Document:

Exhibit
10.5

WRITTEN
CONSENT AND WAIVER 

THIS WRITTEN CONSENT AND
WAIVER is dated as of August 14, 2006 (this “Consent and Waiver”), is
made by Capital Resource Partners IV, L.P., a Delaware limited partnership (“CRP”)
and delivered to SoftBrands, Inc., a Delaware corporation (the “Company”),
pursuant to the terms of the CRP Note Purchase Agreement, Series B Certificate
of Designations and the Series B Warrants, each as defined below. 

W
I  T  N  E  S  S  E  T  H

WHEREAS, CRP is the
holder of (i) all of the outstanding shares of Series B Convertible
Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock”),
of the Company and (ii) warrants to purchase an aggregate of 4,016,518
shares of common stock of the Company (the “Series B Warrants”) which were
issued with the Series B Preferred Stock;

WHEREAS, the rights,
privileges and powers of the holders of Series B Preferred Stock are governed
by the Certificate of Designations of Preferences, Privileges, Powers and
Rights of Series B Convertible Preferred Stock dated as of August 18, 2004 (the
“Series B Certificate of Designations”);

WHEREAS, to facilitate
(i) the issuance and sale of the Company’s Series D Convertible Preferred Stock
(“Series D Preferred Stock”) and warrants to purchase shares of Common
Stock (the “Series D Warrants” and, together with the Series D Preferred
Stock, the “Series D Securities”) to ABRY Mezzanine Partners, L.P., a
Delaware limited partnership (“ABRY”) pursuant to the Series D
Convertible Preferred Stock and Warrant Purchase Agreement, dated as of the
date hereof (the “Series D Purchase Agreement”) and governed by the
Certificate of Designations, Preferences and Rights of the Series D Convertible
Preferred Stock (the “Series D Certificate of Designations”), and (ii)
the exchange by holders thereof of the Company’s Series C Convertible Preferred
Stock (“Series C Preferred Stock”) for the same number of shares of a
new series of Series C-1 Convertible Preferred Stock (“Series C-1 Preferred
Stock”) with a higher dividend preference pursuant to the Exchange
Agreement dated as of the date hereof among the Company, ABRY and CRP (the “Exchange
Agreement”), the Company desires to obtain the waiver by CRP as the holder
of Series B Preferred Stock of certain notice requirements and consent rights
set forth in the Series B Certificate of Designations, Series B Warrants and
the other documents executed in connection therewith (collectively, the “Series
B Governing Documents”);

WHEREAS, CRP has agreed
to waive all of its rights to purchase New Securities (as defined) under Section
3.07 of the Senior Subordinated Secured Note and Warrant Purchase Agreement
dated November 26, 2002, as amended, between CRP and the Company (the “CRP
Note Purchase Agreement”), and under Section 8.5 of the Series C Convertible
Preferred Stock and Warrant Purchase Agreement, dated as of August 17, 2005
(the “Series C Purchase Agreement”), but desires to retain the right to
purchase up to $1 million of the Series D Securities prior to September 8,
2006;

WHEREAS, by a separate
First Amendment, Waiver and Consent to Series C Convertible Preferred Stock and
Warrant Purchase Agreement among ABRY, CRP and the Company dated the date
hereof (the “Series C Consent”), ABRY and CRP are waiving similar 

 

consent rights and notice requirements set forth in
the Certificate of Designations, Preferences and Rights of the Series C
Preferred Stock dated as of August 17, 2005 and in the warrants to purchase
1,200,000 shares of common stock issued contemporaneous with the Series C
Preferred Stock, and amending certain provisions of the Series C Purchase
Agreement;

WHEREAS, pursuant to Section
4 of the Series B Certificate of Designations, the Company is required to
obtain the consent of a majority of the holders of the Series B Preferred Stock
to, among other things, (i) amend or supplement any provision of the
Certificate of Incorporation which impairs or adversely effects the specified
rights, preferences, priorities, privileges, powers or other rights of the
holders of Series B Preferred Stock and (ii) create certain additional
classes or series of shares of stock that rank senior to the Series B Preferred
Stock;

WHEREAS, pursuant to Section
7.02(u) of the CRP Note Purchase Agreement, the Company is required to
obtain the written consent of CRP in order to amend the Rights Plan (as defined
in the CRP Note Purchase Agreement);

WHEREAS, pursuant to Section
8 of the Series B Warrants, the Company is required to provide written
notice to the holders of the Series B Warrants at least 20 days prior to taking
certain corporate actions; and

WHEREAS, CRP is willing
to provide all such consents and/or waivers which may be required under the
Series B Governing Documents in connection with the issuance of the Series C
Securities, upon the terms and subject to the conditions set forth below.

NOW, THEREFORE, the
parties hereto hereby agree as follows:

CRP hereby consents to
the Company’s execution and delivery of the Series D Purchase Agreement and the
Related Documents (as defined in the Series D Purchase Agreement), the
execution and delivery of the Exchange Agreement and the consummation of the
transactions contemplated thereby and waives the following rights and notice
requirements with respect thereto under the Series B Governing Documents:

1.               Series B
Warrantholder Waiver of Notice.  CRP
hereby waives the right to receive notice required by Section 8(d) of
the Series B Warrants with respect to any of the actions taken by the Company
in connection with (i) the issuance by the Company of the Series D Securities
to the Purchasers (as defined in the Series D Purchase Agreement) and (ii) the
issuance of the Series C-1 Preferred Stock in exchange for the Series C
Preferred Stock .

2.               Amendment to
Certificate of Incorporation.  CRP
hereby consents, as required by Section 4 of the Series B Certificate of
Designations, (i) to the filing of the Company’s Series D Certificate of
Designations, which Series D Certificate of Designations CRP hereby
acknowledges and agrees provides for the issuance of Series D Preferred Stock,
which shall be senior to the Series B Preferred Stock with respect to payment
of dividends, but will rank pari passu with the Series B Preferred Stock upon
any liquidation, dissolution or winding up of the Corporation, and (ii) to the
filing of the Certificate of Designations, Preferences and Rights of the Series
C-1 Convertible Preferred Stock (the “Series C-1 Certificate of Designations”),
which Series C-1 Certificate of Designations provides for the issuance of a

 2
 

 

class of Series C-1 Preferred Stock which shall be
identical in all material respects except for the dividend rate to the Company’s
Series C Preferred Stock and, as such, will rank senior to the Series B
Preferred Stock with respect to dividends, but pari passu with the Series B
Preferred Stock upon any liquidation, dissolution or winding up of the
Corporation.

3.               Waiver of Right
to Purchase New Securities, subject to Reservation.  CRP hereby waives its right to purchase New
Securities under Section 3.07 of the CRP Note Purchase Agreement in
connection with and solely with respect to the issuance by the Company of the
Series D Securities and under Section 8.5 of the Series C Purchase Agreement,
in connection with and solely with respect to the issuance by the Company of
the Series D Securities; provided, however, that by execution hereof the
Company agrees that CRP shall have the Purchase Option set forth in Section 3.2
of the Series D Purchase Agreement.

4.               Execution of
Series C Consent.  CRP hereby agrees
to execute, and is executing simultaneous with execution of this Consent and
Waiver, the Series C Consent.

5.               Amendment to
Rights Plan.  CRP hereby consents, in
connection with the issuance by the Company of the Series D Securities, to the
Second Amendment to the Rights Plan as required by Section 7.02(l) of
the CRP Note Purchase Agreement.

6.               Binding Nature
and Benefit.  This Consent and Waiver
shall be binding upon and inure to the benefit of each party hereto and their
respective successors and assigns.

7.               Signatures.  Delivery of an executed signature page of
this Consent and Waiver (which may be by electronic facsimile transmission)
shall be effective as delivery of a manually executed counterpart hereof.

8.               GOVERNING LAW.  THIS CONSENT AND WAIVER SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.

IN WITNESS WHEREOF, the party hereto has caused this
Consent and Waiver to be duly executed and delivered by its proper and duly
authorized officers as of the day and year first above written.

	
  

  	
  CAPITAL RESOURCE PARTNERS IV, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  CRP Partners IV, LLC, its general partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ ALEXANDER MCGRATH

  	
   

  
	
   

  	
  Name:

  	
  Alexander McGrath

  	
   

  
	
   

  	
  Title:

  	
  Managing Member

  	
   

  
						

 

 3
 

 

 

In consideration of the foregoing waiver and consent
and the execution by CRP of the Series C Consent, the Company agrees to pay to
Capital Resource Management, Inc. a fee of $75,000 at closing of the first sale
of Series D Securities.

	
   

  	
  SOFTBRANDS, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
       /s/
  GREGG A. WALDON

  	
   

  
	
   

  	
     Gregg A. Waldon, Chief Financial Officer

  
					

 

 4Exhibit 10.6

 

 

CREDIT AGREEMENT

by and among

 

SOFTBRANDS, INC.

and

EACH OF ITS SUBSIDIARIES THAT ARE
SIGNATORIES HERETO

as Borrowers,

 

 

THE LENDERS THAT ARE SIGNATORIES
HERETO

as the Lenders,

and

WELLS FARGO FOOTHILL, INC.

as the Arranger and Administrative
Agent

 

Dated as of August 11, 2006

 

 

 

TABLE OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  DEFINITIONS AND CONSTRUCTION

  	
   

  	
  1

  
	
   

  	
  1.1

  	
  Definitions

  	
   

  	
  1

  
	
   

  	
  1.2

  	
  Accounting Terms

  	
   

  	
  1

  
	
   

  	
  1.3

  	
  Code

  	
   

  	
  1

  
	
   

  	
  1.4

  	
  Construction

  	
   

  	
  1

  
	
   

  	
  1.5

  	
  Schedules and Exhibits

  	
   

  	
  2

  
	
  2.

  	
  LOAN AND TERMS OF PAYMENT

  	
   

  	
  2

  
	
   

  	
  2.1

  	
  Revolver Advances

  	
   

  	
  2

  
	
   

  	
  2.2

  	
  Term Loan

  	
   

  	
  2

  
	
   

  	
  2.3

  	
  Borrowing Procedures and Settlements

  	
   

  	
  2

  
	
   

  	
  2.4

  	
  Payments

  	
   

  	
  7

  
	
   

  	
  2.5

  	
  Overadvances

  	
   

  	
  10

  
	
   

  	
  2.6

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

  	
   

  	
  10

  
	
   

  	
  2.7

  	
  Cash Management

  	
   

  	
  11

  
	
   

  	
  2.8

  	
  Crediting Payments; Clearance Charge

  	
   

  	
  12

  
	
   

  	
  2.9

  	
  Designated Account

  	
   

  	
  13

  
	
   

  	
  2.10

  	
  Maintenance of Loan Account; Statements of
  Obligations

  	
   

  	
  13

  
	
   

  	
  2.11

  	
  Fees

  	
   

  	
  13

  
	
   

  	
  2.12

  	
  Letters of Credit

  	
   

  	
  13

  
	
   

  	
  2.13

  	
  LIBOR Option

  	
   

  	
  16

  
	
   

  	
  2.14

  	
  Capital Requirements

  	
   

  	
  18

  
	
   

  	
  2.15

  	
  Joint and Several Liability of Borrowers

  	
   

  	
  18

  
	
  3.

  	
  CONDITIONS; TERM OF AGREEMENT

  	
   

  	
  20

  
	
   

  	
  3.1

  	
  Conditions Precedent to the Initial Extension of
  Credit

  	
   

  	
  20

  
	
   

  	
  3.2

  	
  Conditions Precedent to all Extensions of Credit

  	
   

  	
  21

  
	
   

  	
  3.3

  	
  Term

  	
   

  	
  21

  
	
   

  	
  3.4

  	
  Effect of Termination

  	
   

  	
  21

  
	
   

  	
  3.5

  	
  Early Termination by Borrowers

  	
   

  	
  21

  
	
  4.

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  	
  22

  
	
   

  	
  4.1

  	
  No Encumbrances

  	
   

  	
  22

  
	
   

  	
  4.2

  	
  Intentionally Omitted

  	
   

  	
  22

  
	
   

  	
  4.3

  	
  Intentionally Omitted

  	
   

  	
  22

  
						

 

 

 

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.4

  	
  Equipment

  	
   

  	
  22

  
	
   

  	
  4.5

  	
  Location of Inventory and Equipment

  	
   

  	
  22

  
	
   

  	
  4.6

  	
  Intentionally Omitted

  	
   

  	
  22

  
	
   

  	
  4.7

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

  	
   

  	
  22

  
	
   

  	
  4.8

  	
  Due Organization and Qualification; Subsidiaries

  	
   

  	
  23

  
	
   

  	
  4.9

  	
  Due Authorization; No Conflict

  	
   

  	
  23

  
	
   

  	
  4.10

  	
  Litigation

  	
   

  	
  24

  
	
   

  	
  4.11

  	
  No Material Adverse Change

  	
   

  	
  24

  
	
   

  	
  4.12

  	
  Fraudulent Transfer

  	
   

  	
  24

  
	
   

  	
  4.13

  	
  Employee Benefits

  	
   

  	
  25

  
	
   

  	
  4.14

  	
  Environmental Condition

  	
   

  	
  25

  
	
   

  	
  4.15

  	
  Intellectual Property

  	
   

  	
  25

  
	
   

  	
  4.16

  	
  Leases

  	
   

  	
  26

  
	
   

  	
  4.17

  	
  Deposit Accounts and Securities Accounts

  	
   

  	
  26

  
	
   

  	
  4.18

  	
  Complete Disclosure

  	
   

  	
  26

  
	
   

  	
  4.19

  	
  Indebtedness

  	
   

  	
  26

  
	
   

  	
  4.20

  	
  Material Contracts

  	
   

  	
  26

  
	
   

  	
  4.21

  	
  Merger Documents

  	
   

  	
  26

  
	
  5.

  	
  AFFIRMATIVE COVENANTS

  	
   

  	
  27

  
	
   

  	
  5.1

  	
  Accounting System

  	
   

  	
  27

  
	
   

  	
  5.2

  	
  Collateral Reporting

  	
   

  	
  27

  
	
   

  	
  5.3

  	
  Financial Statements, Reports, Certificates

  	
   

  	
  27

  
	
   

  	
  5.4

  	
  Intentionally Omitted

  	
   

  	
  27

  
	
   

  	
  5.5

  	
  Inspection

  	
   

  	
  27

  
	
   

  	
  5.6

  	
  Maintenance of Properties

  	
   

  	
  27

  
	
   

  	
  5.7

  	
  Taxes

  	
   

  	
  27

  
	
   

  	
  5.8

  	
  Insurance

  	
   

  	
  28

  
	
   

  	
  5.9

  	
  Location of Equipment

  	
   

  	
  28

  
	
   

  	
  5.10

  	
  Compliance with Laws

  	
   

  	
  28

  
	
   

  	
  5.11

  	
  Leases

  	
   

  	
  28

  
	
   

  	
  5.12

  	
  Existence

  	
   

  	
  28

  
	
   

  	
  5.13

  	
  Environmental

  	
   

  	
  28

  
						

 

 

 

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.14

  	
  Disclosure Updates

  	
   

  	
  29

  
	
   

  	
  5.15

  	
  Control Agreements

  	
   

  	
  29

  
	
   

  	
  5.16

  	
  Formation of Subsidiaries

  	
   

  	
  29

  
	
   

  	
  5.17

  	
  Further Assurances

  	
   

  	
  29

  
	
   

  	
  5.18

  	
  ERISA Matters

  	
   

  	
  30

  
	
  6.

  	
  NEGATIVE COVENANTS

  	
   

  	
  30

  
	
   

  	
  6.1

  	
  Indebtedness

  	
   

  	
  30

  
	
   

  	
  6.2

  	
  Liens

  	
   

  	
  31

  
	
   

  	
  6.3

  	
  Restrictions on Fundamental Changes

  	
   

  	
  32

  
	
   

  	
  6.4

  	
  Disposal of Assets

  	
   

  	
  32

  
	
   

  	
  6.5

  	
  Change Name

  	
   

  	
  32

  
	
   

  	
  6.6

  	
  Nature of Business

  	
   

  	
  32

  
	
   

  	
  6.7

  	
  Prepayments and Amendments

  	
   

  	
  32

  
	
   

  	
  6.8

  	
  Change of Control

  	
   

  	
  33

  
	
   

  	
  6.9

  	
  Intentionally Omitted

  	
   

  	
  33

  
	
   

  	
  6.10

  	
  Distributions

  	
   

  	
  33

  
	
   

  	
  6.11

  	
  Accounting Methods

  	
   

  	
  33

  
	
   

  	
  6.12

  	
  Investments

  	
   

  	
  33

  
	
   

  	
  6.13

  	
  Transactions with Affiliates

  	
   

  	
  34

  
	
   

  	
  6.14

  	
  Use of Proceeds

  	
   

  	
  34

  
	
   

  	
  6.15

  	
  Equipment with Bailees

  	
   

  	
  34

  
	
   

  	
  6.16

  	
  Financial Covenants

  	
   

  	
  34

  
	
   

  	
  6.17

  	
  ERISA

  	
   

  	
  36

  
	
   

  	
  6.18

  	
  Intellectual Property

  	
   

  	
  36

  
	
   

  	
  6.19

  	
  Merger Documents

  	
   

  	
  36

  
	
  7.

  	
  EVENTS OF DEFAULT

  	
   

  	
  36

  
	
  8.

  	
  THE LENDER GROUP’S RIGHTS AND REMEDIES

  	
   

  	
  39

  
	
   

  	
  8.1

  	
  Rights and Remedies

  	
   

  	
  39

  
	
   

  	
  8.2

  	
  Remedies Cumulative

  	
   

  	
  39

  
	
  9.

  	
  TAXES AND EXPENSES

  	
   

  	
  39

  
	
  10.

  	
  WAIVERS; INDEMNIFICATION

  	
   

  	
  40

  
	
   

  	
  10.1

  	
  Demand; Protest; etc

  	
   

  	
  40

  
	
   

  	
  10.2

  	
  The Lender Group’s Liability for Collateral

  	
   

  	
  40

  
						

 

 

 

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.3

  	
  Indemnification

  	
   

  	
  40

  
	
  11.

  	
  NOTICES

  	
   

  	
  41

  
	
  12.

  	
  CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER

  	
   

  	
  41

  
	
  13.

  	
  ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS

  	
   

  	
  42

  
	
   

  	
  13.1

  	
  Assignments and Participations

  	
   

  	
  42

  
	
   

  	
  13.2

  	
  Successors

  	
   

  	
  44

  
	
  14.

  	
  AMENDMENTS; WAIVERS

  	
   

  	
  44

  
	
   

  	
  14.1

  	
  Amendments and Waivers

  	
   

  	
  44

  
	
   

  	
  14.2

  	
  Replacement of Holdout Lender

  	
   

  	
  45

  
	
   

  	
  14.3

  	
  No Waivers; Cumulative Remedies

  	
   

  	
  46

  
	
  15.

  	
  AGENT; THE LENDER GROUP

  	
   

  	
  46

  
	
   

  	
  15.1

  	
  Appointment and Authorization of Agent

  	
   

  	
  46

  
	
   

  	
  15.2

  	
  Delegation of Duties

  	
   

  	
  47

  
	
   

  	
  15.3

  	
  Liability of Agent

  	
   

  	
  47

  
	
   

  	
  15.4

  	
  Reliance by Agent

  	
   

  	
  47

  
	
   

  	
  15.5

  	
  Notice of Default or Event of Default

  	
   

  	
  47

  
	
   

  	
  15.6

  	
  Credit Decision

  	
   

  	
  48

  
	
   

  	
  15.7

  	
  Costs and Expenses; Indemnification

  	
   

  	
  48

  
	
   

  	
  15.8

  	
  Agent in Individual Capacity

  	
   

  	
  48

  
	
   

  	
  15.9

  	
  Successor Agent

  	
   

  	
  49

  
	
   

  	
  15.10

  	
  Lender in Individual Capacity

  	
   

  	
  49

  
	
   

  	
  15.11

  	
  Withholding Taxes

  	
   

  	
  49

  
	
   

  	
  15.12

  	
  Collateral Matters

  	
   

  	
  51

  
	
   

  	
  15.13

  	
  Restrictions on Actions by Lenders; Sharing of Payments

  	
   

  	
  52

  
	
   

  	
  15.14

  	
  Agency for Perfection

  	
   

  	
  52

  
	
   

  	
  15.15

  	
  Payments by Agent to the Lenders

  	
   

  	
  52

  
	
   

  	
  15.16

  	
  Concerning the Collateral and Related Loan Documents

  	
   

  	
  52

  
	
   

  	
  15.17

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

  	
   

  	
  53

  
	
   

  	
  15.18

  	
  Several Obligations; No Liability

  	
   

  	
  53

  
	
   

  	
  15.19

  	
  Bank Product Providers

  	
   

  	
  54

  
	
  16.

  	
  GENERAL PROVISIONS

  	
   

  	
  54

  
	
   

  	
  16.1

  	
  Effectiveness

  	
   

  	
  54

  
						

 

 

 

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.2

  	
  Section Headings

  	
   

  	
  54

  
	
   

  	
  16.3

  	
  Interpretation

  	
   

  	
  54

  
	
   

  	
  16.4

  	
  Severability of Provisions

  	
   

  	
  54

  
	
   

  	
  16.5

  	
  Counterparts; Electronic Execution

  	
   

  	
  54

  
	
   

  	
  16.6

  	
  Revival and Reinstatement of Obligations

  	
   

  	
  54

  
	
   

  	
  16.7

  	
  Confidentiality

  	
   

  	
  55

  
	
   

  	
  16.8

  	
  Lender Group Expenses

  	
   

  	
  55

  
	
   

  	
  16.9

  	
  USA PATRIOT Act

  	
   

  	
  55

  
	
   

  	
  16.10

  	
  Integration

  	
   

  	
  55

  
	
   

  	
  16.11

  	
  Parent as Agent for Borrowers

  	
   

  	
  55

  
						

 

 

 

EXHIBITS AND SCHEDULES

	
  Exhibit A-1

  	
   

  	
  Form of Assignment and Acceptance

  
	
  Exhibit B-1

  	
   

  	
  Form of Borrowing Base Certificate

  
	
  Exhibit C-1

  	
   

  	
  Form of Compliance Certificate

  
	
  Exhibit L-1

  	
   

  	
  Form of LIBOR Notice

  
	
   

  	
   

  	
   

  
	
  Schedule A-1

  	
   

  	
  Agent’s Account

  
	
  Schedule C-1

  	
   

  	
  Commitments

  
	
  Schedule D-1

  	
   

  	
  Designated Account

  
	
  Schedule P-1

  	
   

  	
  Permitted Holders

  
	
  Schedule P-2

  	
   

  	
  Permitted Investments

  
	
  Schedule P-3

  	
   

  	
  Permitted Liens

  
	
  Schedule 1.1

  	
   

  	
  Definitions

  
	
  Schedule 2.4(c)

  	
   

  	
  Exceptions to Mandatory Prepayments for certain
  Stock Issuances

  
	
  Schedule 2.7(a)

  	
   

  	
  Cash Management Banks

  
	
  Schedule 3.1

  	
   

  	
  Conditions Precedent

  
	
  Schedule 4.5

  	
   

  	
  Locations of Equipment

  
	
  Schedule 4.7(a)

  	
   

  	
  States of Organization

  
	
  Schedule 4.7(b)

  	
   

  	
  Chief Executive Offices

  
	
  Schedule 4.7(c)

  	
   

  	
  Organizational Identification Numbers

  
	
  Schedule 4.7(d)

  	
   

  	
  Commercial Tort Claims

  
	
  Schedule 4.8(b)

  	
   

  	
  Capitalization of Borrowers

  
	
  Schedule 4.8(c)

  	
   

  	
  Capitalization of Borrowers’ Subsidiaries

  
	
  Schedule 4.8(d)

  	
   

  	
  Jurisdiction of Formation of Borrowers’ Subsidiaries

  
	
  Schedule 4.10

  	
   

  	
  Litigation

  
	
  Schedule 4.13

  	
   

  	
  Employee Benefits

  
	
  Schedule 4.14

  	
   

  	
  Environmental Matters

  
	
  Schedule 4.15

  	
   

  	
  Intellectual Property

  
	
  Schedule 4.17

  	
   

  	
  Deposit Accounts and Securities Accounts

  
	
  Schedule 4.19

  	
   

  	
  Permitted Indebtedness

  
	
  Schedule 4.20

  	
   

  	
  Material Contracts

  
	
  Schedule 5.2

  	
   

  	
  Collateral Reporting

  
	
  Schedule 5.3

  	
   

  	
  Financial Statements, Reports, Certificates

  

 

 

CREDIT AGREEMENT

THIS CREDIT AGREEMENT (this “Agreement”), is entered into as
of August 11, 2006, by and among the lenders identified on the signature pages
hereof (such lenders, together with their respective successors and permitted
assigns, are referred to hereinafter each individually as a “Lender” and
collectively as the “Lenders”), WELLS
FARGO FOOTHILL, INC., a California corporation, as the arranger and
administrative agent for the Lenders (in such capacity, together with its
successors and assigns in such capacity, “Agent”), SOFTBRANDS, INC., a Delaware corporation (“Parent”),
and 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 the “Borrowers”).

The
parties agree as follows:

1.             DEFINITIONS AND CONSTRUCTION.

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

1.2           Accounting Terms.  All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP.  When used herein,
the term “financial statements” shall include the notes and schedules
thereto.  Whenever the term “Borrowers”
or the term “Parent” is used in respect of a financial covenant or a related
definition, it shall be understood to mean 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;
provided, however, that to the extent that the Code is used to
define any term herein and such term is defined differently in different
Articles of the Code, the definition of such term contained in Article 9 of the
Code shall govern.

1.4           Construction.  Unless the context of this Agreement or any other Loan Document clearly
requires otherwise, references to the plural include the singular, references
to the singular include the plural, the terms “includes” and “including” are
not limiting, and the term “or” has, except where otherwise indicated, the
inclusive meaning represented by the phrase “and/or.”  The words “hereof,” “herein,” “hereby,” “hereunder,”
and similar terms in this Agreement or any other Loan Document refer to this
Agreement or such other Loan Document, as the case may be, as a whole and not
to any particular provision of this Agreement or such other Loan Document, as
the case may be.  Section, subsection,
clause, schedule, and exhibit references herein are to this Agreement unless
otherwise specified.  Any reference in
this Agreement or in any other Loan Document to any agreement, instrument, or
document shall include all alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and
supplements, thereto and thereof, as applicable (subject to any restrictions on
such alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements set forth herein).  Any reference herein or in any other Loan
Document to the satisfaction or repayment in full of the Obligations shall mean
the repayment in full in cash (or cash collateralization in accordance with the
terms hereof) of all Obligations other than unasserted contingent
indemnification Obligations and other than any Bank Product Obligations that,
at such time, are allowed by the applicable Bank Product Provider to remain outstanding
and that are not required by the provisions of this Agreement to be repaid or
cash collateralized.  Any reference
herein to any Person shall be construed to include such Person’s successors and
assigns.  Any requirement of a writing
contained herein or in any other Loan Document shall be satisfied by the
transmission of a Record and any Record so transmitted shall constitute a
representation and warranty as to the accuracy and completeness of the
information contained therein.

 

 

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

2.             LOAN AND TERMS OF PAYMENT.

2.1           Revolver Advances.

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

(b)           Anything to the contrary in this Section 2.1 notwithstanding,
Agent shall have the right to establish reserves against the Borrowing Base in
such amounts, and with respect to such matters, as Agent in its Permitted
Discretion shall deem necessary or appropriate in its Permitted Discretion,
including reserves with respect to (i) sums that Borrowers or their
Subsidiaries are required to pay under any Section of this Agreement or any
other Loan Document (such as taxes, assessments, insurance premiums, or, in the
case of leased assets, rents or other amounts payable under such leases) and
have failed to pay, and (ii) amounts owing by Borrowers or their
Subsidiaries to any Person to the extent secured by a Lien on, or trust over,
any of the Collateral (other than a Permitted Lien), which Lien or trust, in
the Permitted Discretion of Agent likely would have a priority superior to the
Agent’s Liens (such as Liens or trusts in favor of landlords, warehousemen,
carriers, mechanics, materialmen, laborers, or suppliers, or Liens or trusts
for ad valorem, excise, sales, or
other taxes where given priority under applicable law) in and to such item of
the Collateral.

(c)           Amounts borrowed pursuant to this Section 2.1 may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.  The
outstanding principal amount of the Advances, together with interest accrued
thereon, shall be due and payable on the Maturity Date or, if earlier, on the
date on which they are declared due and payable pursuant to the terms of this
Agreement.

2.2           Term Loan.  Subject to the terms and conditions of this Agreement, on the Closing
Date each Lender with a Term Loan Commitment agrees (severally, not jointly or
jointly and severally) to make term loans (collectively, the “Term Loan”)
to Borrowers in an amount equal to such Lender’s Pro Rata Share of the Term
Loan Amount.  The principal of the Term
Loan shall be repaid on the first (1st) day of each
month commencing with March 1, 2007, and continuing on the first (1st) day of each month thereafter until the first (1st)
day of the month in which the Maturity Date occurs (unless sooner accelerated)
in equal installments of Two Hundred Sixty Nine Thousand Two Hundred Thirty
Dollars ($269,230).  The outstanding
unpaid principal balance and all accrued and unpaid interest on the Term Loan
shall be due and payable on the earliest of (i) the Maturity Date, (ii) the
date of the acceleration of the Term Loan in accordance with the terms hereof,
and (iii) the date of termination of this Agreement pursuant to Section
8.1(c).  All principal of, interest
on, and other amounts payable in respect of the Term Loan shall constitute
Obligations.

2.3           Borrowing Procedures and
Settlements.

(a)           Procedure for
Borrowing.  Each Borrowing shall be made by an
irrevocable written request by an Authorized Person delivered to Agent.  Unless Swing Lender is not obligated to make
a Swing Loan pursuant to Section 2.3(b) below, such notice must be
received by Agent no later than 10:00 a.m. (California time) on the Business
Day that is the requested Funding Date specifying (i) the amount of such
Borrowing, and (ii) the requested Funding Date, which shall be a Business Day; provided,
however, that

 2
 

 

if Swing Lender is not obligated to make a Swing Loan as to a requested
Borrowing, such notice must be received by Agent no later than 10:00 a.m.
(California time) on the Business Day prior to the date that is the requested
Funding Date.  At Agent’s election, in
lieu of delivering the above-described written request, any Authorized Person
may give Agent telephonic notice of such request by the required time.  In such circumstances, Borrowers agree that
any such telephonic notice will be confirmed in writing within 24 hours of the
giving of such telephonic notice, but the failure to provide such written
confirmation shall not affect the validity of the request.

(b)           Making of Swing Loans.  In
the case of a request for an Advance and so long as either (i) the aggregate
amount of Swing Loans made since the last Settlement Date plus the amount of
the requested Advance does not exceed $1,500,000, or (ii) Swing Lender, in its
sole discretion, shall agree to make a Swing Loan notwithstanding the foregoing
limitation, Swing Lender shall make an Advance in the amount of such Borrowing
(any such Advance made solely by Swing Lender pursuant to this Section
2.3(b) being referred to as a “Swing Loan” and such Advances being
referred to collectively as “Swing Loans”) available to Borrowers on the
Funding Date applicable thereto by transferring immediately available funds to
Borrowers’ Designated Account.  Each
Swing Loan shall be deemed to be an Advance hereunder and shall be subject to
all the terms and conditions applicable to other Advances, except that all
payments on any Swing Loan shall be payable to Swing Lender solely for its own
account.  Subject to the provisions of Section
2.3(d)(ii), Swing Lender shall not make and shall not be obligated to make
any Swing Loan if Swing Lender has actual knowledge that (i) one or more of the
applicable conditions precedent set forth in Section 3 will not be
satisfied on the requested Funding Date for the applicable Borrowing, or (ii)
the requested Borrowing would exceed the Availability on such Funding
Date.  Swing Lender shall not otherwise
be required to determine whether the applicable conditions precedent set forth
in Section 3 have been satisfied on the Funding Date applicable thereto
prior to making any Swing Loan.  The
Swing Loans shall be secured by the Agent’s Liens, constitute Obligations
hereunder, and bear interest at the rate applicable from time to time to
Advances that are Base Rate Loans.

(c)           Making of Loans.

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

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

 3
 

 

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

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

(d)           Protective Advances and
Optional Overadvances.

(i)            Agent hereby is authorized by Borrowers and
the Lenders, from time to time in Agent’s sole discretion, (A) after the
occurrence and during the continuance of a Default or an Event of Default, or
(B) at any time that any of the other applicable conditions precedent set forth
in Section 3 are not satisfied, to make Advances to Borrowers on behalf
of the Lenders that Agent, in its Permitted Discretion

 4
 

 

deems
necessary or desirable (1) to preserve or protect the Collateral, or any
portion thereof, (2) to enhance the likelihood of repayment of the Obligations
(other than the Bank Product Obligations), or (3) to pay any other amount
chargeable to Borrowers pursuant to the terms of this Agreement, including
Lender Group Expenses and the costs, fees, and expenses described in Section
9 (any of the Advances described in this Section 2.3(d)(i) shall be
referred to as “Protective Advances”).

(ii)           Any contrary provision of this Agreement notwithstanding, the Lenders
hereby authorize Agent or Swing Lender, as applicable, and either Agent or
Swing Lender, as applicable, may, but is not obligated to, knowingly and
intentionally, continue to make Advances (including Swing Loans) to Borrowers
notwithstanding that an Overadvance exists or thereby would be created, so long
as (A) after giving effect to such Advances, the outstanding Revolver Usage
does not exceed the Borrowing Base by more than $1,500,000, and (B) after
giving effect to such Advances, the outstanding Revolver Usage (except for and
excluding amounts charged to the Loan Account for interest, fees, or Lender
Group Expenses) does not exceed the Maximum Revolver Amount.  In the event Agent obtains actual knowledge
that the Revolver Usage exceeds the amounts permitted by the immediately
foregoing provisions, regardless of the amount of, or reason for, such excess,
Agent shall notify the Lenders as soon as practicable (and prior to making any
(or any additional) intentional Overadvances (except for and excluding amounts
charged to the Loan Account for interest, fees, or Lender Group Expenses)
unless Agent determines that prior notice would result in imminent harm to the
Collateral or its value), and the Lenders with Revolver Commitments thereupon
shall, together with Agent, jointly determine the terms of arrangements that
shall be implemented with Borrowers intended to reduce, within a reasonable
time, the outstanding principal amount of the Advances to Borrowers to an
amount permitted by the preceding paragraph. 
In such circumstances, if any Lender with a Revolver Commitment objects
to the proposed terms of reduction or repayment of any Overadvance, the terms
of reduction or repayment thereof shall be implemented according to the
determination of the Required Lenders. 
Each Lender with a Revolver Commitment shall be obligated to settle with
Agent as provided in Section 2.3(e) for the amount of such Lender’s Pro
Rata Share of any unintentional Overadvances by Agent reported to such Lender,
any intentional Overadvances made as permitted under this Section 2.3(d)(ii),
and any Overadvances resulting from the charging to the Loan Account of
interest, fees, or Lender Group Expenses.

(iii)          Each Protective Advance and each Overadvance shall be deemed to be an
Advance hereunder, except that no Protective Advance or Overadvance shall be
eligible to be a LIBOR Rate Loan and all payments on the Protective Advances
shall be payable to Agent solely for its own account.  The Protective Advances and Overadvances
shall be repayable on demand, secured by the Agent’s Liens, constitute
Obligations hereunder, and bear interest at the rate applicable from time to
time to Advances that are Base Rate Loans. 
The provisions of this Section 2.3(d) are for the exclusive
benefit of Agent, Swing Lender, and the Lenders and are not intended to benefit
any Borrower in any way.

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

(i)            Agent shall request settlement (“Settlement”)
with the Lenders on a weekly basis, or on a more frequent basis if so
determined by Agent (1) on behalf of Swing Lender, with respect to the
outstanding Swing Loans, (2) for itself, with respect to the outstanding
Protective Advances, and (3) with respect to Borrowers’ or their U.S.
Subsidiaries’ Collections received, as to each by notifying the Lenders by
telecopy, telephone, or other similar form of transmission, of such requested
Settlement, no later than 2:00 p.m. (California time) on the Business Day
immediately prior to the date of such requested Settlement (the date of such
requested Settlement being the “Settlement Date”).  Such notice of a Settlement Date shall

 5
 

 

include
a summary statement of the amount of outstanding Advances, Swing  Loans, and Protective Advances for the period
since the prior Settlement Date.  Subject
to the terms and conditions contained herein (including Section 2.3(c)(iii)):  (y) if a Lender’s balance of the Advances
(including Swing Loans and Protective Advances) exceeds such Lender’s Pro Rata
Share of the Advances (including Swing Loans and Protective Advances) as of a
Settlement Date, then Agent shall, by no later than 12:00 noon (California
time) on the Settlement Date, transfer in immediately available funds to a
Deposit Account of such Lender (as such Lender may designate), an amount such
that each such Lender shall, upon receipt of such amount, have as of the
Settlement Date, its Pro Rata Share of the Advances (including Swing Loans and
Protective Advances), and (z) if a Lender’s balance of the Advances (including
Swing Loans and Protective Advances) is less than such Lender’s Pro Rata Share
of the Advances (including Swing Loans and Protective Advances) as of a
Settlement Date, such Lender shall no later than 12:00 noon (California time)
on the Settlement Date transfer in immediately available funds to the Agent’s
Account, an amount such that each such Lender shall, upon transfer of such
amount, have as of the Settlement Date, its Pro Rata Share of the Advances
(including Swing Loans and Protective Advances).  Such amounts made available to Agent under clause
(z) of the immediately preceding sentence shall be applied against the amounts
of the applicable Swing Loans or Protective Advances and, together with the
portion of such Swing Loans or Protective Advances representing Swing Lender’s
Pro Rata Share thereof, shall constitute Advances of such Lenders.  If any such amount is not made available to
Agent by any Lender on the Settlement Date applicable thereto to the extent
required by the terms hereof, Agent shall be entitled to recover for its
account such amount on demand from such Lender together with interest thereon
at the Defaulting Lender Rate.

(ii)           In determining whether a Lender’s balance of the Advances, Swing Loans,
and Protective Advances is less than, equal to, or greater than such Lender’s
Pro Rata Share of the Advances, Swing Loans, and Protective Advances as of a
Settlement Date, Agent shall, as part of the relevant Settlement, apply to such
balance the portion of payments actually received in good funds by Agent with
respect to principal, interest, fees payable by Borrowers and allocable to the
Lenders hereunder, and proceeds of Collateral. 
To the extent that a net amount is owed to any such Lender after such
application, such net amount shall be distributed by Agent to that Lender as
part of such next Settlement.

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

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

(g)           Lenders’ Failure to
Perform.  All Advances (other than Swing Loans and
Protective Advances) shall be made by the Lenders contemporaneously and in
accordance with their Pro Rata Shares. 
It is understood that (i) no Lender shall be responsible for any failure
by any other Lender to

 6
 

 

perform
its obligation to make any Advance (or other extension of credit) hereunder,
nor shall any Commitment of any Lender be increased or decreased as a result of
any failure by any other Lender to perform its obligations hereunder, and (ii)
no failure by any Lender to perform its obligations hereunder shall excuse any
other Lender from its obligations hereunder.

2.4           Payments.

(a)           Payments by Borrowers.

(i)            Except as otherwise expressly provided
herein, all payments by Borrowers shall be made to Agent’s Account for the
account of the Lender Group and shall be made in immediately available funds,
no later than 12:00 noon (California time) on the date specified herein.  Any payment received by Agent later than
12:00 noon (California time), shall be deemed to have been received on the
following Business Day and any applicable interest or fee shall continue to
accrue until such following Business Day.

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

(b)           Apportionment and
Application.

(i)            So long as no Event of Default has occurred
and is continuing and except as otherwise provided with respect to Defaulting
Lenders, all principal and interest payments shall be apportioned ratably among
the Lenders (according to the unpaid principal balance of the Obligations to
which such payments relate held by each Lender) and all payments of fees and
expenses (other than fees or expenses that are for Agent’s separate account)
shall be apportioned ratably among the Lenders having a Pro Rata Share of the
type of Commitment or Obligation to which a particular fee or expense
relates.  All payments to be made
hereunder by Borrowers shall be remitted to Agent and all (subject to Section
2.4(b)(iv) hereof) such payments, and all proceeds of Collateral received by
Agent, shall be applied, so long as no Event of Default has occurred and is
continuing, to reduce the balance of the Advances outstanding and, thereafter,
to Borrowers (to be wired to the Designated Account) or such other Person entitled
thereto under applicable law; provided, that unless a Triggering Event shall
have occurred and be continuing, all amounts received by Agent pursuant to Section
2.7 shall be deposited into the Designated Account.

(ii)           At any time that an Event of Default has occurred and is continuing and
except as otherwise provided with respect to Defaulting Lenders, all payments
remitted to Agent and all proceeds of Collateral received by Agent shall be
applied as follows:

(A)          first, to pay any Lender Group Expenses (including cost or expense
reimbursements) or indemnities then due to Agent under the Loan Documents,
until paid in full,

(B)           second, to pay any fees or premiums then due to Agent under the Loan
Documents until paid in full,

 

 7

 

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

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

(E)           fifth, ratably to pay any Lender Group Expenses (including cost or expense
reimbursements) or indemnities then due to any of the Lenders under the Loan
Documents, until paid in full,

(F)           sixth, ratably to pay any fees or premiums then due to any of the Lenders
under the Loan Documents until paid in full,

(G)           seventh, ratably to pay interest due in respect of the Advances (other than
Protective Advances), the Swing Loans, and the Term Loan until paid in full,

(H)          eighth, ratably (i) to pay the principal of all Swing Loans until paid in
full, (ii) to pay the principal of all Advances until paid in full, (iii) to
Agent, to be held by Agent, for the ratable benefit of Issuing Lender and those
Lenders having a Revolver Commitment, as cash collateral in an amount up to
105% of the Letter of Credit Usage, (iv) to Agent, to be held by Agent, for the
benefit of the Bank Product Providers, as cash collateral in an amount up to
the amount of the Bank Product Reserve established prior to the occurrence of,
and not in contemplation of, the subject Event of Default, and (v) to pay the
outstanding principal balance of the Term Loan (in the inverse order of the
maturity of the installments due thereunder) until the Term Loan is paid in
full,

(I)            ninth, to pay any other Obligations (including the provision of amounts to
Agent, to be held by Agent, for the benefit of the Bank Product Providers, as
cash collateral in an amount up to the amount determined by Agent in its
Permitted Discretion as the amount necessary to secure Borrowers’ and their
Subsidiaries’ obligations in respect of Bank Products), and

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

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

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

(v)        For purposes of Section 2.4(b)(ii), “paid in full” means payment
of all amounts owing under the Loan Documents according to the terms thereof,
including loan fees, service fees, professional fees, interest (and
specifically including interest accrued after the commencement of any
Insolvency Proceeding), default interest, interest on interest, and expense
reimbursements, whether or not any of the foregoing would be or is allowed or
disallowed in whole or in part in any Insolvency Proceeding.

(vi)       In the event of a direct conflict between the priority provisions of
this Section 2.4 and any other provision contained in any other Loan
Document, it is the intention of the parties hereto that such provisions be
read together and construed, to the fullest extent possible, to be in concert
with

 8
 

 

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.

(c)           Prepayments.

(i)            If, as of the last day of any month, (A) the
sum of the outstanding principal balance of the Term Loan on such date plus the Revolver Usage on such date
exceeds (B) the product of (I) 67% times
(II) TTM Recurring Revenues calculated as of the last month for which financial
statements have most recently been delivered pursuant to Section 5.3
(the “Loan Limit” and such excess being referred to as the “Limiter
Excess”), then Borrowers shall immediately prepay the Obligations in
accordance with Section 2.4(d)(i) in an aggregate amount equal to the
Limiter Excess.

(ii)           Immediately upon the receipt by Borrowers or any of their Subsidiaries
of the proceeds of any voluntary or involuntary sale or disposition by
Borrowers or any of their Subsidiaries of property or assets (including
casualty losses or condemnations but excluding sales or dispositions which
qualify as Permitted Dispositions under the definition of Permitted
Dispositions) which exceed $500,000 in the aggregate in any fiscal year,
Borrowers shall prepay the outstanding principal amount of the Obligations in
accordance with Section 2.4(d)(ii) in an amount equal to 100% of
the Net Cash Proceeds (including condemnation awards and payments in lieu
thereof) received by such Person in connection with such sales or dispositions;
provided that, so long as (A) no Default or Event of Default shall have
occurred and is continuing, (B) Administrative Borrower shall have given Agent
prior written notice of Borrowers’ intention to apply such monies to the costs
of replacement of the properties or assets that are the subject of such sale or
disposition or the cost of purchase or construction of other assets useful in
the business of Borrowers or their Subsidiaries, and (C) Borrowers or their
Subsidiaries, as applicable, complete such replacement, purchase, or
construction within 180 days after the initial receipt of such monies,
Borrowers and their Subsidiaries shall have the option to apply such monies to
the costs of replacement of the property or assets that are the subject of such
sale or disposition or the costs of purchase or construction of other assets
useful in the business of Borrowers and their Subsidiaries unless and to the
extent that such applicable period shall have expired without such replacement,
purchase or construction being made or completed, in which case, any amounts
remaining in the cash collateral account shall be paid to Agent and applied in
accordance with Section 2.4(d)(ii). 
Nothing contained in this Section 2.4(c)(ii) shall permit
Borrowers or any of their Subsidiaries to sell or otherwise dispose of any
property or assets other than in accordance with Section 6.4.

(iii)          Immediately upon the receipt by Borrowers or any of their Subsidiaries
of any Extraordinary Receipts which exceed $500,000 in the aggregate in any
fiscal year, Borrowers shall prepay the outstanding principal amount of the
Obligations in accordance with Section 2.4(d)(ii) in an amount equal to
100% of such Extraordinary Receipts, net of any reasonable expenses incurred in
collecting such Extraordinary Receipts.

(iv)          Immediately upon the issuance or incurrence by Borrowers or any of
their Subsidiaries of any Indebtedness (other than Indebtedness permitted under
Section 6.1) or the issuance by Borrowers or any of their
Subsidiaries of any shares of Borrowers’ Stock or their Subsidiaries’ Stock
(other than in the event that Borrowers or any of Subsidiary of a Borrower
forms a Subsidiary in accordance with the terms hereof, the issuance by such
Subsidiary of Stock to a Borrower or such Subsidiary, as applicable, and other
than with respect to the items disclosed on Schedule 2.4(c)), Borrowers
shall prepay the outstanding principal amount of the Obligations in accordance
with Section 2.4(d)(ii) in an amount equal to 100% of the Net Cash
Proceeds received by such Person in connection with such issuance or
incurrence.  The provisions of this Section
2.4(c)(iv) shall not be deemed to be implied consent to any such issuance
or incurrence otherwise prohibited by the terms and conditions of this
Agreement.

 9
 

 

 

(v)           Borrowers shall be permitted to prepay the outstanding principal amount
of the Obligations and accrued and unpaid interest without premium or penalty,
except for prepayment premiums required to be paid pursuant to the Fee Letter.

(d)           Application of Payments.

(i)            Each prepayment pursuant to Section 2.4(c)(i) shall,
(A) so long as no Event of Default shall have occurred and be continuing,
be applied, first, to the
outstanding principal amount of the Advances until paid in full, second, to cash collateralize the Letters
of Credit in an amount equal to 105% of the then extant Letter of Credit Usage,
and third, to the outstanding
principal amount of the Term Loan until paid in full, and (B) if an Event
of Default shall have occurred and be continuing, be applied in the manner set
forth in Section 2.4(b)(ii). 
Each such prepayment of the Term Loan shall be applied against the
remaining installments of principal of the Term Loan in the inverse order of
maturity.

(ii)           Each prepayment pursuant to Section 2.4(c)(ii), 2.4(c)(iii),
or 2.4(c)(iv) above shall (A) so long as no Event of Default shall
have occurred and be continuing, first,
to the outstanding principal amount of the Term Loan until paid in full, second, to the outstanding principal
amount of the Advances (with a corresponding permanent reduction in the Maximum
Revolver Amount) until paid in full, and third,
to cash collateralize the Letters of Credit in an amount equal to 105% of the
then extant Letter of Credit Usage (with a corresponding permanent reduction in
the Maximum Revolver Amount), and (B) if an Event of Default shall have
occurred and be continuing, be applied in the manner set forth in Section 2.4(b)(ii).  Each such prepayment of the Term Loan shall
be applied against the remaining installments of principal of the Term Loan in
the inverse order of maturity.

2.5           Overadvances.  If, at any time or for any reason, the amount of Obligations owed by
Borrowers to the Lender Group pursuant to Section 2.1 or Section 2.12
is greater than any of the limitations set forth in Section 2.1 or Section
2.12, as applicable (an “Overadvance”), Borrowers immediately 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).  Borrowers promise to pay the
Obligations (including principal, interest, fees, costs, and expenses) in
Dollars in full on the Maturity Date or, if earlier, on the date on which the
Obligations are declared due and payable pursuant to the terms of this
Agreement.

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

(a)           Interest Rates.  Except as provided in Section 2.6(c), all Obligations (except
for undrawn Letters of Credit and except for Bank Product Obligations) that
have been charged to the Loan Account pursuant to the terms hereof shall bear
interest on the Daily Balance thereof as follows (i) if the relevant Obligation
is an Advance or a portion of the Term Loan that is a LIBOR Rate Loan, at a per
annum rate equal to the LIBOR Rate plus the LIBOR Rate Margin, (ii) if the
relevant Obligation is an Advance or a portion of the Term Loan that is a Base
Rate Loan, at a per annum rate equal to the Base Rate plus the Base Rate Loan
Margin, and (iii) otherwise, at a per annum rate equal to the Base Rate plus
the Base Rate Margin.

(b)           Letter of Credit Fee.  Borrowers shall pay Agent (for the ratable benefit of the Lenders with
a Revolver Commitment, subject to any agreements between Agent and individual
Lenders), a Letter of Credit fee (in addition to the charges, commissions,
fees, and costs set forth in Section 2.12(e)) which shall accrue at a
rate equal to 2.75% per annum times the Daily Balance of the undrawn amount of
all outstanding Letters of Credit.

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

 10
 

 

(i)            all Obligations (except for undrawn Letters
of Credit and except for Bank Product Obligations) that have been charged to
the Loan Account pursuant to the terms hereof shall bear interest on the Daily
Balance thereof at a per annum rate equal to 2 percentage points above the per
annum rate otherwise applicable hereunder, and

(ii)           the Letter of Credit fee provided for in Section 2.6(b) shall be
increased to 2 percentage points above the per annum rate otherwise applicable
hereunder.

(d)           Payment.  Except as provided to the contrary in Section 2.11 or Section
2.13(a), interest, Letter of Credit fees, and all other fees payable
hereunder shall be due and payable, in arrears, on the first day of each month
at any time that Obligations or Commitments are outstanding.  Borrowers hereby authorize Agent, from time
to time, without prior notice to Borrowers, to charge all interest and fees
(when due and payable), all Lender Group Expenses (as and when incurred), all
charges, commissions, fees, and costs provided for in Section 2.12(e)
(as and when accrued or incurred), all fees and costs provided for in Section 2.11
(as and when accrued or incurred), and all other payments as and when due and
payable under any Loan Document (including the amounts due and payable with
respect to the Term Loan and including any amounts due and payable to the Bank
Product Providers in respect of Bank Products up to the amount of the Bank
Product Reserve) to Borrowers’ Loan Account, which amounts thereafter shall
constitute Advances hereunder and shall accrue interest at the rate then
applicable to Advances that are Base Rate Loans.  Any interest not paid when due shall be
compounded by being charged to the Loan Account and shall thereafter constitute
Advances hereunder and shall accrue interest at the rate then applicable to
Advances that are Base Rate Loans.

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

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

2.7           Cash Management.

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

 11
 

 

(b)           Each Cash Management Bank shall establish and maintain Cash Management
Agreements with Agent and Borrowers. 
Each such Cash Management Agreement shall provide, among other things,
that (i) the Cash Management Bank will comply with any instructions originated
by Agent directing the disposition of the funds in such Cash Management Account
without further consent by Borrowers or their U.S. Subsidiaries, as applicable,
(ii) the Cash Management Bank has no rights of setoff or recoupment or any
other claim against the applicable Cash Management Account, other than for
payment of its service fees and other charges directly related to the administration
of such Cash Management Account and for returned checks or other items of
payment, and (iii) it will forward, by daily sweep, all amounts in the
applicable Cash Management Account to the Agent’s Account.

 

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

(d)           Each Cash Management Account shall be a cash collateral account subject
to a Control Agreement.

(e)           Until a Triggering Event has occurred and is continuing and Agent has
notified Administrative Borrower, all funds received into any Cash Management
Account shall be deposited into the Designated Account.

2.8           Crediting Payments;
Clearance Charge.  The receipt of any payment item by Agent
(whether from transfers to Agent by the Cash Management Banks pursuant to the
Cash Management Agreements or otherwise) shall not be considered a payment on
account unless such payment item is a wire transfer of immediately available
federal funds made to the Agent’s Account or unless and until such payment item
is honored when presented for payment. 
Should any payment item not be honored when presented for payment, then
Borrowers shall be deemed not to have made such payment and interest shall be
calculated accordingly.  Anything to the
contrary contained herein notwithstanding, any payment item shall be deemed
received by Agent only if it is received into the Agent’s Account on a Business
Day on or before 12:00 noon. (California time). 
If any payment item is received into the Agent’s Account on a
non-Business Day or after 12:00 noon (California time) on a Business Day, it
shall be deemed to have been received by Agent as of the opening of business on
the immediately following Business Day. 
From and after the Closing Date, Agent shall be entitled to charge
Borrowers for one Business Day of ‘clearance’ at the rate then applicable under
Section 2.6 to Advances that are Base Rate Loans on all Collections
that are received by Borrowers and their U.S. Subsidiaries (regardless of
whether forwarded by the Cash Management Banks to Agent).  This across-the-board one Business Day
clearance charge on all such Collections of Borrowers and their U.S.  Subsidiaries is acknowledged by the parties
to constitute an integral aspect of the pricing of the financing of Borrowers
and shall apply irrespective of whether or not there are any outstanding
monetary Obligations; the effect of such clearance charge being the equivalent
of charging interest on such Collections through the completion of a period
ending one Business Day after the receipt thereof.  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.

 12
 

 

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

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

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

2.12         Letters of Credit.

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

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

 13
 

 

(ii)           the Letter of Credit Usage would exceed $3,000,000, or

(iii)          the Letter of Credit Usage would exceed the Maximum Revolver Amount less the outstanding amount of Advances less the Bank Product Reserve, and less the aggregate amount of reserves, if
any, established by Agent under Section 2.1(b).

Borrowers
and the Lender Group acknowledge and agree that certain Underlying Letters of
Credit may be issued to support letters of credit that already are outstanding
as of the Closing Date.  Each Letter of
Credit (and corresponding Underlying Letter of Credit) shall be in form and
substance acceptable to the Issuing Lender (in the exercise of its Permitted
Discretion), including the requirement that the amounts payable thereunder must
be payable in Dollars.  If Issuing Lender
is obligated to advance funds under a Letter of Credit, Borrowers immediately
shall reimburse such L/C Disbursement to Issuing Lender by paying to Agent an
amount equal to such L/C Disbursement not later than 12:00 noon, 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 12:00 noon., 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, initially, shall
bear interest at the rate then applicable to Advances that are Base Rate
Loans.  To the extent an L/C Disbursement
is deemed to be an Advance hereunder, Borrowers’ obligation to reimburse such
L/C Disbursement shall be discharged and replaced by the resulting
Advance.  Promptly following receipt by
Agent of any payment from Borrowers pursuant to this paragraph, Agent shall distribute
such payment to the Issuing Lender or, to the extent that Lenders have made
payments pursuant to Section 2.12(b) to reimburse the Issuing Lender,
then to such Lenders and the Issuing Lender as their interests may appear.

(b)           Promptly following receipt of a notice of L/C Disbursement pursuant to Section
2.12(a), each Lender with a Revolver Commitment agrees to fund its Pro Rata
Share of any Advance deemed made pursuant to the foregoing subsection on the
same terms and conditions as if Borrowers had requested such Advance and Agent
shall promptly pay to Issuing Lender the amounts so received by it from the
Lenders.  By the issuance of a Letter of
Credit (or an amendment to a Letter of Credit increasing the amount thereof)
and without any further action on the part of the Issuing Lender or the Lenders
with Revolver Commitments, the Issuing Lender shall be deemed to have granted
to each Lender with a Revolver Commitment, and each Lender with a Revolver
Commitment shall be deemed to have purchased, a participation in each Letter of
Credit, in an amount equal to its Pro Rata Share of the Risk Participation
Liability of such Letter of Credit, and each such Lender agrees to pay to
Agent, for the account of the Issuing Lender, such Lender’s Pro Rata Share of
any payments made by the Issuing Lender under such Letter of Credit.  In consideration and in furtherance of the
foregoing, each Lender with a Revolver Commitment hereby absolutely and
unconditionally agrees to pay to Agent, for the account of the Issuing Lender,
such Lender’s Pro Rata Share of each L/C Disbursement made by the Issuing
Lender and not reimbursed by Borrowers on the date due as provided in Section
2.12(a), or of any reimbursement payment required to be refunded to
Borrowers for any reason.  Each Lender
with a Revolver Commitment acknowledges and agrees that its obligation to
deliver to Agent, for the account of the Issuing Lender, an amount equal to its
respective Pro Rata Share of each L/C Disbursement made by the Issuing Lender
pursuant to this Section 2.12(b) shall be absolute and unconditional and
such remittance shall be made notwithstanding the occurrence or continuation of
an Event of Default or Default or the failure to satisfy any condition set
forth in Section 3.  If any such
Lender fails to make available to Agent the amount of such Lender’s Pro Rata
Share of each L/C Disbursement made by the Issuing Lender in respect of such
Letter of Credit as provided in this Section, such Lender shall be deemed to be
a Defaulting Lender and Agent (for the account of the Issuing Lender) shall be
entitled to recover such amount on demand from such Lender together with
interest thereon at the Defaulting Lender Rate until paid in full.

 14
 

 

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

 

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

(e)           Any and all issuance charges, commissions, fees, and costs incurred by
the Issuing Lender relating to Underlying Letters of Credit shall be Lender
Group Expenses for purposes of this Agreement and immediately shall be
reimbursable by Borrowers to Agent for the account of the Issuing Lender; it
being acknowledged and agreed by each Borrower that, as of the Closing Date,
the issuance charge imposed by the prospective Underlying Issuer is .825% per
annum times the undrawn amount of each Underlying Letter of Credit, that such
issuance charge may be changed from time to time upon prior or contemporaneous
notice to the Administrative Agent, and that the Underlying Issuer also imposes
a schedule of charges for amendments, extensions, drawings, and renewals.

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

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

 15
 

 

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

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

2.13         LIBOR Option.

(a)           Interest and Interest
Payment Dates.  In lieu of having interest charged at the
rate based upon the Base Rate, Borrowers shall have the option (the “LIBOR
Option”) to have interest on all or a portion of the Advances or the Term
Loan be charged (whether at the time when made (unless otherwise provided
herein), upon conversion from a Base Rate Loan to a LIBOR Rate Loan, or upon
continuation of a LIBOR Rate Loan as a LIBOR Rate Loan) at a rate of interest
based upon the LIBOR Rate.  Interest on
LIBOR Rate Loans shall be payable on the earliest of (i) the last day of the
Interest Period applicable thereto, (provided, however, that,
subject to the following clauses (ii) and (iii), in the case of any Interest
Period greater than 3 months in duration, interest shall be payable at 3 month
intervals after the commencement of the applicable Interest Period and on the
last day of such Interest Period), (ii) the date on which all or any portion of
the Obligations are accelerated pursuant to the terms hereof, or (iii) the date
on which this Agreement is terminated pursuant to the terms hereof.  On the last day of each applicable Interest
Period, unless Administrative Borrower properly has exercised the LIBOR Option
with respect thereto, the interest rate applicable to such LIBOR Rate Loan
automatically shall convert to the rate of interest then applicable to Base
Rate Loans of the same type hereunder. 
At any time that an Event of Default has occurred and is continuing,
Borrowers no longer shall have the option to request that Advances or the Term
Loan bear interest at a rate based upon the LIBOR Rate and Agent shall have the
right to convert the interest rate on all outstanding LIBOR Rate Loans to the
rate then applicable to Base Rate Loans hereunder.

(b)           LIBOR Election.

(i)            Administrative Borrower may, at any time and
from time to time, so long as no Event of Default has occurred and is
continuing, elect to exercise the LIBOR Option by notifying Agent prior to
12:00 noon. (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 or the Term Loan
and an Interest Period pursuant to this Section shall be made by delivery to
Agent of a LIBOR Notice received by Agent before the LIBOR Deadline, or by
telephonic notice received by Agent before the LIBOR Deadline (to be confirmed
by delivery to Agent of a LIBOR Notice received by Agent prior to 5:00 p.m.
(California time) on the same day). 
Promptly upon its receipt of each such LIBOR Notice, Agent shall provide
a copy thereof to each of the affected Lenders.

(ii)           Each LIBOR Notice shall be irrevocable and binding on Borrowers.  In connection with each LIBOR Rate Loan, each
Borrower shall indemnify, defend, and hold Agent and the Lenders harmless
against any loss, cost, or expense incurred by Agent or any Lender as a result
of (A) the payment of any principal of any LIBOR Rate Loan other than on the
last day of an Interest Period applicable thereto (including as a result of an
Event of Default), (B) the conversion of any LIBOR Rate Loan other than on the
last day of the Interest Period applicable thereto, or (C) the failure to
borrow, convert, continue or

 16
 

 

prepay
any LIBOR Rate Loan on the date specified in any LIBOR Notice delivered
pursuant hereto (such losses, costs, or expenses, “Funding Losses”).  Funding Losses shall, with respect to Agent
or any Lender, be deemed to equal the amount determined by Agent or such Lender
to be the excess, if any, of (1) the amount of interest that would have accrued
on the principal amount of such LIBOR Rate Loan had such event not occurred, at
the LIBOR Rate that would have been applicable thereto, for the period from the
date of such event to the last day of the then current Interest Period therefor
(or, in the case of a failure to borrow, convert, or continue, for the period
that would have been the Interest Period therefor), minus (2) the amount of interest that would accrue on such
principal amount for such period at the interest rate which Agent or such Lender
would be offered were it to be offered, at the commencement of such period,
Dollar deposits of a comparable amount and period in the London interbank
market.  A certificate of Agent or a
Lender delivered to Administrative Borrower setting forth any amount or amounts
that Agent or such Lender is entitled to receive pursuant to this Section
2.13 shall be conclusive absent manifest error.

(iii)          Borrowers shall have not more than 8 LIBOR Rate Loans in effect at any
given time.  Borrowers only may exercise
the LIBOR Option for LIBOR Rate Loans of at least $500,000 and integral
multiples of $250,000 in excess thereof.

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

(d)           Special Provisions
Applicable to LIBOR Rate.

(i)            The LIBOR Rate may be adjusted by Agent with
respect to any Lender on a prospective basis to take into account any
additional or increased costs to such Lender of maintaining or obtaining any
eurodollar deposits or increased costs, in each case, due to changes in
applicable law occurring subsequent to the commencement of the then applicable
Interest Period, including changes in tax laws (except 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 or maintaining loans bearing interest
at the LIBOR Rate.  In any such event,
the affected Lender shall give Administrative Borrower and Agent notice of such
a determination and adjustment and Agent promptly shall transmit the notice to
each other Lender and, upon its receipt of the notice from the affected Lender,
Administrative Borrower may, by notice to such affected Lender (y) require such
Lender to furnish to Administrative Borrower a statement setting forth the
basis for adjusting such LIBOR Rate and the method for determining the amount
of such adjustment, or (z) repay the LIBOR Rate Loans with respect to
which such adjustment is made (together with any amounts due under Section
2.13(b)(ii)).

(ii)           In the event that any change in market conditions or any law,
regulation, treaty, or directive, or any change therein or in the
interpretation of application thereof, shall at any time after the date hereof,
in the reasonable opinion of any Lender, make it unlawful or impractical for
such Lender to fund or maintain LIBOR Rate Loans or to continue such funding or
maintaining, or to determine or charge interest rates at the LIBOR Rate, such Lender
shall give notice of such changed circumstances to Agent and Administrative
Borrower and Agent promptly shall transmit the notice to each other Lender and
(y) in the case of any LIBOR Rate Loans of such Lender that are outstanding,
the date specified in such Lender’s notice shall be deemed to be the last day
of the Interest Period of such LIBOR Rate Loans, and interest upon the LIBOR
Rate Loans of such Lender thereafter shall accrue interest at the rate then
applicable to Base Rate

 17
 

 

Loans,
and (z) Borrowers shall not be entitled to elect the LIBOR Option until such
Lender determines that it would no longer be unlawful or impractical to do so.

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

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

2.15         Joint and Several Liability
of Borrowers.

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

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

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

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

 18
 

 

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

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

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

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

(i)            Agent and Lenders may collect from such
Borrower without first foreclosing on any Real 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.

 19
 

 

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

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

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

3.             CONDITIONS; TERM OF AGREEMENT.

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

 

 20

 

 

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

(a)           the representations and warranties contained in this Agreement or in
the other Loan Documents, as the same may be updated in accordance with this
Agreement and the other Loan Documents, shall be true and correct in all
material respects (except that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof) on and as of the date of such
extension of credit, as though made on and as of such date (except to the
extent that such representations and warranties relate solely to an earlier
date or exceptions thereto have been consented to in writing by the Agent);

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

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

(d)           no Material Adverse Change shall have occurred since the date of the
last fiscal year end audited financial statements delivered to the Agent.

3.3           Term.  This Agreement shall continue in full force and effect for a term
ending on August ___, 2013 (the “Maturity Date”).  The foregoing notwithstanding, the Lender
Group, upon the election of the Required Lenders, shall have the right to
terminate its obligations under this Agreement immediately and without notice
upon the occurrence and during the continuation of an Event of Default.

3.4           Effect of Termination.  On the date of termination of this Agreement, all Obligations
(including contingent reimbursement obligations of Borrowers with respect to
outstanding Letters of Credit and including all Bank Product Obligations)
immediately shall become due and payable without notice or demand (including
(a) either (i) providing cash collateral to be held by Agent for the benefit of
those Lenders with a Revolver Commitment in an amount equal to 105% of the
Letter of Credit Usage, or (ii) causing the original Letters of Credit to be
returned to the Issuing Lender, and (b) providing cash collateral (in an amount
determined by Agent as sufficient to satisfy the reasonably estimated credit
exposure) to be held by Agent for the benefit of the Bank Product Providers
with respect to the Bank Product Obligations). 
No termination of this Agreement, however, shall relieve or discharge
Borrowers or their Subsidiaries of their duties, Obligations, or covenants
hereunder or under any other Loan Document and the Agent’s Liens in the
Collateral shall remain in effect until all Obligations have been paid in full
and the Lender Group’s obligations to provide additional credit hereunder have
been terminated.  When this Agreement has
been terminated and all of the Obligations have been paid in full and the
Lender Group’s obligations to provide additional credit under the Loan
Documents have been terminated irrevocably, Agent will, at Borrowers’ sole
expense, execute and deliver any termination statements, lien releases,
mortgage releases, re-assignments of trademarks, discharges of security
interests, and other similar discharge or release documents (and, if
applicable, in recordable form), including written authorization to
Administrative Agent to do so, as are reasonably necessary to release, as of
record, the Agent’s Liens and all notices of security interests and liens
previously filed by Agent with respect to the Obligations.

3.5           Early Termination by
Borrowers.  Borrowers have the option, at any time upon
90 days prior written notice by Administrative Borrower to Agent, to terminate
this Agreement and terminate the Commitments hereunder by paying to Agent, in
cash, the Obligations (including (a) either (i) providing cash collateral to be
held by Agent for the benefit of those Lenders with a Revolver Commitment in an
amount equal to 105% of the Letter of Credit Usage, or (ii) causing the
original Letters of Credit to be returned to the

 21
 

 

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

4.             REPRESENTATIONS AND
WARRANTIES.

In
order to induce the Lender Group to enter into this Agreement, 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 thereafter, as updated from time to time in accordance
with the terms of this Agreement, 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 or exceptions thereto have been consented to in writing by Agent) and such
representations and warranties shall survive the execution and delivery of this
Agreement:

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

4.2           Intentionally Omitted.

4.3           Intentionally Omitted.

4.4           Equipment.  Each material item of Equipment of Borrowers and their Subsidiaries is
used or held for use in their business and is in good working order, ordinary
wear and tear and damage by casualty excepted, subject to dispositions
permitted under Section 6.4.

4.5           Location of Equipment.  The Equipment (other than vehicles or Equipment out for repair) of
Borrowers and their Subsidiaries having a book value in excess of $100,000 are
not stored with a bailee, warehouseman, or similar party and are located only
at, or in-transit between, the locations identified on Schedule 4.5 (as
such Schedule may be updated pursuant to Section 5.9).

4.6           Intentionally Omitted.

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

(a)           The name of (within the meaning of Section 9-503 of the Code) and
jurisdiction of organization of each Borrower and each of its Subsidiaries is
set forth on Schedule 4.7(a) (as such Schedule may be updated by written
notice from the Administrative Borrower from time to time to reflect changes
permitted to be made under Section 6.5).

 22
 

 

 

(b)           The chief executive office of each Borrower and each of its
Subsidiaries is located at the address indicated on Schedule 4.7(b) (as
such Schedule may be updated by written notice from the Administrative Borrower
from time to time to reflect changes permitted to be made under Section 5.9).

(c)           Each Borrower’s and each of its Subsidiaries’ tax identification
numbers and organizational identification numbers, if any, are identified on Schedule
4.7(c) (as such Schedule may be updated by written notice from the
Administrative Borrower from time to time to reflect changes permitted to be
made under Section 6.5).

(d)           As of the Closing Date, Borrowers and their Subsidiaries do not hold
any commercial tort claims, except as set forth on Schedule 4.7(d) (as
such Schedule may be updated by written notice from the Administrative Borrower
from time to time to reflect changes).

4.8           Due Organization and
Qualification; Subsidiaries.

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

(b)           Set forth on Schedule 4.8(b) (as such Schedule may be updated by
written notice from Administrative Borrower from time to time to reflect
changes permitted to be made under Section 5.16), is a complete and
accurate description of the authorized capital Stock of each Borrower, by
class, and, as of the Closing Date, a description of the number of shares of
each such class that are issued and outstanding.  Other than as described on Schedule 4.8(b)
(and as updated pursuant to the preceding sentence), there are no
subscriptions, options, warrants, or calls relating to any shares of each
Borrower’s capital Stock, including any right of conversion or exchange under
any outstanding security or other instrument. 
No Borrower is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital Stock or
any security convertible into or exchangeable for any of its capital Stock.

(c)           Set forth on Schedule 4.8(c) (as such Schedule may be updated by
written notice from the Administrative Borrower from time to time to reflect
changes permitted to be made under Section 5.16), is a complete and
accurate list of each Borrower’s direct and indirect Subsidiaries, showing: (i)
the jurisdiction of their organization, (ii) the number of shares of each class
of common and preferred Stock authorized for each of such Subsidiaries, and
(iii) the number and the percentage of the outstanding shares of each such
class owned directly or indirectly by the applicable Borrower.  All of the outstanding capital Stock of each
such Subsidiary has been validly issued and is fully paid and non-assessable.

(d)           Except as set forth on Schedule 4.8(c) (as such Schedule may be
updated by written notice from Administrative Borrower from time to time to
reflect changes permitted to be made under Section 5.16), there are no
subscriptions, options, warrants, or calls relating to any shares of any
Borrower’s Subsidiaries’ capital Stock, including any right of conversion or
exchange under any outstanding security or other instrument.  No Borrower or any of its respective
Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise  acquire or
retire any shares of any Borrower’s Subsidiaries’ capital Stock or any security
convertible into or exchangeable for any such capital Stock.

4.9           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.

 23
 

 

 

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

(c)           Other than the filing of financing statements, the recordation of the
Mortgages, and other filings or actions necessary to perfect Liens granted to
Agent in the Collateral, the execution, delivery, and performance by each
Borrower of this Agreement and the other Loan Documents to which such Borrower
is a party do not and will not require any registration with, consent, or
approval of, or notice to, or other action with or by, any Governmental
Authority, other than consents or approvals that have been obtained and that
are still in force and effect.

(d)           As to each Borrower, this Agreement, the other Loan Documents and the
Merger 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)           To the extent perfected by filing under the Code, possession or,
recording with the United States Patent and Trademark Office and the United
States Copyright Office, the Agent’s Liens are validly created, perfected
(other than (i) in respect of motor vehicles and (ii) any Deposit Accounts and
Securities Accounts not subject to a Control Agreement as permitted by Section
6.12, and subject only to the filing of financing statements), and first
priority Liens, subject only to Permitted Liens.

4.10         Litigation.  Other than those matters disclosed on Schedule 4.10 and other
than matters arising after the Closing Date that reasonably could not be
expected to result in a Material Adverse Change, there are no actions, suits,
or proceedings pending or, to the best knowledge of each Borrower, threatened
against any Borrower or any of its Subsidiaries.

4.11         No Material Adverse Change.  All financial statements relating to Borrowers and their Subsidiaries
that have been delivered by Borrowers to the Lender Group have been prepared in
accordance with GAAP (except, in the case of unaudited financial statements,
for the lack of footnotes and being subject to year-end audit adjustments) and
present fairly in all material respects, Borrowers’ and their Subsidiaries’
financial condition as of the date thereof and results of operations for the
period then ended.  There has not been a
Material Adverse Change with respect to Borrowers and their Subsidiaries since
September 30, 2005.

4.12         Fraudulent Transfer.

(a)           Each Borrower and each Subsidiary of a Borrower is Solvent.

(b)           No transfer of property is being made by any Borrower or any Subsidiary
of a Borrower and no obligation is being incurred by any Borrower or any
Subsidiary of a 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 or their Subsidiaries.

 24
 

 

 

4.13         Employee Benefits.  Schedule 4.13 lists
all Plans maintained or contributed to by each Borrower and all Qualified Plans
maintained or contributed to by any ERISA Affiliate, and separately identifies
the Pension Plans, Multiemployer Plans, unfunded Pension Plans, Welfare Plans
and retiree Welfare Plans.  Except as set
forth on Schedule 4.13, each Qualified Plan has  been determined by the Internal Revenue
Service to qualify under Section 401(a) of the IRC, and the trusts created
thereunder have been determined to be exempt from tax under the provisions of
Section 501(a) of the IRC, and to the best knowledge of each Borrower nothing
has occurred which would cause the loss of such qualification or tax-exempt
status.  Except as set forth on Schedule
4.13, each Plan is in material compliance with the applicable provisions of
ERISA, the IRC, and all other applicable statutes, governmental rules and
regulations, including the filing of reports required under the IRC or
ERISA.  During the twelve (12)
consecutive month period prior to the date of the execution and delivery of
this Agreement:  (i) no Reportable Event
has occurred and is continuing with respect to any Pension Plan subject to
Title IV of ERISA, (ii) no Prohibited Transaction has occurred and is continuing
with respect to any Plan, (iii) neither the Borrower nor any ERISA Affiliate
has withdrawn from any Pension Plan subject to Title IV of ERISA or instituted
steps to do so, (iv) no steps have been instituted to terminate any Plan, and
(v) no contribution failure has occurred with respect to any Pension Plan
sufficient to give rise to a lien under Section 302(f) of ERISA and there is no
accumulated funding deficiency with respect to any Pension Plan, whether or not
waived, in each case under clauses (i) through (v), where a Material Adverse Change
could reasonably be expected to occur as a result.  No condition exists or event or transaction
has occurred in connection with any Plan which could result in the Borrower or
any ERISA Affiliate incurring any material liability, fine or penalty.  Each Borrower and each ERISA Affiliate have
made all contributions required to be made by them to any Pension Plan or
Welfare Plan when due.  Except as
otherwise listed on Schedule 4.13, no Pension Plan subject to ERISA has
any Unfunded Pension Liability where a Material Adverse Change could be
reasonably expected to occur as a result. 
Except as otherwise listed on Schedule 4.13, neither any Borrower
nor any ERISA Affiliate is a member of or contributes to any Multiemployer
Plan.  Except as otherwise listed on Schedule
4.13, neither any Borrower nor any ERISA Affiliate has any contingent
liability with respect to any postretirement benefit under a Welfare Plan other
than liability for continuation coverage described in Part 6 of Title I of
ERISA or under applicable state law. 
Except as otherwise listed on Schedule 4.13, and after the
Closing Date that reasonably could not be expected to result in a Material
Adverse Change, there are no pending, or to the knowledge of any Borrower,
threatened claims, actions or lawsuits (other than claims for benefits in the
normal course), asserted or instituted against (x) any Plan or its assets, (y)
any fiduciary with respect to any Plan or (z) any Borrower or any ERISA
Affiliate with respect to any Plan.

4.14         Environmental Condition.  Except as set forth on Schedule 4.14, (a) to Borrowers’
knowledge, none of Borrowers’ or their Subsidiaries’ properties or assets has
ever been used by Borrowers, their Subsidiaries, or by previous owners or
operators in the disposal of, or to produce, store, handle, treat, release, or
transport, any Hazardous Materials, where such use, production, storage,
handling, treatment, release or transport was in violation, in any material
respect, of any applicable Environmental Law and could reasonably be expected
to cause a Material Adverse Change to occur, (b) to Borrowers’ knowledge, none
of Borrowers’ nor their Subsidiaries’ properties or assets has ever been
designated or identified in any manner pursuant to any environmental protection
statute as a Hazardous Materials disposal site, (c) none of Borrowers nor any
of their Subsidiaries have received notice that a Lien arising under any
Environmental Law has attached to any revenues or to any Real Property owned or
operated by Borrowers or their Subsidiaries, and (d) none of Borrowers nor any
of their Subsidiaries have received a summons, citation, notice, or directive
from the United States Environmental Protection Agency or any other federal or
state governmental agency concerning any action or omission by any Borrower or
any Subsidiary of a Borrower resulting in the releasing or disposing of
Hazardous Materials into the environment which could reasonably be expected to
cause a Material Adverse Change to occur.

4.15         Intellectual Property.  Each Borrower and each Subsidiary of a Borrower owns, or holds licenses
in, all trademarks, trade names, copyrights, patents, patent rights, and
licenses that are necessary to the conduct of its business as currently
conducted, and attached hereto as Schedule 4.15 (as updated from

 25
 

 

time
to time by written notice from the Administrative Borrower) is a true, correct,
and complete listing of all material patents, patent applications, trademarks,
trademark applications, copyrights, and copyright registrations as to which each
Borrower or one of its Subsidiaries is the owner or is an exclusive licensee; provided,
however, that Borrowers may amend Schedule 4.15 to add additional
property so long as such amendment occurs by written notice to Agent not less
than 10 days before the date on which a Borrower or any Subsidiary of Borrower
acquires any such property after the Closing Date.  The intellectual property listed on Schedule
4.15 that will be registered with the United States Copyright Office not
later than 120 days after the Closing Date represents not less than 80% of the
consolidated revenue of the Parent and its Subsidiaries from all copyrights
owned by the Parent and its Subsidiaries.

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

4.17         Deposit Accounts and
Securities Accounts.  Set forth on Schedule 4.17 is a
listing of all of Borrowers’ and their U.S. Subsidiaries’ Deposit Accounts and
Securities Accounts, including, with respect to each bank or securities
intermediary (a) the name and address of such Person, and (b) the account
numbers of the Deposit Accounts or Securities Accounts maintained with such
Person (as updated from time to time by written notice from the Administrative
Borrower).

4.18         Complete Disclosure.  All factual information (taken as a whole) furnished by or on behalf of
Borrowers or their Subsidiaries in writing to Agent or any Lender (including
all information contained in the Schedules hereto or in the other Loan
Documents) for purposes of or in connection with this Agreement, the other Loan
Documents, the Merger 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 or their Subsidiaries in writing to
Agent or any Lender will be, true and accurate in all material respects on the
date as of which such information is dated or certified and not incomplete by
omitting to state any fact necessary to make such information (taken as a
whole) not misleading in any material respect at such time in light of the
circumstances under which such information was provided.  On the Closing Date, the Closing Date
Projections represent, and as of the date on which any other Projections are
delivered to Agent, such additional Projections represent Borrowers’ good faith
estimate of their and their Subsidiaries’ future performance for the periods
covered thereby based upon assumptions believed by Borrowers to be reasonable
at the time of the delivery thereof to Agent (it being understood that such
projections and forecasts are subject to uncertainties and contingencies, many
of which are beyond the control of Borrowers and their Subsidiaries and no
assurances can be given that such projections or forecasts will be realized).

4.19         Indebtedness.  Set forth on Schedule 4.19 is a true and complete list of all
Indebtedness in excess of $500,000 of each Borrower and each Subsidiary of a
Borrower outstanding immediately prior to the Closing Date that is to remain
outstanding after the Closing Date and such Schedule accurately sets forth the
aggregate principal amount of such Indebtedness and the principal terms
thereof.

4.20         Material Contracts.  Set forth on Schedule 4.20 is a true and complete list of all
Material Contracts as of the Closing Date. 
Each Material Contract outstanding immediately prior to the Closing Date
that is to remain outstanding after the Closing Date (a) is in full force and
effect and is binding upon and enforceable against each Borrower or Subsidiary
thereof that is a party thereto, and to each Borrower’s best knowledge, each
other Person that is a party thereto in accordance with its terms, (b) has not
been otherwise amended or modified (other than amendments or modifications that
are not prohibited by the terms of this Agreement or any other Loan Document),
and (c) is not in default, in any material respect.

4.21         Merger Documents.  Borrowers have delivered to Agent true and correct copies of the Merger
Documents.  The transactions contemplated
by the Merger Agreement and the other Merger

 26
 

 

Documents
have been consummated in accordance with their respective terms and nothing has
come to any Borrower’s attention that would indicate that any of the
representations and warranties contained in the Merger Documents is not true
and correct in any material respect.

5.             AFFIRMATIVE COVENANTS.

Each Borrower covenants and agrees that, until termination of all of
the Commitments and payment in full of the Obligations, Borrowers shall and
shall cause each of their respective Subsidiaries to do all of the following:

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

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

5.3           Financial Statements,
Reports, Certificates.  Deliver to Agent, with copies to each Lender,
each of the financial statements, reports, or other items set forth on Schedule 5.3
at the times specified therein.  In
addition, Parent agrees that no Subsidiary of Parent will have a fiscal year
different from that of Parent.

5.4           Intentionally Omitted.

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

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

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

 27
 

 

 

5.8           Insurance.

(a)           At Borrowers’ expense, maintain insurance respecting their and their
Subsidiaries’ assets wherever located, covering loss or damage by fire, theft,
explosion, and all other hazards and risks (“Casualty Loss”) as
ordinarily are insured against by other Persons engaged in the same or similar
businesses.  Borrowers also shall
maintain 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 an endorsement naming Agent as the loss
payee (under a satisfactory lender’s loss payable endorsement) or additional
insured, as appropriate.  Each policy of
insurance or endorsement shall contain a clause requiring the insurer to
endeavor 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 Casualty
Loss exceeding $250,000 covered by such insurance.  So long as no Event of Default has occurred
and is continuing, Borrowers shall have the exclusive right to adjust any
Casualty Loss payable under any such insurance policies which are less than
$250,000.  Following the occurrence and
during the continuation of an Event of Default, or in the case of any Casualty
Loss payable under such insurance exceeding $250,000, Agent shall have the exclusive
right to adjust any Casualty Loss, without any liability to Borrowers
whatsoever in respect of such adjustments.

5.9           Location of Equipment.  Keep Borrowers’ and their Subsidiaries’ Inventory and Equipment (other
than vehicles and Equipment out for repair) having book value in excess of $100,000
only at the locations identified on Schedule 4.5 and their chief
executive offices only at the locations identified on Schedule 4.7(b); provided,
however, that Administrative Borrower may amend Schedule 4.5 or Schedule
4.7 so long as such amendment occurs by written notice to Agent not less
than 30 days prior to the date on which such Equipment is moved to such new
location or such chief executive office is relocated, so long as such new
location is within the continental United States, and so long as, at the time
of such written notification, the applicable Borrower provides Agent a
Collateral Access Agreement with respect thereto.

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

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

5.12         Existence.  At all times preserve and keep in full force and effect each Borrower’s
and each of its Subsidiaries’ valid existence and good standing, except as
otherwise permitted under Section 6.3 and, except as could not reasonably
be expected to result in a Material Adverse Change, any rights, franchises,
permits, licenses, accreditations, authorizations, or other approvals material
to their businesses.

5.13         Environmental.

(a)           Keep any property either owned or operated by any Borrower or any
Subsidiary of a Borrower free of any Environmental Liens or post bonds or other
financial assurances sufficient to satisfy the obligations or liability
evidenced by such Environmental Liens, (b) comply, in all material respects,
with Environmental Laws and provide to Agent documentation of such compliance
which Agent reasonably requests, except where the non-compliance with which,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Change, (c) promptly notify Agent of any release of a
Hazardous Material in any reportable quantity from or onto property owned or
operated by any Borrower or any Subsidiary of a Borrower and take any Remedial
Actions required to abate said release or otherwise to come

 28
 

 

into
material compliance with applicable Environmental Law, and (d) promptly, but in
any event within 5 days of its receipt thereof, provide Agent with written
notice of any of the following: 
(i) notice that an Environmental Lien has been filed against any of
the real or personal property of any Borrower or any Subsidiary of a Borrower,
(ii) commencement of any Environmental Action or notice that an Environmental
Action will be filed against any Borrower or any Subsidiary of a Borrower, and
(iii) notice of a violation, citation, or other administrative order which
reasonably could be expected to result in a Material Adverse Change.

5.14         Disclosure Updates.  Promptly and in no event later than 5 Business Days after obtaining
knowledge thereof, notify Agent if any written information, exhibit, or report
furnished to the Lender Group contained, at the time it was furnished, any
untrue statement of a material fact or omitted to state any material fact
necessary to make the statements contained therein not misleading in light of
the circumstances in which made.  The
foregoing to the contrary notwithstanding, any notification pursuant to the
foregoing provision will not cure or remedy the effect of the prior untrue
statement of a material fact or omission of any material fact nor shall any
such notification have the effect of amending or modifying this Agreement or
any of the Schedules hereto, except as otherwise expressly permitted hereunder.

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

5.16         Formation of Subsidiaries.  At the time that any Borrower forms any direct or indirect U.S.
Subsidiary or acquires any direct or indirect U.S. Subsidiary after the Closing
Date, such Borrower shall (a) cause such new U.S. Subsidiary to provide to
Lender a joinder to this Agreement, together with such other security documents
(including Mortgages with respect to any Real Property of such new U.S.
Subsidiary), as well as appropriate financing statements (and with respect to
all property subject to a Mortgage, fixture filings), all in form and substance
reasonably satisfactory to Lender (including being sufficient to grant Agent a
first priority Lien (subject to Permitted Liens) in and to the assets of such
newly formed or acquired U.S. Subsidiary), (b) provide to Agent a pledge
agreement and appropriate certificates and powers or financing statements,
hypothecating all of the direct or beneficial ownership interest in such new
U.S. Subsidiary, in form and substance reasonably satisfactory to Agent, and
(c) provide to Agent all other documentation, including one or more opinions of
counsel reasonably satisfactory to Agent, which in its reasonable opinion is
appropriate with respect to the execution and delivery of the applicable
documentation referred to above (including policies of title insurance or other
documentation with respect to all property subject to a Mortgage).  At the time that a Borrower forms any
first-tier Foreign Subsidiary or acquires any first-tier Foreign Subsidiary
after the Closing Date, such Borrower shall provide to Agent a pledge agreement
and appropriate certificates and powers or financing statements, pledging 65%
of that Borrower’s beneficial ownership in such new first-tier Foreign Subsidiary,
in form and substance reasonably satisfactory to the Agent .  Any document, agreement, or instrument
executed or issued pursuant to this Section 5.16 shall be a Loan
Document.

5.17         Further Assurances.  At
any time upon the request of Agent, Borrowers shall execute or deliver to
Agent, and shall cause their U.S. Subsidiaries to execute or deliver to Agent,
any and all financing statements, fixture filings, security agreements,
pledges, assignments, endorsements of certificates of title, mortgages, deeds
of trust, opinions of counsel, and all other documents (collectively, the “Additional
Documents”) that Agent may reasonably request in form and substance
reasonably satisfactory to Agent, to create, perfect, and continue perfected or
to better perfect the Agent’s Liens in all of the properties and assets of
Borrowers and their U.S. Subsidiaries (whether now owned or hereafter arising
or acquired, tangible or intangible, real or personal), to create and perfect
Liens in favor of Agent in any Real Property acquired by Borrowers or their
U.S. Subsidiaries after the Closing Date, and in order to fully consummate all
of the transactions contemplated hereby and under the other Loan
Documents.  To the maximum extent permitted

 29
 

 

by
applicable law, Borrowers authorize Agent to execute any such Additional
Documents in Borrowers’ or their U.S. Subsidiaries’ names, as applicable, and
authorizes Agent to file such executed Additional Documents in any appropriate
filing office.

5.18         ERISA Matters.  
Furnish to Agent:

(a)           Notice of ERISA Matters. 
Forthwith upon learning of the occurrence of any of the following which
could be reasonably expected to result in a Material Adverse Change, written
notice thereof which describes the same and the steps being taken by a Borrower
with respect thereto:  (i) a Prohibited
Transaction in connection with any Plan (ii) the occurrence of a Reportable
Event with respect to any Pension Plan subject to Title IV of ERISA, (iii) the
institution of any steps by the Borrower, the PBGC or any other Person to
terminate any Plan, (iv) the institution of any steps by a Borrower or any
ERISA Affiliate to withdraw from any Pension Plan which could result in
material liability to a Borrower, (v) the failure to make a required
contribution to any Pension Plan if such failure is sufficient to give rise to
a lien under Section 302(f) of ERISA, (vi) the taking of any action with
respect to a Pension Plan which could result in the requirement that a Borrower
furnish a bond or other security to the PBGC or such Pension Plan, (vii) any
material increase in the contingent liability of a Borrower with respect to any
post retirement Welfare Plan benefits, (viii) any and all claims, actions, or
lawsuits (other than claims for benefits in the ordinary course) asserted or
instituted, and of any threatened litigation or claims  (other than claims for benefits in the
ordinary course), against a Borrower or against any ERISA Affiliate in
connection with any Plan maintained, at any time, by a Borrower or such ERISA
Affiliate, or to which a Borrower or such ERISA Affiliate has or had at any
time any obligation to contribute, or/and against any such Plan itself, or
against any fiduciary of or service provided to any such Plan, or (ix) the
occurrence of any event with respect to any Plan which would result in the
Borrower incurring any material liability, fine or penalty.

(b)           Copies of ERISA Information.  Upon
the Agent’s request, each of the following shall be delivered by such Borrower
to the Agent:  (i) a copy of each Plan (or,
where any such plan is not in writing, complete description thereof) (and if
applicable, related trust agreements or other funding instruments) and all
amendments thereto, all written interpretations thereof and written
descriptions thereof that have been distributed to employees or former
employees of a Borrower or any of its ERISA Affiliates; (ii) the most recent
determination letter issued by the Internal Revenue Service with respect to
each Pension Plan; (iii) for the three most recent plan years, Annual Reports
on Form 5500 Series requires to be filed with any governmental agency for each
Plan; (iv) all actuarial reports prepared for the last three plan years for
each Pension Plan; (v) a listing of all Multiemployer Plans, with the aggregate
amount of the most recent annual contributions required to be made by a
Borrower or any ERISA Affiliate to each such Multiemployer Plan and copies of
the collective bargaining agreements requiring such contributions; (vi) any
information that has been provided to the Borrower or any ERISA Affiliate
regarding withdrawal liability under any Multiemployer Plan and (vii) the
aggregate amount of the most recent annual payments made to former employees of
a Borrower or any ERISA Affiliate under any retiree Welfare Plan.

6.             NEGATIVE COVENANTS.

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

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

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

 30
 

 

 

(b)           Indebtedness set forth on Schedule 4.19 and any Refinancing
Indebtedness in respect of such Indebtedness,

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

(d)           endorsement of instruments or other payment items for deposit and
inadvertent and immaterial overdrafts on payment items for which insufficient
funds are available,

(e)           Indebtedness composing Permitted Investments,

(f)            Indebtedness of any Borrower to any other
Borrower, of any Borrower to any U.S. Subsidiary, of any U.S. Subsidiary to any
other U.S. Subsidiary, of any Foreign Subsidiary to any Borrower or of any
Foreign Subsidiary to any Subsidiary so long as all such instruments evidencing
any such Indebtedness owed to a Borrower or a U.S. Subsidiary are pledged to
the Agent to secure the Obligations, and of any Borrower to any Foreign
Subsidiary or any U.S. Subsidiary to any Foreign Subsidiary so long as the
principal amount of all such Indebtedness (1) owed to SoftBrands Research PVT.
LTD. does not exceed $1,000,000 in the aggregate outstanding at any time; (2)
owed to WinnLodge AG does not exceed $1,000,000 in the aggregate outstanding at
any time; and (3) owed to any other Foreign Subsidiary does not exceed
$2,300,000 in the aggregate outstanding at any time, and in all cases subject
to the Intercompany Subordination Agreement,

(g)           Indebtedness not in excess of $500,000 in the aggregate outstanding at
any time on terms reasonably acceptable to Agent, and subordinated to the
Obligations pursuant to a subordination agreement reasonably acceptable to
Agent, and any Refinancing Indebtedness in respect of such Indebtedness subject
to the limitations provided in this Section 6.1(g),

(h)           Hedge Agreements entered into for bona fide hedging purposes and not
for speculation,

(i)            unsecured contingent liabilities arising with
respect to customary indemnification obligations in favor of sellers in
connection with Permitted Acquisitions and purchasers of assets in connection
with dispositions permitted under Section 6.4 in an aggregate amount not
to exceed $500,000 outstanding at any time,

(j)            unsecured contingent liabilities and
guaranties of Borrowers or any of their Subsidiaries with respect to
Indebtedness and lease obligations of any Borrower or any Subsidiary otherwise
permitted under this Agreement,

(k)           unsecured Indebtedness in an aggregate amount not to exceed $500,000
outstanding at any time assumed in Permitted Acquisitions and any Refinancing
Indebtedness in respect of such Indebtedness,

(l)            other unsecured Indebtedness in an aggregate
principal amount not exceeding $500,000 at any time outstanding, and

(m)          other secured Indebtedness solely to
the extent permitted under clause (q) in the definition of Permitted Liens.

6.2           Liens.  Create, incur, assume, or suffer to exist, directly or indirectly, any
Lien on or with respect to any of its assets, of any kind, whether now owned or
hereafter acquired, or any income or profits therefrom, except for Permitted
Liens.

 31
 

 

 

6.3           Restrictions on Fundamental
Changes.

(a)           Enter into any merger, consolidation or reorganization, except as
otherwise permitted pursuant to this Section 6.3, and except for (i) the
merger, consolidation or reorganization of any Borrower into any other
Borrower, (ii) the merger, consolidation or reorganization of any Subsidiary of
any Borrower into any Borrower as long as such Borrower is the Person surviving
such merger, consolidation or reorganization, (iii) the merger, consolidation
or reorganization of any U.S. Subsidiary into another U.S. Subsidiary or any
Foreign Subsidiary into another Foreign Subsidiary and (iv) in connection with
any Permitted Acquisition.

(b)           Liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), provided that any Subsidiary which is not a Borrower may
liquidate or dissolve if the Parent determines in good faith that such
liquidation, winding up or dissolution is in the best interest of Parent and
its Subsidiaries and so long (i) the revenue of such Subsidiary at the time of
the proposed liquidation or dissolution does not comprise more than 5% of the
Parent’s and its Subsidiaries’ consolidated revenue and (ii) the value of the
assets of such Subsidiary at the time of the proposed liquidation or
dissolution does not exceed $1,500,000.

(c)           Suspend or go out of a substantial portion of its or their business,
provided that any Subsidiary which is not a Borrower may suspend or go out of a
substantial portion of its business if the Parent determines in good faith that
action is in the best interest of Parent and its Subsidiaries and so long (i)
the revenue of such Subsidiary at the time of the action does not comprise more
than 5% of the Parent’s and its Subsidiaries’ consolidated revenue and (ii) the
value of the assets of such Subsidiary at the time of the proposed action does
not exceed $1,500,000.

6.4           Disposal of Assets.  Other than Permitted Dispositions, convey, sell, lease, license,
assign, transfer, or otherwise dispose of (or enter into an agreement to
convey, sell, lease, license, assign, transfer, or otherwise dispose of) any of
the assets of any Borrowers or any Subsidiary of a Borrower.

6.5           Change Name.  Change any Borrower’s or any of its Subsidiaries’ name, organizational
identification number, state of organization or organizational identity; provided,
however, that a Borrower or a Subsidiary of a Borrower may change its
name upon at least 20 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 or such Subsidiary provides any financing statements necessary to
perfect and continue perfected the Agent’s Liens.

6.6           Nature of Business.  Make any change in the general nature of their business as described in
Schedule 6.6 or acquire any properties or assets that are not reasonably
related to the conduct of such business activities.

6.7           Prepayments and Amendments. 
Except (i) in connection with Refinancing Indebtedness permitted by Section
6.1, (ii) prepayment of the Obligations as provided in this Agreement,
(iii) payment of Indebtedness to the Existing Lender on the Closing Date, (iv)
payment of Indebtedness owed by a Borrower to another Borrower or Subsidiary or
by a Subsidiary to a Borrower or Subsidiary subject in all cases to Section
6.1 and (v) payment of Indebtedness secured by an asset that becomes due as
a result of the sale or transfer of such asset subject to Section 6.1,

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

 

 32

 

 

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

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

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

6.9           Intentionally Omitted.

6.10         Distributions.  Make any distribution or declare or pay any dividends (in cash or other
property, other than common Stock) on, or purchase, acquire, redeem, or retire
any of any Borrower’s Stock, of any class, whether now or hereafter
outstanding, except for:

(a)           dividends and distributions made by any
Subsidiary to a U.S. Subsidiary or to a Borrower or by any Foreign Subsidiary
to a Foreign Subsidiary,

(b)           dividends and distributions made by Parent
with respect to its Stock payable solely in additional shares of Stock,

(c)           repurchases pursuant to and in accordance
with stock option and other Benefit Plans or in connection with the severance or
termination of officers and employees of the Borrowers and their Subsidiaries,
and

(d)           so long as no Default or Event of Default
shall have occurred and be continuing or would result from any such payment,
cash dividends on up to 18,000 shares of Series C-1 Convertible Preferred Stock
and up to 6,667 shares of Series D Convertible Preferred Stock (x)  in an
amount not to exceed 8% per annum payable on a semi-annual basis, (y)  in
an amount not to exceed 10% per annum payable on a semi-annual basis from the
first day of the fiscal quarter in which any Remedy Event shall occur through
the end of the fiscal quarter in which such Remedy Event is cured, and (z) to
the extent necessary to pay cash dividends that were accrued and not paid
during any previous Event of Default or Default (for the avoidance of doubt, no
dividends shall be paid under clause (x), (y) or (z) of this Section
6.10(iv)  while there is a Default or Event of Default
continuing but  such dividends may be accrued and paid when
there is no Default or Event of Default continuing and provided that such
payment of accrued and unpaid dividends would not result in a Default or Event
of Default).

6.11         Accounting Methods.  Modify or change their fiscal year or their method of accounting (other
than as may be required to conform to GAAP) or enter into, modify, or terminate
any agreement currently existing, or at any time hereafter entered into with
any third party accounting firm or service bureau for the preparation or
storage of Borrowers’ or their Subsidiaries’ accounting records without said
accounting firm or service bureau agreeing to provide Agent information
regarding Borrowers’ and their Subsidiaries’ financial condition.

6.12         Investments.  Except for Permitted Investments, directly or indirectly, make or
acquire any Investment or incur any liabilities (including contingent
obligations) for or in connection with any Investment; provided, however,
that Administrative Borrower and its U.S. Subsidiaries shall not have Permitted
Investments (other than in the Cash Management Accounts) in Deposit Accounts or
Securities Accounts in an aggregate amount in excess of $500,000 at any one
time unless Administrative Borrower or

 33
 

 

its U.S. Subsidiary, as applicable, and the
applicable securities intermediary or bank have entered into Control Agreements
governing such Permitted Investments in order to perfect (and further
establish) the Agent’s Liens in such Permitted Investments.  Subject to the foregoing proviso, Borrowers
shall not and shall not permit their U.S. Subsidiaries to establish or maintain
any Deposit Account or Securities Account unless Agent shall have received a
Control Agreement in respect of such Deposit Account or Securities Account.

6.13         Transactions with Affiliates.  Except as set forth on Schedule 6.13, directly or indirectly
enter into or permit to exist any transaction with any Affiliate of any
Borrower or any Subsidiary of a Borrower except for:

(a)           transactions (other the payment of
management, consulting, monitoring, advisory fees or transfer pricing
transactions to the extent constituting Permitted Investments or Indebtedness
permitted under Section 6.1) between Borrowers or their Subsidiaries, on the
one hand, and any Affiliate of Borrowers or their Subsidiaries which is not a
Borrower or a Subsidiary of a Borrower, on the other hand, so long as such
transactions (i) are upon fair and reasonable terms, (ii) are fully
disclosed to Agent if they involve one or more payments by any Borrower or any
of Subsidiary of a Borrower in excess of $250,000 for any single transaction or
series of transactions, and (iii) are no less favorable to Borrowers or
their Subsidiaries, as applicable, than would be obtained in an arm’s length
transaction with a non-Affiliate; and

(b)           the payment of reasonable fees, compensation,
or employee benefit arrangements to, and any indemnity provided for the benefit
of, outside directors of Parent in the ordinary course of business and
consistent with industry practice.

6.14         Use of Proceeds.  Use the proceeds of the Advances and the Term Loan for any purpose
other than (a) on the Closing Date, (i) to finance a portion of the Merger
Transaction, (ii) repay, in full, the outstanding principal, accrued interest,
and accrued fees and expenses owing to Existing Lender, and (iii) 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.

6.15         Equipment with Bailees.  Store the Equipment of Borrowers or their Subsidiaries at any time now
or hereafter with a bailee, warehouseman, or similar party.

6.16         Financial Covenants.

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

	
  Applicable Amount

  	
   

  	
  Applicable Period

  
	
  $

  	
  1,273,000

  	
   

  	
  For the 3 month
  period ending December 31, 2006

  
	
  $

  	
  2,930,000

  	
   

  	
  For the 6 month
  period ending March 31, 2007

  
	
  $

  	
  5,117,000

  	
   

  	
  For the 9 month
  period ending June 30, 2007

  
	
  $

  	
  8,027,000

  	
   

  	
  For the 12 month
  period ending September 30, 2007

  
	
  $

  	
  8,931,000

  	
   

  	
  For the 12 month
  period ending December 31, 2007

  
	
  $

  	
  9,436,000

  	
   

  	
  For the 12 month
  period ending March 31, 2008

  
	
  $

  	
  9,736,000

  	
   

  	
  For the 12 month
  period ending June 30, 2008

  
	
  $

  	
  9,606,000

  	
   

  	
  For the 12 month
  period ending September 30, 2008

  
	
  $

  	
  10,000,000

  	
   

  	
  For the 12 month
  period ending each quarter thereafter

  

 

 34
 

 

 

(b)           Fixed Charge Coverage
Ratio.  Have a Fixed Charge Coverage Ratio, measured
on a quarter-end basis, less than the required amount set forth in the
following table for the applicable period set forth opposite thereto:

	
  Applicable Ratio

  	
   

  	
  Applicable Period

  
	
  0.75:1.0

  	
   

  	
  For the 3 month
  period ending December 31, 2006

  
	
  0.40:1.0

  	
   

  	
  For the 6 month
  period ending March 31, 2007

  
	
  0.62:1.0

  	
   

  	
  For the 9 month
  period ending June 30, 2007

  
	
  0.83:1.0

  	
   

  	
  For the 12 month
  period ending September 30, 2007

  
	
  0.86:1.0

  	
   

  	
  For the 12 month
  period ending December 31, 2007

  
	
  1.0:1.0

  	
   

  	
  For the 12 month
  period ending March 31, 2008

  
	
  1.0:1.0

  	
   

  	
  For the 12 month
  period ending June 30, 2008

  
	
  1.0:1.0

  	
   

  	
  For the 12 month
  period ending September 30, 2008

  
	
  1.1:1.0

  	
   

  	
  For the 12 month
  period ending each quarter thereafter

  

 

 35
 

 

 

(c)           Capital Expenditures.  Make Capital Expenditures in excess of the amount set forth in the
following table for the applicable period; provided that (1) with respect to
any portion of the Capital Expenditure limitation solely for the 3 month period
ended September 30, 2006, that is not fully utilized in such 3 month period,
such unused amount may be carried forward to fiscal year 2007 (but to no other
succeeding fiscal year) and such carried forward amount shall be deemed to be
utilized first, provided, further that such carried forward amount shall not
included in calculating the Fixed Charge Coverage Ratio for the measurement
periods at December 31, 2006, March 31, 2007, June 30, 2007 and September 30,
2007 and (2) with respect to any portion of the Capital Expenditure limitation
for any subsequent period that is not fully utilized in such period, such
unused amount may be carried forward to the next succeeding fiscal year (but to
no other succeeding fiscal year) and such carried forward amount shall be
deemed to be utilized first :

	
  3 month
  period ended

  September 30, 2006

  	
   

  	
  Fiscal Year 2007

  	
   

  	
  Fiscal Year 2008

  	
   

  	
  Fiscal Year 2009

  and thereafter

  
	
  $

  	
  1,100,000

  	
   

  	
  $

  	
  3,625,000

  	
   

  	
  $

  	
  3,000,000

  	
   

  	
  120% of Capital
  Expenditures set forth on the Parent’s Projections delivered for such year in
  accord with Section 5.3 on terms satisfactory to Agent

  
										

 

(d)           Required Availability.  From the Closing Date through and including
the date on which the financial covenants set forth in (a) and (b) above are
first measured and verified by the Administrative Agent, permit Excess
Availability plus Qualified Cash to be less than $9,000,000.

6.17         ERISA.  Each Borrower shall not, nor shall any Borrower cause or permit, any
ERISA Affiliate to allow any condition to exist in connection with any Pension
Plan subject to Title IV of ERISA which could reasonably be expected to
constitute grounds for the PBGC to institute proceedings to have such Pension
Plan terminated or a trustee appointed to administer such Pension Plan; and
each Borrower shall not engage in, or permit to exist or occur, or permit any
ERISA Affiliate to engage in, or permit to exist or occur, any other condition,
event or transaction with respect to any Pension Plan which could result in a
Borrower or any ERISA Affiliate incurring any material liability, fine or
penalty.

6.18         Intellectual Property.  No Borrower shall permit the
intellectual property listed on Schedule 4.15 that is to be registered
with the United States Copyright Office no later than 120 days after the
Closing Date to represent less than 80% of the consolidated revenue of the
Parent and its Subsidiaries from all copyrights owned by the Parent and its
Subsidiaries.

6.19         Merger Documents.  Amend,
modify or waive in any way materially adverse to Parent, any Borrower, or the
Lender Group, any term or provision of the Merger Documents.

7.             EVENTS OF DEFAULT.

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

 36
 

 

 

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

7.2           If Borrowers or any Subsidiary of any
Borrower

(a)           fails to perform or observe any covenant or
other agreement contained in sections (j) and (x)(i) of Schedule 3.1,or
in any of Sections 2.7, 5.2, 5.3, 5.4, 5.5, 5.8,
5.12, 5.14, 5.16, 5.17, 5.18 and 6.1
through 6.19 of this Agreement or Section 6 of the Security Agreement;

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

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

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

7.4           If an Insolvency Proceeding is commenced by
any Borrower or any Subsidiary of a Borrower;

7.5           If an Insolvency Proceeding is commenced
against any Borrower or any Subsidiary of a Borrower, and any of the following
events occur:  (a) the applicable
Borrower or Subsidiary consents to the institution of such Insolvency
Proceeding against it, (b) the petition commencing the Insolvency Proceeding is
not timely controverted, (c) the petition commencing the Insolvency Proceeding
is not dismissed within 60 calendar days of the date of the filing thereof, (d)
an interim trustee is appointed to take possession of all or any substantial
portion of the properties or assets of, or to operate all or any substantial
portion of the business of, any Borrower or any Subsidiary of a Borrower, or
(e) an order for relief shall have been issued or entered therein;

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

7.7           If one or more judgments, orders, or awards
involving an aggregate amount of $500,000, or more (except to the extent fully
covered by insurance pursuant to which the insurer has accepted liability
therefor in writing) shall be entered or filed against any Borrower or any
Subsidiary of any Borrower or with respect to any of their respective assets,
and the same is not released, discharged, bonded against, or stayed

 37
 

 

 

pending appeal before the earlier of 30 days after
the date it first arises or 5 days prior to the date on which such asset is
subject to being forfeited by the applicable Borrower or the applicable
Subsidiary;

7.8           If there is a default in one or more
agreements to which any Borrower or any Subsidiary of a Borrower is a party
with one or more third Persons relative to Indebtedness of any Borrower or any
Subsidiary of any Borrower involving an aggregate amount of $500,000 or more,
and such default (i) occurs at the final maturity of the obligations
thereunder, or (ii) results in acceleration of the maturity of the
applicable Borrower’s or Subsidiary’s obligations thereunder (unless rescinded
prior to the Agent taking any action hereunder);

7.9           If any warranty, representation, statement,
or Record made herein or in any other Loan Document or delivered to Agent or
any Lender in connection with this Agreement or any other Loan Document proves
to be untrue in any material respect (except that such materiality qualifier
shall not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof) as of the date of
issuance or making or deemed making thereof;

7.10         If there is an event of default under any
Material Contract and the consequence of such event of default constitutes a
material adverse effect on the Borrowers’ business as determined by the Agent
in its reasonable discretion;

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

7.12         Any provision of any Loan Document shall at
any time for any reason be declared to be null and void, or the validity or
enforceability thereof shall be contested by any Borrower or any Subsidiary of
a Borrower, or a proceeding shall be commenced by any Borrower or any
Subsidiary of a Borrower, or by any Governmental Authority having jurisdiction
over any Borrower or any Subsidiary of a Borrower, seeking to establish the
invalidity or unenforceability thereof, or any Borrower or any Subsidiary of a
Borrower shall deny that it has any liability or obligation purported to be
created under any Loan Document;

7.13         The occurrence of a Change of Control; or

7.14          (a)
The Institution by the PBGC, a Borrower or any ERISA Affiliate of steps to
terminate a Plan or to organize, withdraw from or terminate from a multiple
employer plan or a Multiemployer Plan if as a result of such reorganization,
withdrawal or termination, such Borrower or any ERISA Affiliate could be
required to make a contribution to such Pension Plan or could incur a liability
or obligation to such Pension Plan in excess of $500,000 or (b) a contribution
failure occurs with respect to any Plan sufficient to give rise to a lien under
Section 302(f) of ERISA; or (c) the assets of a Borrower or any ERISA Affiliate
are encumbered as a result of security provided to a Plan pursuant to Section
412 of the IRC or Section 306 of ERISA in connection with a request for a
minimum funding waiver or extension of the amortization period, or pursuant to
Section 401(a)(29) of the IRC or Section 307 of ERISA as a result of a Pension
Plan amendment; or (d) a Borrower or an ERISA Affiliate fails to pay a PBGC
premium with respect to a Pension Plan subject to Title IV of ERISA when due
and it remains unpaid for more than 30 days thereafter; or (e) the occurrence
of a Prohibited Transaction or Reportable Event with respect to a Plan which
could reasonably be expected to have a Material Adverse Change; or (f) a
Borrower or any of its ERISA Affiliates creates or permits the creation of any
accumulated funding deficiency in excess of $100,000, whether or not waived.

 38
 

 

 

8.             THE LENDER GROUP’S RIGHTS
AND REMEDIES.

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

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

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

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

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

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

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

9.             TAXES AND EXPENSES.

If any Borrower fails to pay any monies (whether
taxes, assessments, insurance premiums, or, in the case of leased properties or
assets, rents or other amounts payable under such leases) due to third Persons,
or fails to make any deposits or furnish any required proof of payment or
deposit, all as required under the terms of this Agreement, then, Agent, in its
sole discretion and without prior notice to any Borrower, may do any or all of
the following:  (a) make payment of the
same or any part thereof, (b) set up such reserves against the Borrowing Base
or the Maximum Revolver Amount as Agent deems necessary to protect the Lender
Group from the exposure created by such failure, or (c) in the case of the
failure to comply with Section 5.8 hereof, obtain and maintain insurance
policies of the type described in Section 5.8 and take any action with
respect to such policies as Agent deems prudent.  Any such amounts paid by Agent shall
constitute Lender Group Expenses and any such payments shall not constitute an
agreement by the Lender Group to make similar payments in the future or a
waiver by the Lender Group of any Event of Default under this Agreement.  Agent need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and 

 39
 

 

the receipt of the usual official notice for the payment thereof shall
be conclusive evidence that the same was validly due and owing.

10.           WAIVERS; INDEMNIFICATION.

10.1         Demand; Protest; etc.  Except as specifically provided in Section 8.1, each Borrower
waives demand, protest, notice of protest, notice of default or dishonor,
notice of payment and nonpayment, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of documents, instruments, chattel paper, and
guarantees at any time held by the Lender Group on which any such Borrower may
in any way be liable.

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

10.3         Indemnification.  Each Borrower shall pay, indemnify, defend, and hold the Agent-Related
Persons, the Lender-Related Persons, and each Participant (each, an “Indemnified
Person”) harmless (to the fullest extent permitted by law) from and against
any and all claims, demands, suits, actions, investigations, proceedings,
liabilities, fines, costs, penalties, and damages, and all reasonable fees and
disbursements of attorneys, experts, or consultants and all other costs and
expenses actually incurred in connection therewith or in connection with the
enforcement of this indemnification (as and when they are incurred and
irrespective of whether suit is brought), at any time asserted against, imposed
upon, or incurred by any of them (a) in connection with or as a result of or
related to the execution, delivery, enforcement, performance, or administration
(including any restructuring or workout with respect hereto) of this Agreement,
any of the other Loan Documents, or the transactions contemplated hereby or
thereby or the monitoring of Borrowers’ and their Subsidiaries’ compliance with
the terms of the Loan Documents, (b) with respect to any investigation,
litigation, or proceeding related to this Agreement, any other Loan Document,
or the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission,
event, or circumstance in any manner related thereto, and (c) in connection
with or arising out of any presence or release of Hazardous Materials at, on,
under, to or from any assets or properties owned, leased or operated by Parent
or any of its Subsidiaries or any Environmental Actions, Environmental
Liabilities and Costs or Remedial Actions related in any way to any such assets
or properties of Parent or any of its Subsidiaries (each and all of the
foregoing, the “Indemnified Liabilities”).  The foregoing to the contrary
notwithstanding, Borrowers shall have no obligation to any Indemnified Person
under this Section 10.3 with respect to any Indemnified Liability that a
court of competent jurisdiction finally determines to have resulted from the
gross negligence or willful misconduct of such Indemnified Person.  This provision shall survive the termination
of this Agreement and the repayment of the Obligations.  If any Indemnified Person makes any payment
to any other Indemnified Person with respect to an Indemnified Liability as to
which Borrowers were required to indemnify the Indemnified Person receiving
such payment, the Indemnified Person making such payment is entitled to be
indemnified and reimbursed by Borrowers with respect thereto.  A Person seeking to be indemnified under this
Section 10.3 shall use its reasonable efforts to notify the Administrative
Borrower of any event requiring indemnification under this Section 10.3 within
20 days following such Person’s knowledge of the event giving rise to the
indemnification claim.  A Person’s
failure to notify the Administrative Borrower in accord with the immediately
preceding sentence shall not in any way relieve the Borrowers’ of their
indemnification obligations hereunder. WITHOUT
LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH
RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART

 40
 

 

ARE CAUSED BY OR ARISE OUT OF ANY
NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.

11.           NOTICES.

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

	
  If to Administrative
  Borrower:

  	
   

  	
  SOFTBRANDS, INC.

  Two Meridian Crossing, Suite 800

  Minneapolis, MN 55423

  Attn: Chief Financial Officer

  Fax No.: 612-851-6280

  
	
   

  	
   

  	
   

  
	
  with copies to:

  	
   

  	
  Dorsey & Whitney LLP

  
	
   

  	
   

  	
  50 South Sixth Street, Suite 1500

  
	
   

  	
   

  	
  Minneapolis, MN 55402

  
	
   

  	
   

  	
  Attn: Tom Martin, Esq.

  
	
   

  	
   

  	
  Fax No.: 612-340-7806

  
	
   

  	
   

  	
   

  
	
  If to Agent:

  	
   

  	
  WELLS FARGO FOOTHILL, INC.

  
	
   

  	
   

  	
  One Boston Place, 18th Floor

  Boston, Massachusetts 02108

  Attn: Business Finance Manager

  Fax No.: 617-523-1697

  
	
   

  	
   

  	
   

  
	
  with copies to:

  	
   

  	
  Duane Morris LLP

  
	
   

  	
   

  	
  227 West Monroe Street, Suite 3400

  
	
   

  	
   

  	
  Chicago, Illinois 60606

  
	
   

  	
   

  	
  Attn: Kenneth A. Latimer, Esq.

  
	
   

  	
   

  	
  Fax No.: 312-499-6701

  

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

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

(a)           THE VALIDITY OF THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE
CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE
RIGHTS OF

 41
 

 

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 ILLINOIS.

(b)           THE PARTIES AGREE THAT ALL
ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND TO THE EXTENT
PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF COOK,
STATE OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH
ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.  BORROWERS AND EACH MEMBER OF THE LENDER GROUP
WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO
ASSERT THE DOCTRINE OF FORUM  NON  CONVENIENS OR TO OBJECT
TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
12(b).

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

13.           ASSIGNMENTS AND
PARTICIPATIONS; SUCCESSORS

13.1         Assignments and
Participations.

(a)           Any Lender may assign and delegate to one or
more assignees (each an “Assignee”) that are Eligible Transferees all or
any portion, of the Obligations, the Commitments and the other rights and
obligations of such Lender hereunder and under the other Loan Documents, in a
minimum amount (unless waived by the Agent) of $5,000,000 (except such minimum
amount shall not apply to (x) an assignment or delegation by any Lender to any
other Lender or an Affiliate of any Lender or (y) a group of new Lenders, each
of whom is an Affiliate of each other or a fund or account managed by any such
new Lender or an Affiliate of such new Lender to the extent that the aggregate
amount to be assigned to all such new Lenders is at least $5,000,000); provided,
however, that Borrowers and Agent may continue to deal solely and
directly with such Lender in connection with the interest so assigned to an
Assignee until (i) written notice of such assignment, together with payment
instructions, addresses, and related information with respect to the Assignee,
have been given to Administrative Borrower and Agent by such Lender and the
Assignee, (ii) such Lender and its Assignee have delivered to Administrative
Borrower and Agent an Assignment and Acceptance and Agent has notified the
assigning Lender of its receipt thereof in accordance with Section 13.1(b),
and (iii) unless waived by the Agent, the assigning Lender or Assignee has paid
to Agent for Agent’s separate account a processing fee in the amount of
$3,500.  Anything contained herein to the
contrary notwithstanding, the payment of any fees shall not be required and the
Assignee need not be an Eligible Transferee if such assignment is in connection
with any merger, consolidation, sale, transfer, or other disposition of all or
any substantial portion of the business or loan portfolio of the assigning
Lender.

 42
 

 

 

(b)           From and after the date that Agent notifies
the assigning Lender (with a copy to Administrative Borrower) that it has
received an executed Assignment and Acceptance and, if applicable,  payment of the required processing fee, (i)
the Assignee thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder have been assigned to it pursuant to such Assignment
and Acceptance, shall have the rights and obligations of a Lender under the
Loan Documents, and (ii) the assigning Lender shall, to the extent that rights
and obligations hereunder and under the other Loan Documents have been assigned
by it pursuant to such Assignment and Acceptance, relinquish its rights (except
with respect to Section 10.3 hereof) and be released from any future
obligations under this Agreement (and in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender’s
rights and obligations under this Agreement and the other Loan Documents, such
Lender shall cease to be a party hereto and thereto), and such assignment shall
effect a novation among Borrowers, the assigning Lender, and the Assignee; provided,
however, that nothing contained herein shall release any assigning
Lender from obligations that survive the termination of this Agreement,
including such assigning Lender’s obligations under Section 15 and Section
16.7(a) of this Agreement.

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

(d)           Immediately upon Agent’s receipt of the
required processing fee, if applicable, and delivery of notice to the assigning
Lender pursuant to Section 13.1(b), this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments
arising therefrom.  The Commitment
allocated to each Assignee shall reduce such Commitments of the assigning Lender
pro tanto.

(e)           Any Lender may at any time sell to one or
more commercial banks, financial institutions, or other Persons (a “Participant”)
participating interests in all or any portion of its Obligations, its
Commitment, and the other rights and interests of that Lender (the “Originating
Lender”) hereunder and under the other Loan Documents; provided, however,
that (i) the Originating Lender shall remain a “Lender” for all purposes of
this Agreement and the other Loan Documents and the Participant receiving the
participating interest in the Obligations, the Commitments, and the other
rights and interests of the Originating Lender hereunder shall not constitute a
“Lender” hereunder or under the other Loan Documents and the Originating Lender’s
obligations under this Agreement shall remain unchanged, (ii) the Originating
Lender shall remain solely responsible for the performance of such obligations,
(iii) Borrowers, Agent, and the Lenders shall continue to deal solely and
directly with the Originating Lender in connection with the Originating Lender’s
rights and obligations under this Agreement and the other Loan Documents,
(iv) no Lender shall transfer or grant any participating interest under
which the Participant has the right to approve

 43
 

 

 

any amendment to, or any consent or waiver with
respect to, this Agreement or any other Loan Document, except to the extent
such amendment to, or consent or waiver with respect to this Agreement or of
any other Loan Document would (A) extend the final maturity date of the
Obligations hereunder in which such Participant is participating, (B) reduce
the interest rate applicable to the Obligations hereunder in which such
Participant is participating, (C) release all or substantially all of the
Collateral or guaranties (except to the extent expressly provided herein or in
any of the Loan Documents) supporting the Obligations hereunder in which such
Participant is participating, (D) postpone the payment of, or reduce the amount
of, the interest or fees payable to such Participant through such Lender, or
(E) change the amount or due dates of scheduled principal repayments or
prepayments or premiums, and (v) all amounts payable by Borrowers hereunder
shall be determined as if such Lender had not sold such participation, except
that, if amounts outstanding under this Agreement are due and unpaid, or shall
have been declared or shall have become due and payable following the
occurrence of an Event of Default as provided in Section 8.1, each
Participant shall be deemed to have the right of set off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement.  The rights
of any Participant only shall be derivative through the Originating Lender with
whom such Participant participates and no Participant shall have any rights
under this Agreement or the other Loan Documents or any direct rights as to the
other Lenders, Agent, Borrowers, the Collections of Borrowers or their
Subsidiaries, the Collateral, or otherwise in respect of the Obligations.  No Participant shall have the right to
participate directly in the making of decisions by the Lenders among
themselves.

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

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

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

14.           AMENDMENTS; WAIVERS.

14.1         Amendments and Waivers.  No amendment or waiver of any provision of this Agreement or any other
Loan Document (other than Bank Product Agreements or the Fee Letter), 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, but only in the specific instance and for the specific
purpose for which given; provided, however, that no such waiver,
amendment, or consent shall, unless in writing and signed by all of the Lenders
directly affected thereby and Administrative Borrower (on behalf of all
Borrowers), do any of the following:

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

 

 44

 

 

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

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

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

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

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

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

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

(i)            other than in connection with a merger,
liquidation, dissolution or sale of such Person expressly permitted by the
terms hereof or the other Loan Documents, release any Borrower from any
obligation for the payment of money,

(j)            amend any of the provisions of Section
2.4(b)(i) or (ii),

(k)           change the definition of Borrowing Base, Maximum Revolver Amount, Term
Loan Amount, or change Section 2.1(b), or

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

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

14.2         Replacement of Holdout
Lender.

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

(b)           Prior to the effective date of such replacement, the Holdout Lender and
each Replacement Lender shall execute and deliver an Assignment and Acceptance,
subject only to the Holdout Lender being repaid its share of the outstanding
Obligations (including an assumption of its Pro Rata Share of the Risk
Participation Liability) without any premium or penalty of any kind whatsoever.  If the Holdout Lender shall refuse or fail to
execute and deliver any such Assignment and Acceptance prior to the effective

 45
 

 

 

date
of such replacement, the Holdout Lender shall be deemed to have executed and
delivered such Assignment and Acceptance. 
The replacement of any Holdout Lender shall be made in accordance with
the terms of Section 13.1.  Until
such time as the Replacement Lenders shall have acquired all of the
Obligations, the Commitments, and the other rights and obligations of the
Holdout Lender hereunder and under the other Loan Documents, the Holdout Lender
shall remain obligated to make the Holdout Lender’s Pro Rata Share of Advances
and to purchase a participation in each Letter of Credit, in an amount equal to
its Pro Rata Share of the Risk Participation Liability of such Letter of
Credit.

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

15.           AGENT; THE LENDER GROUP.

15.1         Appointment and
Authorization of Agent.  Each Lender hereby designates and appoints
WFF as its representative under this Agreement and the other Loan Documents and
each Lender hereby irrevocably authorizes Agent to execute and deliver each of
the other Loan Documents on its behalf and to take such other action on its
behalf under the provisions of this Agreement and each other Loan Document and
to exercise such powers and perform such duties as are expressly delegated to
Agent by the terms of this Agreement or any other Loan Document, together with
such powers as are reasonably incidental thereto.  Agent agrees to act as such on the express
conditions contained in this Section 15. 
The provisions of this Section 15 (other than the rights of
Lenders and Administrative Borrower under Section 15.9 and the proviso
to Section 15.11(a)) are solely for the benefit of Agent, and the
Lenders, and Borrowers and their Subsidiaries shall have no rights as a third
party beneficiary of any of the provisions contained herein.  Any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document notwithstanding,
Agent shall not have any duties or responsibilities, except those expressly set
forth herein, nor shall Agent have or be deemed to have any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against Agent; it being
expressly understood and agreed that the use of the word “Agent” is for
convenience only, that WFF is merely the representative of the Lenders, and
only has the contractual duties set forth herein.  Except as expressly otherwise provided in
this Agreement, Agent shall have and may use its sole discretion with respect
to exercising or refraining from exercising any discretionary rights or taking
or refraining from taking any actions that Agent expressly is entitled to take
or assert under or pursuant to this Agreement and the other Loan
Documents.  Without limiting the
generality of the foregoing, or of any other provision of the Loan Documents
that provides rights or powers to Agent, Lenders agree that Agent shall have
the right to exercise the following powers as long as this Agreement remains in
effect:  (a) maintain, in accordance with
its customary business practices, ledgers and records reflecting the status of
the Obligations, the Collateral, the Collections of Borrowers and their Subsidiaries,
and related matters, (b) execute or file any and all financing or similar
statements or notices, amendments, renewals, supplements, documents,
instruments, proofs of claim, notices and other written agreements with respect
to the Loan Documents, (c) make Advances, for itself or on behalf of Lenders as
provided in the Loan Documents, (d) exclusively receive, apply, and distribute
the Collections of Borrowers and their Subsidiaries as provided in the Loan Documents,
(e) open and maintain such bank accounts and cash management arrangements as
Agent deems necessary and appropriate in accordance with the Loan Documents for
the foregoing purposes with respect to the Collateral and the Collections of
Borrowers and their Subsidiaries, (f) perform, exercise, and enforce any
and all other rights and remedies of the Lender Group with respect to
Borrowers, the Obligations, the Collateral, the Collections of Borrowers and
their 

 46
 

 

Subsidiaries,
or otherwise related to any of same as provided in the Loan Documents, and (g)
incur and pay such Lender Group Expenses as Agent may deem necessary or
appropriate for the performance and fulfillment of its functions and powers
pursuant to the Loan Documents.

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

15.3         Liability of Agent.  None of the Agent Related Persons shall (a) be liable for any action
taken or omitted to be taken by any of them under or in connection with this
Agreement or any other Loan Document or the transactions contemplated hereby
(except for its own gross negligence or willful misconduct), or (b) be
responsible in any manner to any of the Lenders for any recital, statement,
representation or warranty made by any Borrower or 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 obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
books and records or properties of Borrowers or the books or records or
properties of any of Borrowers’ Subsidiaries or Affiliates.

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

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

 47
 

 

 

take
such action, or refrain from taking such action, with respect to such Default
or Event of Default as it shall deem advisable.

15.6         Credit Decision.  Each Lender acknowledges that none of the Agent Related Persons has
made any representation or warranty to it, and that no act by Agent hereinafter
taken, including any review of the affairs of Borrowers and their Subsidiaries
or Affiliates, shall be deemed to constitute any representation or warranty by
any Agent-Related Person to any Lender. 
Each Lender represents to Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of Borrowers and any other Person party to
a Loan Document, and all applicable bank regulatory laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to Borrowers. 
Each Lender also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of Borrowers and
any other Person party to a Loan Document. 
Except for notices, reports, and other documents expressly herein
required to be furnished to the Lenders by Agent, Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of Borrowers and any other Person party to a Loan
Document that may come into the possession of any of the Agent Related Persons.

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

15.8         Agent in Individual Capacity.  WFF and its Affiliates may make loans to, issue letters of credit for
the account of, accept deposits from, acquire equity interests in, and
generally engage in any kind

 48
 

 

 

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

15.9         Successor Agent.  Agent may resign as Agent upon 45 days notice to the Lenders (unless
such notice is waived by the Required Lenders). 
If Agent resigns under this Agreement, the Required Lenders shall
appoint a successor Agent for the Lenders and, as long as no Event of Default
has occurred and is continuing, with the consent of Administrative Borrower,
which consent shall not be unreasonably withheld, delayed or conditioned.  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 and, as long as no Event of Default has occurred and is continuing,
with the consent of Administrative Borrower, which consent shall not be
unreasonably withheld, delayed or conditioned. 
In any such event, upon the acceptance of its appointment as successor
Agent hereunder, such successor Agent shall succeed to all the rights, powers,
and duties of the retiring Agent and the term “Agent” shall mean such successor
Agent and the retiring Agent’s appointment, powers, and duties as Agent shall
be terminated.  After any retiring Agent’s
resignation hereunder as Agent, the provisions of this Section 15 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement.  If no
successor Agent has accepted appointment as Agent by the date which is 45 days
following a retiring Agent’s notice of resignation, the retiring Agent’s
resignation shall nevertheless thereupon become effective and the Lenders shall
perform all of the duties of Agent hereunder until such time, if any, as the
Lenders appoint a successor Agent as provided for above.

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

15.11       Withholding Taxes.

(a)           All payments made by any Borrower hereunder or under any note or other
Loan Document will be made without setoff, counterclaim, or other defense.  In addition, all such payments will be made
free and clear of, and without deduction or withholding for, any present or
future Taxes, and in the event any deduction or withholding of Taxes is
required, each Borrower shall comply with the penultimate

 49
 

 

 

sentence
of this Section 15.11(a).  “Taxes”
shall mean, any taxes, levies, imposts, duties, fees, assessments or other
charges of whatever nature now or hereafter imposed by any jurisdiction or by
any political subdivision or taxing authority thereof or therein with respect
to such payments (but excluding any tax imposed by any jurisdiction or by any
political subdivision or taxing authority thereof or therein measured by or
based on the net income or net profits of any Lender) and all interest,
penalties or similar liabilities with respect thereto.  If any Taxes are so levied or imposed, each
Borrower agrees to pay the full amount of such Taxes and such additional
amounts as may be necessary so that every payment of all amounts due under this
Agreement, any note, or Loan Document, including any amount paid pursuant to
this Section 15.11(a) after withholding or deduction for or on account
of any Taxes, will not be less than the amount provided for herein; provided,
however, that Borrowers shall not be required to increase any such amounts if
the increase in such amount payable results from Agent’s or such Lender’s own
willful misconduct or gross negligence (as finally determined by a court of
competent jurisdiction).  Each Borrower
will furnish to Agent as promptly as possible after the date the payment of any
Tax is due pursuant to applicable law certified copies of tax receipts
evidencing such payment by any Borrower.

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

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

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

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

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

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

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

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

 50
 

 

 

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

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

(f)            If the IRS or any other Governmental
Authority of the United States or other jurisdiction asserts a claim that Agent
did not properly withhold tax from amounts paid to or for the account of any
Lender due to a failure on the part of such Lender (because the appropriate
form was not delivered, was not properly executed, or because such Lender
failed to notify Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Lender shall indemnify and hold Agent harmless for all amounts
paid, directly or indirectly, by Agent, as tax or otherwise, including
penalties and interest, and including any taxes imposed by any jurisdiction on
the amounts payable to Agent under this Section 15.11, together with all
costs and expenses (including attorneys fees and expenses).  The obligation of the Lenders under this
subsection shall survive the payment of all Obligations and the resignation or
replacement of Agent.

15.12       Collateral Matters.

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

(b)           Agent shall have no obligation whatsoever to any of the Lenders to
assure that the Collateral exists or is owned by Borrowers or is cared for,
protected, or insured or has been encumbered, or that the Agent’s Liens have
been properly or sufficiently or lawfully created, perfected, protected, or 

 51
 

 

 

enforced
or are entitled to any particular priority, or to exercise at all or in any
particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent pursuant to any of the Loan Documents, it being understood
and agreed that in respect of the Collateral, or any act, omission, or event
related thereto, subject to the terms and conditions contained herein, Agent
may act in any manner it may deem appropriate, in its sole discretion given
Agent’s own interest in the Collateral in its capacity as one of the Lenders
and that Agent shall have no other duty or liability whatsoever to any Lender
as to any of the foregoing, except as otherwise provided herein.

15.13       Restrictions on Actions by
Lenders; Sharing of Payments.

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

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

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

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

15.16       Concerning the Collateral
and Related Loan Documents.  Each member of the Lender Group authorizes
and directs Agent to enter into this Agreement and the other Loan
Documents.  Each member of the Lender
Group agrees that any action taken by Agent in accordance with the terms of
this Agreement or the other Loan Documents relating to the Collateral and the
exercise by Agent of its powers set

 52
 

 

 

forth
therein or herein, together with such other powers that are reasonably
incidental thereto, shall be binding upon all of the Lenders.

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

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

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

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

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

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

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

15.18       Several Obligations; No
Liability.  Notwithstanding that certain of the Loan Documents
now or hereafter may have been or will be executed only by or in favor of Agent
in its capacity as such, and not by or in favor of the Lenders, any and all
obligations on the part of Agent (if any) to make any credit available
hereunder shall constitute the several (and not joint) obligations of the
respective Lenders on a ratable basis, according to their respective
Commitments, to make an amount of such credit not to exceed, in principal
amount, at any one time outstanding, the amount of their respective
Commitments.  Nothing

 53
 

 

 

contained
herein shall confer upon any Lender any interest in, or subject any Lender to
any liability for, or in respect of, the business, assets, profits, losses, or
liabilities of any other Lender.  Each
Lender shall be solely responsible for notifying its Participants of any
matters relating to the Loan Documents to the extent any such notice may be
required, and no Lender shall have any obligation, duty, or liability to any
Participant of any other Lender.  Except
as provided in Section 15.7, no member of the Lender Group shall have
any liability for the acts of any other member of the Lender Group.  No Lender shall be responsible to any
Borrower or any other Person for any failure by any other Lender to fulfill its
obligations to make credit available hereunder, nor to advance for it or on its
behalf in connection with its Commitment, nor to take any other action on its
behalf hereunder or in connection with the financing contemplated herein.

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

16.           GENERAL PROVISIONS.

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

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

16.3         Interpretation.  Neither this Agreement nor any uncertainty or ambiguity herein shall be
construed against the Lender Group 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.

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

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

16.6         Revival and Reinstatement of
Obligations.  If the incurrence or payment of the Obligations
by any Borrower or the transfer to the Lender Group of any property should for
any reason subsequently be declared to be void or voidable under any state or
federal law relating to creditors’ rights, including provisions of the
Bankruptcy Code relating to fraudulent conveyances, preferences, or other

 54
 

 

 

voidable
or recoverable payments of money or transfers of property (each, a “Voidable
Transfer”), and if the Lender Group is required to repay or restore, in
whole or in part, any such Voidable Transfer, or elects to do so upon the
reasonable advice of its counsel, then, as to any such Voidable Transfer, or
the amount thereof that the Lender Group is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of the
Lender Group related thereto, the liability of Borrowers automatically shall be
revived, reinstated, and restored and shall exist as though such Voidable
Transfer had never been made.

16.7         Confidentiality.

(a)           Agent and Lenders each individually (and
not jointly or jointly and severally) agree that material, non-public
information regarding Borrowers and their Subsidiaries, their operations,
assets, and existing and contemplated business plans shall be treated by Agent
and the Lenders in a confidential manner, and shall not be disclosed by Agent
and the Lenders to Persons who are not parties to this Agreement, except:  (i) to attorneys for and other advisors,
accountants, auditors, and consultants to any member of the Lender Group, (ii)
to Subsidiaries and Affiliates of any member of the Lender Group (including the
Bank Product Providers), provided that any such Subsidiary or Affiliate shall
have agreed in writing to receive such information hereunder subject to the
terms of this Section 16.7, (iii) as may be required by statute,
decision, or judicial or administrative order, rule, or regulation, (iv) as may
be agreed to in advance by Administrative Borrower or its Subsidiaries or as
requested or required by any Governmental Authority pursuant to any subpoena or
other legal process (and the Agent shall use its reasonable efforts to provide
notice of the same to the Administrative Borrower), (v) as to any such
information that is or becomes generally available to the public (other than as
a result of prohibited disclosure by Agent or the Lenders), (vi) in connection
with any assignment, participation or pledge of any Lender’s interest under
this Agreement, provided that any such assignee, participant, or pledgee shall
have agreed in writing to receive such information hereunder subject to the
terms of this Section, and (vii) in connection with any litigation or other
adversary proceeding involving parties hereto which such litigation or
adversary proceeding involves claims related to the rights or duties of such
parties under this Agreement or the other Loan Documents.  The provisions of this Section 16.7(a)
shall survive for 3 years after the payment in full of the Obligations.

(b)           Anything in this Agreement to the
contrary notwithstanding, Agent may provide information concerning the terms
and conditions of this Agreement and the other Loan Documents to loan
syndication and pricing reporting services.

16.8         Lender Group Expenses. 
Borrowers agree to pay any and all Lender Group Expenses promptly after
demand therefor by Agent and agrees that their obligations contained in this Section
16.8 shall survive payment or satisfaction in full of all other
Obligations.

16.9         USA PATRIOT Act. Each Lender that is subject to the
requirements of the USA Patriot Act (Title 111 of Pub. L. 107-56 (signed into
law October 26, 2001)) (the “Act”) hereby notifies Borrowers that
pursuant to the requirements of the Act, it is required to obtain, verify and
record information that identifies Borrowers, which information includes the
name and address of Borrowers and other information that will allow such Lender
to identify Borrowers in accordance with the Act.

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

16.11       Parent as Agent for
Borrowers.  Each Borrower hereby irrevocably appoints
Parent as the borrowing agent and attorney-in-fact for all Borrowers (the “Administrative
Borrower”) which appointment shall remain in full force and effect unless and
until Agent shall have received prior written notice signed by each Borrower
that such appointment has been revoked and that another Borrower has been
appointed Administrative Borrower.  Each
Borrower hereby irrevocably appoints and authorizes the Administrative

 55
 

 

 

Borrower
(i) to provide Agent with all notices with respect to Advances and Letters of
Credit obtained for the benefit of any Borrower and all other notices and
instructions under this Agreement and (ii) to take such action as the
Administrative Borrower deems appropriate on its behalf to obtain Advances and
Letters of Credit and to exercise such other powers as are reasonably
incidental thereto to carry out the purposes of this Agreement.  It is understood that the handling of the
Loan Account and Collateral of Borrowers in a combined fashion, as more fully set
forth herein, is done solely as an accommodation to Borrowers in order to
utilize the collective borrowing powers of Borrowers in the most efficient and
economical manner and at their request, and that Lender Group shall not incur
liability to any Borrower as a result hereof. 
Each Borrower expects to derive benefit, directly or indirectly, from
the handling of the Loan Account and the Collateral in a combined fashion since
the successful operation of each Borrower is dependent on the continued
successful performance of the integrated group.  To induce the Lender Group to do so, and in
consideration thereof, each Borrower hereby jointly and severally agrees to
indemnify each member of the Lender Group and hold each member of the Lender
Group harmless against any and all liability, expense, loss or claim of damage
or injury, made against the Lender Group by any Borrower or by any third party
whosoever, arising from or incurred by reason of (a) the handling of the
Loan Account and Collateral of Borrowers as herein provided, (b) the Lender Group’s
relying on any instructions of the Administrative Borrower, or (c) any other
action taken by the Lender Group hereunder or under the other Loan Documents,
except that Borrowers will have no liability to the relevant Agent-Related
Person or Lender-Related Person under this Section 16.11 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.  A Person seeking to be
indemnified under this Section 16.11 shall use its reasonable efforts to notify
the Administrative Borrower of any event requiring indemnification under this
Section 16.11 within 20 days following such Person’s knowledge of the event
giving rise to the indemnification claim. 
A Person’s failure to notify the Administrative Borrower in accord with
the immediately preceding sentence shall not in any way relieve the Borrowers’
of their indemnification obligations hereunder.

[Signature
pages to follow.]

 56
 

 

 

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

 

	
  

  	
   

  	
  SoftBrands, Inc.

  a Delaware corporation, as a Borrower

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Gregg A. Waldon

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Senior Vice President and Secretary

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SoftBrands Manufacturing, Inc.

  a Minnesota corporation, as a Borrower

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Robert Wright

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Vice President and Secretary

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SoftBrands International, Inc.

  a Delaware corporation, as a Borrower

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Robert Wright

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Vice President and Secretary

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SoftBrands Licensing, Inc.

  a Delaware corporation, as a Borrower

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Robert Wright

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
  Vice President and Secretary

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MAI Systems Corporation

  a Delaware corporation, as a Borrower

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Robert Wright

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
  Vice President and Secretary

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Hotel Information Systems, Inc.

  a Delaware corporation, as a Borrower

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Robert Wright

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
  Vice President and Secretary

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CLS Software International, Inc.

  a California corporation, as a Borrower

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Robert Wright

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
  Vice President and Secretary

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Wells Fargo Foothill, Inc.

  a California corporation, as Agent and a Lender 

  
	
   

  	
   

  	
   

  
	
   

  	
  

  	
  By:

  	
    /s/ Robert Stanley

  	
   

  
	
   

  	
   

  	
  Its:

  	
     Vice President

  	
   

  
							

 

 57

 

 

Schedule
1.1

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

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

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

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

“Acquisition”
means any transaction or series of related transactions for the purpose of or
resulting, directly or indirectly, in (a) the acquisition of all or
substantially all of the assets of a Person, or of all or substantially all of
any business or division of a Person (other than a Person that is already a
Subsidiary), (b) the acquisition of Stock (including the acquisition of any
rights, warrants or options to acquire the Stock) of any Person (other than a
Person that is already a Subsidiary), or otherwise causing any Person (other
than a Person that is already a Subsidiary) to become a Subsidiary, or (c) a
merger or consolidation or any other combination with another Person (other
than a Person that is already a Subsidiary).

“Additional
Documents” has the meaning specified therefor in Section 5.17.

“Administrative
Borrower” has the meaning specified therefor in Section 16.11.

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

“Affiliate”
means, as applied to any Person, any other Person who controls, is controlled
by, or is under common control with, such Person.  For purposes of this definition, “control”
means the possession, directly or indirectly through one or more intermediaries,
of the power to direct the management and policies of a Person, whether through
the ownership of Stock, by contract, or otherwise; provided, however,
that, for purposes of Section 6.13 of the Agreement: (a) any Person
which owns directly or indirectly 10% or more of the Stock having ordinary
voting power for the election of directors or other members of the governing
body of a Person or 10% or more of the partnership or other ownership interests
of a Person (other than as a limited partner of such Person) shall be deemed an
Affiliate of such Person, (b) each director (or comparable manager) of a Person
shall be deemed to be an Affiliate of such Person, and (c) each partnership in
which a Person is a general partner shall be deemed an Affiliate of such Person.  No officer or employee of a Person who is not a Person under clause
(a), (b) or (c) of the proviso to the preceding sentence shall be deemed to be
an Affiliate.

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

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

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

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

 

 

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

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

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

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

“Availability”
means, as of any date of determination, the amount that Borrowers are entitled
to borrow as Advances under Section 2.1 of the Agreement (after giving
effect to all then outstanding Obligations (other than Bank Product
Obligations) and all sublimits and reserves then applicable hereunder).

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

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

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

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

“Bank
Product Reserve” means, as of any date of determination, the lesser of (a)
$2,000,000, and (b) the amount of reserves that Agent has established (based
upon the Bank Product Providers’ reasonable determination of the credit
exposure of Administrative Borrower and its Subsidiaries in respect of Bank
Products) in respect of Bank Products then provided or outstanding.

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

“Base
LIBOR Rate” means the rate per annum, determined by Agent in accordance
with its customary procedures, and utilizing Bloomberg’s Financial Markets
quotation system (or, if Bloomberg’s ceases to publish such quotation, any
other such other electronic or other quotation sources as Agent considers
appropriate), to be the rate at which Dollar deposits (for delivery on the
first day of the requested Interest Period) are offered to major banks in the
London interbank market 2 Business Days prior to the commencement of the
requested Interest Period, for a term and in an amount comparable to the Interest
Period and the amount of the LIBOR Rate Loan requested (whether as an initial
LIBOR Rate Loan or as a continuation of a LIBOR Rate Loan or as a conversion of
a

 

 

Base Rate Loan to a LIBOR
Rate Loan) by Administrative Borrower in accordance with the Agreement, which
determination shall be conclusive in the absence of manifest error.

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

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

“Base Rate Margin” means, as of any date of determination:

(a)           For the period from and including the
Closing Date to but excluding the effective date of any determination of the
Base Rate Margin pursuant to clause (b) below, 1.75 percentage points per annum
(the “Initial Base Rate Margin”).

(b)           Thereafter, so long as no Default or
Event of Default has occurred and is continuing, the relevant Base Rate Margin
set forth in the table below that corresponds to the applicable EBITDA of
Parent and its Subsidiaries set forth opposite thereto (as determined in
accordance with clause (c) below).

	
  EBITDA

  	
   

  	
  Base Rate Margin:

  
	
  <$9,000,000

  	
   

  	
  1.75 percentage
  points

  
	
  $9,000,00 to
  $11,500,000

  	
   

  	
  1.50 percentage
  points

  
	
  $11,500,001 to
  $13,500,000

  	
   

  	
  1.25 percentage
  points

  
	
  >$13,500,000

  	
   

  	
  1.00 percentage
  points

  

 

(c)           The Base Rate Margin shall be
determined from time to time pursuant to clause (b) above on the first day of
the month following the date on which Parent delivers to Agent the audited
financial statements and corresponding Compliance Certificate in accordance
with Section 5.3, commencing with the delivery by Parent of the audited
financial statements and corresponding Compliance Certificate for the fiscal
year of Parent ended September 30, 2006. 
In the event that the audited financial statements and corresponding
Compliance Certificate are not provided to Agent in accordance with Section
5.3, the Base Rate Margin shall be set at the Initial Base Rate Margin as
of the first day of the month following the date on which such audited
financial statements and corresponding Compliance Certificate were required to
be delivered until the date on which such audited financial statements and
corresponding Compliance Certificate are delivered (on which date (but not
retroactively), without constituting a waiver of any Default or Event of
Default arising as a result of Parent’s and Borrower’s failure to timely
deliver such audited financial statements and corresponding Compliance
Certificate, the Base Rate Margin shall be set at the relevant Base Rate Margin
set forth in the table above based upon the calculation of the EBITDA of Parent
and its Subsidiaries set forth in the Compliance Certificate delivered with
such audited financial statements).

 

 

“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 of the board
of directors (or comparable managers).

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

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

“Borrowing
Base” means, as of any date of determination, the result of (a) 0.67 times TTM Recurring Revenue minus
(b) all amounts outstanding under the Term Loan minus (c) the
Bank Product Reserve minus (d) the aggregate amount of reserves, if
any, established by Agent under Section 2.1(c).

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

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

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

“Capitalized
Lease Obligation” means that portion of the obligations under a Capital
Lease that is required to be capitalized in accordance with GAAP.

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

“Cash
Equivalents” means (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States or issued by any agency
thereof and backed by the full faith and credit of the United States, in each
case maturing within 1 year from the date of acquisition thereof, (b)
marketable direct obligations issued by any state of the United States or 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 one of the two highest ratings obtainable from either
Standard & Poor’s Rating Group (“S&P”) or Moody’s Investors Service,
Inc. (“Moody’s”), (c) commercial paper maturing no more than 270 days from the
date of creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody’s, (d) certificates of
deposit or bankers’ acceptances maturing within 1 year from the date of
acquisition thereof issued by any bank organized under the laws of the United
States or any state thereof having at the date of acquisition thereof combined
capital and surplus of not less than $250,000,000, (e) Deposit Accounts
maintained with (i) any bank that satisfies the criteria described in clause
(d) above, or (ii) any other bank organized under the laws of the United States
or any state thereof so long as the amount maintained with any such other bank
is less than or equal to $100,000

 

 

and is insured by the Federal
Deposit Insurance Corporation, and (f) Investments in money market funds
substantially all of whose assets are invested in the types of assets described
in clauses (a) through (e) above.

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

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

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

“Change
of Control” means that (a) Any “person” or “group” (within the meaning of
Sections 13(d) and 14(d) of the Exchange Act) becomes the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 20%,
or more, of the Stock of Parent having the right to vote for the election of
members of the Board of Directors, (b) a majority of the members of the Board
of Directors do not constitute Continuing Directors or (c) Parent ceases to
own, directly or indirectly, 100% of the outstanding Stock of each of its
Subsidiaries in existence as of the Closing Date, subject to Section 6.3.

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

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

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

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

“Collateral
Assignment of Merger Agreement” means that certain Collateral Assignment of
Merger Agreement of even date herewith made by the Parent in favor of the
Agent.

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

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

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

 

 

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

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

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

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

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

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

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

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

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

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

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

“EBITDA”
means, with respect to
any fiscal period, Parent’s and its Subsidiaries’ consolidated net earnings (or
loss) applicable to common shareholders, minus extraordinary gains, income tax
benefits and interest income, plus preferred stock dividends, interest expense,
income tax expense, non-cash extraordinary losses, share-based compensation
expense, payments made to W. Brian Kretzmer and James W. Dolan pursuant to the
consulting agreements in effect with such individuals, any restructuring
charges or other one-time charges up to an aggregate amount of $1,500,000 in
the first 12 months of the Closing Date, any one-time non-cash income statement
adjustments associated with third party valuations of the opening balance sheet
of MAI Systems Corporation, depreciation and amortization for such period, in
each case, determined on a consolidated basis in accordance with GAAP.

“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 financial institution that is engaged in making,
purchasing, or otherwise investing in commercial loans in the ordinary course
of its business and having (together with its Affiliates) total assets in
excess of $250,000,000, (d) any Affiliate (other than individuals) of a Lender,
(e) so long as no Event of Default has occurred and is continuing, any other
Person approved by Agent and Administrative Borrower (which approval of
Administrative Borrower shall not be unreasonably withheld, delayed, or
conditioned), and (f) during the continuation of an Event of Default, any other
Person approved by Agent.

“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, any Subsidiary of a Borrower, or any of their predecessors in
interest, (b) from adjoining properties or businesses, or (c) from or onto any
facilities which received Hazardous Materials generated by any Borrower, any
Subsidiary of a Borrower, or any of their predecessors in interest.

“Environmental
Law” means any applicable federal, state, provincial, foreign or local
statute, law, rule, regulation, ordinance, code, binding and enforceable
guideline, binding and enforceable written policy, or rule of common law now or
hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, in each case, to the extent binding on any
Borrower or any Subsidiary of a Borrower, relating to the environment, the
effect of the environment on employee health, or Hazardous Materials, in each
case as amended from time to time.

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

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

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

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

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

 

 

aggregated with the
employees of a Borrower or a Subsidiary of a Borrower under IRC Section 414(o).

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

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

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

“Existing
Lender” means CPI Securities and WAMCO 32.

“Extraordinary
Receipts” means any cash received by Parent or any of its Subsidiaries not
in the ordinary course of business, including (a) foreign, United States, state
or local tax refunds, (b) pension plan reversions, (c) proceeds of insurance
(including key man life insurance and business interruption insurance, but
excluding any casualty insurance), (d) judgments, proceeds of settlements or
other consideration of any kind in connection with any cause of action, (e)
indemnity payments under the Merger Agreement or any other agreement, and (f)
any purchase price adjustment received in connection with any purchase
agreement, including, without limitation, the Merger Agreement.

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

“Fixed
Charges” means, with respect to any fiscal period and with respect to
Parent and its Subsidiaries determined on a consolidated basis in accordance
with GAAP, the sum, without duplication, of (a) Interest Expense accrued during
such period, (b) scheduled principal payments in respect of Indebtedness that
are required to be paid during such period, (c) payments of cash distributions
to the extent permitted under Section 6.10 and (d) all federal, state, and
local income taxes paid during such period.

“Fixed
Charge Coverage Ratio” means, with respect to Parent for any period, the
ratio of (i) EBITDA for such period minus
Capital Expenditures made (to the extent not already incurred in a prior
period) or incurred during such period, to (ii) Fixed Charges for such period.

“Foreign
Subsidiaries” means each of the Subsidiaries of the Parent that is organized
or incorporated under any laws outside of the laws of the United States.

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

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

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

“Governing
Documents” means, with respect to any Person, the certificate or articles
of incorporation, by-laws, or other organizational documents of such Person.

 

 

“Governmental
Authority” means any federal, state, local, or other governmental or
administrative body, instrumentality, board, department, or agency or any
court, tribunal, administrative hearing body, arbitration panel, commission, or
other similar dispute-resolving panel or body.

“Hazardous
Materials” means (a) substances that are defined or listed in, or otherwise
classified pursuant to, any applicable laws or regulations as “hazardous
substances,” “hazardous materials,” “hazardous wastes,” “toxic substances,” or
any other formulation intended to define, list, or classify substances by
reason of deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity, or “EP toxicity”, (b) oil, petroleum,
or petroleum derived substances, natural gas, natural gas liquids, synthetic
gas, drilling fluids, produced waters, and other wastes associated with the
exploration, development, or production of crude oil, natural gas, or
geothermal resources, (c) any flammable substances or explosives or any
radioactive materials, and (d) asbestos in any form or electrical equipment
that contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of 50 parts per million.

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

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

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

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

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

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

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

 

 

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

“Interest
Period” means, with respect to each LIBOR Rate Loan, a period commencing on
the date of the making of such LIBOR Rate Loan (or the continuation of a LIBOR
Rate Loan or the conversion of a Base Rate Loan to a LIBOR Rate Loan) and
ending 1, 2, 3 or 6 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, 3 or 6 months after the date on which the Interest Period
began, as applicable, and (e) Borrowers (or Administrative Borrower on behalf
thereof) may not elect an Interest Period which will end after the Maturity
Date.

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

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

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

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

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

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

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

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

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

 

 

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

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

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

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

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

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

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

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

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

 

 

“LIBOR Rate Margin” means, as of any date of determination:

(a)           For the period from and including the
Closing Date to but excluding the effective date of any determination of the
LIBOR Rate Margin pursuant to clause (b) below, 2.75 percentage points per
annum (the “Initial LIBOR Rate Margin”).

(b)           Thereafter, so long as no Default or
Event of Default has occurred and is continuing, the relevant LIBOR Rate Margin
set forth in the table below that corresponds to the applicable EBITDA of
Parent and its Subsidiaries set forth opposite thereto (as determined in
accordance with clause (c) below).

	
  EBITDA

  	
   

  	
  LIBOR Rate Margin:

  
	
  <$9,000,000

  	
   

  	
  2.75 percentage
  points

  
	
  $9,000,00 to
  $11,500,000

  	
   

  	
  2.50 percentage
  points

  
	
  $11,500,001-$13,500,000

  	
   

  	
  2.25 percentage
  points

  
	
  >$13,500,000

  	
   

  	
  2.00 percentage
  points

  

 

(c)           The LIBOR Rate Margin shall be
determined from time to time pursuant to clause (b) above on the first day of
the month following the date on which Parent delivers to Agent the audited
financial statements and corresponding Compliance Certificate in accordance
with Section 5.3, commencing with the delivery by Parent of the audited
financial statements and corresponding Compliance Certificate for the fiscal
year of Parent ended September 30, 2006. 
In the event that the audited financial statements and corresponding
Compliance Certificate are not provided to Agent in accordance with Section
5.3, the LIBOR Rate Margin shall be set at the Initial LIBOR Rate Margin as
of the first day of the month following the date on which such audited
financial statements and corresponding Compliance Certificate were required to
be delivered until the date on which such audited financial statements and
corresponding Compliance Certificate are delivered (on which date (but not
retroactively), without constituting a waiver of any Default or Event of
Default arising as a result of Parent’s and Borrower’s failure to timely
deliver such audited financial statements and corresponding Compliance
Certificate, the LIBOR Rate Margin shall be set at the relevant LIBOR Rate
Margin set forth in the table above based upon the calculation of the EBITDA of
Parent and its Subsidiaries set forth in the Compliance Certificate delivered
with such audited financial statements).

“Lien”
means any mortgage, deed of trust, pledge, hypothecation, assignment, charge,
deposit arrangement, encumbrance, easement, lien (statutory or other), security
interest, or other security arrangement and any other preference, priority, or
preferential arrangement of any kind or nature whatsoever, including any
conditional sale contract or other title retention agreement, the interest of a
lessor under a Capital Lease and any synthetic or other financing lease having
substantially the same economic effect as any of the foregoing.

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

“Loan
Documents” means the Agreement, the Bank Product Agreements, any Borrowing
Base Certificate, the Cash Management Agreements, the Collateral Assignment of
Merger Agreement, the Control Agreements, the Copyright Security Agreement, the
Fee Letter, the Source Code Escrow Agreement, the Intercompany Subordination
Agreement, the Letters of Credit, the Mortgages, the Patent Security Agreement,
the Security Agreement, the Trademark Security Agreement, any note or notes
executed by a Borrower in connection with the Agreement and payable 

 

 

to a member of the Lender Group,
and any other agreement entered into, now or in the future, by any Borrower or
any of their Subsidiaries and the Lender Group in connection with the
Agreement.

“Loan
Limit” has the meaning specified therefor in Section 2.4(c)(i).

“Limiter
Excess” has the meaning specified therefor in Section 2.4(c)(i).

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

“Material
Contract” means  (a) any contract or
agreement to which a Borrower or Subsidiary of a Borrower is a party, whether
entered into as of the Closing Date or after the Closing Date, if the breach of
any such contract or agreement or the failure of any such contract or agreement
to be in full force and effect would cause the representations and warranties
set forth in Section 4.20 to cease being true and correct or (b) any
contract or agreement to which a Borrower or Subsidiary of a Borrower is a
party, whether entered into as of the Closing Date or after the Closing Date,
if the breach of any such contract or agreement or the failure of any such
contract or agreement to be in full force and effect could be reasonably
expected to result in a Material Adverse Change.

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

“Maximum
Revolver Amount” means $9,000,000.

“Merger
Agreement”  means that certain Merger
Agreement of even date herewith by and among SoftBrands, Inc., SBN Acquisition
Corp., MAI Systems Corporation and the Stockholders’ Representative (as
identified therein).

“Merger
Documents” means the
Merger Agreement and any other documents, instruments and agreements executed
and delivered in connection with the Merger or otherwise relating thereto.

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

“Multiemployer
Plan” has the meaning given to such term in Section 3(37) or Section
4001(a)(3) of ERISA or Section 414(f) of the IRC.

“Net
Cash Proceeds” means:

(a)
with respect to any sale or disposition by a Borrower or a Subsidiary of a
Borrower of property or assets, the amount of cash proceeds received (directly
or indirectly) from time to time (whether as initial consideration or through
the payment of deferred consideration) by or on behalf of a Borrower or a
Subsidiary of a Borrower, in connection therewith after deducting therefrom
only (i) the amount of any Indebtedness secured by any Permitted Lien on any
asset (other than (A) Indebtedness owing to Agent or any Lender under the Agreement
or the other Loan Documents and (B) Indebtedness assumed by the purchaser of
such asset) which is required to be, and is, repaid in connection with such
sale or disposition, (ii) reasonable fees, commissions, and expenses related
thereto and required to be paid by a Borrower or such Subsidiary of a Borrower
in connection with such sale or disposition and (iii) taxes paid or payable to
any taxing authorities by a Borrower or such

 

 

Subsidiary of a Borrower in
connection with such sale or disposition, in each case to the extent, but only
to the extent, that the amounts so deducted are, at the time of receipt of such
cash, actually paid or payable to a Person that is not an Affiliate of a
Borrower or a Subsidiary of a Borrower, and are properly attributable to such
transaction; and

(b)
with respect to the issuance or incurrence of any Indebtedness by a Borrower or
a Subsidiary of a Borrower, or the issuance by a Borrower or a Subsidiary of a
Borrower of any shares of its Stock, the aggregate amount of cash received
(directly or indirectly) from time to time (whether as initial consideration or
through the payment or disposition of deferred consideration) by or on behalf
of a Borrower or such Subsidiary in connection with such issuance or
incurrence, after deducting therefrom only (i) reasonable fees,
commissions, and expenses related thereto and required to be paid by a Borrower
or such Subsidiary in connection with such issuance or incurrence, (ii) taxes
paid or payable to any taxing authorities by a Borrower or such Subsidiary in
connection with such issuance or incurrence, in each case to the extent, but
only to the extent, that the amounts so deducted are, at the time of receipt of
such cash, actually paid or payable to a Person that is not an Affiliate of a
Borrower or Subsidiary of a Borrower, and are properly attributable to such
transaction.

“Net
Mark-to-Market Exposure” of a Person means, as of any date of
determination, the excess (if any) of all unrealized losses over all unrealized
profits of such Person arising from Hedge Agreements.  “Unrealized losses” means the fair market
value of the cost to such Person of replacing the transaction under any Hedge
Agreement as of the date of determination (assuming such transaction were to be
terminated as of that date), and “unrealized profits” means the fair market
value of the gain to such Person of replacing such transaction as of the date
of determination (assuming such transaction were to be terminated as of that
date), all in accordance with GAAP.

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

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

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

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

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

 

 

 

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

“Permitted
Acquisition” means (i) any Acquisition expressly permitted by the Agent in
its sole and absolute discretion and (ii) any Acquisition by any Borrower so long
as:

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

(b)           the sum of Excess Availability plus
Qualified Cash is not less than $5,000,000, and would not be less than such
figure from the
consummation of such proposed Acquisition,

(c)           the business being acquired, or the
Person whose Stock is being acquired, is engaged in the type of business
engaged in by such Borrower or U.S. Subsidiary as of the Closing Date,

(d)
          after giving effect to such
proposed Acquisition, neither Parent nor any Subsidiary shall have any
Indebtedness other than as permitted under Section 6.1,

(e)           Parent has provided Agent with a
certification executed by its chief financial officer, supported by detailed
calculations, that on a pro forma
basis, created by adding the historical combined financial statements of Parent
(including the combined financial statements of any other Person or assets that
were the subject of a prior Permitted Acquisition during the relevant period)
to the historical consolidated financial statements of the Person to be
acquired (or the historical financial statements related to the assets to be
acquired) pursuant to the proposed Acquisition (adjusted to eliminate expense items
that would not have been incurred, if the combination had been accomplished at
the beginning of the relevant period, such eliminations to be reasonably
acceptable to Agent), Parent and its Subsidiaries would have been in compliance
with the financial covenants in Section 6.16 (i) for the 12 month period
ended immediately prior to the proposed date of consummation of such proposed
Acquisition, and (ii) for the 12 month period ended one year after the proposed
date of consummation of such proposed Acquisition, together with copies of all
such historical financial statements of the Person or assets being acquired,

(f)            the historical consolidated
financial statements of the Person to be acquired or related to the assets to
be acquired pursuant to the proposed acquisition shall show positive EBITDA on
a trailing twelve-month basis for the 12 consecutive month period most recently
ended on or prior to the date of the proposed Acquisition,

(g)           Parent has provided Agent with
forecasted balance sheets, profit and loss statements, and cash flow statements
of the Person to be acquired, all prepared on a basis consistent with such
Person’s historical financial statements, together with appropriate supporting
details and a statement of underlying assumptions for the 2 year period
following the date of the proposed Acquisition (on a year by year basis, and
for the 1 year period following the date of the proposed Acquisition, on a
month by month basis), in form and substance (including as to scope and
underlying assumptions) reasonably satisfactory to Agent,

(h)           Parent has provided Agent with
written notice of the proposed Acquisition not less than 30 days prior to the
anticipated closing date of the proposed Acquisition together with such
documentation that Agent may reasonably require demonstrating that after 

 

 

giving effect to the
proposed Acquisition, Parent and its Subsidiaries (individually and taken as a
whole) could not reasonably be expected to suffer a Material Adverse Change as
a result of the proposed Acquisition,

(i)            the subject assets or Stock, as
applicable, are being acquired directly by a Borrower,

(j)            in the case of an asset Acquisition,
the relevant Borrower, as applicable, shall have executed and delivered or
authorized, as applicable, any and all documentation reasonably requested by
the Agent in order to include the newly acquired assets within the collateral
hypothecated under the Loan Documents,

(k)           in the case of a Stock acquisition,
the relevant Borrower shall have (i) executed and delivered a pledge agreement
respecting the Stock being acquired and shall have delivered to Agent
possession of any original Stock certificates and stock powers (endorsed in
blank) respecting all of the issued and outstanding shares of Stock of such
acquired Person, and (ii) caused such acquired Person to execute and deliver a
joinder to the Credit Agreement and Security Agreement (in form satisfactory to
Agent), together with any and all financing statements and other documentation
reasonably requested by Agent, to cause such acquired Person to be obligated
with respect to the Obligations and to include the assets of the acquired
Person within the collateral hypothecated under the Loan Documents,

(l)            the assets being acquired are
located within the United States, and the Person whose Stock is being acquired
is organized in a jurisdiction located within the United States,

(m)          the consideration paid in connection
with such proposed Acquisition consists of cash, Permitted Indebtedness and/or
common Stock of Parent, and

(n)           the aggregate consideration paid in
connection with all Acquisitions consummated in any fiscal year does not exceed
$10,000,000, and the aggregate consideration paid in connection with all
Acquisitions consummated during the term of this Agreement does not exceed
$15,000,000.

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

“Permitted
Dispositions” means (a) sales or other dispositions of Equipment that is
substantially worn, damaged, or obsolete in the ordinary course of business,
(b) sales of Inventory to buyers in the ordinary course of business, (c) the
use or transfer of money or Cash Equivalents in a manner that is not prohibited
by the terms of the Agreement or the other Loan Documents, (d) the licensing,
on a non-exclusive basis, of patents, trademarks, copyrights, and other
intellectual property rights in the ordinary course of business, (e)
dispositions of assets in connection with transactions permitted under Sections
6.3, 6.12 and 6.13, (f) sales or other dispositions of other assets
(including pursuant to a sale and leaseback transaction) so long as such assets
sold or disposed by Borrowers and their Subsidiaries in any fiscal year do not
exceed, $500,000 in the aggregate, and (g) the sale or discount without
recourse of Accounts arising in the ordinary course of business in connection
with the compromise or collection thereof in an aggregate amount in any fiscal
year does not exceed $250,000.

“Permitted
Holder” means the Person identified on Schedule P-1.

 

 

“Permitted Investments”
means (a) Investments in cash and Cash Equivalents; (b) Investments in
negotiable instruments for collection; (c) advances made in connection with
purchases of goods or services in the ordinary course of business; (d)
Investments received in settlement of amounts due to a Borrower or any
Subsidiary of a Borrower effected in the ordinary course of business or owing
to a Borrower or any Subsidiary of a Borrower as a result of Insolvency
Proceedings involving an Account Debtor or upon the foreclosure or enforcement
of any Lien in favor of a Borrower or any Subsidiary of a Borrower; (e)
Permitted Acquisitions; (f) Investments by Subsidiaries other than U.S.
Subsidiaries in Securities Accounts, Deposit Accounts or other similar
investments outside the United States so long as the aggregate amount of such
Investments outside the United States does not constitute more than (1) 75% of
all Investments by Parent and its Subsidiaries from the period commencing on
the Closing Date and ending on December 31, 2006 and (2) 50% of all Investments
by Parent and its Subsidiaries for any period on or after January 1, 2007
(excluding from such percentage any Investments held in China) and 35% of all
Investments by Parent and its Subsidiaries for any period on or after January
1, 2007 (including in such percentage any Investments held in China) and; (g)
Investments identified on Schedule P-2 to the Agreement; (h) Investments
by Borrowers in the Stock of their Subsidiaries; (i) loans, advances or capital
contributions made by any Borrower to any Subsidiary and made by any Subsidiary
to any Borrower or any other Subsidiary in an aggregate amount not to exceed
$2,500,000; (j) Guarantees and other Investments constituting Indebtedness
permitted by Section 6.1; (k) promissory notes acquired in connection
with dispositions of assets permitted under Section 6.4; (l) loans and
advances to employees of Borrowers and their Subsidiaries in the ordinary course
of business generally consistent with past practice; (m) Accounts and bank
deposits made in the ordinary course of business subject in all cases to
Control Agreements; (n) Permitted Acquisitions; (o) other Investments by
Borrowers and their Subsidiaries in or to Persons other than their Subsidiaries
in an aggregate amount not to exceed $500,000, and (p) the purchase of
Indebtedness as permitted in Section 6.7; provided such Indebtedness is
promptly retired.

“Permitted
Liens” means (a) Liens held by Agent to secure the Obligations; (b) Liens
for unpaid taxes, assessments, or other governmental charges or levies that
either (i) are not yet delinquent, or (ii) do not have priority over the Agent’s
Liens and the underlying taxes, assessments, or charges or levies are the
subject of Permitted Protests; (c) judgment Liens that do not constitute an
Event of Default under Section 7.7 of the Agreement; (d) Liens set forth
on Schedule P-3, provided that any such Lien only secures the
Indebtedness that it secures on the Closing Date and any Refinancing
Indebtedness in respect thereof; (e) the interests of lessors under operating
leases; (f) purchase money Liens or the interests of lessors under Capital
Leases to the extent that such Liens or interests secure Permitted Purchase
Money Indebtedness and so long as (i) such Lien attaches only to the asset
purchased or acquired and the proceeds thereof, and (ii) such Lien only secures
the Indebtedness that was incurred to acquire the asset purchased or acquired
or any Refinancing Indebtedness in respect thereof; (g) Liens arising by
operation of law in favor of warehousemen, landlords, carriers, mechanics,
materialmen, laborers, or suppliers, incurred in the ordinary course of
business and not in connection with the borrowing of money, and which Liens
either (i) are for sums not yet delinquent, or (ii) are the subject of
Permitted Protests; (h) Liens on amounts deposited in connection with obtaining
worker’s compensation or other unemployment insurance; (i) Liens on amounts deposited
in connection with the making or entering into of bids, tenders, or leases in
the ordinary course of business and not in connection with the borrowing of
money; (j) Liens on amounts deposited as security for surety or appeal bonds in
connection with obtaining such bonds in the ordinary course of business; (k)
with respect to any Real Property, easements, rights of way, and zoning
restrictions that do not materially interfere with or impair the use or
operation thereof; (l) Liens securing Indebtedness incurred in connection with
Permitted Acquisitions to the extent permitted under Section 6.1; (m) 

 

 

licenses, leases or
subleases granted to other Persons not interfering in any material respect with
the business of Borrowers or any of their Subsidiaries; (n) banker’s Liens,
rights of setoff and similar Liens incurred on deposits made in the ordinary
course of business; (o) any interest or title of a lessor under any operating
lease; (p) customary restrictions on transfers of assets contained in agreements
related to the sale by Borrower or any of Borrower’s Subsidiaries of such
assets pending their sale, provided that such restrictions apply only to the
assets to be sold and such sale is permitted under this Agreement; and (q)
other Liens securing Indebtedness not in excess of $100,000 at any time
outstanding so long as such Liens are subordinate to the Agent’s Liens.

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

“Permitted
Purchase Money Indebtedness” means, as of any date of determination,
Purchase Money Indebtedness incurred after the Closing Date in an aggregate
principal amount outstanding at any one time not in excess of $3,000,000.

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

“PBGC” means the Pension Benefit Guaranty Corporation established under
Title IV of ERISA or any other governmental agency, department or
instrumentality succeeding to the functions of said corporation.

“Pension
Plan” means any employee pension benefit plan as defined in Section 3(2) of
ERISA (including a Multiemployer Plan) and to which the Borrower or any ERISA
Affiliate may have any liability including by reason of having been a
substantial employer within the meaning of Section 4063 of ERISA at any time
within the preceding five (5) years or by reason of being deemed to be a
contributing sponsor under Section 4069 of ERISA.

“Plan”
has the meaning given to such term in Section 3(3) of ERISA.

“Prohibited
Transaction” means any transaction described in Section 406 of ERISA which
is not exempt by reason of Section 408 of ERISA, and any transaction described
in Section 4975(c) of the IRC which is not exempt by reason of Section
4975(c)(2) or Section 4975(d) of the IRC.

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

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

 

 

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

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

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

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

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

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

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

“Qualified
Plan” means any Pension Plan which is intended to be qualified under
Section 401(a) of the IRC and which a Borrower or any ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.

 

 

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

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

“Recurring
Revenues” means, with respect to any period, the total support and
maintenance revenues of Parent and its Subsidiaries for such period, as
reflected on Parent’s and its Subsidiaries’ financial statements, recognized in
accordance with GAAP.

“Remedy
Event” means a Remedy Event as defined in either (i) that certain Series C
Convertible Preferred Stock and Warrant Purchase Agreement dated as of August
17, 2005 by and among the Parent, and ABRY Mezzanine Partners, L.P. and Capital
Resource Partners IV, L.P. as Purchasers, as amended by that certain First
Amendment, Waiver and Consent to Series C Convertible Preferred Stock and
Warrant Purchase Agreement, dated as of August 14, 2006 among the Parent and
Such Purchasers, or (ii) a Remedy Event as defined in that certain Series D
Convertible Preferred Stock and Warrant Purchase Agreement dated as of August
14, 2006 by and among the Parent, and ABRY Mezzanine Partners, L.P. and Capital
Resource Partners IV, L.P.

“Reportable
Event” has the meaning given to such term in Section 4043 of ERISA or the
regulations thereunder, excluding any event for which the PBGC has by
regulation waived the 30 day notice requirement, or a withdrawal from a plan
described in Section 4063 of ERISA.

“Refinancing
Indebtedness” means refinancings, renewals, or extensions of Indebtedness
so long as: (a) the terms and conditions of such refinancings, renewals,
or extensions do not, in Agent’s reasonable judgment, materially impair the
prospects of repayment of the Obligations by Borrowers or materially impair
Borrowers’ creditworthiness, (b) such refinancings, renewals, or extensions do
not result in an increase in the principal amount of the Indebtedness so
refinanced, renewed, or extended, (c) such refinancings, renewals, or
extensions do not result in an increase in the interest rate as stated to be
computed with respect to the Indebtedness so refinanced, renewed, or extended,
(d) such refinancings, renewals, or extensions do not result in a shortening of
the average weighted maturity of the Indebtedness so refinanced, renewed, or
extended, nor are they on terms or conditions that, taken as a whole, are
materially more burdensome or restrictive to Borrowers, (e) if the Indebtedness
that is refinanced, renewed, or extended was subordinated in right of payment
to the Obligations, then the terms and conditions of the refinancing, renewal,
or extension must include subordination terms and conditions that are at least
as favorable to the Lender Group as those that were applicable to the
refinanced, renewed, or extended Indebtedness, and (f) the Indebtedness that is
refinanced, renewed, or extended is not recourse to any Person that is liable
on account of the Obligations other than those Persons which were obligated
with respect to the Indebtedness that was refinanced, renewed, or extended.

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

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

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

 

 

“Reportable
Event” has the meaning given to such term in Section 4043 of ERISA or the
regulations thereunder, excluding any event for which the PBGC has by
regulation waived the 30 day notice requirement, or a withdrawal from a plan
described in Section 4063 of ERISA.

“Required
Availability” means that the sum of (a) Excess Availability, plus (b) Qualified Cash exceeds
$9,000,000.

“Required
Lenders” means, at any time, Lenders whose aggregate Pro Rata Shares
(calculated under clause (d) of the definition of Pro Rata Shares) exceed 50%.

“Required
Library” means copyrights registered with the United States Copyright
Office that comprise not less than 80% of the total amount of software and
maintenance revenues of the Parent and its Subsidiaries on a consolidated
basis.

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

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

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

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

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

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

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

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

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

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

 

 

“Source
Code Escrow Agreement” means that certain Source Code Escrow Agreement, in
form and substance reasonably satisfactory to Agent, among Agent, Borrowers and
an escrow agent satisfactory to Agent on terms and conditions reasonably
satisfactory to Agent.

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

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

“Subsidiary”
of a Person means a corporation, partnership, limited liability company, or
other entity in which that Person directly or indirectly owns or controls the
shares of Stock having ordinary voting power to elect a majority of the board
of directors (or appoint other comparable managers) of such corporation,
partnership, limited liability company, or other entity, including, without
limitation, each of the Parent’s Foreign Subsidiaries and U.S. Subsidiaries.

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

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

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

“Term
Loan” has the meaning specified therefor in Section 2.2.

“Term
Loan Amount” means $21,000,000.

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

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

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

“Triggering
Event” means the occurrence and continuance of either (i) an Event of
Default; and/or (ii) the sum of Excess Availability plus Qualified Cash is less
than $2,500,000.

“TTM
Recurring Revenues” means, as of any date of determination, Recurring
Revenues of Parent and its Subsidiaries for the most recently completed 12
month period for which Borrowers have delivered financial statements to Lenders
in accordance with Section 5.3, determined on a consolidated basis in
accordance with GAAP.

 

 

“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 a Borrower.

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

“Unfunded
Pension Liability” means, at any time, the aggregate amount, if any, of the
sum of (i) the amount by which the present value of all accrued benefits under
each Pension Plan subject to Title IV of ERISA exceeds the fair market value of
all assets of such Pension Plan subject to Title IV of ERISA allocable to such
benefits in accordance with Title IV of ERISA, all determined as of the most
recent valuation date for each such Title IV of ERISA using the actuarial
assumptions in effect under such Pension Plan subject to Title IV of ERISA and
(ii) for a period of five (5) years following a transaction reasonably likely
to be covered by Section 4069 of ERISA, the liabilities (whether or not
accrued) that could be avoided by Borrower or any ERISA Affiliate as a result
of such transaction.

“United
States” means the United States of America.

“U.S.
Subsidiaries” means any Subsidiary of the Parent that is not a Foreign
Subsidiary.

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

“Welfare
Plan” has the meaning given to such term in Section 3(1) of ERISA.

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

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

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00109-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00109-of-00352.parquet"}]]