Event of Default had occurred and
is continuing (and to the extent such Defaulting Lender’s Advance was not
funded by the Lender Group), retain same to be re-advanced to Borrowers as if
such Defaulting Lender had made Advances to Borrowers.  Subject to the foregoing, Agent may hold
and, in its Permitted Discretion, re-lend to Borrowers for the account of such
Defaulting Lender the amount of all such payments received and retained by 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

 

 

 

28

 

Administrative Borrower
shall have waived such Defaulting Lender’s default in writing, or (z) the
Defaulting Lender makes its Pro Rata Share of the applicable Advance and pays
to Agent all amounts owing by Defaulting Lender in respect thereof.  The operation of this Section shall not be
construed to increase or otherwise affect the Commitment of any Lender, to
relieve or excuse the performance by such Defaulting Lender or any other Lender
of its duties and obligations hereunder, or to relieve or excuse the
performance by Borrowers of their duties and obligations hereunder to Agent or
to the Lenders other than such Defaulting Lender.  Any such failure to fund by any Defaulting Lender shall
constitute a material breach by such Defaulting Lender of this Agreement and
shall entitle Administrative Borrower at its option, upon written notice to
Agent, to arrange for a substitute Lender to assume the Commitment of such
Defaulting Lender, such substitute Lender to be acceptable to Agent.  In connection with the arrangement of such a
substitute Lender, the Defaulting Lender shall have no right to refuse to be
replaced hereunder, and agrees to execute and deliver a completed form of
Assignment and Acceptance 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 (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 Borrowers’ rights or 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 an 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 Borrowers on the Funding Date applicable thereto by transferring
immediately available funds to Administrative 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 no such Swing Loan shall be eligible for the LIBOR
Option and 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

 

 

 

29

 

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, and shall bear interest at the rate applicable from time
to time to Advances that are Base Rate Loans.

 

(e)           Agent Advances.

 

(i)            Agent hereby is
authorized by Borrowers 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 Borrowers 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, or (C) to pay any other amount chargeable to
Borrowers pursuant to the terms of this Agreement, including Lender Group
Expenses and the costs, fees, and expenses described in Section 10 (any
of the Advances described in this Section 2.3(e) shall be referred to as
“Agent Advances”).  Each Agent
Advance is an Advance hereunder and shall be subject to all the terms and
conditions applicable to other Advances, except that no such Agent Advance
shall be eligible for the LIBOR Option and 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 Borrowers)
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 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

 

 

 

30

 

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 the
account of such Lender as such Lender may designate, an amount such that each
such Lender shall, upon receipt of such amount, have as of the Settlement Date,
its Pro Rata Share of the Advances, 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 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 or Agent’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 and fees payable by Borrowers and allocable to the Lenders hereunder,
and proceeds of Collateral.  To the
extent that a net amount is owed to any such Lender after such application,
such net amount shall be distributed by Agent to that Lender as part of such
next Settlement.

 

(iii)          Between Settlement
Dates, Agent, to the extent no 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 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

 

 

 

31

 

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 owing
to each Lender, including the Swing Loans owing to Swing Lender, and Agent
Advances owing to Agent, and the interests therein of each Lender, from time to
time.  In addition, each Lender is
authorized to, at such Lender’s option, and Agent shall, note the date and
amount of each payment or prepayment of principal of such Lender’s Advances (or
in the case of Agent, all Advances, including Swing Loans and Agent Advances)
in its books and records, including computer records, such books and records
constituting conclusive evidence, absent manifest error, of the accuracy of the
information contained therein.  In the
event of any inconsistency between the books and records of any Lender of the
books and records of Agent, the books and records of Agent shall control.

 

(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 Borrowers 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 Revolver Usage does not exceed the Borrowing Base by more than
$1,500,000, (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 a 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 Borrowers 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 they shall not be
eligible for the LIBOR Option and 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.

 

 

 

32

 

(i)            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 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)), and the Lenders with Commitments thereupon shall, together with
Agent, jointly determine the terms of arrangements that shall be implemented
with Borrowers and intended to reduce, within a reasonable time, the
outstanding principal amount of the Advances to Borrowers to an amount
permitted by the preceding paragraph. 
In 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.

 

(ii)           Each Lender with a
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 Borrowers.

 

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

 

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

 

 

 

33

 

(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 (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.  All payments shall be remitted to Agent and
all such payments, including all proceeds of Accounts or other Collateral,
received by Agent (other than payments, including proceeds of Accounts or other
Collateral, received while no Default or Event of Default has occurred or is
continuing and which relate to the payment of principal or interest of specific
Obligations or which relate to the payment of specific fees), 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 accounts, after giving effect to any
letter agreements between Agent and the 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) and the
Swing Loans until paid in full,

 

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

 

(H)          eighth, to pay the
principal of all Swing Loans until paid in full,

 

(I)            ninth, to pay the
principal of all other Advances until paid in full,

 

(J)            tenth, 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 Commitment, as
cash collateral in an amount up to 105% of the then extant Letter of Credit
Usage until paid in full,

 

 

 

34

 

(K)          eleventh, to pay any
other Obligations until paid in full, and

 

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

 

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

 

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

 

(iv)          For purposes of the
foregoing, “paid in full” in respect of any amount means payment of such amount
owing under the Loan Documents according to the terms thereof, whether or not
constituting loan fees, service fees, professional fees, interest (and
specifically including interest accrued after the commencement of any
Insolvency Proceeding), default interest, interest on interest, and expense
reimbursements, and whether or not 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 aggregate amount of
outstanding principal of the Advances, Letter of Credit Usage and other
Obligations accrued and payable by Borrowers to the Lender Group pursuant to
this Agreement is greater than permitted in Sections 2.1 or 2.12 (an “Overadvance”),
Borrowers immediately shall pay to Agent, in cash, the amount of such excess,
which amount shall be used by Agent to reduce the Obligations in accordance
with the priorities set forth in Section 2.4(b).  In addition, Borrowers hereby promise to pay
the Obligations (including principal, interest, fees, costs, and expenses) in
Dollars in full to the Lender Group 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 other amounts that have accrued but are not
yet due and payable pursuant to Section 2.6(d)) that have been charged
to the Loan Account pursuant to the terms

 

 

 

35

 

hereof shall bear interest on the Daily
Balance thereof as follows:  (i) if the
relevant Obligation is an Advance that is a LIBOR Rate Loan, at a per annum
rate equal to the LIBOR Rate plus the LIBOR Rate Margin, and (ii) otherwise, at
a per annum rate equal to the Base Rate plus the Base Rate Margin.

 

(b)           Letter of Credit Fee.  Borrowers shall pay Agent (for the ratable
benefit of the Lenders with a Commitment, subject to any letter agreement
between Agent and individual Lenders), a Letter of Credit fee (inclusive of all
charges, commissions, fees, and costs associated with the issuance of L/C’s)
which shall accrue at a rate equal to 3.25% (of which 3.00% shall be
apportioned ratably among the Lenders and 0.25% shall be for the separate
account of Agent) 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 ) that have been charged to the Loan
Account pursuant to the terms hereof shall bear interest on the Daily Balance
thereof at a per annum rate equal to 3 percentage points above the per annum
rate otherwise applicable hereunder, and

 

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

 

(d)           Payment. 
Interest, Letter of Credit fees, and all other fees payable hereunder
shall be due and payable, in arrears, on the first day of each month at any time
that Obligations or Commitments are outstanding.  Borrowers hereby authorize Agent, from time to time, without
prior notice to Borrowers, to charge 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 to Borrowers’ Loan Account, which amounts thereafter constitute
Advances hereunder and shall accrue interest at the rate then applicable to
Advances hereunder.  Any interest not
paid when due shall be compounded by being charged to Borrowers’ Loan Account
and shall thereafter constitute Advances hereunder and shall accrue interest at
the rate then applicable to Advances that are Base Rate Loans hereunder.

 

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

 

(f)            Intent to Limit Charges to Maximum Lawful Rate.  In no event shall the interest rate or rates
payable under this Agreement, plus any other amounts paid in connection
herewith, exceed the highest rate permissible under any law that a court of
competent jurisdiction

 

 

 

36

 

shall, in a final determination, deem
applicable.  Borrowers and the Lender
Group, in executing and delivering this Agreement, intend legally to agree upon
the rate or rates of interest and manner of payment stated within it; provided,
however, that, anything contained herein to the contrary
notwithstanding, if said rate or rates of interest or manner of payment exceeds
the maximum allowable under applicable law, then, ipso facto, as of the date
of this Agreement, Borrowers are and shall be liable only for the payment of
such maximum as allowed by law, and payment received from Borrowers in excess
of such legal maximum, whenever received, shall be applied to reduce the
principal balance of the Obligations to the extent of such excess.

 

2.7          Cash
Management.

 

(a)           Borrowers shall (i) establish and
maintain cash management services of a type and on terms satisfactory to Agent
at one or more of the banks set forth on Schedule 2.7(a) (each a “Cash
Management Bank”), and shall request in writing and otherwise take such
reasonable steps to ensure that all of its 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 Collections
(including those sent directly by 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 Borrowers, in
form and substance reasonably 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 Event of Default has
occurred and is continuing, Administrative Borrower may amend Schedule
2.7(a) to add or replace a Cash Management Account Bank or Cash Management
Account; provided, however, that (i) such prospective Cash
Management Bank shall be reasonably satisfactory to Agent and Agent shall have
consented in writing in advance to the opening of such Cash Management Account
with the prospective Cash Management Bank, and (ii) prior to the time of the
opening of such Cash Management Account, Borrowers and such prospective Cash
Management Bank shall have executed and delivered to Agent a Cash Management
Agreement.  Borrowers shall close any of
their Cash Management Accounts (and establish replacement cash management
accounts in accordance with the foregoing sentence) promptly and in any event
within 30 days of written notice from Agent that the creditworthiness of any
Cash Management Bank is no longer acceptable in Agent’s reasonable judgment, or
as promptly as practicable and in any event within 60 days of notice from Agent
that the operating performance, funds transfer, 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.

 

 

 

37

 

(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 Borrowers are
hereby deemed to have granted a Lien to Agent.

 

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

 

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

 

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

 

 

 

38

 

2.11        Fees.  Borrowers
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 (unless
otherwise expressly indicated):

 

(a)           Closing Fee.  Borrowers shall pay to Agent, for the ratable benefit of the
Lenders, a closing fee of one percent (1.00%) of the Maximum Revolver Amount,
which fee shall be due and payable in full on the Closing Date,

 

(b)           Unused Line Fee.  On the first day of each month during the term of this Agreement,
an unused line fee in an amount equal to 
0.375% per annum times the result of (a) the Maximum
Revolver Amount, less (b) the sum of (i) the average Daily Balance of
Advances that were outstanding during the immediately preceding month, plus
(ii) the average daily balance of the Letter of Credit Usage during the
immediately preceding month,

 

(c)           Fee Letter Fees.  As and when due and payable under the terms of the Fee Letter,
Borrower shall pay to Agent the fees set forth in the Fee Letter, and

 

(d)           Audit, Appraisal, and Valuation Charges.  For the separate account of Agent, audit,
appraisal, and valuation fees and charges as follows, (i) a fee of $750 per
day, per auditor, plus out-of-pocket expenses for each financial audit of a
Borrower performed by personnel employed by Agent, such financial audits not to
occur more than 4 times per calendar year so long as there has not occurred any
Event of Default which is continuing, (ii) no later than six months following
the Closing Date, a one time charge of $5,000 plus out-of-pocket expenses for
expenses for the establishment of electronic collateral reporting systems, and
(iii) 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 Borrowers,
to appraise the Collateral, or any portion thereof, or to assess a Borrower’s
business valuation.

 

2.12        Letters of
Credit

 

(a)           Subject to the terms and conditions
of this Agreement, the Issuing Lender agrees to issue letters of credit for the
account of Borrowers (each, an “L/C”) or to purchase participations or
execute indemnities or reimbursement obligations (each such undertaking, an “L/C
Undertaking”) with respect to letters of credit issued by an Underlying
Issuer (as of the Closing Date, the prospective Underlying Issuer is to be
Wells Fargo Bank of Minnesota, N.A.) for the account of Borrowers.  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), Administrative 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 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

 

 

 

39

 

Issuing Lender, Borrowers also shall be an
applicant under the application with respect to any Underlying Letter of Credit
that is to be the subject of an L/C Undertaking.  The Issuing Lender shall have no obligation to issue a Letter of
Credit if any of the following would result after giving effect to the
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 $50,000,000, or

 

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

 

Borrowers
and the Lender Group acknowledge and agree that certain Underlying Letters of
Credit may, at Administrative Borrower’s request, be issued to support letters
of credit for the account of any Borrower that already are outstanding as of the
Closing Date.  Each Letter of Credit
(and corresponding Underlying Letter of Credit) shall have an expiry date no
later than 30 days prior to the Maturity Date and all such Letters of Credit
(and corresponding Underlying Letter of Credit) shall be in form and substance
acceptable to the Issuing Lender (in the exercise of its Permitted Discretion),
including the requirement that the amounts payable thereunder must be payable
in Dollars.  If Issuing Lender is obligated
to advance funds under a Letter of Credit, Borrowers immediately shall
reimburse such L/C Disbursement to Issuing Lender by paying to Agent an amount
equal to such L/C Disbursement not later than 11:00 a.m., California time, on
the date that such L/C Disbursement is made, if Administrative Borrower shall
have received written or telephonic notice of such L/C Disbursement prior to
10:00 a.m., California time, on such date, or, if such notice has not been
received by Administrative Borrower prior to such time on such date, then not
later than 11:00 a.m., California time, on the Business Day that Administrative
Borrower receives such notice, if such notice is received prior to 10:00 a.m.,
California time, on the date of receipt, and, in the absence of such
reimbursement, the L/C Disbursement immediately and automatically shall be
deemed to be an Advance hereunder and, thereafter, shall bear interest at the
rate then applicable to Advances that are Base Rate Loans under Section 2.6.  To the extent an L/C Disbursement is deemed
to be an Advance hereunder, Borrowers’ obligation to reimburse such L/C
Disbursement shall be discharged and replaced by the resulting Advance.  Promptly following receipt by Agent of any
payment from Borrowers pursuant to this paragraph, Agent shall distribute such
payment to the Issuing Lender or, to the extent that Lenders have made payments
pursuant to Section 2.12(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 Commitment agrees to fund its Pro Rata Share of any Advance deemed made
pursuant to the foregoing subsection on the same terms and conditions as if
Borrowers had requested such Advance and Agent shall promptly pay to Issuing
Lender the amounts so received by it from the Lenders.  By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Lender or the Lenders with
Commitment, the Issuing Lender shall be deemed to have granted to each Lender
with a Commitment, and each Lender with a Commitment shall be deemed to have
purchased, a

 

 

 

40

 

participation in each Letter of Credit, in an
amount equal to its Pro Rata Share of the Risk Participation Liability of such
Letter of Credit, and each such Lender agrees to pay to Agent, for the account
of the Issuing Lender, such Lender’s Pro Rata Share of any payments made by the
Issuing Lender under such Letter of Credit. 
In consideration and in furtherance of the foregoing, each Lender with a
Commitment hereby absolutely and unconditionally agrees to pay to Agent, for the
account of the Issuing Lender, such Lender’s Pro Rata Share of each L/C
Disbursement made by the Issuing Lender and not reimbursed by Borrowers on the
date due as provided in clause (a) of this Section, or of any reimbursement
payment required to be refunded to Borrowers for any reason.  Each Lender with a Commitment acknowledges
and agrees that its obligation to deliver to Agent, for the account of the
Issuing Lender, an amount equal to its respective Pro Rata Share pursuant to
this Section 2.12(b) shall be absolute and unconditional and such remittance
shall be made notwithstanding the occurrence or continuation of an Event of
Default or Default or the failure to satisfy any condition set forth in Section
3 hereof.  If any such Lender fails
to make available to Agent the amount of such Lender’s Pro Rata Share of any
payments 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)           Each Borrower hereby agrees to
indemnify, save, defend, and hold the Lender Group harmless from any loss,
cost, expense, or liability, and reasonable attorneys fees incurred by the
Lender Group arising out of or in connection with any Letter of Credit; provided,
however, that no Borrower shall be obligated hereunder to indemnify for
any loss, cost, expense, or liability that is caused by the gross negligence or
willful misconduct of the Issuing Lender or any other member of the Lender
Group.  Each Borrower agrees to be bound
by the Underlying Issuer’s regulations and interpretations of any Underlying
Letter of Credit or by Issuing Lender’s interpretations of any L/C issued by
Issuing Lender to or for such Borrower’s account, even though this
interpretation may be different from such Borrower’s own, and each Borrower
understands and agrees that the Lender Group shall not be liable for any error,
negligence, or mistake, whether of omission or commission, in following
Borrowers’ instructions or those contained in the Letter of Credit or any
modifications, amendments, or supplements thereto.  Each Borrower understands that the L/C Undertakings may require Issuing
Lender to indemnify the Underlying Issuer for certain costs or liabilities
arising out of claims by Borrowers against such Underlying Issuer.  Each Borrower hereby agrees to indemnify,
save, defend, and hold the Lender Group harmless with respect to any loss,
cost, expense (including reasonable attorneys fees), or liability incurred by
the Lender Group under any L/C Undertaking as a result of the Lender Group’s
indemnification of any Underlying Issuer; provided, however, that
no Borrower shall be obligated hereunder to indemnify for any loss, cost,
expense, or liability that is caused by the gross negligence or willful
misconduct of the Issuing Lender or any other member of the Lender Group.

 

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

 

(e)           [INTENTIONALLY OMITTED]

 

 

 

41

 

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

 

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

 

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

 

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

 

2.13        LIBOR Option.

 

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

 

 

 

42

 

(b)           LIBOR
Election.

 

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

 

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

 

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

 

(c)           Prepayments.  Borrowers may prepay LIBOR Rate Loans at any time; provided,
however, that in the event that LIBOR Rate Loans are prepaid on any date
that is not the

 

 

 

43

 

last day of the Interest Period applicable
thereto, including as a result of any automatic prepayment through the required
application by Agent of proceeds of Collections in accordance with Section
2.4(b) or for any other reason, including early termination of the term of
this Agreement or acceleration of the Obligations pursuant to the terms hereof,
each Borrower shall indemnify, defend, and hold Agent and the Lenders and their
Participants harmless against any and all Funding Losses in accordance with
clause (b) above.

 

(d)           Special Provisions Applicable to LIBOR Rate.

 

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

 

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

 

(e)           No Requirement of Matched Funding.  Anything to the contrary contained herein
notwithstanding, neither Agent, nor any Lender, nor any of their Participants,
is required

 

 

 

44

 

actually to acquire eurodollar deposits to
fund or otherwise match fund any Obligation as to which interest accrues at a
rate determined by reference to the LIBOR Rate.  The provisions of this Section shall apply as if each Lender or
its Participants had match funded any Obligation as to which interest is
accruing at a rate determined by reference to the LIBOR Rate by acquiring
eurodollar deposits for each Interest Period in the amount of the LIBOR Rate
Loans.

 

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

 

2.15        Joint and Several Liability of
Borrowers.

 

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

 

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

 

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

 

 

 

45

 

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

 

(e)           Except as otherwise expressly
provided in this Agreement, each Person composing Borrowers hereby waives
notice of acceptance of its joint and several liability, notice of any Advances
or Letters of Credit issued under or pursuant to this Agreement, notice of the
occurrence of any Default, Event of Default, or of any demand for any payment
under this Agreement, notice of any action at any time taken or omitted by
Agent or Lenders under or in respect of any of the Obligations, any requirement
of diligence or to mitigate damages and, generally, to the extent permitted by
applicable law, all demands, notices and other formalities of every kind in
connection with this Agreement (except as otherwise provided in this
Agreement).  Each Person composing
Borrowers hereby assents to, and waives notice of, any extension or
postponement of the time for the payment of any of the Obligations, the
acceptance of any payment of any of the Obligations, the acceptance of any
partial payment thereon, any waiver, consent or other action or acquiescence by
Agent or Lenders at any time or times in respect of any default by any Person
composing Borrowers in the performance or satisfaction of any term, covenant,
condition or provision of this Agreement, any and all other indulgences
whatsoever by Agent or Lenders in respect of any of the Obligations, and the
taking, addition, substitution or release, in whole or in part, at any time or
times, of any security for any of the Obligations or the addition, substitution
or release, in whole or in part, of any Person composing Borrowers.  Without limiting the generality of the
foregoing, each of Borrowers assents to any other action or delay in acting or
failure to act on the part of any Agent or Lender with respect to the failure
by any Person composing Borrowers to comply with any of its respective
Obligations, including, without limitation, any failure strictly or diligently
to assert any right or to pursue any remedy or to comply fully with applicable
laws or regulations thereunder, which might, but for the provisions of this Section
2.15 afford grounds for terminating, discharging or relieving any Person
composing Borrowers, in whole or in part, from any of its Obligations under this
Section 2.15, it being the intention of each Person composing Borrowers
that, so long as any of the Obligations hereunder remain unsatisfied, the
Obligations of such Person composing Borrowers under this Section 2.15
shall not be discharged except by performance and then only to the extent of
such performance.  The Obligations of
each Person composing Borrowers under this Section 2.15 shall not be
diminished or rendered unenforceable by any winding up, reorganization,
arrangement, liquidation, reconstruction or similar proceeding with respect to
any Person composing Borrowers or any Agent or Lender.  The joint and several liability of the
Persons composing Borrowers hereunder shall continue in full force and effect
notwithstanding any absorption, merger, amalgamation or any other change
whatsoever in the name, constitution or place of formation of any of the
Persons composing Borrowers or any Agent or Lender.

 

(f)            Each Person composing Borrowers
represents and warrants to Agent and Lenders that such Borrower is currently
informed of the financial condition of Borrowers and of all other circumstances
which a diligent inquiry would reveal and which bear upon the risk of
nonpayment of the Obligations.  Each
Person composing Borrowers further represents and warrants to Agent and Lenders
that such Borrower has read and understands the terms and conditions of the

 

 

 

46

 

Loan Documents.  Each Person composing Borrowers hereby covenants that such
Borrower will continue to keep informed of Borrowers’ financial condition, the
financial condition of other guarantors, if any, and of all other circumstances
which bear upon the risk of nonpayment or nonperformance of the Obligations.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(i)            The provisions of this Section
2.15 are made for the benefit of the Agent, the Lenders and their
respective successors and assigns, and may be enforced by it or them from time
to time against any or all of the Persons composing Borrowers as often as
occasion therefor may arise and without requirement on the part of any such
Agent, Lender, successor or assign first to marshal any of its or their claims
or to exercise any of its or their rights against any of the other Persons
composing Borrowers or to exhaust any remedies available to it or them against
any of the other Persons composing Borrowers or to resort to any other source
or means of obtaining payment of any of the Obligations hereunder or to elect
any other remedy.  The provisions of
this Section 2.15 shall remain in effect until all of the Obligations
shall have been paid in full or otherwise fully satisfied.  If at any time, any payment, or any part
thereof, made in respect of any of the Obligations, is rescinded or must
otherwise be restored or returned by any Agent or Lender upon the insolvency,
bankruptcy or

 

 

 

47

 

reorganization of any of the Persons
composing Borrowers, or otherwise, the provisions of this Section 2.15
will forthwith be reinstated in effect, as though such payment had not been
made.

 

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

 

(k)           Each of the Persons composing
Borrowers hereby agrees that, after the occurrence and during the continuance
of any Default or Event of Default, the payment of any amounts due with respect
to the indebtedness owing by any Borrower to any other Borrower is hereby
subordinated to the prior payment in full in cash of the Obligations.  Each Borrower hereby agrees that after the
occurrence and during the continuance of any Default or Event of Default, such
Borrower will not demand, sue for or otherwise attempt to collect any
indebtedness of any other Borrower owing to such Borrower until the Obligations
shall have been paid in full in cash. 
If, notwithstanding the foregoing sentence, such Borrower shall collect,
enforce or receive any amounts in respect of such indebtedness, such amounts
shall be collected, enforced and received by such Borrower as trustee for the
Lender Group, and such Borrower shall deliver any such amounts to Agent for
application to the Obligations in accordance with Section 2.4(b).

 

2.16        Interpretation of Certain Aspects of
Advances.  Notwithstanding anything to the contrary
provided herein:

 

(a)           A Swing Loan may be made only if
Administrative Borrower has requested that the applicable Advance be a Base
Rate Loan; and

 

(b)           Although Swing Loan and Agent
Advances are considered to be “Advances” under the Loan Documents, no Lender is
required to make an Advance under Section 2.1(a) if a Swing Loan or
Agent Advance is made, but each Lender is required to make Settlement pursuant
to Section 2.1(f).

 

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

 

 

 

48

 

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 April 13, 2001;

 

(b)           Agent shall have received all
financing statements required by Agent, duly executed by the applicable
Borrowers, and Agent shall have received searches reflecting the filing of all
such financing statements;

 

(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 Disbursement
Letter,

 

(ii)           the Intercreditor
Agreement,

 

(iii)          the Fee Letter,

 

(iv)          the Officers’
Certificate;

 

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

 

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

 

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

 

(g)           Agent shall have received
certificates of status with respect to each Borrower, each dated within 30 days
of the Closing Date, such certificates to be issued by the appropriate officer
of the following jurisdictions, which certificates shall indicate that such
Borrower is in good standing in such jurisdictions: for each Borrower,
California, Wisconsin, and Minnesota, and for Silicon Graphics Federal, Inc.,
Maryland;

 

(h)           Agent shall have received
confirmation from Bank of America that Parent has secured, to Bank of America’s
satisfaction, by cash or one or more letters of credit, Parent’s obligation to
cover: (i) the mark-to-market exposure on foreign exchange contracts (said
collateral to be released as the contracts expire); and (ii) the extension of
credit from Bank of America’s New Delhi, India branch;

 

 

 

49

 

(i)            [INTENTIONALLY OMITTED];

 

(j)            [INTENTIONALLY OMITTED];

 

(k)           Agent shall have received an executed
copy of that certain Amendment of Confirmation entered into between Parent and
Bank of America as part of the Structured Stock Repurchase Documents;

 

(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)          [INTENTIONALLY OMITTED];

 

(n)           Agent shall have received opinions of
Borrowers’ counsel in form and substance satisfactory to Agent;

 

(o)           Agent shall have received
satisfactory evidence (including a certificate of the chief financial officer
of Parent) that all tax returns required to be filed by Borrowers have been
timely filed and all taxes upon Borrowers 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;

 

(p)           Borrowers shall have the Required
Availability after giving effect to the initial extensions of credit hereunder;

 

(q)           Agent shall have completed its
business, legal, and collateral due diligence, including (i) a collateral audit
and review of Borrowers’ books and records and verification of Borrowers’
representations and warranties to the Lender Group, the results of which shall
be satisfactory to Agent, and (ii) an inspection of each of the locations where
Inventory is located, the results of which shall be satisfactory to Agent;

 

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

 

(s)           [INTENTIONALLY OMITTED];

 

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

 

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

 

(v)           [INTENTIONALLY OMITTED];

 

(w)          [INTENTIONALLY OMITTED];

 

 

 

50

 

(x)            Agent shall have received copies of
the listing of United States registered patents, trademarks and copyrights, in
each case together with a certified of the secretary of Administrative Borrower
certifying each such document as being a true, correct, and complete copy
thereof;

 

(y)           Borrowers shall have received all
licenses, approvals or evidence of other actions required by any Governmental
Authority in connection with the execution and delivery by Borrowers of this
Agreement or any other Loan Document or with the consummation of the
transactions contemplated hereby and thereby; and

 

(z)            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 Borrowers to so perform or cause to be performed constituting an
Event of Default):

 

(a)           within 30 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;

 

(b)           within 60 days of the Closing Date,
deliver to Agent executed copies of the Cash Management Agreements;

 

(c)           deliver to Agent Collateral Access
Agreement with respect to the following locations: (i) 2081 N. Shoreline Blvd.,
Bldg. 11, Mountain View, California, by June 15, 2001, (ii) 1600 Amphitheatre
Parkway, Bldgs. 30, 31, 40, 41, 42, and 43, by June 15, 2001, (iii) Warehouse
of Wisconsin, 2313 Olson Drive, Chippewa Falls, Wisconsin, (iv) Sonic Air, 2200
Outer Loop Drive, Louisville, Kentucky, by May 21, 2001,  (v) 12200-G Plum Orchard Drive, Silver
Spring, Maryland, by June 15, 2001,and (vi) North American Van Lines, 1710
Little Orchard Street, San Jose, California, by July 30, 2001;

 

(d)           within 30 days of the Closing Date,
deliver to Agent an executed copy of the Intercompany Subordination Agreement;

 

(e)
          within 5 Business Days of the
Closing Date, deliver to Agent an executed UCC-1 financing statement describing
the Collateral for filing in the State of Kentucky; and

 

(f)            no later than November 15, 2001,
deliver to Agent executed copies of the Intellectual Property Security
Agreement and all other documents related thereto, in form and substance
satisfactory to Agent in its Permitted Discretion, necessary to create and
perfect a Lien on Borrower’s Intellectual Property in favor of Agent, for the
benefit of the Lender Group.

 

 

 

51

 

3.3          Conditions Precedent to all
Extensions of Credit.  The obligation of the Lender
Group (or any member thereof) to make all Advances (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 any Borrower, Agent, any Lender, or any of their
Affiliates;

 

(d)           no Material Adverse Change shall have
occurred with respect to Borrowers from the financial condition of Borrowers on
March 31, 2001 reflected in the Closing Date Business Plan;

 

(e)           no Material Adverse Change (other
than a Material Adverse Change described in Section 3.3(d)) shall have
occurred; and

 

(f)            Administrative Borrower shall have
delivered to Agent a completed and executed Borrowing Base Certificate, dated
as of the Business Day on which the request for the Borrowing is made.

 

3.4          Term.  This
Agreement shall become effective upon the execution and delivery hereof by
Borrowers, Agent, and the Lenders and shall continue in full force and effect
for a term ending on April 13, 2003 (the “Maturity Date”).  The foregoing notwithstanding, the Lender
Group, upon the election of the Required Lenders, shall have the right to terminate
its obligations under this Agreement pursuant to Section 9.1.

 

3.5          Effect
of Termination.  On the date of termination of this
Agreement, all Obligations (including contingent reimbursement obligations of
Borrowers with respect to any outstanding Letters of Credit) immediately shall
become due and payable without notice or demand.  No termination of this Agreement, however, shall relieve or
discharge Borrowers of their duties, Obligations, or covenants hereunder and
the Agent’s Liens in the Collateral shall remain in effect until all
Obligations have been fully and finally discharged 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 fully and finally discharged and the Lender
Group’s obligations to provide additional credit under the Loan Documents have
been terminated irrevocably, Agent will, at Borrowers’ sole expense, execute
and deliver any UCC termination statements, lien releases, mortgage releases,
re-assignments of trademarks, discharges of security interests, and other

 

 

 

52

 

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 Borrowers.  Borrowers
have the option, at any time upon 90 days prior written notice by
Administrative Borrower to Agent, to terminate this Agreement by paying to
Agent, for the benefit of the Lender Group, in cash, the Obligations (including
either (i) providing cash collateral to be held by Agent for the benefit of
those Lenders with a Commitment in an amount equal to 105% of the then extant
Letter of Credit Usage, or (ii) causing the original Letters of Credit to be
returned to the Issuing Lender), in full, together with the Applicable
Prepayment Premium (to be allocated based upon letter agreements between Agent
and individual Lenders).  If
Administrative Borrower has sent a notice of termination pursuant to the
provisions of this Section, then the Commitments shall terminate and Borrowers
shall be obligated to repay the Obligations (including either (i) providing
cash collateral to be held by Agent for the benefit of those Lenders with a
Commitment in an amount equal to 105% of the then extant Letter of Credit
Usage, or (ii) causing the original Letters of Credit to be returned to the
Issuing Lender), 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 terminate after the occurrence 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, Borrowers 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.  Notwithstanding any provision to the
contrary herein provided, Borrowers shall not be liable for an Applicable
Prepayment Premium if this Agreement is terminated as a direct result of
Borrowers refinancing the Obligations through a commercial banking unit of
Wells Fargo as a provider, arranger or agent of such refinancing.

 

4.             CREATION OF SECURITY INTEREST.

 

4.1          Grant
of Security Interest.  Each Borrower hereby grants to Agent, for
the benefit of the Lender Group, a continuing security interest in all of its
right, title, and interest in all currently existing and hereafter acquired or
arising  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 Borrowers of each of their covenants and duties under the Loan
Documents.  The Agent’s Liens in and to
the  Collateral shall attach to all  Collateral without further act on the part
of Agent or Borrowers.  Anything
contained in this Agreement or any other Loan Document to the contrary
notwithstanding, except for Permitted Dispositions, Borrowers have no
authority, express or implied, to dispose of any item or portion of the
Collateral.

 

 

53

 

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

 

4.3          Collection of Accounts, General
Intangibles Collateral, and Negotiable Property 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 Borrowers that the Accounts, Negotiable Property Collateral and General
Intangibles Collateral have been assigned to Agent or that Agent has a security
interest therein, or (b) collect the Accounts, Negotiable Property Collateral
and General Intangibles Collateral directly and charge the collection costs and
expenses to the Loan Account.  Each
Borrower agrees that it will hold in trust for the Lender Group, as the Lender
Group’s trustee, any Collections that it receives and immediately will deliver
said Collections to Agent or a Cash Management Bank in their original form as
received by the applicable Borrower.

 

4.4          Delivery of Additional
Documentation Required.  At any time upon the request of Agent,
Borrowers shall execute and deliver to Agent, any and all financing statements,
original financing statements in lieu of continuation statements, fixture
filings, security agreements, pledges, assignments, endorsements of
certificates of title, and all other documents (the “Additional Documents”)
that Agent may request in its Permitted Discretion, in form and substance
reasonably satisfactory to Agent, to perfect and continue perfected or better
perfect the Agent’s Liens in the Collateral (whether now owned or hereafter
arising or acquired), 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, each Borrower authorizes Agent to execute any such Additional
Documents in the applicable Borrower’s name and authorize Agent to file such
executed Additional Documents in any appropriate filing office.

 

4.5          Power of
Attorney.  Each Borrower hereby irrevocably makes,
constitutes, and appoints Agent (and any of Agent’s officers, employees, or
agents designated by Agent) as such Borrower’s true and lawful attorney, with
power to (a) if such Borrower refuses to, or fails timely to execute and
deliver any of the documents described in Section 4.4, sign the name of
such 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 such
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 Accounts; provided, however, that so
long as no Event of Default has occurred which is continuing, Agent will
coordinate any such verification activities with Administrative Borrower, (d)
endorse such Borrower’s name on any Collection 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 such
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 the Accounts, General Intangibles Collateral or Negotiable Property
Collateral 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

 

 

 

54

 

Agent as each 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 hereafter to inspect the Books and to check, test, and appraise the
Collateral in order to verify Borrowers’ financial condition or the amount,
quality, value, condition of, or any other matter relating to, the Collateral; provided,
however, that so long as no Event of Default has occurred which is
continuing, any such inspection, check, test or appraisal shall be conducted
during normal business hours in a manner so as not to interfere unreasonably
with Borrowers’ business operations.

 

4.7          [INTENTIONALLY
OMITTED.]

 

5.             REPRESENTATIONS AND WARRANTIES.

 

In
order to induce the Lender Group to enter into this Agreement, each Borrower
makes the following representations and warranties to the Lender Group which
shall be true, correct, and complete, in all material respects, as of the date
hereof, and shall be true, correct, and complete, in all material respects, as
of the Closing Date, and at and as of the date of the making 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.  Each Borrower has good and indefeasible
title to its Collateral 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 to such Account Debtors in the ordinary course of Borrowers’
business, owed to Borrowers without defenses, disputes, offsets, counterclaims,
or rights of return or cancellation.  As
to each Eligible Account, such Account is not excluded as ineligible by virtue
of one or more of the criteria set forth in clauses (a) through (o) contained
in the definition of “Eligible Accounts” in Section 1.1.

 

5.3          Threshold
Inventory.  The Threshold Inventory is of good and
merchantable quality, free from material defects.  As to each item of Threshold Inventory, such Inventory is:

 

(a)           owned by a Borrower free and clear of
all Liens other than Agent’s Liens and Permitted Liens,

 

(b)           either located at one of the
locations set forth on Schedule 5.5 or in transit from one such location
to another such location,

 

 

 

55

 

(c)           not located on real property leased
by a Borrower or in a contract warehouse, in each case, unless subject to a
Collateral Access Agreement executed by the lessor, the warehouseman, or other
third party, as the case may be (subject to the delivery of certain Collateral
Access Agreements as provided in Section 3.2(c)), and unless segregated
or otherwise separately identifiable from goods of others, if any, stored on
the premises,

 

(d)           not goods that have been returned or
rejected by Borrowers’ customers, and

 

(e)           not goods that are obsolete or slow
moving, restrictive or custom items, or that constitute packaging and shipping
materials, supplies used or consumed in Borrowers’ business, bill and hold
goods, defective goods, “seconds,” or Inventory acquired on consignment.

 

5.4          Threshold
Equipment.  The Threshold Equipment is used or held for
use in Borrowers’ business and is fit for such purposes.

 

5.5          Location of Threshold Inventory and
Threshold Equipment.  Except as set forth on Schedule 5.5,
the Threshold Inventory and the Threshold Equipment are not stored with a
bailee, warehouseman, or similar party and are located only at the locations
identified on Schedule 5.5 or are in transit from one such location to
another.

 

5.6          Inventory
Records.  Each Borrower keeps correct and accurate
records itemizing and describing the type, quality, and quantity of its
Inventory and the book value thereof.

 

5.7          Location of Chief Executive Office;
FEIN.  The chief executive office of each Borrower
is located at the address indicated in Schedule 5.7 and each Borrower’s
FEIN is identified in Schedule 5.7.

 

5.8          Due Organization and Qualification;
Subsidiaries.

 

(a)           Each Borrower is duly organized and
existing and in good standing under the laws of the jurisdiction of its
organization and qualified to do business in any state where the failure to be
so qualified reasonably could be expected to 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 each
Borrower, by class, and, as of the Closing Date, a description of the number of
shares of each such class that are issued and outstanding.  Other than as described on Schedule
5.8(b), there are no subscriptions, options, warrants, or calls relating to
any shares of any Borrower’s capital Stock, including any right of conversion
or exchange under any outstanding security or other instrument.  No Borrower is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its capital Stock or any security convertible into or exchangeable
for any of its capital Stock.

 

(c)           Set forth on Schedule 5.8(c),
is a complete and accurate list of each Borrower’s direct and indirect
Subsidiaries, showing: (i) the jurisdiction of their organization; and (ii)
where indicated in Schedule 5.8(c), the percentage of equity ownership
of such Subsidiaries.  All of the

 

 

56

 

outstanding capital Stock of
each such Subsidiary has been validly issued and is fully paid and non-assessable.

 

5.9          Due
Authorization; No Conflict.

 

(a)           As to each Borrower, the execution,
delivery, and performance by such 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 such Borrower.

 

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

 

(c)           Other than the filing of financing
statements and fixture filings, the execution, delivery, and performance by
each Borrower of this Agreement and the Loan Documents to which such Borrower
is a party do not and will not require any registration with, consent, or
approval of, or notice to, or other action with or by, any Governmental
Authority or other Person.

 

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

 

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

 

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 Borrowers,
threatened against Borrowers, or any of their Subsidiaries, as applicable,
except for (a) matters that are fully covered by insurance (subject to
customary deductibles), and (b) matters arising after the Closing Date that, if
decided adversely to Borrowers, or any of their Subsidiaries, as applicable,
reasonably could not be expected to result in a Material Adverse Change.

 

5.11        No
Material Adverse Change.  All
financial statements relating to Borrowers that have been delivered by
Borrowers to the Lender Group other than the financial statements provided

 

 

 

57

 

in the Closing Date Business Plan 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, Borrowers’ financial
condition as of the date thereof and results of operations for the period then
ended.  There has not been a Material
Adverse Change with respect to Borrowers from the financial condition of
Borrowers on March 31, 2001 reflected in the Closing Date Business Plan.

 

5.12        Fraudulent
Transfer.

 

(a)           Each Borrower is Solvent.

 

(b)           No transfer of property is being made
by any Borrower and no obligation is being incurred by any Borrower in
connection with the transactions contemplated by this Agreement or the other
Loan Documents with the intent to hinder, delay, or defraud either present or
future creditors of Borrowers.

 

5.13        Employee
Benefits.  Except as set forth on Schedule 5.13,
none of Borrowers, their Subsidiaries, or any of their ERISA Affiliates
maintains or contributes to any Benefit Plan or Multiemployer Plan.  Each of Borrowers, their Subsidiaries and
their ERISA Affiliates have satisfied the minimum funding standards of ERISA
and the IRC with respect to each Benefit Plan to which it is obligated to
contribute and has made all contributions required under the terms of each
Multiemployer Plan to which it is obligated to contribute.  No ERISA Event has occurred nor has any
other event occurred that may result in an ERISA Event that reasonably could be
expected to result in a Material Adverse Change.  None of Borrowers, their Subsidiaries or any of their ERISA
Affiliates is required to provide security to any Benefit Plan under Section
401(a)(29) of the IRC.

 

5.14        Environmental
Condition.  No Borrower has received notice that a Lien
arising under any Environmental Law has attached to any of its revenues or to
any Collateral.

 

5.15        Brokerage
Fees.  Borrowers have not utilized the services of
any broker or finder in connection with Borrowers’ obtaining financing from the
Lender Group under this Agreement and no brokerage commission or finders fee is
payable by Borrowers in connection herewith.

 

5.16        Intellectual Property; IP Collateral.

 

(a)           Each Borrower owns,
or holds licenses in all of its Intellectual Property, and licenses that are
necessary to the conduct of its business as currently conducted.  Attached hereto as Schedule 5.16A is
a true, correct, and complete listing of all IP Collateral as to which each
Borrower is the owner or is an exclusive licensee.

 

(b)           Except as set forth
in Schedule 5.16A:

 

(i)                Each Borrower
is the sole owner of its IP Collateral, free and clear of any Lien (other than
in favor of Agent, for the benefit of Lender Group) without the payment of any
monies or royalty except with respect to off-the-shelf software;

 

 

 

58

 

(ii)               Each Borrower
has taken, and will continue to take, all actions which are necessary or
advisable to acquire and protect its IP Collateral, consistent with prudent
commercial practices and such Borrower’s business judgment, including without
limitation: (x) registering all Copyrights which, in such Borrower’s
business judgment, are of sufficient value to merit such treatment, in the U.S.
Copyright Office, and (y) registering all Patent Collateral and Trademarks
which, in such Borrower’s business judgment, are of sufficient value to merit
such treatment, in the United States Patent and Trademark Office;

 

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

 

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

 

(v)               Borrowers have
not received any formal notice of any violation or infringement of any
proprietary rights of any other Person;

 

(vi)              to the knowledge
of Borrowers, no Person is infringing any of the Trademarks;

 

(vii)             except on an arm’s-length
basis for value and other commercially reasonable terms, Borrowers have not
granted any license with respect to any IP Collateral to any Person; and

 

(viii)            Borrowers are
not pursuing any claims or causes of actions against any Person for
infringement of Borrowers’ IP Collateral.

 

5.17        Leases.  Borrowers
enjoy peaceful and undisturbed possession under all leases of Equipment and
Real Property located in the United States material to the business of
Borrowers and to which Borrowers are a party or under which Borrowers are
operating.  All of such leases are valid
and subsisting and no material default by Borrowers exists under any of them.

 

5.18        DDAs.  Set forth
on Schedule 5.18 are all of the DDAs of each Borrower, including, with respect
to each depository: (i) the name and address of that depository, and (ii) the
account numbers of the accounts maintained with such depository.

 

5.19        Complete
Disclosure.  All factual information (taken as a whole)
furnished by or on behalf of Borrowers in writing to Agent or any Lender
(including all information contained in the Schedules hereto or in the other
Loan Documents) for purposes of or in connection with this Agreement, the other
Loan Documents or any transaction contemplated herein or therein is, and all
other such factual information (taken as a whole) hereafter furnished by or on
behalf of Borrowers in writing to the 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

 

 

 

59

 

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
Business Plan represents, and as of the date on which any other Projections are
delivered to Agent, such additional Projections represent Borrowers’ good faith
best estimate of its future performance for the periods covered thereby.  Notwithstanding anything in any Loan
Document to the contrary, Borrowers make no representation or warranty for any
purpose, including, without limitation, Section 8.11 hereof,  as to any projection or forecast of results
or other forward looking statement set forth in any Projection, in the Closing
Date Business Plan or otherwise in any document or statement delivered or made
to the Agent or any Lender other than, in the case of any such projection,
forecast or forward looking statement, that Borrowers had a good faith belief
at the time of such delivery that such projection, forecast or forward looking
statement was reasonably supported based on the assumptions described in
connection therewith at the time of such delivery.

 

5.20        Indebtedness.  Set
forth on Schedule 5.20 is a true and complete list of all Indebtedness
of each Borrower outstanding immediately prior to the Closing Date that is to
remain outstanding after the Closing Date and such Schedule accurately reflects
the aggregate principal amount of such Indebtedness and the principal financial
terms thereof.

 

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

 

6.             AFFIRMATIVE
COVENANTS.

 

Each
Borrower covenants and agrees that, so long as any credit hereunder shall be
available and until full and final payment of the Obligations, Borrowers shall
do all of the following (provided, however, that only Administrative
Borrower is required to comply with Section 6.2 and Section
6.3(a)(iii), in each case on behalf of itself and the other Borrower):

 

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

 

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:

 

	
  Weekly

  	
   

  	
  (a)
  a sales journal, collection journal, and credit register since the last such
  schedule and a calculation of the Borrowing Base as of such date, and

   

  (b)
  notice of all returns, disputes, or claims.

   

  (c) restricted and
  unrestricted cash of Parent and its Subsidiaries on both a consolidated
  domestic and worldwide basis,

  

 

 

60

 

 

	
   

  	
   

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

  
	
  Monthly (not later than

  the 10th day of each

  month)

  	
   

  	
  (e)
  a detailed aging, by total, of the Accounts, together with a reconciliation
  to the detailed calculation of the Borrowing Base  previously provided to Agent,

   

  (f)
  a summary aging, by vendor, of Borrowers’ accounts payable  and any book overdraft, and

   

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

  
	
   

  	
   

  	
   

  
	
  Quarterly

  	
   

  	
  (h)
  a detailed list of each Borrower’s customers,

   

  (i) a report regarding
  each Borrower’s accrued, but unpaid, ad valorem taxes,

  
	
   

  	
   

  	
   

  
	
  Upon request by Agent

  	
   

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

   

  (k) such other reports as
  to the Collateral, or the financial condition of Borrowers as Agent may
  request.

  

 

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

 

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 (45 days in the case of the a month that is the end of one
of the first 3 fiscal quarters in a fiscal year) after the end of each  month during each of Parent’s fiscal years,

 

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

 

 

 

61

 

(ii)           a certificate
signed by the chief financial officer of Parent 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 Parent and its Subsidiaries,

 

(B)           the representations
and warranties of Borrowers 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 Borrowers have taken, are taking, or
propose to take with respect thereto), and

 

(iii)          a Compliance
Certificate demonstrating, in reasonable detail, compliance at the end of such
quarter with the applicable financial covenants contained in Section 7.20,
and

 

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

 

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

 

(ii)           a certificate of
such accountants addressed to Agent and the Lenders stating that such
accountants do not have knowledge of the existence of any Default or Event of Default
under Section 7.20,

 

(c)           as soon as available, but in any
event within 30 days prior to the start of each of Parent’s fiscal years,

 

(i)            copies of Parent’s
Projections, in form and substance (including as to scope and underlying
assumptions) satisfactory to Agent, in its reasonable discretion, for the
forthcoming 3 years, year by year, and for the forthcoming fiscal year, quarter
by quarter, certified by the chief financial officer of Parent as being such
officer’s good faith best estimate of the financial performance of Parent and
its Subsidiaries

 

 

 

62

 

during the period covered
thereby,

 

(d)           if and when filed by any Borrower,
within 5 days of filing,

 

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

 

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

 

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

 

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

 

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

 

(f)            as soon as a 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 Borrowers propose to
take with respect thereto, and

 

(g)           upon the request of Agent, any other
report reasonably requested relating to the financial condition of Borrowers.

 

In
addition to the financial statements referred to above, Parent agrees to
deliver financial statements prepared on both a consolidated and consolidating
basis.  Parent agrees that its
independent certified public accountants are authorized to communicate with
Agent and to release to Agent whatever financial information concerning
Borrowers that Borrowers are obligated to deliver to Agent pursuant to this
Agreement, and agrees that Agent may contact directly any such accounting firm
or service bureau in order to obtain such information.

 

6.4          Intellectual Property; IP Collateral.  Comply with their continuing obligations described in Section
5.16 and the Intellectual Property Security Agreement.

 

6.5          Return.  Cause
returns and allowances as between Borrowers and their Account Debtors, to be on
the same basis and in accordance with the usual customary practices of the applicable
Borrower, 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,

 

 

 

63

 

ordinary wear and tear excepted, and comply
at all times with the provisions of all 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 Borrowers or any of their assets to be
paid in full, before delinquency or before the expiration of any extension
period, except to the extent that the validity of such assessment or tax shall
be the subject of a Permitted Protest. 
Borrowers will make timely payment or deposit of all tax payments and
withholding taxes required of it by applicable laws, including those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Agent with proof reasonably
satisfactory to Agent indicating that the applicable Borrower has made such
payments or deposits.  Borrowers shall
deliver satisfactory evidence of payment of applicable excise taxes in each
United States jurisdiction in which any Borrower is required to pay any such
excise tax.

 

6.8          Insurance.

 

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

 

(b)           Administrative Borrower shall give
Agent prompt notice of any loss of the Collateral in an amount in excess of
$250,000 covered by such insurance. 
Agent shall have the exclusive right to adjust any such losses payable
under any such insurance policies in excess of $250,000, without any liability
to Borrowers whatsoever in respect of such adjustments.  Any monies received as payment for any loss
under any insurance policy mentioned above (other than liability insurance
policies) or as payment of any award or compensation for condemnation or taking
by eminent domain of Collateral, shall be paid over to Agent to be applied at
the option of the Required Lenders either to the prepayment of the Obligations
or shall be disbursed to Administrative Borrower under staged payment terms
reasonably satisfactory to the Required Lenders for application to the cost of
repairs, replacements, or restorations. 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)           Borrowers shall not take out separate
insurance concurrent in form or contributing in the event of loss with
insurance covering the Collateral 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.  Administrative Borrower
immediately shall notify Agent whenever such separate insurance is taken out, specifying
the insurer

 

 

 

64

 

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 Threshold Inventory
and Threshold Equipment.  Keep the Threshold Inventory
and Threshold Equipment only at the locations identified on Schedule 5.5
or in transit from one such location to another; provided, however,
that Administrative Borrower may amend Schedule 5.5 so long as such
amendment occurs by written notice to Agent not less than 30 days prior to the
date on which the Inventory or Equipment is moved to such new location, so long
as such new location is within the continental United States, and so long as,
at the time of such written notification, the applicable Borrower provides any
financing statements or fixture filings necessary to perfect and continue
perfected the Agent’s Liens on such assets and also, if such location is not
owned by a Borrower, provides to Agent a Collateral Access Agreement (subject to
the time and extent permitted for compliance with Section 3.2(c)).

 

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, would not result in and reasonably could not
be expected to result in a Material Adverse Change.

 

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

 

6.12        Brokerage
Commissions.  Pay any and all brokerage commission or finders fees incurred in
connection with or as a result of Borrowers’ obtaining financing from the
Lender Group under this Agreement. 
Borrowers agree and acknowledge that payment of all such brokerage
commissions or finders fees shall be the sole responsibility of Borrowers, and
each 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
Borrowers’ obtaining financing from the Lender Group under this Agreement.

 

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

 

6.14        [INTENTIONALLY
OMITTED]

 

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 facts and circumstances in which such statement was made or known by any
Borrower to exist at the time such statement was made, and (b) correct any
defect or error that may be discovered therein or in any Loan

 

 

65

 

Document or in the execution, acknowledgment,
filing, or recordation thereof.

 

6.16        Cash
Collateral.  Provide and
maintain at all times cash collateral to be held by Agent in an amount equal to
no less than $6,995,540.38, which cash collateral will be held in an interest
bearing account maintained by Agent.

 

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

 

7.             NEGATIVE
COVENANTS.

 

Each
Borrower covenants and agrees that, so long as any credit hereunder shall be
available and until full and final payment of the Obligations, it will not 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 or
permit any Subsidiary to do the same, 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)           the SGI Loan and Permitted Purchase Money Indebtedness;

 

(d)           Indebtedness reflected in the Closing Date Business Plan;

 

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

 

(f)            Indebtedness consisting of obligations of Parent under
the Structured Stock Repurchase Documents or incurred in connection with any
full or partial termination, unwinding or settlement, whether or not at the
option of Parent, of the Structured Stock Repurchase,

 

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

 

(h)           refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) through (g) of this Section 7.1 (and
continuance or renewal of any Permitted Liens associated therewith) so long as:
(i) such refinancings, renewals, or extensions do not result in an increase in
the principal amount of, or interest rate with respect to, the Indebtedness so
refinanced, renewed, or extended, (ii) such refinancings, renewals, or
extensions do not result in a shortening of the average weighted maturity of
the Indebtedness so refinanced, renewed, or extended, nor are they on terms or

 

 

 

66

 

conditions, that, taken as a whole, are
materially more burdensome or restrictive to the applicable Borrower, and (iii)
if the Indebtedness that is refinanced, renewed, or extended was subordinated
in right of payment to the Obligations, then the terms and conditions of the
refinancing, renewal, or extension Indebtedness must be 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.

 

7.2          Liens.  Create,
incur, assume, or permit to exist, directly or indirectly, any Lien on or with
respect to any of the following property, 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(h)
and so long as the replacement Liens only encumber those assets that secured
the refinanced, renewed, or extended Indebtedness): (i) each Borrower’s
Intellectual Property; provided, however, that such Intellectual Property shall
not include the Excluded Intellectual Property, or (ii) Borrowers’ other assets
located within the United States, of any kind.

 

7.3          Restrictions on Fundamental Changes.

 

(a)           Enter into any merger or
consolidation (other than a merger or consolidation in which Borrower is the
surviving entity and that is otherwise permitted in Section 7.13),
reorganization or recapitalization not otherwise permitted under the Loan
Documents, or reclassify its Stock other than pursuant to the terms of such
Stock.

 

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

 

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

 

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

 

7.5          Change Name. 
Change its name, FEIN, corporate structure or identity, or add any new
fictitious name; provided, however, that a Borrower may change its name upon at
least 30 days prior written notice by Administrative Borrower to Agent of such
change and so long as, at the time of such written notification, such Borrower
provides any financing statements or fixture filings necessary to perfect and
continue perfected Agent’s Liens.

 

7.6          Guarantee.  Except where otherwise permitted as a guarantee of Indebtedness
under Section 7.1, guarantee or otherwise become in any way liable with
respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of Borrowers or
which are transmitted or turned over to Agent.

 

7.7          Nature
of Business.  Make any change in the principal nature of its business.

 

 

 

67

 

7.8          Prepayments
and Amendments.

 

(a)           Except in connection with
(i) any full or partial termination, unwinding or settlement, whether or
not at the option of Parent, of the Structured Stock Repurchase or otherwise
pursuant to the Structured Stock Repurchase Documents or (ii) a
refinancing permitted by Section 7.1(h), prepay, redeem, defease,
purchase, or otherwise acquire any Indebtedness of any Borrower, other than the
Obligations in accordance with this Agreement; and

 

(b)           Except in connection with
(i) any full or partial termination, unwinding or settlement, whether or
not at the option of Parent, of the Structured Stock Repurchase or otherwise
pursuant to the Structured Stock Repurchase Documents or (ii) a
refinancing permitted by Section 7.1(h), 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) through 7.1(g)
in a manner materially adverse to the Lender Group.

 

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

 

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

 

7.11        Distributions. 
Other than (i) any full or partial termination, unwinding or
settlement, whether or not at the option of Parent, of the Structured Stock
Repurchase or otherwise pursuant to the Structured Stock Repurchase Documents
or (ii) distributions or declaration and payment of dividends by a
Borrower to another Borrower, make any distribution or declare or pay any
dividends (in cash or other property, other than common Stock) on, or purchase,
acquire, redeem, or retire any  Borrower’s
Stock, of any class, whether now or hereafter outstanding.

 

7.12        Accounting
Methods.  Materially 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 Borrowers’ accounting records in a manner that would
result in said accounting firm or service bureau declining to provide Agent
information regarding the Collateral or Borrowers’ financial condition.

 

7.13        Investments.  Except for Permitted Investments, directly or indirectly, make or
acquire any Investment, or incur any liabilities (including contingent
obligations) other than Indebtedness permitted under Section 7.1 and
guarantees permitted under Section 7.6 for or in connection with any
Investment.

 

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

 

 

 

68

 

7.15        Suspension.  Other than Permitted Dispositions, suspend or go out of a
substantial portion of its business.

 

7.16        [INTENTIONALLY
OMITTED].

 

7.17        Use of
Proceeds.  Use the proceeds of the Advances for any
purpose other than (a) on the Closing Date to pay transactional fees, costs,
and expenses incurred in connection with this Agreement, the other Loan
Documents, and the transactions contemplated hereby and thereby, and (b)
thereafter, consistent with the terms and conditions hereof, for its lawful and
permitted purposes.

 

7.18        Change in Location of Chief
Executive Office; Inventory and Equipment with Bailees.  Relocate its chief executive office to a new
location without Administrative Borrower providing 30 days prior written
notification thereof to Agent and so long as, at the time of such written
notification, the applicable Borrower provides any financing statements or
fixture filings necessary to perfect and continue perfected the Agent’s Liens
and also provides to Agent a Collateral Access Agreement with respect to such
new location if such location is not owned by Borrower.  The Threshold Inventory and Threshold
Equipment shall not at any time now or hereafter be stored with a bailee,
warehouseman, or similar party without Agent’s prior written consent.

 

7.19        [INTENTIONALLY
OMITTED.]

 

7.20        Financial
Covenants.  Fail to maintain:

 

(a)           Minimum EBITDA.  EBITDA, measured on a fiscal quarter-end
basis, of not less than the required amount set forth in the following table
for the applicable period set forth opposite thereto:

 

	
   

  	
  Applicable Amount

  	
   

  	
  Applicable Period

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  <$95,000,000>

  	
   

  	
  For the 3 month period

  ending June 30, 2001

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  <$135,000,000>

  	
   

  	
  For the 3 month period

  ending September 30,
  2001

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  $21,000,000

  	
   

  	
  For the 3 month period
  ending

  December 28, 2001

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  $35,000,000

  	
   

  	
  For the 3 month period
  ending

  March 29, 2002

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  $7,950,000

  	
   

  	
  For the 3 month period
  ending

  June 28, 2002;

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  <$6,250,000>

  	
   

  	
  For the 3 month period
  ending

  September 27, 2002;

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

 

69

 

	
   

  	
  $12,900,000

  	
   

  	
  For the 3 month period
  ending

  December 27, 2002;

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  $12,075,000

  	
   

  	
  For the 3 month period
  ending

  March 28, 2003

  	
   

  

 

provided, however, that: (y)
if Parent is required under GAAP to make a non-cash write-down of its remaining
investment in WAM!NET after the date hereof, then the required amount of EBITDA
for the 3 month period during which said write-down is made shall be decreased
by the amount of said write-down; and  (z) for the calculation of the minimum amount of EBITDA for the 3
month periods ending December 28, 2001 and March31, 2002, net income will be
measured prior to non-cash mark-to-market adjustments necessitated as a direct
result of the settlement of the class action lawsuits filed in December 1997
and January 1998, in the United States District Court for the Northern District
of California, Lead Docket Case No. 97-CV-4362 and in the California Superior
Court for the County of Santa Clara, Case Nos. CV770727, CV770685, and CV774756.

 

(b)           Minimum Cash and Cash Equivalents. Cash and
Cash Equivalents of Parent and its Subsidiaries, determined on a consolidated
basis, (i) except as set forth in clause (ii) below, of no less than
$50,000,000 at all times during the term of this Agreement, and (ii) of no less
than $40,000,000 for the period beginning on November 3, 2001 through November
9, 2001.

 

(c)           Maximum Capital Expenditures.  Make capital expenditures in excess of
$10,000,000 in any fiscal quarter.

 

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 Borrowers fail 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          (a) If Borrowers fail or neglect
to perform, keep, or observe any covenant or other provision contained in Sections
6.2 or 6.3 hereof and such failure or neglect continues for a period of 5
Business Days after the date on which such failure or neglect first occurs, or
(b) if Borrowers fail or neglect to perform, keep, or observe any covenant
or other provision contained in Sections 4.2, 6.1, 6.6, 6.7 or 6.11
hereof and such failure or neglect is not cured within 15 days after the date
on which such failure or neglect first occurs, or (c) if Borrowers fail or
neglect to perform, keep, or observe any other covenant or other provision
contained in any Section of this Agreement (other than a

 

 

70

 

Section that is expressly addressed elsewhere
in this Section 8) or the Loan Documents (other than a Section of
such other Loan Document addressed elsewhere in this Section 8);

 

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

 

8.4          If an Insolvency Proceeding is
commenced by any Borrower;

 

8.5          If an Insolvency Proceeding is
commenced against any Borrower and any of the following events occurs:  (a) the applicable Borrower consents to the
institution of the 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 obligation 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, any Borrower, or (e) an
order for relief shall have been entered therein;

 

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

 

8.7          If a notice of Lien, levy, or
assessment is filed of record with respect to any Collateral (or any portion
thereof) 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 Collateral (or any
portion thereof) and the same is not paid before such payment is delinquent;

 

8.8          If a judgment or other claim becomes a
Lien or encumbrance upon any material portion of the Collateral;

 

8.9          If there is a default in any material
agreement to which any Borrower or any of its Subsidiaries is a party,
including any agreement evidencing, securing or otherwise relating to
Indebtedness in an amount in excess of $5,000,000, and such default (a) occurs
at the final maturity of the obligations thereunder, or (b) results in a right
by the other party thereto, irrespective of whether exercised, to accelerate
the maturity of the applicable Borrower’s or its Subsidiaries’ obligations
thereunder, to terminate such agreement, or to refuse to renew such agreement
pursuant to an automatic renewal right therein;

 

8.10        If any Borrower 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 by the terms of the subordination provisions applicable to such
Indebtedness;

 

8.11        If any material misstatement or
misrepresentation exists now or hereafter in any

 

 

 

71

 

warranty, representation, statement, or
Record made to the Lender Group in connection with the transactions
contemplated by the Loan Documents by any Borrower, or any officer, employee,
or director of any Borrower proves to have been untrue in any material respect
when made;

 

8.12        [INTENTIONALLY OMITTED];

 

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 (to the extent that perfection can be effected
by the measures required to be taken under the Loan Documents for such purpose)
and, except to the extent permitted by the terms hereof or thereof and
otherwise subject to Permitted Liens, first priority Lien on or security
interest in the Collateral covered hereby or thereby; 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 any Borrower in a
proceeding shall be commenced by any Borrower, or by any Governmental Authority
having jurisdiction over any Borrower, seeking to establish the invalidity or
unenforceability thereof.

 

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
Borrowers:

 

(a)           Declare all Obligations (including
the Dollar amount of contingent unreimbursed liabilities under L/C’s and L/C
Undertakings) whether evidenced by this Agreement, by any of the other Loan
Documents, or otherwise, immediately due and payable;

 

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

 

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

 

(d)           Settle or adjust disputes and claims
directly with Account Debtors for amounts and upon terms which Agent considers
reasonably advisable, and in such cases, Agent will credit the Loan Account
with only the net amounts received by Agent in payment of such disputed
Accounts after deducting all Lender Group Expenses incurred or expended in
connection therewith;

 

(e)           Cause Borrowers to hold all returned
Inventory in trust for the Lender Group, segregate all returned Inventory from
all other assets of Borrowers or in Borrowers’ possession and conspicuously
label said returned Inventory as the property of the Lender Group;

 

 

72

 

(f)            Without notice to or demand upon any
Borrower, make such payments and do such acts as Agent considers necessary or
reasonable to protect its security interests in the Collateral.  Each Borrower agrees to assemble the
Collateral if Agent so requires, and to make the Collateral available to Agent
at a place that Agent may designate which is reasonably convenient to both
parties.  Each Borrower authorizes Agent
to enter the premises where the Collateral is located, to take and maintain
possession of the 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 Borrowers’ Loan Account therefor. 
With respect to any of Borrowers’ owned or leased premises, each
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 any 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
any 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 any Borrower held by the Lender Group;

 

(h)           Agent or Agent’s designee may
(a) notify Account Debtors of Borrowers that the Accounts, General
Intangibles Collateral and Negotiable Property Collateral of Borrower have been
assigned to Agent or that Agent has a security interest therein, or
(b) collect such Accounts, General Intangibles Collateral and Negotiable
Property Collateral directly and charge the collection costs and expenses to
the Loan Account.  Borrowers agree that
each will hold in trust for Agent, as Agent’s trustee, any Collections that it
receives and immediately will deliver said Collections to Agent in their
original form as received by such Borrower;

 

(i)            Hold, as cash collateral, any and
all balances and deposits of any 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;

 

(j)            Ship, reclaim, recover, store,
finish, maintain, repair, prepare for sale, advertise for sale, and sell (in
the manner provided for herein) the Collateral.  Each Borrower hereby grants to Agent a license or other right to
use, without charge, such Borrower’s software (including all rights thereto as
owner or licensee thereof), 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 Collateral, in completing production of,
advertising for sale, and selling any Collateral and such Borrower’s rights
under all licenses and all franchise agreements shall inure to the Lender
Group’s benefit;

 

(k)           Sell the 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
Borrowers’ premises) as Agent determines is commercially reasonable.  It is not necessary that the Collateral be
present at any such sale;

 

 

73

 

 

(l)            Agent shall give notice of the
disposition of the Collateral as follows:

 

(i)            Agent shall give
Administrative Borrower (for the benefit of the applicable 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
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 Administrative 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 Collateral that is perishable or threatens to
decline speedily in value or that is of a type customarily sold on a recognized
market;

 

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

 

(n)           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;

 

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

 

(p)           Any deficiency that exists after
disposition of the Collateral as provided above will be paid immediately by
Borrowers.  Any excess will be returned,
without interest and subject to the rights of third Persons, by Agent to
Administrative Borrower (for the benefit of the applicable 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
any Borrower fails to pay any monies (whether taxes, assessments, insurance
premiums, or, in the case of leased properties or assets, rents or other
amounts payable under such leases) due to third Persons, or fails to make any
deposits or furnish any required proof of payment or deposit, all as required
under the terms of this Agreement, then Agent, in its sole discretion, and
without prior notice to any Borrower, may do any or all of the following; provided,
however, that if any failure by any Borrower described above in this Section
10 does not constitute an Event of Default and occurs when there has not
occurred any Event of Default which is continuing, then Agent may do any or all
of the following only if Agent shall have given notice of such failure to
Administrative Borrower and 

 

 

74

 

 

such failure is not cured
within 5 Business Days after the date of such notice:  (a) make payment of the same or any part thereof, (b) set up such
reserves in Borrowers’ 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.  Each Borrower waives demand, protest, notice
of protest, notice of default or dishonor (other than any notice required under
this Agreement), notice of payment and nonpayment (other than any notice
required under this Agreement), nonpayment at maturity, release, compromise,
settlement, extension, or renewal of documents, instruments, chattel paper, and
guarantees at any time held by the Lender Group on which each such Borrower may
in any way be liable.

 

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

 

11.3        Indemnification.  Each 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, Borrowers 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 misconduct of such Indemnified 

 

 

75

 

 

Person.  This provision shall survive the termination
of this Agreement and the repayment of the Obligations.  If any Indemnified Person makes any payment
to any other Indemnified Person with respect to an Indemnified Liability as to
which Borrowers were required to indemnify the Indemnified Person receiving
such payment, the Indemnified Person making such payment is entitled to be
indemnified and reimbursed by Borrowers with respect thereto.  WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL
APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH
IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION
OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.

 

12.          NOTICES.

 

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

 

	
  Administrative Borrower:

  	
   

  	
  Silicon Graphics, Inc.

  
	
   

  	
   

  	
  1600 Amphitheatre Parkway

  
	
   

  	
   

  	
  Mountain View, California
  94043

  
	
   

  	
   

  	
  Attn:  Jean Furter, Vice President and Treasurer

  
	
   

  	
   

  	
  Fax No.: (650) 932-0660

  
	
   

  	
   

  	
  Email address:  jean@sgi.com

  
	
   

  	
   

  	
   

  
	
  with copies to:

  	
   

  	
  Brobeck Phleger &
  Harrison, LLP

  
	
   

  	
   

  	
  Spear Street Tower

  
	
   

  	
   

  	
  One Market

  
	
   

  	
   

  	
  San Francisco, California
  94105

  
	
   

  	
   

  	
  Attn:  Douglas Young, Esq.

  
	
   

  	
   

  	
  Fax No.: (415) 442-1010

  
	
   

  	
   

  	
  Email address: 
  dyoung@brobeck.com

  
	
   

  	
   

  	
   

  
	
  and copies to:

  	
   

  	
  Silicon Graphics, Inc.

  
	
   

  	
   

  	
  1600 Amphitheatre Parkway

  
	
   

  	
   

  	
  Mountain View, California
  94043

  
	
   

  	
   

  	
  Attn:  Barry Weinert, Esq., Associate General
  Counsel

  
	
   

  	
   

  	
  Fax No.: (650) 933-0096

  
	
   

  	
   

  	
  Email address:  barryw@sgi.com

  

 

 

76

 

	
   

  	
   

  	
   

  
	
  If to Lenders:

  	
   

  	
  c/o Foothill Capital
  Corporation

  
	
   

  	
   

  	
  2450 Colorado Avenue

  
	
   

  	
   

  	
  Suite 3000 West

  
	
   

  	
   

  	
  Santa Monica, California
  90404

  
	
   

  	
   

  	
  Attn:  Business Finance Division Manager

  
	
   

  	
   

  	
  Fax No.:  (310) 453-7413

  
	
   

  	
   

  	
   

  
	
  with copies to:

  	
   

  	
  Jeffer, Mangels, Butler
  & Marmaro LLP

  
	
   

  	
   

  	
  1900 Avenue of the Stars

  
	
   

  	
   

  	
  7th Floor

  
	
   

  	
   

  	
  Los Angeles, California
  90067

  
	
   

  	
   

  	
  Attn:  Joel J. Berman, Esq.

  
	
   

  	
   

  	
  Fax:  (310) 203-0567

  
	
   

  	
   

  	
  Email address:  jjb@jmbm.com

  

 

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

 

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 CALIFORNIA.

 

(b)           THE PARTIES AGREE THAT ALL ACTIONS OR
PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS
LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, PROVIDED, HOWEVER,
THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY
BE BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT
ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER 

 

 

77

 

 

PROPERTY MAY BE FOUND.  BORROWERS 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).

 

(c)           BORROWERS 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.  BORROWERS 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, so long as no Event of Default has occurred and is
continuing, upon 5 Business Days’ notice to and with the written consent of
Administrative Borrower (not to be unreasonably withheld) (provided that no
written consent of Agent or Borrowers 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; provided, however, that Borrowers
and Agent may continue to deal solely and directly with such Lender in
connection with the interest so assigned to an Assignee until (i) written
notice of such assignment, together with payment instructions, addresses, and
related information with respect to the Assignee, have been given to
Administrative Borrower and Agent by such Lender and the Assignee, (ii) such
Lender and its Assignee have delivered to Administrative Borrower and Agent an
Assignment and Acceptance 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 and (iv) such Assignee has
delivered any applicable documentation relating to exemption from withholding
taxes provided for in Section 16.11. 
Anything contained herein to the contrary notwithstanding, the consent
of Agent or Borrowers shall not be required (and payment of any fees shall not
be required) if such assignment is in connection with any merger,
consolidation, sale, transfer, or other disposition of all or any substantial
portion of the business or loan portfolio of such Lender.

 

(b)           From and after the date that Agent
notifies the assignor Lender (with a copy to Administrative Borrower) that it
has received an executed Assignment and Acceptance and payment of the
above-referenced processing fee, (i) the Assignee thereunder shall be a party
hereto and, to the 

 

 

78

 

 

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 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 affect a novation
between Borrowers 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 Borrowers or the
performance or observance by Borrowers of any of their obligations under this
Agreement or any other Loan Document furnished pursuant hereto, (3) such
Assignee confirms that it has received a copy of this Agreement, together with
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Assignment and Acceptance,
(4) such Assignee will, independently and without reliance upon Agent, such
assigning Lender or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement, (5) such
Assignee appoints and authorizes Agent to take such actions and to exercise
such powers under this Agreement as are delegated to Agent, by the terms
hereof, together with such powers as are reasonably incidental thereto, and (6)
such Assignee agrees that it will perform all of the obligations which by the
terms of this Agreement are required to be performed by it as a Lender.

 

(d)           Immediately upon 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 interests of the Originating Lender hereunder shall not 

 

 

79

 

 

constitute a “Lender”
hereunder or under the other Loan Documents and the Originating Lender’s
obligations under this Agreement shall remain unchanged, (ii) the Originating
Lender shall remain solely responsible for the performance of such obligations,
(iii) Borrowers, Agent, and the Lenders shall continue to deal solely and
directly with the Originating Lender in connection with the Originating
Lender’s rights and obligations under this Agreement and the other Loan
Documents, (iv) no Lender shall transfer or grant any participating interest
under which the Participant has the right to approve any amendment to, or any
consent or waiver with respect to, this Agreement or any other Loan Document,
except to the extent such amendment to, or consent or waiver with respect to
this Agreement or of any other Loan Document would (A) extend the final
maturity date of the Obligations hereunder in which such Participant is
participating, (B) reduce the interest rate applicable to the Obligations
hereunder in which such Participant is participating, (C) release all or 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 Borrowers hereunder shall be determined as if such Lender had not
sold such participation.  The rights of
any Participant only shall be derivative through the Originating Lender with whom
such Participant participates and no Participant shall have any rights under
this Agreement or the other Loan Documents or any direct rights as to the other
Lenders, Agent, Borrowers, the Collections, the Collateral, or otherwise in
respect of the Obligations.  No
Participant shall have the right to participate directly in the making of
decisions by the Lenders among themselves. 
The provisions of this Section 14.1(e) are solely for the benefit
of the Lender Group, and no Borrower shall have any rights as third party of
any such provisions.

 

(f)            In connection with any such
assignment or participation or proposed assignment or participation, a Lender
may disclose all documents and information which it now or hereafter may have
relating to Borrowers or Borrowers’ 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.

 

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 Borrowers
may not assign this Agreement or any rights or duties hereunder without the
Lenders’ prior written consent and any prohibited assignment shall be
absolutely void ab initio.  No consent
to assignment by the Lenders shall release any Borrower from its
Obligations.  A Lender may assign this
Agreement and the other Loan Documents and its rights and duties hereunder and
thereunder pursuant to Section 14.1 hereof and, except as expressly
required pursuant to Section 14.1 hereof, no consent or approval by any
Borrower is required in connection with any such assignment.

 

 

80

 

 

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 Borrowers therefrom, shall be effective unless the same shall be
in writing and signed by the Required Lenders (or by Agent at the written
request of the Required Lenders) and Administrative Borrower (on behalf of all
Borrowers) 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, amendment, or consent shall, unless in
writing and signed by all of the Lenders affected thereby and Administrative
Borrower (on behalf of all Borrowers) and acknowledged by Agent, 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 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,”

 

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

 

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

 

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

 

(k)           amend any of the provisions of Section
16,

 

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

 

 

81

 

 

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 Borrowers of any provision of this
Agreement.  Agent’s and each Lender’s
rights under this Agreement and the other Loan Documents will be cumulative and
not exclusive of any other right or remedy that Agent or any Lender may have.

 

16.          AGENT;
THE LENDER GROUP.

 

16.1        Appointment and Authorization of
Agent.  Each Lender hereby designates and appoints
Agent as its representative under this Agreement and the other Loan Documents
and each Lender hereby irrevocably authorizes Agent to take such action on its
behalf under the provisions of this Agreement and each other Loan Document and
to exercise such powers and perform such duties as are expressly delegated to
Agent by the terms of this Agreement or any other Loan Document, together with
such powers as are reasonably incidental thereto.  Agent agrees to act as such on the express conditions contained
in this Section 16.  The
provisions of this Section 16 (other than Sections 16.11 and 16.17)
are solely for the benefit of Agent and the Lenders, and Borrowers shall have
no rights as a third party beneficiary of any of the provisions contained
herein (other than 

 

 

82

 

 

Sections
16.11 and 16.17).  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 Agent 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, 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 as
provided in the Loan Documents, (e) open and maintain such bank accounts and
cash management accounts as Agent deems necessary and appropriate in accordance
with the Loan Documents for the foregoing purposes with respect to the
Collateral and the Collections, (f) perform, exercise, and enforce any and all
other rights and remedies of the Lender Group with respect to Borrowers, the
Obligations, the Collateral, the Collections, 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 of the Lenders
for any recital, statement, representation or warranty made by any Borrower or
any Subsidiary or Affiliate of any Borrower, or any officer or director
thereof, contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for
in, or received by Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document, or
for any failure of any Borrower or any other party to any Loan Document to
perform its obligations hereunder or thereunder.  No Agent-Related Person shall be under any 

 

 

83

 

 

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 Borrowers or the books or
records or properties of any of Borrowers’ 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 Borrowers or counsel to any Lender), independent accountants and other experts
selected by Agent.  Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless Agent shall first receive such advice or concurrence
of the Lenders as it deems appropriate and until such instructions are
received, Agent shall act, or refrain from acting, as it deems advisable.  If Agent so requests, it shall first be
indemnified to its reasonable satisfaction by 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 Administrative Borrower
referring to this Agreement, describing such Default or Event of Default, and
stating that such notice is a “notice of default.”  Agent promptly will notify the Lenders of its receipt of any such
notice or of any Event of Default of which Agent has actual knowledge.  If any Lender obtains actual knowledge of
any Event of Default, such Lender promptly shall notify the other Lenders and
Agent of such Event of Default.  Each
Lender shall be solely responsible for giving any notices to its Participants,
if any.  Subject to Section 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 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 Borrowers and their
Subsidiaries or Affiliates, shall be deemed to constitute any representation or
warranty by any Agent-Related Person to any Lender. Each Lender represents to
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
prospects, operations, property, financial and other condition and
creditworthiness of Borrowers and any other Person (other than the Lender
Group) party to a 

 

84

 

 

Loan Document, and all
applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to Borrowers.  Each Lender also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement
and the other Loan Documents, and to make such investigations as it deems
necessary to inform itself as to the business, prospects, operations, property,
financial and other condition and creditworthiness of Borrowers and any other
Person (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 Borrowers 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 Borrowers are 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 Collections 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 Collections received by
Agent, each Lender hereby agrees that it is and shall be obligated to pay to or
reimburse Agent for the amount of such Lender’s Pro Rata Share thereof.  Whether or not the transactions contemplated
hereby are consummated, the Lenders shall indemnify upon demand the Agent-Related
Persons (to the extent not reimbursed by or on behalf of Borrowers and without
limiting the obligation of Borrowers to do so), according to their Pro Rata
Shares, from and against any and all Indemnified Liabilities; provided,
however, that no Lender shall be liable for the payment to any Agent-Related
Person of any portion of such Indemnified Liabilities resulting solely from
such Person’s gross negligence or willful misconduct nor shall any Lender be
liable for the obligations of any Defaulting Lender in failing to make an
Advance or other extension of credit hereunder. Without limitation of the
foregoing, each Lender shall reimburse Agent upon demand for such Lender’s
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
Borrowers.  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 

 

 

85

 

 

engage in any kind of
banking, trust, financial advisory, underwriting, or other business with
Borrowers and their 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 Borrowers or their
Affiliates and any other Person (other than the Lender Group) party to any Loan
Documents that is subject to confidentiality obligations in favor of Borrowers
or such other Person and that prohibit the disclosure of such information to
the Lenders, and the Lenders acknowledge that, in such circumstances (and in
the absence of a waiver of such confidentiality obligations, which waiver Agent
will use its reasonable best efforts to obtain), Agent shall not be under any
obligation to provide such information to them.  The terms “Lender” and “Lenders” include 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.  If no successor Agent is
appointed prior to the effective date of the resignation of Agent, Agent may
appoint, after consulting with the Lenders, a successor Agent.  If Agent has materially breached or failed
to perform any material provision of this Agreement or of applicable law, the
Required Lenders may agree in writing to remove and replace Agent with a
successor Agent from among the Lenders. 
In any such event, upon the acceptance of its appointment as successor
Agent hereunder, such successor Agent shall succeed to all the rights, powers,
and duties of the retiring Agent and the term “Agent” shall mean such successor
Agent and the retiring Agent’s appointment, powers, and duties as Agent shall
be terminated.  After any retiring
Agent’s resignation hereunder as Agent, the provisions of this Section 16
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement. 
If no successor Agent has accepted appointment as Agent by the date
which is 45 days following a retiring Agent’s notice of resignation, the
retiring Agent’s resignation shall nevertheless thereupon become effective and
the Lenders shall perform all of the duties of Agent hereunder until such time,
if any, as the Lenders appoint a successor Agent as provided for above.

 

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 Borrowers and
their 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 Borrowers or their
Affiliates and any other Person (other than the Lender Group) party to any Loan
Documents that is subject to confidentiality obligations in favor of Borrowers
or such other Person and that prohibit the disclosure of such information to
the Lenders, and the Lenders acknowledge that, in such circumstances (and in
the absence of a waiver of such confidentiality obligations, which waiver such
Lender will use its reasonable best efforts to obtain), such Lender 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 

 

86

 

the Agent.

 

16.11      Withholding
Taxes.

 

(a)           If any Lender is a “foreign
corporation, partnership or trust” 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 Borrowers, to deliver to Agent and Administrative 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 (within the meaning of Section 881(c)(3)(B) of the IRC), or
(III) a controlled foreign corporation described in Section 881(c)(3)(C) of the
IRC, and (B) a properly completed IRS Form W-8BEN, before the first payment of
any interest under this Agreement and at any other time reasonably requested by
Agent or Administrative Borrower;

 

(ii)           if such Lender
claims an exemption from, or a reduction of, withholding tax under a United
States tax treaty, properly completed IRS Form W-8BEN before the first payment
of any interest under this Agreement and at any other time reasonably requested
by Agent or Administrative 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 Administrative
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 in full of, United States withholding
tax.

 

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

 

(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 due 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 Borrowers due 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 

 

 

87

 

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 Borrowers
hereunder or under any note or other Loan Document will be made without setoff,
counterclaim, or other defense, except as required by applicable law 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, each Borrower agrees to pay the full amount of such
Taxes, and such additional amounts as may be necessary so that every payment of
all amounts due under this Agreement 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 Borrowers shall not be required
to increase any such amounts payable to Agent or any Lender (i) that is not
organized under the laws of the United States, if such Person fails to comply
with the other requirements of this Section 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. 
Borrowers 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 Borrowers.

 

(f)            Each Lender hereby represents that,
as of the date it became a Lender under this Agreement, it was not subject to
any Taxes applicable to payments made by the Borrowers hereunder.

 

(g)           (i)            If
any Lender becomes subject to any Taxes applicable to payments 

 

 

88

 

made by the Borrowers
hereunder (a “Taxed Lender”), and so long as there has not occurred any Event
of Default which is continuing, then Administrative Borrower, upon at least 5
Business Days prior irrevocable notice to the Agent and such Taxed Lender, may
permanently replace such Taxed Lender with one or more substitute Lenders which
is an Eligible Transferee (each, a “Tax Replacement Lender”), and the Taxed
Lender shall have no right to refuse to be replaced hereunder.  Such notice to replace the Taxed 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.

 

(ii)           Prior to the effective date of such
replacement, the Taxed Lender and each Tax Replacement Lender shall execute and
deliver an Assignment and Acceptance Agreement, subject only to the Taxed
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 Taxed Lender shall refuse or fail to execute and deliver any such
Assignment and Acceptance Agreement prior to the effective date of such
replacement, the Taxed Lender shall be deemed to have executed and delivered
such Assignment and Acceptance Agreement. 
The replacement of any Taxed Lender shall be made in accordance with the
terms of Section 14.1.  Until
such time as the Tax Replacement Lenders shall have acquired all of the
Obligations, the Commitments, and the other rights and obligations of the Taxed
Lender hereunder and under the other Loan Documents, the Taxed Lender shall
remain obligated to make the Taxed 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.

 

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 Borrowers of all Obligations, (ii) constituting
property being sold or disposed of if a release is required or desirable in
connection therewith and if Administrative Borrower certifies to Agent that the
sale or disposition is permitted under Section 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 no
Borrower owned any interest at the time the security interest was granted or at
any time thereafter, or (iv) constituting property leased to a 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 Administrative Borrower at any time, the Lenders will confirm in writing
Agent’s authority to release any such Liens on particular types or items of
Collateral pursuant to this Section 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, or warranty, and (2) such release
shall not in any manner discharge, affect, or impair the Obligations or any
Liens (other than those expressly being released) upon (or obligations of
Borrowers in respect of) all interests retained by Borrowers, including, the
proceeds of any sale, all of which shall continue to constitute part of the
Collateral.

 

 

89

 

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

 

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 Borrowers or any
deposit accounts of Borrowers now or hereafter maintained with such
Lender.  Each of the Lenders further
agrees that it shall not, unless specifically requested to do so 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 Pro
Rata Share 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 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. 
Should any Lender obtain possession of any such Collateral, such Lender
shall notify Agent thereof, and, promptly upon Agent’s request therefor shall
deliver such Collateral to Agent or in accordance with 

 

 

90

 

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 or internal 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 Borrowers and will rely significantly upon the Books, as
well as on representations of Borrowers’ personnel,

 

(d)           and Agent agrees to keep all Reports
and other material, non-public information regarding Borrowers and their
Subsidiaries and their operations, assets, and existing and contemplated
business plans in a confidential manner; it being understood and agreed by
Borrowers that in any event such Lender or Agent may make disclosures (i) to
counsel for and other advisors, accountants, and auditors to such Lender or
Agent, (ii) 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 or Agent of an interest herein or any participation
interest in such Lender’s rights hereunder, (iii) of information that has
become public by disclosures made by Persons other than such Lender or Agent,
its Affiliates, assignees, transferees, or Participants, or (iv) 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 or Agent shall:  (y) notify Administrative Borrower of
any request by any court, governmental or administrative 

 

 

91

 

agency, or pursuant to any
subpoena or other legal process for disclosure of any such non-public material
information concurrent with, or where practicable, prior to the disclosure
thereof, and (z) notify all other Persons described in clause (i) above
that they are bound by, and cause all other Persons described in clause (ii)
above to be bound by, the provisions of this Section 16.17(d), and

 

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

 

In addition to the
foregoing:  (x) any Lender may from time
to time request of Agent in writing that Agent provide to such Lender a copy of
any report or document provided by Borrowers to Agent that has not been
contemporaneously provided by Borrowers to such Lender, and, upon receipt of
such request, Agent shall provide a copy of same to such Lender, (y) to the
extent that Agent is entitled, under any provision of the Loan Documents, to
request additional reports or information from Borrowers, any Lender may, from
time to time, reasonably request Agent to exercise such right as specified in
such Lender’s notice to Agent, whereupon Agent promptly shall request of
Administrative Borrower the additional reports or information reasonably
specified by such Lender, and, upon receipt thereof from Administrative
Borrower, Agent promptly shall provide a copy of same to such Lender, and (z)
any time that Agent renders to Administrative 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 not joint) obligations of the
respective Lenders on a ratable basis, according to their respective
Commitments, to make an amount of such credit not to exceed, in principal
amount, at any one time outstanding, the amount of their respective
Commitments.  Nothing contained herein
shall confer upon any Lender any interest in, or subject any Lender to any
liability for, or in respect of, the business, assets, profits, losses, or
liabilities of any other Lender.  Each
Lender shall be solely responsible for notifying its Participants of any
matters relating to the Loan Documents to the extent any such notice may be
required, and no Lender shall have any obligation, duty, or liability to any
Participant of any other Lender.  Except
as provided in Section 16.7, no member of the Lender Group shall have
any liability for the acts of any other member of the Lender Group.  No Lender shall be responsible to any
Borrower or any other Person for any failure by any other Lender to fulfill its
obligations to make credit available hereunder, nor to advance for it or on its
behalf in connection with its Commitment, nor to take any other action on its
behalf hereunder or in connection with the financing contemplated herein.

 

 

92

 

 

16.19      Legal
Representation of Agent.  In connection with the negotiation, drafting, and execution of
this Agreement and the other Loan Documents, or in connection with future legal
representation relating to loan administration, amendments, modifications,
waivers, or enforcement of remedies, Jeffer, Mangels, Butler & Marmaro LLP
(“JMBM”) only has represented and only shall represent Foothill in its capacity
as Agent and as a Lender.  Each other
Lender hereby acknowledges that JMBM does not represent it in connection with
any such matters.

 

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

 

17.          GENERAL
PROVISIONS.

 

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

 

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 or resolved against the Lender Group or Borrowers, whether
under any rule of construction or otherwise. 
On the contrary, this Agreement has been reviewed by all parties and
shall be construed and interpreted according to the ordinary meaning of the
words used so as to accomplish fairly the purposes and intentions of all
parties hereto.  Time is of the essence
in Borrowers’ payment and performance of the Obligations.

 

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 in 

 

 

93

 

accordance with Section 15.1.

 

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

 

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

 

17.9        Parent
as Agent for Borrowers.  Each Borrower hereby irrevocably appoints
Parent as its borrowing agent and attorney-in-fact for all actions required to
be taken by such Borrower under this Agreement (the “Administrative Borrower”)
which appointment shall remain in full force and effect unless and until Agent
shall have received prior written notice signed by each Borrower that such
appointment has been revoked and that another Borrower has been appointed
Administrative Borrower.  Each Borrower
hereby irrevocably appoints and authorizes the Administrative Borrower (i) to
provide Agent with all notices with respect to Advances and Letters of Credit
obtained for the benefit of any Borrower and all other notices and instructions
under this Agreement and (ii) to take such action as the Administrative
Borrower deems appropriate on its behalf to obtain Advances and Letters of
Credit and to exercise such other powers as are reasonably incidental thereto
to carry out the purposes of this Agreement. 
It is understood that the handling of the Loan Account and Collateral of
Borrowers in a combined fashion, as more fully set forth herein, is done solely
as an accommodation to Borrowers in order to utilize the collective borrowing
powers of Borrowers in the most efficient and economical manner and at their
request, and that Lender Group shall not incur liability to any Borrower as a
result thereof.  Each Borrower expects
to derive benefit, directly or indirectly, from the handling of the Loan
Account and the Collateral in a combined fashion since the successful operation
of each Borrower is dependent on the continued 

 

 

94

 

successful performance of the Parent and the other Borrowers as an
integrated group.  To induce the Lender
Group to do so, and in consideration thereof, each Borrower hereby jointly and
severally agrees to indemnify each member of the Lender Group and hold each
member of the Lender Group harmless against any and all liability, expense,
loss or claim of damage or injury, made against the Lender Group by any
Borrower or by any third party whosoever, arising from or incurred by reason of
(a) the collective handling of the Loan Account and Collateral of Borrowers as
herein provided, (b) the Lender Group’s relying on any instructions of the
Administrative Borrower, or (c) any other action taken by the Lender Group
hereunder or under the other Loan Documents, except that Borrowers will have no
liability to the relevant Agent-Related Person or Lender-Related Person under
this Section 17.9 with respect to any liability that has been finally
determined by a court of competent jurisdiction to have resulted solely from
the gross negligence or willful misconduct of such Agent-Related Person or
Lender-Related Person, as the case may be.

 

[Signature
page to follow.]

 

 

95

 

 

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

 

 

	
   

  	
  SILICON GRAPHICS, INC.

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:  Jean Furter

  
	
   

  	
  Title:  VP and Treasurer

  
	
   

  	
   

  
	
   

  	
  SILICON GRAPHICS FEDERAL, INC.

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:  Jeff Zellmer

  
	
   

  	
  Title:  VP

  
	
   

  	
   

  
	
   

  	
  FOOTHILL CAPITAL CORPORATION,

  
	
   

  	
  a California corporation,
  as Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
  By:  Teresa Bolick

  
	
   

  	
  Title:  VP

  
	
   

  	
   

  
	
   

  	
  BANK OF AMERICA, N.A.,

  
	
   

  	
  as Documentation Agent and
  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:   Kevin R. Kelly

  
	
   

  	
  Title: Sr. V.P.

  

 

 

96

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