Document:

Exhibit-10.49

 

DATED: 9th SEPTEMBER 2002

 

(1)           PEREGRINE SYSTEMS OPERATIONS LIMITED (as “Lender”)

 

(2)           PEREGRINE SYSTEMS LIMITED (as “Borrower”)

 

FUNDING AGREEMENT

 

NICHOLSON GRAHAM & JONES

[ILLEGIBLE]

 

 

THIS DEED is made on the 9th day of September 2002

 

PARTIES:-

 

(1)           PEREGRINE SYSTEMS OPERATIONS LIMITED, a
company incorporated in the Republic of Ireland (Registered Number 324176),
whose registered office is at Unit 3094, National Digital Park, Citywest,
Dublin 24 (the “Lender”); and

 

(2)           PEREGRINE SYSTEMS LIMITED, a company incorporated in England and Wales
(Registered Number 2563273) whose registered office is at Peregrine House,
26-28 Paradise Road, Richmond, Surrey, TW9 1SF (the “Borrower”).

 

WHEREAS:

 

(A)          The Lender is the holding company of the Borrower.

 

(B)           The Lender has agreed to make available and
the Borrower has agreed to accept a working capital facility.

 

(C)           This Deed sets out the terms and conditions
of the working capital facility.

 

THIS DEED WITNESSES as follows:-

 

1.             DEFINITIONS

 

1.1           The following words and expressions shall
have the following meanings except where the context otherwise admits or
requires:

 

	
  “Advance”

  	
   

  	
  means each advance made or
  to be made under The Facility;

  
	
   

  	
   

  	
   

  
	
  “Business
  Day”

  	
   

  	
  means a day (other than a
  Saturday or Sunday) on which banks and financial markets are open for
  business in London and Dublin;

  
	
   

  	
   

  	
   

  
	
  “Commencement
  of Insolvency”

  	
   

  	
  means (a) the appointment
  of a receiver, and manager or administrative receiver over all or any parts
  of the property of the Borrower; (b) the making of an administration or
  winding up order in relation to the Borrower or of an order which subjects
  the Borrower to any procedure under the insolvency law of a country outside
  Great Britain; (c) the presentation by the Borrower or its senior management
  of

  

 

 

	
   

  	
   

  	
  proposals to the
  Borrower’s creditors, or to its principal financial creditors, for any
  re-scheduling, re-financing or re-structuring of all or a substantial part of
  the Borrower’s indebtedness;

  
	
   

  	
   

  	
   

  
	
  “Facility”

  	
   

  	
  means subject to termination
  under clause 7 below, the loan facility granted by the Lender to the Borrower
  under this Deed;

  
	
   

  	
   

  	
   

  
	
  “Funding
  Facility Deed”

  	
   

  	
  means the funding facility
  deed between Peregrine Systems Inc and the Lender in the form annexed to this
  Deed at Appendix 1;

  
	
   

  	
   

  	
   

  
	
  “Loan”

  	
   

  	
  means the aggregate
  principal amount of the Advances from time to time outstanding under this
  Deed;

  
	
   

  	
   

  	
   

  
	
  “Notice
  of Drawing”

  	
   

  	
  means a Notice of Drawing
  requesting an Advance in the form annexed to this Deed at Appendix 2, duly
  completed and signed by two directors on behalf of the Borrower;

  
	
   

  	
   

  	
   

  
	
  “Repayment
  Date”

  	
   

  	
  means the date specified
  in Clause 6 or such later date upon which sums become payable to the Lender
  in accordance with Clause 8;

  
	
   

  	
   

  	
   

  
	
  “Sterling
  and £”

  	
   

  	
  means the lawful currency
  for the time being of the United Kingdom; and

  
	
   

  	
   

  	
   

  
	
  “Termination”

  	
   

  	
  means the occurrence of
  each or any of the events set out in clause 7 below.

  

 

1.2           Further Definitions

 

(a)           Any reference in this Deed to:-

 

	
  “Lender”

  	
   

  	
  includes its successors
  immediate or derivative;

  
	
   

  	
   

  	
   

  
	
  “month”

  	
   

  	
  or a period of one or more
  “months” is a reference to a period which ends on the day (“the corresponding
  day”) in the relevant calendar month numerically corresponding to the day of
  the calendar month on which the period started or, if there is no

  

 

 

	
   

  	
   

  	
  corresponding day, a
  period which ends on the last day of the relevant calendar month;

  
	
   

  	
   

  	
   

  
	
  “persons”

  	
   

  	
  includes individuals,
  bodies corporate, unincorporated associations, partnerships, governments,
  states and state agencies (whether or not having separate legal personality);

  
	
   

  	
   

  	
   

  
	
  “tax(es)”

  	
   

  	
  includes any tax levy,
  import duty, charge, fee, deduction or withholding of any nature and however
  called, levied, collected, withheld or assessed by any person;

  

 

1.3           The words and expressions defined by the
Companies Act 1985 and the Insolvency Act 1986 shall have the same meaning
herein unless the context otherwise admits or requires:

 

2.             INTERPRETATION

 

In
this Deed references to the deed or document are to such deed or document as
from time to time amended, novated, supplemented or replaced by a document
having a similar effect, a  reference
to any statute includes that statute as amended, extended or re-enacted and to
any bye-law, regulation, order, instrument or subordinate legislation made under
the relevant statute, the singular includes the plural and vice versa,
references to clauses and sub-clauses and to schedules are to the clauses and
sub-clauses of and to the schedules to this Agreement, the word “including”
will not limit the generality of any preceding words, the words “other” and
“otherwise” will not be limited by any words preceding them, headings to
clauses and sub-clauses are to be ignored in construing this Deed and
references to time are to London time unless otherwise specified.

 

3.             AMOUNT AND PURPOSE

 

3.1           Subject to clause 3.3 the Borrower shall be
entitled to draw down under this Facility such amounts from time to time as
shall be necessary to enable it to pay its debts as they fall due.

 

3.2           Sums advanced under this Facility may only be
utilised by the Borrower for the Borrower’s working capital purposes and
reorganisation costs.

 

3.3           Any sum in excess of US$1 million shall be
subject to the prior approval in writing of the Chief Financial Officer of
Peregrine Systems Inc such approval not to be

 

 

unreasonably
withheld or delayed in the case of expenditure reasonably and properly required
for the purpose of the business of the Borrower.

 

4.             FACILITY

 

4.1           Availability

 

Subject
to the terms of this Deed the Facility shall be available to the Borrower for
drawing until the Repayment Date.

 

4.2           Advance of the Facility

 

A
Notice of Drawing requesting drawdown of any Advance under the Facility must be
received by the Lender no later than 10.00 a.m. on the second Business Day
before the date on which the Advance is required. The Notice of Drawing must be
accompanied by a reconciliation of the Account and a cash flow (the “Cash Flow”) covering a period of not less
than 14 days commencing on the date of the Notice of Drawing. The Notice of
Drawing must specify:-

 

(a)           the amount required;

 

(b)           the purpose for which the Advance is required in so far as the same is
not clear from the Cash Flow;

 

(c)           the date on which the Advance is required, which must be a Business
Day; and

 

(d)           the name and address of the bank and the
title and number of the account to which the Advance is to be remitted.

 

4.3           Conditions precedent

 

The
Lender’s obligation to make the Facility available will only be effective when
all of the following conditions precedent have been satisfied:-

 

(a)           the Lender and Peregrine Systems Inc have
executed the Funding Facility Deed;

 

(b)           this Deed is executed by the Borrower;

 

(c)           the Borrower has provided the first cash
flow forecast to the Lender; and

 

(d)           the Lender has confirmed its agreement to
the first cash flow forecast.

 

 

5.             FINANCIAL INFORMATION

 

The
Lender shall provide to the Borrower copies of the Lender’s monthly management
accounts together with a monthly cash flow forecast within 14 days of the last
day of each calendar month together with any information provided to the Lender
under the Funding Facility Deed to enable the Borrower to satisfy itself that
the Lender will be able to continue to make the Facility available to the
Borrower.

 

6.             REPAYMENT

 

6.1           Subject as provided in Clause 8 the Borrower
shall repay the Loan within 12 months of Termination or such other period as
the parties shall agree.

 

7.             TERMINATION

 

7.1           Termination will occur or will be deemed to occur in the following
events:-

 

(a)           the Lender declaring the Facility is
cancelled, provided that the Lender provides the Borrower with ninety days
written notice of such cancellation and further provided that the Facility
shall not be cancelled prior to 31 October 2003;

 

(b)           the breach or termination by Peregrine
Systems, Inc of the Funding Facility Deed provided that this Deed shall not
terminate prior to the exhaustion of all and any of the Lender’s rights of
action against Peregrine Systems, Inc and/or the expiry of a 90 day period
following the execution of an assignment by the Lender to the Borrower in
accordance with Clauses 10.1(a) and (b).

 

(c)           any warranty, representation or statement
made in this Deed proves to have been incorrect or misleading in any material
respect and is not remedied to the satisfaction of the other party within
twenty-eight days of notification by the other party;

 

(d)           the Lender or the Borrower fails duly to
perform or comply with any of the obligations expressed in this Deed;

 

(e)           the Borrower commences negotiations with all
or a material part of its creditors with a view to the general re-adjustment or
re-scheduling of its indebtedness or makes a general assignment for the benefit
of or a composition with its creditors other than with the prior written
consent of the Lender provided that such consent shall not be unreasonably
withheld;

 

 

(f)            any creditor of the Borrower takes any
corporate action or other steps are taken or legal proceedings are started for
the winding-up, dissolution or re-organisation or for the appointment of a
receiver, administrator, administrative receiver, trustee or similar officer of
the Borrower or of all or a material part of the Borrower’s revenues and
assets, other than in each case with the prior written consent of the Lender
provided that such consent shall not be unreasonably withheld;

 

(g)           any judgment or any other judicial
determination of liability is issued against the Borrower or any of its
subsidiaries or any distress, execution, diligence, attachment or other process
affects any asset of the Borrower in respect of a liability in excess of
£50,000 or its equivalent and is not discharged within seven days thereafter.

 

8.             SUBORDINATION

 

The
Lender agrees that following the Commencement of Insolvency of the Borrower it
shall take no step or action for the repayment of the Facility or any part of
it until such time that all other creditors of the of the Borrower have been
paid in full and the Lender further agrees that any sums received by it in
respect of the Facility after such date shall be held by it on trust for such
other creditors of the Borrower so that the Lender shall be bound to pay any
such sums so received to such person or persons who may be responsible for
arranging for the payment of the Borrower’s creditors.

 

9.             PAYMENTS

 

9.1           All payments to be made under this Deed shall
be made in Pounds Sterling and in immediately available funds.

 

9.2           All payments to be made under this Deed shall
be made without set-off or counterclaim and free and clear of and without
deduction of any taxes, levies, duties, charges, fees, deductions,
withholdings, restrictions or conditions of any description.  If the Lender or Borrower is required at any
time by any applicable law to make any such deduction from any payment, the sum
due from the Borrower or the Lender in respect of such payment shall be
increased by such an amount as will result, notwithstanding the making of such
deduction, in the Lender’s or the Borrower’s receipt on the due date for
payment of each amount of a net sum equal to the sum that the Lender or the
Borrower would have received had no such deduction been required to be made.

 

10.           REPRESENTATIONS AND
WARRANTIES

 

10.1         The Lender represents and warrants to the Borrower that:-

 

 

(a)           it has full power to enter into and perform
its obligations under this Deed (which has been duly accepted by the Borrower),
and that this Deed is valid, enforceable and binding upon it in accordance with
its terms, and that it has obtained and will maintain in effect all necessary
corporate authorisations and all other necessary consents; licences and
authorities;

 

(b)           Peregrine Systems Inc has executed the
Funding Facility Deed in which Peregrine Systems Inc has represented and
warranted to the Lender that Peregrine Systems Inc has full power to enter into
and perform its obligations under the Funding Facility Deed and that the
Funding Facility Deed is valid and enforceable and binding upon it in
accordance with its terms, and that it has obtained and will maintain in effect
all necessary corporate authorisations and all other necessary consents,
licences and authorities.

 

(c)           In so far as it is necessary for the Borrower
to enforce the terms of the representation referred to and described in clause
10.l(b) above the Lender agrees to execute an assignment of the benefit of the
representation and warranty to the Borrower in consideration of the payment of
the sum of £1 from the Borrower to the Lender receipt of which is hereby
acknowledged by the Lender.

 

(d)           the execution, delivery and performance by
the Lender of this Deed and the events contemplated by this Deed; will not
violate:-

 

(i)            its memorandum and articles of association;

 

(ii)           any provision of any applicable law,
regulation or decree to which it is subject;

 

(iii)          any provision of any contract, banking
facility or arrangement to which it is a party or any other obligations on the
Lender;

 

or
result in the execution or imposition of any lien, charge or encumbrance on the
assets of the Lender; and

 

(e)           the Lender is not in default under any
agreement (save as disclosed in writing to the Borrower) to which it is a party
which would have a material adverse effect on its business and financial
condition.

 

10.2         The Borrower represents and warrants to the Lender that:-

 

(a)           it has full power to enter into and perform
its obligations under this Deed (which has been duly accepted by the Lender),
and that this Deed is valid,

 

 

 

enforceable and binding upon it in accordance with its terms, and that
it has obtained and will maintain in effect all necessary corporate
authorisations and all other necessary consents; licences and authorities;

 

(b)           the execution, delivery and performance by
the Borrower of this Deed and the events contemplated by this Deed; will not
violate:-

 

(i)            its memorandum and articles of association;

 

(ii)           any provision of any applicable law,
regulation or decree to which it is subject;

 

(iii)          any provision of any contract, banking
facility or arrangement to which it is a party or any other obligations on the
Borrower;

 

or result in the execution or imposition of any lien, charge or
encumbrance on the assets of the Borrower; and

 

(c)           the Borrower is not in default under any
agreement (save as disclosed in writing to the Lender) to which it is a party
which would have a material adverse effect on its business and financial
condition.

 

10.3         The warranties given by the Lender and the
Borrower herein shall be continuing and deemed to be repeated on each date on
which any payment is made under this Deed and on the making of any request for
an Advance by reference to the facts existing on each such date.

 

11.           ASSIGNMENT AND TRANSFERS

 

12.           The Borrower may not assign or transfer any
of its rights or obligations under this Deed without the written consent of the
Lender.

 

12.1         Lender

 

The
Lender may at any time assign all or any part of the Lender’s rights,
obligations and interests under this Agreement to any person.

 

12.2         Disclosure of information

 

The Lender may disclose to a potential assignee (or any other person
with whom the Lender is contemplating entering into contractual relations with
respect to this Agreement) such information about the Borrower as the Lender
considers material to a potential assignee.

 

 

13.           MISCELLANEOUS

 

13.1         Time of the essence

 

Time will be of the essence of the performance of the obligations of
the Borrower under or in connection with this Deed.

 

13.2         Severability

 

Each of the provisions of this Deed is severable and distinct from the
others and if at any time one or more of such provisions is invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions of this Deed will not in any way be affected or impaired.

 

13.3         Rights cumulative

 

All rights of the Lender are cumulative and any express right conferred
on the Lender or the Borrower under this Deed may be exercised without
prejudicing or being limited by any other express or implied right of the
Lender.

 

14            LAW AND JURISDICTION

 

14.1         This Deed is governed by
English law.

 

14.2         Courts of England and
Wales

 

The Courts of England and Wales will have jurisdiction to settle any
disputes which may arise out of or in connection with this Deed.

 

14.3         No Exclusion or
Limitation of Rights

 

Nothing in this Clause 14 excludes or limits any right which the Lender
or the Borrower may have (whether under the law or any country, an
international convention or otherwise) with regard to the bringing of
proceedings, the service of process, the recognition or enforcement of a
judgment or any similar or related matter in any jurisdiction.

 

15.           NOTICES

 

15.1         Each communication to be under this Deed shall
be made in writing and may be made by letter or facsimile transmission.

 

 

15.2         Any communication to be made or delivered by
one party to the other shall be made or delivered to that other party at its
address set out at the beginning of this Deed or to such other address as may
from time to time be notified in writing by one party to the other in
accordance with this clause.

 

15.3         Any communication made or delivered for any
purpose of this Deed shall be deemed made or delivered when dispatched in the
case of a facsimile or in the case of a letter when left at the relevant
address or two Business Days after dispatch by prepaid first class post in an
envelope addressed to the relevant address.

 

16.           THIRD PARTIES

 

Except
in respect of the obligations of the Lender contained in Clause 8 a person who
is not a party to this Deed shall have no right under the Contracts (Rights of
Third Parties) Act 1999 to enforce any term of this Deed.

 

17.           EXECUTION

 

The
parties agreed and intend this Deed should be executed in counterparts.

 

AS WITNESS the hands of the duly authorised representatives of the parties the
day and year first above written.

 

 

	
  EXECUTED
  as a DEED by

  	
  )

  	
   

  
	
  PEREGRINE
  SYSTEMS OPERATIONS 

  	
  )

  	
   

  
	
  LIMITED in the presence of:

  	
  )

  	
  /s/
  [ILLEGIBLE]

  	
   

  
	
   

  	
   

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/
  [ILLEGIBLE]

  	
   

  
	
   

  	
   

  	
  Director/Secretary

  

 

	
  EXECUTED
  as a DEED by 

  	
  )

  	
   

  
	
  PEREGRINE
  SYSTEMS LIMITED

  	
  )

  	
   

  
	
  in the presence of:

  	
  )

  	
  /s/
  [ILLEGIBLE]

  	
   

  
	
   

  	
   

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/
  [ILLEGIBLE]

  	
   

  
	
   

  	
   

  	
  Director/SecretaryExhibit 10.50

 

DEBTOR IN POSSESSION CREDIT AGREEMENT

 

dated as of

 

September 24, 2002

 

by and among

 

PEREGRINE SYSTEMS, INC.,

a Delaware corporation and

a Chapter 11 Debtor-in-Possession, and

PEREGRINE REMEDY, INC., a Delaware corporation and

a Chapter 11 Debtor-in-Possession (collectively, “Borrowers”)

 

and

 

and the Subsidiaries of Borrowers named herein (“Guarantors”)

 

and

 

BMC SOFTWARE, INC.,

a Delaware corporation (“Lender”)

 

 

TABLE OF CONTENTS

 

	
  ARTICLE
  1

  DIP
  FACILITY

  
	
   

  	
   

  	
   

  
	
  Section 1.1

  	
  Post-Petition Loans

  	
   

  
	
   

  	
  ARTICLE 2

  INTEREST, FEES AND CHARGES

  	
   

  
	
  Section 2.1

  	
  Interest

  	
   

  
	
  Section 2.2

  	
  Fees

  	
   

  
	
  Section 2.3

  	
  Computation of Interest and Fees

  	
   

  
	
  Section 2.4

  	
  Reimbursement Obligations

  	
   

  
	
  Section 2.5

  	
  Bank Charges

  	
   

  
	
  Section 2.6

  	
  Funding Losses

  	
   

  
	
  Section 2.7

  	
  Maximum Interest

  	
   

  
	
   

  	
  ARTICLE 3

  LOAN ADMINISTRATION

  	
   

  
	
  Section 3.1

  	
  Manner of Borrowing and Funding
  Post-Petition Loans

  	
   

  
	
   

  	
  ARTICLE 4 

  PAYMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.1

  	
  General Payment Provisions

  	
   

  
	
  Section 4.2

  	
  Repayment of Post-Petition Loans

  	
   

  
	
  Section 4.3

  	
  Payment of Other Obligations

  	
   

  
	
  Section 4.4

  	
  Marshalling; Payments Set Aside

  	
   

  
	
  Section 4.5

  	
  Application of Payments and Collections

  	
   

  
	
  Section 4.6

  	
  Receipt of Payments and Collections

  	
   

  
	
  Section 4.7

  	
  Prepayments

  	
   

  
	
   

  	
  ARTICLE 5

  DIP TERM AND TERMINATION
  OF COMMITMENT

  	
   

  
	
  Section 5.l

  	
  Term of Commitment

  	
   

  
	
  Section 5.2

  	
  Termination

  	
   

  
	
   

  	
  ARTICLE 6

  COLLATERAL SECURITY AND
  GUARANTEE

  	
   

  
	
  Section 6.1

  	
  Grant of Security Interest in Collateral

  	
   

  
	
  Section 6.2

  	
  Other Collateral

  	
   

  
	
  Section 6.3

  	
  Lien on Deposit Accounts

  	
   

  
	
  Section 6.4

  	
  Lien Perfection; Further Assurances

  	
   

  
	
  Section 6.5

  	
  Lien Priority

  	
   

  
	
  Section 6.6

  	
  Guarantee

  	
   

  
	
  Section 6.7

  	
  No Impairment of Guarantee

  	
   

  
	
  Section 6.8

  	
  Subrogation

  	
   

  
	
   

  	
  ARTICLE 7

  COLLATERAL ADMINISTRATION

  	
   

  
	
  Section 7.1

  	
  General Provisions

  	
   

  
	
  Section 7.2

  	
  Administration of Accounts

  	
   

  
	
  Section 7.3

  	
  Administration of Inventory

  	
   

  
				

 

ii

 

	
  Section 7.4

  	
  Administration of Equipment

  	
   

  
	
  Section 7.5

  	
  Pledged Securities

  	
   

  
	
   

  	
  ARTICLE 8

  REPRESENTATIONS AND
  WARRANTIES

  	
   

  
	
  Section 8.1

  	
  General Representations and Warranties

  	
   

  
	
  Section 8.2

  	
  Reaffirmation of Representations and
  Warranties

  	
   

  
	
   

  	
  ARTICLE 9

  COVENANTS AND CONTINUING
  AGREEMENTS

  	
   

  
	
  Section 9.1

  	
  Affirmative Covenants

  	
   

  
	
  Section 9.2

  	
  Negative Covenants

  	
   

  
	
   

  	
  ARTICLE 10

  CONDITIONS PRECEDENT

  	
   

  
	
  Section 10.1

  	
  Conditions
  Precedent to Initial Credit Extensions

  	
   

  
	
  Section 10.2

  	
  Conditions
  Precedent to All Credit Extensions

  	
   

  
	
  Section 10.3

  	
  Limited
  Waiver of Conditions Precedent

  	
   

  
	
   

  	
  ARTICLE 11

  EVENTS
  OF DEFAULT;

   RIGHTS AND REMEDIES ON DEFAULT

  	
   

  
	
  Section 11.1

  	
  Events of Default

  	
   

  
	
  Section 11.2

  	
  Acceleration of the Obligations

  	
   

  
	
  Section 11.3

  	
  Remedies

  	
   

  
	
  Section 11.4

  	
  Licenses and Sale of Collateral

  	
   

  
	
  Section 11.5

  	
  Setoff

  	
   

  
	
  Section 11.6

  	
  Pledged Securities

  	
   

  
	
  Section 11.7

  	
  Remedies Cumulative; No Waiver

  	
   

  
	
   

  	
  ARTICLE 12

  BENEFIT OF AGREEMENT;
  ASSIGNMENTS AND PARTICIPATIONS

  	
   

  
	
  Section 12.1

  	
  Successors and Assigns

  	
   

  
	
  Section 12.2

  	
  Participations

  	
   

  
	
  Section 12.3

  	
  Assignments

  	
   

  
	
   

  	
  ARTICLE 13

  MISCELLANEOUS

  	
   

  
	
  Section 13.1

  	
  Power of Attorney

  	
   

  
	
  Section 13.2

  	
  General Indemnity

  	
   

  
	
  Section 13.3

  	
  Survival of All Indemnities

  	
   

  
	
  Section 13.4

  	
  Indulgences Not Waivers

  	
   

  
	
  Section 13.5

  	
  Modification of Agreement

  	
   

  
	
  Section 13.6

  	
  Severability

  	
   

  
	
  Section 13.7

  	
  Cumulative Effect; Conflict of Terms

  	
   

  
	
  Section 13.8

  	
  Execution in Counterparts

  	
   

  
	
  Section 13.9

  	
  Lender’s Consent

  	
   

  
	
  Section 13.10

  	
  Notices

  	
   

  
	
  Section 13.11

  	
  Performance of Borrowers’ Obligations

  	
   

  
	
  Section 13.12

  	
  Time of Essence

  	
   

  
	
  Section 13.13

  	
  Entire Agreement; Appendix A, Exhibits
  and Schedules

  	
   

  
	
  Section 13.14

  	
  Interpretation

  	
   

  

 

iii

 

	
  Section 13.15

  	
  Governing Law

  	
   

  
	
  Section 13.16

  	
  Waivers by Obligors

  	
   

  
	
  Section 13.17

  	
  Release

  	
   

  
	
   

  	
  APPENDIX
  A

  GENERAL
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SCHEDULES AND EXHIBITS

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A -

  	
  Form of DIP Note

  	
   

  
	
  Exhibit B -

  	
  Form of Notice of
  Borrowing

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 7.1

  	
  Location of Collateral

  	
   

  
	
  Schedule 8.1 (o)

  	
  Pledged Securities

  	
   

  
	
  Schedule 8.1 (q)

  	
  Subsidiaries of Borrowers

  	
   

  
	
  Schedule 9.2(b)

  	
  Liens

  	
   

  

 

iv

 

DEFINED
TERMS

 

	
   

  	
   

  
	
  Acceptable Plan

  	
   

  
	
  Account

  	
   

  
	
  Account Debtor

  	
   

  
	
  Acquisition Agreement

  	
   

  
	
  Affiliate

  	
   

  
	
  Agreement

  	
   

  
	
  Applicable Law

  	
   

  
	
  Asset Disposition

  	
   

  
	
  Average Loan Balance

  	
   

  
	
  Avoidance Claim

  	
   

  
	
  Base Rate

  	
   

  
	
  Base Rate Loan

  	
   

  
	
  Bid
  Procedures Order

  	
   

  
	
  Borrower

  	
   

  
	
  Borrowers

  	
   

  
	
  Borrowing

  	
   

  
	
  Break-Up Fee

  	
   

  
	
  Budget

  	
   

  
	
  Budgeted Expenses

  	
   

  
	
  Business Day

  	
   

  
	
  Capital Expenditures

  	
   

  
	
  Capitalized Lease
  Obligation

  	
   

  
	
  Carve Out

  	
   

  
	
  Cash Equivalents

  	
   

  
	
  CERCLA

  	
   

  
	
  Chapter 11 Case

  	
   

  
	
  Chapter 11 Cases

  	
   

  
	
  Chattel Paper

  	
   

  
	
  Claims

  	
   

  
	
  Closing Date

  	
   

  
	
  Collateral

  	
   

  
	
  Commitment

  	
   

  
	
  Commitment Termination
  Date

  	
   

  
	
  Committee

  	
   

  
	
  Company

  	
   

  
	
  Compliance Certificate

  	
   

  
	
  Confirmation Order

  	
   

  
	
  Contingent Obligation

  	
   

  
	
  Court

  	
   

  
	
  Critical Vendor

  	
   

  
	
  Debt

  	
   

  
	
  Default

  	
   

  
	
  Default Rate

  	
   

  

 

 

v

 

	

  
  Deposit Account

  	
   

  
	
  DIP Facility

  	
   

  
	
  DIP Financing Documents

  	
   

  
	
  DIP Motion

  	
   

  
	
  DIP Note

  	
   

  
	
  DIP Term

  	
   

  
	
  Distribution

  	
   

  
	
  Document

  	
   

  
	
  Dollars and the sign $

  	
   

  
	
  Eligible Assignee

  	
   

  
	
  Environmental Laws

  	
   

  
	
  Environmental Release

  	
   

  
	
  Equipment

  	
   

  
	
  Equity Interest

  	
   

  
	
  ERISA

  	
   

  
	
  Estate

  	
   

  
	
  Event of Default

  	
   

  
	
  Extraordinary Expenses

  	
   

  
	
  Final Financing Order

  	
   

  
	
  Financing Orders

  	
   

  
	
  Fiscal Year

  	
   

  
	
  FLSA

  	
   

  
	
  Foreign Subsidiary

  	
   

  
	
  Full Payment

  	
   

  
	
  GAAP

  	
   

  
	
  General Intangible

  	
   

  
	
  Governmental Approvals

  	
   

  
	
  Governmental Authority

  	
   

  
	
  Guarantors

  	
   

  
	
  Hazardous Materials

  	
   

  
	
  Indemnified Amount

  	
   

  
	
  Indemnitee

  	
   

  
	
  Insolvency Proceeding

  	
   

  
	
  Instrument

  	
   

  
	
  Intellectual Property

  	
   

  
	
  Interim Financing Order

  	
   

  
	
  Interim Period

  	
   

  
	
  Inventory

  	
   

  
	
  Investment Property

  	
   

  
	
  Lender

  	
   

  
	
  Lender Professionals

  	
   

  
	
  LIBOR Loan

  	
   

  
	
  LIBOR Rate

  	
   

  
	
  Lien

  	
   

  
	
  Material Adverse Effect

  	
   

  
	
  Material Contract

  	
   

  

 

vi

 

	
  Maximum Rate

  	
   

  
	
  Money Borrowed

  	
   

  
	
  Moody’s

  	
   

  
	
  Multiemployer
  Plan

  	
   

  
	
  Net Proceeds

  	
   

  
	
  Notes

  	
   

  
	
  Notice of
  Borrowing

  	
   

  
	
  Obligations

  	
   

  
	
  Obligor

  	
   

  
	
  Ordinary Course of
  Business

  	
   

  
	
  Organization Documents

  	
   

  
	
  OSHA

  	
   

  
	
  Parent

  	
   

  
	
  Participant

  	
   

  
	
  Payment Items

  	
   

  
	
  Permitted Contingent
  Obligations

  	
   

  
	
  Permitted Liens

  	
   

  
	
  Permitted Purchase Money
  Debt

  	
   

  
	
  Person

  	
   

  
	
  Petition Date

  	
   

  
	
  Plan

  	
   

  
	
  Pledged Securities

  	
   

  
	
  Post-Petition Loan

  	
   

  
	
  Pre-Petition Emergency
  Loan

  	
   

  
	
  Pre-Petition Term Loan

  	
   

  
	
  primary obligations

  	
   

  
	
  primary obligor

  	
   

  
	
  Professional Expenses

  	
   

  
	
  Professional Person

  	
   

  
	
  Properly Contested

  	
   

  
	
  Property

  	
   

  
	
  Purchase Money Debt

  	
   

  
	
  Purchase Money Lien

  	
   

  
	
  Real Property

  	
   

  
	
  RELEASED CLAIMS

  	
   

  
	
  RELEASED
  PARTIES

  	
   

  
	
  RELEASING PARTIES

  	
   

  
	
  Reorganization Plan

  	
   

  
	
  Reportable Event

  	
   

  
	
  Restricted Investment

  	
   

  
	
  S&P

  	
   

  
	
  SEC

  	
   

  
	
  Security

  	
   

  
	
  Security Documents

  	
   

  
	
  Senior Officer

  	
   

  
	
  Subsidiary

  	
   

  

 

vii

 

	
  Tax Refund

  	
   

  
	
  Taxes

  	
   

  
	
  Transferee

  	
   

  
	
  UCC

  	
   

  

 

viii

 

DEBTOR IN POSSESSION CREDIT AGREEMENT

 

THIS DEBTOR IN POSSESSION CREDIT AGREEMENT dated as of September 24, 2002, by and among
PEREGRINE SYSTEMS, INC., a Delaware
corporation and a Chapter 11 debtor-in-possession and PEREGRINE REMEDY, INC., a Delaware
corporation and a Chapter 11 debtor-in-possession (each individually a “Borrower”, and collectively, “Borrowers”); each of the Subsidiaries
of Borrowers listed on the signature pages hereof (collectively, “Guarantors”) and BMC SOFTWARE, INC., a Delaware corporation
(“Lender”). Capitalized
terms used in this Agreement have the meanings assigned to them in Appendix
A, General Definitions.

 

R E C I T A L S:

 

A.            Borrowers are debtors-in-possession
under Chapter 11 of the Bankruptcy Code in cases (the “Chapter 11 Cases”) pending in the United
States Bankruptcy Court for the District of Delaware (the “Court”). 
Borrowers have requested that Lender extend financing on a secured basis
to Borrowers in connection with the Chapter 11 Cases in accordance with the
provisions of this Agreement.

 

B.            Lender is willing to make loans and
other extensions of credit to Borrowers, subject to the terms and conditions of
this Agreement and subject to the terms and conditions set forth in the
Financing Orders.

 

C.            Each of the Guarantors has agreed to
guaranty the obligations of Borrowers hereunder, and each of Borrowers and
Guarantors has agreed to secure its obligations to Lender hereunder with Liens
on all of its Property, whether real, personal or mixed, tangible or
intangible, now existing or hereafter acquired or arising, all as more fully
provided herein.

 

NOW,
THEREFORE, in consideration of the premises and the mutual covenants and agreements
herein contained, the parties hereto hereby agree as follows:

 

ARTICLE 1

DIP FACILITY

 

Subject
to the terms and conditions of, and in reliance upon the representations and
warranties made in, this Agreement and the other DIP Financing Documents, Lender
agrees to make the DIP Facility available to Borrowers, in an aggregate amount
up to the Commitment, as follows:

 

Section 1.1             Post-Petition
Loans.

 

(a)           General.  Subject to the terms and conditions of this
Agreement, Lender agrees to make Post-Petition Loans to Borrowers, on any
Business Day during the period from the date hereof through the day before the
last day of the DIP Term, in an aggregate principal amount outstanding at any
time which does not exceed the Commitment at such time; provided, however, that
Lender shall have no obligation whatsoever to make any Post-Petition Loan if,
at the time of the proposed funding thereof, the aggregate principal amount of
all the Post-Petition

 

1

 

Loans then outstanding would
exceed the Commitment after the funding of such Post-Petition Loan. The
Post-Petition Loans shall bear interest as set forth in Section 2.1 hereof,
shall be guaranteed by the Guarantors and secured by all of the Collateral and
shall be evidenced by the DIP Note. Each Post-Petition Loan shall, at the
option of Borrowers unless otherwise specified herein, be made as and consist
entirely of either a Base Rate Loan or LIBOR Loan.  Amounts borrowed under the DIP Facility and repaid or prepaid may
not be reborrowed.

 

(b)           Use of Proceeds. The proceeds
of the Post-Petition Loans shall be used by Borrowers during the pendency of
their Chapter 11 Cases exclusively for one or more of the following
purposes:  (i) to pay in full the
Pre-Petition Term Loan and the Pre-Petition Emergency Loan from the proceeds of
the initial Post-Petition Loan, to the extent authorized by the Court; (ii) to
pay expenditures described in the Budget or, with Lender’s consent after the
occurrence of an Event of Default, to fund the cost of an orderly liquidation
of the Collateral to the extent approved by Lender; (iii) to pay fees required
to be paid to the office of the United States Trustee; (iv) to pay any of the
Obligations; (v) to pay the Claims of Critical Vendors, to the extent
authorized by order of the Court; (vi) to pay the Break-Up Fee and for this
purpose $10,000,000 will be reserved from the Commitment; and (vii) to pay
other expenses authorized by order of the Court; provided that in no event
shall the outstanding Post-Petition Loans exceed $60,000,000 until the Bid
Procedures Order is entered. Notwithstanding anything to the contrary contained
herein, in no event shall proceeds of Post-Petition Loans be used to pay any
Professional Expenses incurred in connection with the assertion of or joinder
in any claim, counterclaim, action, contested matter, objection, defense or
other proceeding, the purpose of which is to seek or the result of which would
be to obtain any order, judgment, declaration, or similar relief (i) invalidating,
setting aside, avoiding or subordinating, in whole or in part, any of the
Obligations or Liens and security interests in any of the Collateral granted to
Lender under this Agreement or the Financing Orders; (ii) declaring any of the
DIP Financing Documents to be invalid, not binding or unenforceable in any
respect, (iii) preventing, enjoining, hindering or otherwise delaying Lender’s
enforcement of any of the DIP Financing Documents or any realization upon any
Collateral (unless such enforcement or realization is in direct violation of an
explicit provision in any of the Financing Orders); (iv) declaring any Liens
granted or purported to be granted under any of the DIP Financing Documents to
have a priority other than the priority set forth therein; or (v) objecting to
the amount or method of calculation by Lender of any of the Obligations.  Nothing in this Section 1.1 (b) shall be
construed to waive Lender’s right to object to any requests, motions or applications
made in or filed with the Court, including any applications for interim or
final allowances of Professional Expenses.

 

(c)           DIP Note. The Post-Petition
Loans made by Lender and interest accruing thereon shall be evidenced by the
records of Lender and by the DIP Note payable to Lender (or the assignee of
Lender), which shall be executed by Borrowers, completed in conformity with
this Agreement and delivered to Lender on the Closing Date. All outstanding
principal amounts and accrued interest under the DIP Note shall be due and
payable as set forth in Section 4.2 hereof.

 

2

 

ARTICLE
2

INTEREST, FEES AND CHARGES

 

Section 2.1             Interest.

 

(a)             Rates of Interest.  Borrowers agree to pay interest in respect
of all unpaid principal amounts of the Post-Petition Loans from the respective
dates such principal amounts are advanced until paid (whether at stated
maturity, on acceleration or otherwise) at a rate per annum equal to the
applicable rate indicated below:

 

(i)              for
Post-Petition Loans made or outstanding as Base Rate Loans, 2% plus the Base Rate in effect from time to
time; or

 

(ii)             for
Post-Petition Loans made or outstanding as LIBOR Loans, 3.50% plus the LIBOR Rate for the applicable
Post-Petition Loan as determined by Lender in conformity with this Agreement.

 

Upon
determining the LIBOR Rate for any LIBOR Loan requested by Borrowers, Lender
shall promptly notify Borrowers thereof by telephone and, if so requested by
Borrowers, confirmed in writing (including, by way of electronic transmission).
Such determination made in good faith shall, absent manifest error, be final,
conclusive and binding on all parties and for all purposes. The applicable rate
of interest for all Post-Petition Loans bearing interest based upon the Base
Rate shall be increased or decreased, as the case may be, by an amount equal to
any increase or decrease in the Base Rate, with such adjustments to be
effective as of the opening of business on the day that any such change in the
Base Rate becomes effective.

 

(b)           Interest Rate Not Ascertainable.  If Lender shall determine in good faith
(which determination shall, absent manifest error, be final, conclusive and
binding upon all parties) that on any date for determining the LIBOR Rate for
any Post-Petition Loan, by reason of any changes arising after the date of this
Agreement affecting the London interbank market, adequate and fair means do not
exist for ascertaining the applicable interest rate on the basis provided for
in the definition of LIBOR Rate, then, and in any such event, Lender shall
forthwith give notice (by telephone confirmed in writing) to Borrowers of such
determination.  Until Lender notifies
Borrowers that the circumstances giving rise to the suspension described herein
no longer exist, the obligation of Lender to make LIBOR Loans shall be
suspended, and any subsequent Post-Petition Loan shall bear interest as a Base
Rate Loan.

 

(c)           Default Rate of Interest.  From and after the occurrence of any Event
of Default, but only so long as such Event of Default is continuing, the
principal amount of the Obligations (and, to the extent permitted by Applicable
Law, all past due interest) shall bear interest at the Default Rate.

 

Section 2.2            Fees.

 

(a)           Facility Fee.  Borrowers shall pay to Lender a facility fee
of .35% of the Commitment, which shall be fully earned and non-refundable and
shall be paid concurrently with the funding of the initial Post-Petition Loan
hereunder.

 

3

 

(b)           Commitment Fee.  Borrowers shall pay to Lender a commitment
fee equal to 0.75% per annum of the amount by which the Average Loan  Balance for any month (or portion thereof
that the Commitment is in effect) is less than $110,000,000, such fee to be paid on the first
Business Day of the following month; but if the Commitment is terminated on a
day other than the first day of a month, then any such fee payable for the
month in which termination shall occur shall be paid on the effective date of
such termination.

 

(c)           General Provisions.  All fees shall be fully earned by Lender
pursuant to the foregoing provisions of this Agreement on the due date thereof
and, except as otherwise set forth herein or required by Applicable Law, shall
not be subject to rebate, refund or proration. All fees provided for in this Section
2.2 are and shall be deemed to be compensation for services and are not, and
shall not be deemed to be, interest or any other charge for the use,
forbearance or detention of money.

 

Section 2.3             Computation
of Interest and Fees.  Interest
shall be calculated on a daily basis, commencing on the date of funding of the
initial Post-Petition Loan, and shall be payable monthly, in arrears, on the
first Business Day of each month. All interest, fees and other charges provided
for in this Agreement shall be calculated daily and shall be computed on the
actual number of days elapsed over a year of 360 days.

 

Section 2.4             Reimbursement
Obligations.  Borrowers shall
reimburse Lender for all reasonable legal, accounting, appraisal and other fees
and expenses incurred by Lender in connection with (i) the negotiation and
preparation of any of the DIP Financing Documents, any amendment or
modification to any of the DIP Financing Documents, any waiver of any Default
or Event of Default thereunder, or any restructuring or forbearance with
respect thereto; (ii) the administration of the DIP Financing Documents and the
transactions contemplated thereby; (iii) any action taken to perfect or
maintain the perfection or priority of any of Lender’s Liens with respect to
any of the Collateral; (iv) any inspection of or audits conducted with respect
to any Obligor’s books and records or any of the Collateral; (v) any effort to
verify, protect, preserve, or restore any of the Collateral or  to collect, sell, liquidate or
otherwise dispose of or realize upon any of the Collateral; (vi) any
litigation, contest, dispute, suit, proceeding or action (whether instituted by
or against Lender, any Obligor or any other Person) in any way arising out of
or relating to any of the Collateral (or the validity, perfection or priority
of any of Lender’s Liens thereon), any of the DIP Financing Documents or the
validity, allowance or amount of any of the Obligations; (vii) the protection
or enforcement of any rights or remedies of Lender in any Insolvency
Proceeding; and (viii) any other action taken by Lender to enforce any of the
rights or remedies of Lender against any Obligor or any Account Debtors to
enforce collection of any of the Obligations or payments with respect to any of
the Collateral.  All amounts chargeable
to Borrowers under this Section 2.4 shall constitute Obligations that are
secured by all of the Collateral and shall be payable to Lender on demand.
Borrowers shall also reimburse Lender for reasonable expenses incurred by
Lender in its administration of any of the Collateral to the extent and in the
manner provided in Article 7 hereof or in any of the other DIP Financing
Documents. The foregoing shall be in addition to, and shall not be construed to
limit, any other provision of any of the DIP Financing Documents regarding the
reimbursement by Borrowers of costs, expenses or liabilities suffered or
incurred by Lender.

 

4

 

Section 2.5             Bank
Charges.  Borrowers shall pay to
Lender, on demand, any and all fees, costs or expenses which Lender pays to a
bank or other similar institution arising out of or in connection with (a) the
forwarding to Borrowers or any other Person on behalf of Borrowers by Lender of
proceeds of Post-Petition Loans made by Lender to Borrowers pursuant to this
Agreement and (b) the depositing for collection by Lender of any Payment Item
received or delivered to Lender on account of the Obligations. Borrowers
acknowledge and agree that Lender may charge such costs, fees and expenses to
Borrowers based upon Lender’s good faith estimate of such costs, fees and
expenses as they are incurred by Lender.

 

Section 2.6             Funding
Losses.  Borrowers shall compensate
Lender, upon Lender’s written consent (which request shall set forth the basis
for requesting such amounts and which request shall, absent manifest error, be
final, conclusive and binding upon Borrowers), for all losses, expenses and
liabilities (including any interest paid by Lender to lenders of funds borrowed
by Lender to make or carry its LIBOR Loan to the extent not recovered by Lender
in connection with the re-employment of such funds), which Lender may sustain:
(a) if for any reason (other than a default by Lender) a Borrowing of any LIBOR
Loan does not occur on the date specified therefor in a Notice of Borrowing
(whether or not withdrawn), (b) if any repayment of any LIBOR Loan occurs on a
date prior to the Commitment Termination Date, or (c) if, for any reason,
Borrowers default in their obligation to repay any LIBOR Loan when required by
the terms of this Agreement.

 

Section 2.7             Maximum
Interest.  In no event whatsoever
shall the aggregate of all amounts deemed interest hereunder or under the Notes
and charged or collected pursuant to the terms of this Agreement or pursuant to
the Notes exceed the Maximum Rate, nor shall any provisions hereof be construed
as a contract to pay for the use, forbearance or detention of money with
interest at a rate or in an amount in excess of the Maximum Rate. If any
provisions of this Agreement or the Notes contravene any Applicable Law, such
provisions shall be deemed amended to conform to such Applicable Law.
Notwithstanding anything to the contrary contained herein, no provision of this
Agreement or the Notes shall require the payment or permit the collection of
interest in excess of the Maximum Rate. If any excess of interest in such
respect is herein provided for, or shall be adjudicated to be so provided, in
this Agreement, the Notes or otherwise in connection with this loan transaction,
the provisions of this paragraph shall govern and prevail, and neither
Borrowers nor the sureties, guarantors, successors or assigns of Borrowers
shall be obligated to pay the excess amount of such interest, or any other
excess sum paid for the use, forbearance or detention of sums loaned pursuant
hereto. If for any reason interest in excess of the Maximum Rate shall be
deemed charged, required or permitted by any court of competent jurisdiction,
any such excess shall be applied as a payment and reduction of the principal of
indebtedness evidenced by this Agreement and the Notes; and, if the principal
amount hereof has been paid in full, any remaining excess shall forthwith be
paid to Borrowers. In determining whether or not the interest paid or payable
exceeds the Maximum Rate, Borrowers and Lender shall, to the extent permitted
by Applicable Law, (a) characterize any non-principal payment as an expense,
fee, or premium rather than as interest, (b) exclude voluntary prepayments and
the effects thereof, and (c) amortize, prorate, allocate, and spread in equal
or unequal parts the total amount of interest throughout the entire
contemplated term of the indebtedness evidenced by this Agreement and the Notes
so that the interest for the entire term does not exceed the Maximum Rate.

 

5

 

ARTICLE 3

LOAN ADMINISTRATION

 

Section 3.1             Manner
of Borrowing and Funding Post-Petition Loans.  Borrowings under the Commitment established pursuant to Article 1
hereof shall be made and funded as follows:

 

(a)           Notice of Borrowing.

 

(i)            Whenever Borrowers desire to make a
Borrowing under this Agreement, Borrowers shall give Lender prior written
notice of such Borrowing request (a “Notice
of Borrowing”), which shall be in the form of Exhibit B annexed
hereto and signed by a Senior Officer. Except for the initial Notice of
Borrowing, such Notice of Borrowing shall be given by Borrowers no later than
11:00 a.m., Houston, Texas time, at the office of Lender, as designated by Lender
from time to time at least three (3) Business Days prior to the requested
funding date of such Borrowing, but no more frequently than once per week.
Notices received after 11:00 a.m. shall be deemed received on the next Business
Day. Each Post-Petition Loan shall be in the minimum amount of $2,500,000
(unless deemed requested pursuant to Section 3.l(a)(ii) or otherwise agreed by
Lender). Each Notice of Borrowing shall be irrevocable and shall specify (A)
the principal amount of the Borrowing, (B) the date of Borrowing (which shall
be a Business Day), (C) whether the Borrowing is to consist of a Base Rate Loan
or LIBOR Loan, and (D) the proposed use of the proceeds thereof.

 

(ii)           Unless payment is otherwise timely
made by Borrowers, the becoming due of the Break-Up Fee or of any amount
required to be paid under this Agreement or any of the other DIP Financing
Documents with respect to the Obligations (whether as principal, accrued
interest, fees or other charges) shall be deemed irrevocably to be a request for
a Post-Petition Loan on the due date of, and in an aggregate amount required to
pay, such Break-Up Fee, principal, accrued interest, fees or other charges, and
the proceeds of such Post-Petition Loan may be disbursed by way of direct
payment of the Break-Up Fee or relevant Obligation.

 

(b)           Fundings by Lender.  Subject to its receipt of a Notice of
Borrowing as provided in Section 3.1(a)(i), and in compliance with the terms
and conditions hereof, Lender shall make the proceeds of the Post-Petition Loan
available to Borrowers by disbursing such proceeds in accordance with
Borrowers’ disbursement instructions set forth in the applicable Notice of
Borrowing.

 

(c)           Disbursement Authorization.  Borrowers hereby irrevocably authorize
Lender to disburse the proceeds of each Post-Petition Loan requested by
Borrowers, or deemed to be requested pursuant to Section 3.1(a), as follows:
(i) the proceeds of each Post-Petition Loan requested under Section 3.1(a)(i)
shall be disbursed by Lender in accordance with the terms of the Notice of
Borrowing; and (ii) the proceeds of each Post-Petition Loan requested or deemed
requested under Section 3.1(a)(ii) shall be disbursed by Lender by way of
direct payment of the relevant interest or other Obligation.  Any proceeds disbursed in payment of any of
the Obligations shall be deemed to have been received by Borrowers.

 

6

 

ARTICLE 4

PAYMENTS

 

Section 4.1             General
Payment Provisions.  All payments
(including all prepayments) of principal of and interest on the Post-Petition
Loans and other Obligations that are payable to Lender shall be made to Lender
in Dollars, without any offset or counterclaim and free and clear of (and
without deduction for) any present or future Taxes, by wire transfer of
immediately available funds not later than 12:00 noon, Houston, Texas time, on
the due date.

 

Section 4.2             Repayment
of Post-Petition Loans.

 

(a)           Payment of Principal.  The outstanding principal amounts with
respect to the Post-Petition Loans shall be due and payable on the Commitment
Termination Date.

 

(b)           Payment of Interest. Interest
accrued on each Post-Petition Loan shall be due and payable on the first
Business Day of each month (for the immediately preceding month), computed
through the last calendar day of the preceding month. Accrued but unpaid
interest shall also be paid by Borrowers on the Commitment Termination Date.

 

Section 4.3             Payment
of Other Obligations. The balance of the Obligations requiring the payment
of money, including Extraordinary Expenses incurred by Lender, shall be repaid
by Borrowers to Lender as and when provided in the DIP Financing Documents, or,
if no date of payment is otherwise specified in the DIP Financing Documents, on
demand.

 

Section 4.4             Marshalling;
Payments Set Aside.  Lender shall
not be under any obligation to marshall any assets in favor of any Obligor or
against or in payment of any or all of the Obligations. To the extent that
Borrowers make a payment or payments to Lender or Lender receives payment from
the proceeds of any Collateral or exercises its right of setoff, and such
payment or payments or the proceeds of Collateral or setoff or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required to be repaid to a trustee, receiver or any other party, then
to the extent of such recovery, the Obligations or part thereof originally
intended to be satisfied, and all Liens, rights and remedies therefor, shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred. The provisions of the
immediately preceding sentence of this Section 4.4 shall survive any
termination of the Commitment and Full Payment of the Obligations.

 

Section 4.5             Application
of Payments and Collections.  All
monies to be applied to the Obligations, whether such monies represent
voluntary payments by one or more Obligors or are received pursuant to demand
for payment or realized from any disposition of Collateral, shall be applied as
follows: (i) first, to pay the amount of Extraordinary Expenses and amounts
owing to Lender pursuant to Section 13.11 hereof that have not been reimbursed
to Lender by Borrowers, together with interest accrued thereon at the rate then
applicable to Base Rate Loans; (ii) second, to pay any Indemnified Amount that
has not been paid to Lender by Obligors, together with interest accrued thereon
at the rate then applicable to Base Rate Loans; (iii) third, to pay any fees
due and payable to Lender; (iv) fourth, in payment of accrued interest in
respect of the Post-

 

7

 

Petition Loans; (v) fifth,
in payment of the unpaid principal of the Post-Petition Loans; and (vi) sixth,
in payment of any other Obligations then outstanding.

 

Section 4.6             Receipt
of Payments and Collections.  All
payments received by Lender by 12:00 noon, Houston, Texas time, on any Business
Day shall be deemed received on that Business Day. All Payment Items received
by Lender after 12:00 noon, Houston, Texas time, on any Business Day shall be
deemed received on the next Business Day. Except to the extent that the manner
of application to the Obligations of payments or proceeds of Collateral is
expressly governed by other provisions of this Agreement, Borrowers irrevocably
waive the right to direct the application of any and all payments and
Collateral proceeds at any time or times received by Lender from or on behalf
of Borrowers, and Borrowers do hereby irrevocably agree that Lender shall have
the continuing exclusive right to apply and reapply any and all such payments
and Collateral proceeds received at any time or times hereafter by Lender or
its agent against the Obligations, in such manner as Lender may deem advisable,
notwithstanding any entry by Lender upon any of its books and records.

 

Section 4.7             Prepayments.

 

(a)           Voluntary Prepayments.  Borrowers may, upon at least three (3)
Business Days notice to Lender, prepay the Post-Petition Loans at any time
without premium or penalty, but subject to any compensation payable pursuant to
Section 2.6 hereof.

 

(b)           Mandatory Prepayments.  A mandatory prepayment of the Post-Petition
Loans shall be due on any date (i) Borrowers or any Guarantor shall receive Net
Proceeds from any Asset Disposition in an amount equal to such Net Proceeds,
and (ii) Borrowers or any of their Subsidiaries shall receive any Tax Refund in
an amount equal to such Tax Refund.

 

ARTICLE 5

DIP TERM AND TERMINATION OF COMMITMENT

 

Section 5.1             Term
of Commitment.  Subject to Lender’s
right to cease making Post-Petition Loans to Borrowers when any Default exists
and is continuing or upon the Commitment Termination Date, the Commitment shall
be in effect for the DIP Term. The DIP Term may be extended by written
agreement between Borrowers and Lender without further notice or hearing or
order by the Court.

 

Section 5.2             Termination.

 

(a)           Termination by Lender.  Lender may terminate the DIP Facility (and
any Commitment thereunder) at any time, without notice to Borrowers, after the
occurrence and during the continuance of an Event of Default.

 

(b)           Termination by Borrowers.  Borrowers may terminate the DIP Facility at
any time upon 10 days prior written notice to Lender; provided, however, no
such termination by Borrowers shall be effective until Full Payment of the
Obligations. Any notice of termination given by Borrowers shall be irrevocable
unless Lender otherwise agrees in writing. Borrowers may elect to terminate the
DIP Facility in its entirety only.

 

8

 

(c)           Effect of Termination.  On the Commitment Termination Date, all of
the Obligations shall be immediately due and payable, and Lender shall have no
further obligation to make any Post-Petition Loans. All undertakings, agreements,
covenants, warranties and representations of Borrowers contained in the DIP
Financing Documents shall survive any such termination and Lender shall retain
its Liens in the Collateral and all of its rights and remedies under the DIP
Financing Documents notwithstanding such termination until Full Payment of the
Obligations. The provisions of Section 2.4, Section 4.4, and this Section
5.2(c) and all obligations of Borrowers to indemnify Lender pursuant to this
Agreement shall in all events survive any termination of the Commitment.

 

ARTICLE 6

COLLATERAL SECURITY AND GUARANTEE

 

Section 6.1             Grant
of Security Interest in Collateral. 
To secure the prompt and Full Payment and performance of all of the
Obligations, each Borrower hereby grants to Lender, a continuing security
interest in and Lien upon all of the following Property and interests in
Property of such Borrower, whether now owned or existing or hereafter created,
acquired or arising (irrespective of whether the same existed on or was created
or acquired after the Petition Date):

 

(a)           all Accounts;

 

(b)           all Inventory;

 

(c)           all Equipment;

 

(d)           all General Intangibles (including
all Intellectual Property);

 

(e)           all Instruments;

 

(f)            all Chattel Paper;

 

(g)           all Documents;

 

(h)           all Investment Property (including
all Pledged Securities);

 

(i)            all other goods and personal
property, whether tangible or intangible, wherever located, including money,
letters of credit and all rights of payment or performance under letters of
credit;

 

(j)            all Real Property;

 

(k)           all Avoidance Claims;

 

(1)           all money and other Property of any
kind, whether or not in the possession or under the control of Lender or a
bailee of Lender;

 

9

 

(m)          all cash and non-cash proceeds of (a)
through (1) above, including proceeds of and unearned premiums with respect to
insurance policies insuring any of the Collateral; and

 

(n)           all books and records (including
customer lists, files, correspondence, tapes, computer programs, print-outs,
and other computer materials and records) of Borrower pertaining to any of (a)
through (m) above.

 

In no event shall (i) the
Lien granted above in all Avoidance Claims be enforceable unless and until the
Final Financing Order is entered nor (ii) the Liens described herein extend to
the Carve-Out. Lender agrees that so long as no Default or Event of Default
shall have occurred and be continuing, Borrowers shall be permitted to pay
Professional Expenses allowed and payable as part of the Carve-Out.

 

Section 6.2             Other
Collateral. In addition to the items of Property referred to in Section 6.1
above, the Obligations shall also be secured by all of the other items of
Property from time to time described in the Financing Orders or any of the
Security Documents as security for all of the Obligations.

 

Section 6.3             Lien
on Deposit Accounts.  As additional
security for the Full Payment and performance of the Obligations, each Borrower
hereby grants to Lender a continuing security interest in and Lien upon, and
hereby collaterally assigns to Lender, all of such Borrower’s right, title and
interest in and to any deposits or other sums at any time credited to each
Deposit Account. In connection with the foregoing, each Borrower hereby
authorizes and directs each bank or other depository to pay or deliver to
Lender upon its written demand therefor made at any time upon the occurrence
and during the continuation of an Event of Default and without further notice
to such Borrower (such notice being hereby expressly waived), all balances in each
Deposit Account maintained by such Borrower with such depository for
application to the Obligations then outstanding, and the rights given Lender in
this Section shall be cumulative with and in addition to Lender’s other rights
and remedies in regard to the foregoing Property as proceeds of Collateral.
Each Borrower hereby irrevocably appoints Lender as their attomey-in-fact to
collect any and all such balances to the extent any such payment is not made to
Lender by such bank or other depository after demand thereon is made by Lender
pursuant hereto.

 

Section 6.4             Lien
Perfection; Further Assurances. 
Promptly after Lender’s request therefor, but subject to Section 9.l(p),
Borrowers shall execute or cause to be executed and deliver to Lender such
instruments, assignments, title certificates or other documents as are
necessary under the UCC or other Applicable Law (including any motor vehicle
certificates of title act) to perfect (or continue the perfection of) Lender’s
Lien upon the Collateral, and shall take such other action as may be requested
by Lender to give effect to or carry out the intent and purposes of this
Agreement.  Each Borrower hereby
authorizes Lender to file any financing statement which may be necessary under
the UCC. The parties agree that a carbon, photographic or other reproduction of
this Agreement shall be sufficient as a financing statement and may be filed in
any appropriate office in lieu thereof.

 

10

 

Section 6.5             Lien
Priority.  The Liens and security
interests granted to Lender pursuant to the provisions of this Article 6 and
pursuant to any of the DIP Financing Documents shall be first priority Liens
and security interests in the Collateral owned by each Borrower, subject only
to (a) valid, perfected, nonavoidable and enforceable Liens which constitute
Permitted Liens, and (b) the Carve-Out, and except as expressly provided
otherwise in the Financing Orders.

 

Section 6.6             Guarantee.

 

(a)           Each of the Guarantors
unconditionally and irrevocably guarantees the due and punctual payment and
performance by Borrowers of the Obligations. 
Each of the Guarantors further agrees that the Obligations may be
extended or renewed, in whole or in part, without notice to or further assent
from it, and it will remain bound upon this guarantee notwithstanding any
extension or renewal of any of the Obligations.  The Obligations of the Guarantors shall be joint and several.

 

(b)           Each of the Guarantors waives
presentation to, demand for payment from and protest to Borrowers or any other
Guarantor, and also waives notice of protest for nonpayment. The Obligations of
the Guarantors hereunder shall not be affected by (i) the failure of Lender to
assert any claim or demand or to enforce any right or remedy against Borrowers
or any other Guarantor under the provisions of this Agreement or any other DIP
Financing Documents or otherwise; (ii) any extension or renewal of any
provision hereof or thereof; (iii) any rescission, waiver, compromise,
acceleration, amendment or modification or any of the terms or provisions of
any of the DIP Financing Documents; (iv) the release, exchange, waiver or
foreclosure of any security held by Lender for Obligations or any of them; (v)
the failure of Lender to exercise any right or remedy against any other
Guarantor; or (vi) the release or substitution of any Guarantor or any other
Guarantor.

 

(c)           Each of the Guarantors further agrees
that this guarantee constitutes a guarantee of performance and of payment when
due and not just of collection, and waives any right to require that any resort
be had by Lender to any security held for payment of the Obligations or to any
balance of any deposit, account or credit on the books of Lender in favor of
Borrowers or any other Guarantor, or to any other Person.

 

(d)           Each of the Guarantors hereby waives
any defense that it might have based on a failure to remain informed of the
financial condition of Borrowers and of any other Guarantor and any
circumstances affecting the ability of the Borrowers to perform under this
Agreement and the other DIP Financing Documents.

 

(e)           Each Guarantor’s guarantee shall not
be affected by the genuineness, validity, regularity or enforceability of the
Obligations, this Agreement, the Notes, the other DIP Financing Documents or
any other instrument evidencing any Obligations, or by the existence, validity,
enforceability, perfection, or extent of any collateral therefore or by any
other circumstance relating to the Obligations which might otherwise constitute
a defense to this guarantee. Lender makes no representation or warranty in
respect of any such circumstances and shall have no duty or responsibility
whatsoever to any Guarantor in respect of the management and maintenance of the
Obligations.

 

11

 

(f)            Upon the Obligations becoming due
and payable (by acceleration or otherwise), Lender shall be entitled to
immediate payment of such Obligations by the Guarantors upon written demand by
Lender without further application to or order of the Court.

 

Section 6.7             No
Impairment of Guarantee.  The
obligations of the Guarantors hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason (other than Full Payment),
including without limitation, any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to any defense or set-off,
counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of the Obligations. Without limiting the
generality of the foregoing, the obligations of the Guarantors hereunder shall
not be discharged or impaired or otherwise affected by the failure of Lender to
assert any claim or demand or to enforce any remedy under this Agreement or any
other agreement, by any waiver or modification of any provision thereof, by any
default, failure or delay, willful or otherwise, in the performance of the
Obligations, or by any other act or thing or omission or delay to do any other
act or thing which may or might in any manner or to any extent vary the risk of
the Guarantors or would otherwise operate as a discharge of the Guarantors as a
matter of law, unless and until Full Payment of the Obligations.

 

Section 6.8             Subrogation.  Until Full Payment of the Obligations
guaranteed hereby, each Guarantor hereby waives all rights or subrogation of
contribution, whether arising by contract or operation of law.

 

ARTICLE 7

COLLATERAL ADMINISTRATION

 

Section 7.1             General
Provisions.

 

(a)           Locations of Collateral.  All tangible items of Collateral, other than
Inventory in transit, shall at all times be kept by an Obligor at one or more
of the business locations of Obligors described in Schedule 7.1 hereof
and shall not be moved therefrom, without the prior written approval of Lender,
except that prior to an Event of Default and acceleration of the maturity of
the Obligations in consequence thereof, an Obligor may (i) make sales or other
dispositions of any Collateral to the extent authorized by Section 7.4(b)
hereof and (ii) move Inventory or any record relating to any Collateral to a
location in the United States other than those described in Schedule 7.1,
so long as an Obligor has given Lender at least 10 days prior written notice of
such new location.

 

(b)           Insurance of Collateral;
Condemnation Proceeds.  Borrowers
shall maintain and pay for insurance upon all Collateral, wherever located,
covering casualty, hazard, public liability, and such other risks in such
amounts and with such insurance companies as are reasonably satisfactory to
Lender. All proceeds payable under each such policy shall be payable to Lender
for application to the Obligations. 
Borrowers shall deliver the originals or certified copies of such
policies to Lender with loss payable endorsements reasonably satisfactory to
Lender, naming Lender as sole loss payee, assignee or additional insured, as
appropriate.  Each policy of insurance
or endorsement shall contain a clause requiring the insurer to give not less than
30 days prior written notice to Lender in  the
event of cancellation of the policy for any reason. If Borrowers fail to
provide and pay for such insurance, Lender may, at its option, but

 

12

 

shall
not be required to, procure the same and charge Borrowers therefor. Borrowers
agree to deliver to Lender, promptly as rendered, true copies of all reports
made in any reporting forms to insurance companies. For so long as no Event of
Default exists and is continuing, Borrowers shall have the right to settle,
adjust and compromise any claim with respect to any insurance maintained by
Borrowers provided that all proceeds thereof are applied in the manner
specified in this Agreement, and Lender agrees promptly to provide any
necessary endorsement to any checks or drafts issued in payment of any such
claim. At any time that an Event of Default exists and is continuing, only
Lender shall be authorized to settle, adjust and compromise such claims. Lender
shall have all rights and remedies with respect to such policies of insurance
as are provided for in this Agreement and the other DIP Financing Documents.

 

(c)           Protection of Collateral.  All expenses of protecting, storing,
warehousing, insuring, handling, maintaining and shipping any Collateral, all
Taxes imposed under any Applicable Law on any of the Collateral or in respect
of the sale thereof, and all other payments required to be made by Lender to
any Person to realize upon any Collateral shall be borne and paid by Obligors.
If any Obligor fails to pay promptly any portion thereof when due, Lender may,
at its option, but shall not be required to, pay the same and charge Borrowers
therefor. Lender shall not be liable or responsible in any way for the
safekeeping of any of the Collateral or for any loss or damage thereto (except
for reasonable care in the custody thereof while any Collateral is in Lender’s
actual possession) or for any diminution in the value thereof, or for any act
or default of any warehouseman, carrier, forwarding agency, or other Person whomsoever,
but the same shall be at Obligors’ sole risk.

 

(d)           Defense of Title to Collateral.  Each Obligor shall at all times defend its
title to the Collateral and Lender’s Liens therein against all Persons and all
claims and demands whatsoever.

 

Section 7.2             Administration
of Accounts.

 

(a)           Records and Schedules of Accounts.  Each Obligor shall keep accurate and
complete records of its Accounts and all payments and collections thereon and
shall submit to Lender on such periodic basis as Lender shall request a sales
and collections report for the preceding period, in form satisfactory to
Lender.  On or before the 20th day of
each month from and after the date hereof, Borrowers shall deliver to Lender,
in form acceptable to Lender, a detailed aged trial balance of all Accounts
existing as of the last day of the preceding month, specifying the names,
addresses, face value, dates of invoices and due dates for each Account Debtor
obligated on an Account so listed (“Schedule
of Accounts”), and, upon Lender’s request therefor, copies of
proof of delivery and a copy of all documents, including repayment histories
and present status reports relating to the Accounts so scheduled and such other
matters and information relating to the status of then existing Accounts as Lender
shall reasonably request. At the request of Lender made at any time, each
Obligor shall deliver to Lender copies of invoices or invoice registers related
to all of its Accounts.

 

(b)           Account Verification.  Whether or not a Default or an Event of Default
exists, Lender shall have the right at any time, in the name of Lender, any
designee of Lender or Borrowers, to verify the validity, amount or any other
matter relating to any Accounts of any

 

13

 

Obligor by mail, telephone,
telegraph or otherwise.  Each Obligor
shall cooperate fully with Lender in an effort to facilitate and promptly
conclude any such verification process.

 

Section 7.3             Administration
of Inventory

 

(a)           Records and Reports of Inventory.  Each Obligor shall keep accurate and
complete records of its Inventory and shall furnish Lender periodic inventory
reports in form and detail satisfactory to Lender and certified to be true and
correct by the chief financial officer (or any other officer acceptable to
Lender in its sole discretion) of each Borrower.

 

(b)           Returns of Inventory.  An Obligor shall not return any of its
Inventory to a supplier or vendor thereof, or any other Person, whether for
cash, credit against future purchases or then existing payables, or otherwise,
unless (i) such return is in the ordinary course of business of Obligor and
such Person; (ii) no Default or Event of Default exists or would result
therefrom; (iii) Borrowers promptly notify Lender thereof if the aggregate value
of all Inventory returned in any month exceeds $100,000; and (iv) such return
is not made for the purpose of allowing such Person to credit its claim against
an Obligor arising prior to the Petition Date.

 

Section 7.4             Administration
of Equipment.

 

(a)           Records and Schedules of Equipment.  Each Obligor shall keep accurate records
itemizing and describing the kind, type, quality, quantity and cost of its
Equipment and all dispositions made in accordance with Section 7.4(b) hereof,
and shall furnish Lender with a current schedule containing the foregoing
information on at least an annual basis and more often if requested by Lender.
Promptly after request therefor by Lender, an Obligor shall deliver to Lender
any and all evidence of ownership, if any, of any of the Equipment.

 

(b)           Dispositions of Equipment.  Each Obligor will not sell, lease or
otherwise dispose of or transfer any of the Equipment or any part thereof
without the prior written consent of Lender; provided, however, that the
foregoing restriction shall not apply, for so long as no Default or Event of
Default exists, to (i) dispositions of Equipment in the Ordinary Course of
Business, (ii) dispositions of Equipment which, in the aggregate has a fair
market value or book value, whichever is less, of $250,000 or less, provided
that all Net Proceeds thereof are remitted to Lender for application to the
Obligations, or (iii) replacements of Equipment that is substantially worn,
damaged or obsolete with Equipment of like kind, function and value, provided that
the replacement Equipment shall be acquired prior to or concurrently with any
disposition of the Equipment that is to be replaced, the replacement Equipment
shall be free and clear of Liens other than Permitted Liens that are not
Purchase Money Liens, and such Obligor shall have given Lender at least 10 days
prior written notice of such disposition.

 

(c)           Condition of Equipment.  The Equipment is in good operating condition
and repair, and all necessary replacements of and repairs thereto shall be made
so that the value and operating efficiency of the Equipment shall be maintained
and preserved, reasonable wear and tear excepted. Each Obligor will not permit
any of the Equipment to become affixed to any real Property leased to such
Obligor so that an interest arises therein under the real estate laws of the
applicable jurisdiction unless the landlord of such real Property has executed
a landlord waiver or leasehold mortgage in favor of and in form acceptable to
Lender, and each Obligor

 

14

 

will
not permit any of the Equipment to become an accession to any personal Property
that is subject to a Lien unless the Lien is a Permitted Lien.

 

Section 7.5             Pledged
Securities.

 

(a)           Delivery of Certificates.  Each Obligor will deliver to Lender as soon
as reasonably practicable after the Closing Date all certificates or
instruments representing or evidencing any Pledged Securities, whether now
existing or hereafter acquired, in suitable form for transfer by delivery or,
as applicable, accompanied by such Obligor’s endorsement or duly executed
instruments of transfer in blank, all in form and substance satisfactory to
Lender.  Lender shall have the right, at
any time in its discretion and without notice to any Obligor, to transfer to or
to register in its name or in the name of its nominees any or all of the
Pledged Securities.  Lender shall have
the right at any time to exchange certificates or instruments representing or
evidencing any of the Pledged Securities for certificates or instruments of
smaller or larger denominations.

 

(b)           Certain Distributions.  Any sums paid upon or in respect of any of
the Pledged Securities upon liquidation or dissolution of any issuer of any of
the Pledged Securities, any distribution of capital made on or in respect of
any of the Pledged Securities, or any property distributed upon or with respect
to any of the Pledged Securities pursuant to the recapitalization or
reclassification of the capital of any issuer of Pledged Securities or pursuant
to the reorganization thereof shall be delivered to Lender to be held by it
hereunder as additional security for the Obligations.  If any sums of money or property so paid or distributed in
respect of any of the Pledged Securities shall be received by any Obligor, such
Obligor shall, until such money or property is paid or delivered to Lender,
hold such money or such property in trust for Lender, segregated from other
funds of such Obligor, as additional security for the Obligations.

 

(c)           Voting Rights.  Except as provided in Section 11.6, each
Obligor will be entitled to exercise all voting, consensual and corporate
rights with respect to the Pledged Securities; provided, however, that no vote
shall be cast, consent given or right exercised or other action taken by such
Obligor which would impair the Collateral or which would be inconsistent with
or result in any violation of any provision of this Agreement or any other DIP
Financing Document or, without prior written consent of Lender, to enable or take
any action to permit any issuer of Pledged Securities to issue any Equity
Interest of any nature or issue any other securities convertible into or
granting the right to purchase or exchange for any Equity Interest securities
of any nature of such issuer.

 

(d)           Control.  No Obligor shall grant control over any
Investment Property to any Person other than Lender.

 

15

 

ARTICLE 8

REPRESENTATIONS
AND WARRANTIES

 

Section 8.1             General
Representations and Warranties.  To
induce Lender to enter into this Agreement and to make available the
Commitment, each Obligor warrants and represents to Lender that:

 

(a)           Organization and Qualification.  Each Obligor is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, has the power to own Properties and to
transact the business in which it is presently engaged or proposed to be
engaged and is duly qualified and in good standing in each jurisdiction in
which it presently is, or proposes to be, engaged in business, other than
failures to be so qualified and in good standing that could not reasonably be
expected to have a Material Adverse Effect.

 

(b)           Power and Authority.  The execution, delivery and performance by
each Obligor of the DIP Financing Documents are within such Obligor’s corporate
power, have been duly authorized by all necessary or proper corporate action
and, on the date of initial funding of Post-Petition Loans hereunder, will be
authorized by the Interim Financing Order pursuant to Sections 363 and 364 of
the Bankruptcy Code; are not in contravention of any provision of its own
Organizational Documents; will not violate any Applicable Law (following entry
of the Interim Financing Order); does not require the consent or approval of
any Governmental Authority or any other Person other than the entry by the
Court of the Interim Financing Order and thereafter the Final Financing Order.

 

(c)           Enforceable Agreements.  Each of the DIP Financing Documents has been
duly executed and delivered by such Obligor and constitutes a legal, valid and
binding obligation of Borrowers, enforceable against such Obligor in accordance
with its terms, subject to the Financing Orders.

 

(d)           Priority of Liens.  Upon entry of the Interim Financing Order,
and thereafter upon entry of the Final Financing Order, the security interests
granted pursuant to the DIP Financing Documents constitute valid, enforceable,
perfected and first priority Liens on the Collateral owned by the Obligors,
except to the extent otherwise expressly provided in the Financing Orders and
except for Permitted Liens.

 

(e)           Places of Business.  Each Obligor has no office or place of
business, nor does each Obligor store any Collateral, at any location other
than those identified in Schedule 7.1.

 

(f)            Compliance With Laws.  All of each Obligor’s business, operations
and Properties are conducted, maintained and owned in accordance with
Applicable Law, including all Environmental Laws, except to the extent that any
such noncompliance could not reasonably be expected to have a Material Adverse
Effect and except as heretofore described by Borrowers in filings with the SEC.

 

(g)           Governmental Approvals.  Each Obligor has obtained and holds in full
force and effect all Governmental Approvals necessary for the operation of its
business as

 

16

 

presently and proposed to be
conducted to the extent that the failure to obtain same could not reasonably be
expected to have a Material Adverse Effect.

 

(h)            No Adverse Changes.  Since the Petition Date, no event has
occurred that has or could reasonably be expected to have a Material Adverse
Effect.

 

(i)             Taxes.  Each Obligor has filed all federal, state
and local tax returns and other reports that it is required by Applicable Law
to file and has paid, or made for provision of the payment of, all Taxes upon
it, its income and properties as and when such Taxes are due and payable,
except to the extent being Properly Contested.

 

(j)             Brokers.  Except for possible claims of Ernst &
Young LLP payable by Borrowers, there are no claims for brokerage commissions,
finders’ fees or investment banking fees in connection with the transactions
contemplated by this Agreement or any of the other DIP Financing Documents.

 

(k)            No Default.  No Default or Event of Default exists at the
time, or would result from the funding, of any Post-Petition Loan or other
extension of credit hereunder;

 

(1)            ERISA.  Borrowers and each of their Subsidiaries are
in full compliance with the requirements of ERISA and the regulations
promulgated thereunder with respect to each Plan. No fact or situation that is
reasonably likely to result in a material adverse change in the financial
condition of Borrowers or any of their Subsidiaries exists in connection with
any Plan. Neither Borrowers nor any of their Subsidiaries has any withdrawal
liability in connection with a Multiemployer Plan.

 

(m)           Not a Regulated
Entity.  No Obligor is (i) an
“investment company” or a “person directly or indirectly controlled by or
acting on behalf of an investment company” within the meaning of the Investment
Company Act of 1940; or (ii) a “holding company,” or a “subsidiary company” of
a “holding company,” or an “affiliate” of a “holding company” or of a
“subsidiary company” of a “holding company,” within the meaning of the Public
Utility Holding Company Act of 1935.

 

(n)           Margin Stock.  Neither Borrowers nor any of their
Subsidiaries is engaged, principally or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying any
margin stock.

 

(o)           Pledged Securities.  All Pledged Securities of any Obligor as of
the date hereof are listed on Schedule 8.1(o), and all of such Pledged
Securities are owned by such Obligor free and clear of any Lien or adverse
claim except any Lien granted to secure the Pre-Petition Term Loan, which Lien
shall be released concurrently with the funding of the initial Post-Petition
Loan. The Pledged Securities pledged hereunder by the Obligors constitute that
percentage of the issued and outstanding Equity Interests of each issuer
thereof as set forth on Schedule 8.1(o).  All of the Pledged Securities have been duly and validly issued
and are fully paid and nonassessable. Except as set forth on Schedule 8.1(o), all certificates or instruments
evidencing the Pledged Securities have been delivered to Lender.

 

17

 

(p)           Acquisition Agreement.  All of the representations and warranties
made by Borrowers in Articles III and IV of the Acquisition Agreement are true
and correct in all material respects.

 

(q)           Subsidiaries.  All of the direct and indirect Subsidiaries
of Borrowers are listed on Schedule 8.1(q).

 

Section 8.2             Reaffirmation
of Representations and Warranties. 
All of the foregoing representations and warranties made by any Obligor
in this Agreement or in any of the other DIP Financing Documents shall survive
the execution and delivery of this Agreement and such other DIP Financing
Documents, and shall be deemed to have been remade and reaffirmed on each day
that any Obligations are outstanding or that Borrowers request or are deemed to
have requested the funding of a Post-Petition Loan under the DIP Facility.

 

ARTICLE 9

COVENANTS AND CONTINUING AGREEMENTS

 

Section 9.1             Affirmative
Covenants.  During the DIP Term and
thereafter until Full Payment of the Obligations, each Obligor covenants that
it shall and shall cause each of its Subsidiaries to:

 

(a)           Business and Existence.  Preserve and maintain its separate corporate
existence and all rights, privileges, and franchises in connection therewith,
and maintain its qualification and good standing in all states in which such
qualification is necessary to the ownership of its Properties or the conduct of
its businesses.

 

(b)           Business Records.  Keep adequate records and books of account
with respect to its business activities in which proper entries are made in
accordance with GAAP reflecting all financial transactions.

 

(c)           Visits and Inspections.  Permit representatives of Lender, from time
to time, as often as may be reasonably requested, but only during normal
business hours, to visit and inspect the Properties of any Obligor or any
Subsidiary, inspect and make extracts from their books and records, and discuss
with their officers, employees and independent accountants, the business,
assets, liabilities, financial condition, business prospects and results of
operations of any Obligor or any Subsidiary.

 

(d)           Further Assurances.  At Lender’s request, promptly execute or
cause to be executed and deliver to Lender any and all documents, instruments
and agreements deemed necessary by Lender to give effect to or carry out the
terms or intent of this Agreement or any of the DIP Financing Documents.

 

(e)           Compliance With Orders.  To the extent having applicability to any
Obligor, comply with the Interim Financing Order, the Final Financing Order and
all other orders entered by the Court in the Chapter 11 Cases.

 

18

 

(f)            Financing of Company.  Provide financing in the minimum amount set
forth in the Budget, or such greater other amounts as Lender deems necessary to
enable Company and Guarantors to conduct normal business operations throughout
the DIP Term.

 

(g)           Financial Statements.  Cause to be prepared and to be furnished to
Lender the following:

 

(i)            as soon as available, and in any
event within 30 days after the end of each month hereafter, unaudited interim
consolidated financial statements of Parent and its Subsidiaries as of the end
of such month and the related unaudited consolidated statements of income and
cash flow for such month and for the portion of Parent’s Fiscal Year then
elapsed, certified by the chief financial officer of Parent as prepared in accordance
with GAAP and fairly presenting the consolidated financial position and results
of operations of Parent and its Subsidiaries for such month and period subject
only to changes from audit and year-end adjustments and the ongoing restatement
process and except that such statements need not contain notes;

 

(ii)           such other data and information
(financial or otherwise) as Lender, from time to time, may reasonably request,
bearing upon or related to the Collateral or any Obligor’s or any Subsidiary’s
financial condition or results of operations;

 

(iii)          promptly after the sending or filing
thereof, as the case may be, copies of any l0Qs, l0Ks and any proxy statements,
financial statements or reports which Parent has made generally available to
their shareholders and copies of any regular, periodic and special reports or
registration statements which Borrowers file with the SEC (or any other
Governmental Authority which may be substituted therefor), or any national
securities exchange; and

 

(iv)          on or before the third Business Day of
each week, (A) a report in form acceptable to Lender setting forth any
variances in actual cash receipts and expenditures from those projected in the
Budget and (B) an update to the Budget setting forth any changes therein reasonably
anticipated by Borrowers (it being understood that no such changes shall become
part of the Budget unless approved by Lender in writing).

 

Concurrently
with the delivery of the financial statements described in clause (i) of this
Section 9.1(g), or more frequently if requested by Lender during any period
that a Default or Event of Default exists, Borrowers shall cause to be prepared
and furnish to Lender a Compliance Certificate.

 

(h)           Notices.  Notify Lender in writing, promptly after
such Obligor’s obtaining knowledge thereof, of the termination or breach of any
Material Contract; the occurrence of any Default or Event of Default; such
Obligor’s violation (or asserted violation) of any Applicable Law (including
the Bankruptcy Code or any Environmental Law); any claim that such Obligor may
make under any policy of insurance with respect to the Collateral; any pleading
filed with the Court seeking relief from stay or conversion or dismissal of any
Chapter 11 Case; and any proposed sale of any of the Collateral (including with
such notice copies of drafts of all instruments and agreements applicable to
any such sale), which shall specify the identity of the proposed purchaser, the
terms of the proposed sale and the expected date of

 

19

 

closing, subject to Court
approval. Borrowers shall provide, or shall cause their counsel in its Chapter
11 Cases to provide, Lender’s counsel with copies of all pleadings, motions,
reports, applications and other papers filed by Borrowers with the Court as
well as copies of all billing and expense statements received from any
Professional Person.  Each Obligor shall
include counsel for Lender on any “Special Notice List” or other similar list
of parties to be served with papers in its Chapter 11 Case.

 

(i)            Insurance.  In addition to the insurance required herein
with respect to the Collateral, maintain with financially sound and reputable
insurers, insurance with respect to its Properties and business against such
casualties and contingencies of such type (including product liability,
business interruption, larceny, embezzlement or other criminal misappropriation
insurance) and in such amounts as is customary in the business of such Obligor.

 

(j)            Compliance With Laws.  Comply with all Applicable Law, including
ERISA, FLSA, OSHA, all Environmental Laws, the Bankruptcy Code and all laws,
statutes, regulations and ordinances regarding the collection, payment and
deposit of Taxes, and obtain and keep in force any and all Governmental Approvals
necessary to the ownership of its Properties or to the conduct of its business,
to the extent that any such failure to comply, obtain or keep in force could be
reasonably expected to have a Material Adverse Effect.

 

(k)           Taxes.  Pay and discharge all Taxes prior to the
date on which such Taxes become delinquent or penalties attach thereto, except
and to the extent only that such Taxes are being Properly Contested or are not
permitted to be paid currently under federal bankruptcy law.

 

(1)           Reports to the U.S. Trustee.  As soon as available, and in any event
within 2 Business Days after the filing thereof, provide to Lender a copy of
each report filed by any Obligor with the office of the United States Trustee.

 

(m)          Proposed Sale of Assets.  Promptly upon receipt thereof, provide to
Lender any and all documentation that in any way relates to a written
solicitation, offer, or proposed sale or disposition of any material amount of
real or personal Property of Parent or any of its Subsidiaries (other than
Company and any of the Guarantors), including letters of inquiry,
solicitations, letters of intent or asset purchase agreements.

 

(n)           Utility Deposits.  To the extent any Obligor has made or makes
any deposits for the benefit of utilities companies or any other Person, such
Obligor acknowledges that Lender has been granted a first priority perfected
Lien in such deposits, subject to any right of setoff by such utility company.
No Obligor shall use or transfer such deposits, and each Obligor hereby assigns
and sets over all such deposits to Lender, subject to any right of setoff by
such utility company.

 

(o)           Payment of Administrative Expenses.  Make all payments of (i) post-petition
operating costs and expenses as and when due and (ii) administrative costs and
expenses as and when such administrative costs and expenses are due and
payable, as approved by the Court.

 

(p)           Pledge of Stock of Guarantors.  Cooperate with Lender in executing all
collateral documents and taking all actions to enable Lender to obtain or
confirm, in accordance

 

20

 

with the laws of the
applicable foreign jurisdictions, valid, enforceable and perfected Liens in all
Equity Interests of each Guarantor on or before October 15, 2002. Borrowers’
failure to exert their diligent good faith efforts to achieve compliance with
this Section 9.l(p) by October 15, 2002 shall constitute an Event of Default.

 

(q)           Acquisition Agreement.  Comply with all covenants contained in
Article VI of the Acquisition Agreement which are incorporated herein by
reference with the same effect as if all such covenants were restated herein.

 

(r)            Other Information.  Promptly (and in any event within 5 Business
Days) after any request of Lender, deliver to Lender such additional financial
or other information concerning the acts, conduct, properties, assets,
liabilities, operations, businesses, financial condition or transactions of
Borrowers or any of their Subsidiaries, or concerning any matter which may
affect the administration of any Obligor’s Estate, as Lender may from time to
time reasonably request.

 

Section 9.2             Negative
Covenants.  During the DIP Term and
thereafter until Full Payment of the Obligations, each Obligor covenants that
it shall not and shall not permit any Subsidiary to:

 

(a)           Fundamental Changes.  Merge or consolidate with any Person,
acquire a material amount of assets of any Person, or liquidate, wind up its
affairs or dissolve itself.

 

(b)           Limitation on Liens.  Create or suffer to exist any Lien upon any
of its Property, income or profits, whether now owned or hereafter acquired,
except: (i) Liens in existence on the Petition Date as disclosed on Schedule
9.2(b) and not required to be terminated as noted thereon; (ii) Liens for
Taxes (excluding any Lien imposed pursuant to any of the provisions of ERISA)
not yet due or being Properly Contested; (iii) statutory Liens (excluding Liens
imposed pursuant to any of the provisions of ERISA) securing the claims or
demands of materialmen, mechanics, carriers, warehousemen, landlords and other
like Persons for labor, materials, supplies or rentals incurred in the Ordinary
Course of Business, but only if the payment thereof is not at the time required
or the Debt secured by such Lien is being Properly Contested; (iv) Liens
resulting from deposits made in the Ordinary Course of Business in connection
with workmen’s compensation, unemployment insurance, social security and other
like laws; (v) reservations, exceptions, easements, rights-of-way, and other
similar encumbrances affecting real Property of any Obligor that were in
existence on the Petition Date; (vi) Liens securing Permitted Purchase Money
Debt; and (vii) such other Liens as Lender may consent to in writing from time
to time, in its sole and absolute discretion.

 

(c)           Disposition of Assets.  Except as contemplated by the Acquisition
Agreement, sell, lease or otherwise dispose of any of their Property, including
any disposition of the Collateral as part of a sale and leaseback transaction,
to or in favor of any Person, except (i) sales of Inventory in the Ordinary
Course of Business for so long as no Event of Default exists hereunder, (ii)
dispositions of Equipment as authorized by Section 7.4 hereof, (iii)
dispositions of Property that are authorized by the Court after notice and
hearing, provided that the Net Proceeds thereof are remitted to Lender for
application to the Obligations as provided herein, (iv)

 

21

 

dispositions
which result in Full Payment of all of the Obligations and (v) the rejection
pursuant to Section 365 of the Bankruptcy Code of unexpired leases and
executory contracts.

 

(d)           Compromise of Accounts.  Compromise or settle, or extend the time of
payment of, any Account in excess of $250,000 without Lender’s prior written
consent.

 

(e)           Payment of Claims.  Make any payment of principal or interest on
account of any Claim against any Obligor that arose prior to the Petition Date,
other than rent under leases in existence on the Petition Date, Claims permitted
to be paid by the Budget and “first day orders” to the extent approved by order
of the Court, the Claims of Critical Vendors to the extent approved by Lender,
and any other payments authorized by the Court.

 

(f)            Filing of Motions and
Applications.  Apply to the Court
for authority to (i) take any action that is prohibited by the terms of any of
the DIP Financing Documents, (ii) refrain from taking any action that is
required to be taken by the terms of any of the DIP Financing Documents or the
Financing Orders (iii) permit any Debt or Claim to be pari passu with or senior
to any of the Obligations, or (iv) use any cash proceeds of the Collateral
other than in payment of the Obligations or as otherwise expressly authorized
herein.

 

(g)           Modifications to Orders.  Seek or consent to any amendment, supplement
or any other modification of any of the terms of the Financing Orders.

 

(h)           Restricted Investments.  Make or have any new Restricted Investment.

 

(i)            Distributions.  Make any Distribution, except Distributions
by a Subsidiary to a Borrower in cash or as otherwise expressly permitted by
the Budget.

 

(j)            Permitted Debt.  Incur or suffer to exist any Debt other than
Claims and Debt in existence on the Petition Date; the Obligations; Capitalized
Lease Obligations not to exceed $100,000.00 and Permitted Purchase Money Debt;
Debt (other than Debt for Money Borrowed, Capitalized Lease Obligations and
Permitted Purchase Money Debt) incurred in the Ordinary Course of Business
during the Chapter 11 Cases, so long as such Debt is not past due and payable
and is not secured by any Lien that is not a Permitted Lien; and Permitted
Contingent Obligations.

 

(k)           Conduct of Business.  Engage in any business other than the
business engaged in by it on the Petition Date and any business or activities
that are substantially similar, related or incidental thereto.

 

(1)           Use of Proceeds.  Use any proceeds of Post-Petition Loans for
a purpose that is not expressly permitted by Section 1.1(b).

 

(m)          Accounting Changes.  Change any method of accounting or
accounting practice used by it, except for any change required by GAAP or
Applicable Law.

 

(n)           Organization Documents.  Amend, modify or otherwise change any of the
terms or provisions in any of its Organization Documents as in effect on the
date hereof, except for changes that do not affect in any way any Borrower’s or
such Subsidiary’s rights and

 

22

 

obligations to enter into
and perform the DIP Financing Documents to which it is a party and to pay all
of the Obligations and that do not otherwise have a Material Adverse Effect.

 

(o)           Advances and Transfers to
Subsidiaries.  Notwithstanding
anything in this Agreement to the contrary, while Post-Petition Loans are
outstanding or while any Commitment exists, make any loans, advances or
transfers to any Subsidiaries other than loans by Borrowers to Subsidiaries to
pay expenditures permitted by the Budget or otherwise approved by Lender in
writing.

 

(p)           Budget.  Make or commit or agree to make, or permit
any of its Subsidiaries to make or commit or agree to make, any expenditures in
any given week or on a cumulative basis which are not set forth in the Budget,
subject to cumulative variances not to exceed five percent (5%) of such aggregate
expenditures.

 

ARTICLE 10

CONDITIONS PRECEDENT

 

Section 10.1           Conditions
Precedent to Initial Credit Extensions. 
Notwithstanding any other provision of this Agreement or any of the
other DIP Financing Documents, and without affecting in any manner the rights
of Lender under other sections of this Agreement, Lender shall not be required
to fund any Post-Petition Loan requested by Borrowers, unless, on or before
September 27, 2002, or the date of the Final Financing Order, as applicable,
each of the following conditions has been and continues thereafter to be
satisfied:

 

(a)           All of the DIP Financing Documents
(unless Section 9.1(p) applies) shall have been executed in form and substance
satisfactory to Lender by each of the signatories thereto and accepted by
Lender, and each Obligor shall be in compliance with all of the terms thereof,
and all representations and warranties contained therein shall be true and
correct in all material respects.

 

(b)           No Default or Event of Default shall
exist at the time of, and would not result from the funding of, any requested
Post-Petition Loan, and no event shall have occurred and no condition shall
exist since the Petition Date that has had or could reasonably be expected to
have a Material Adverse Effect.

 

(c)           The Interim Financing Order shall
have been entered, shall be in full force and effect and shall not have been
vacated, reversed, modified or stayed in any respect (and, if such order is the
subject of a pending appeal, no performance of any obligation of any party shall
have been stayed pending such appeal).

 

(d)           Lender shall have received
satisfactory proof of insurance by Obligors, in accordance with the terms of
this Agreement, and, no later than the date of the Final Financing Order,
evidence of loss payable endorsements naming Lender as loss payee with respect
to each policy and certified copies of Obligors’ liability insurance policies,
together with endorsements naming Lender as an additional insured.

 

23

 

(e)           No later than the date of the Final
Financing Order, Lender shall have received all certificates evidencing any of
the Pledged Securities, together with stock powers duly endorsed in blank
relating thereto.

 

(f)            Lender shall have received the
Budget and found it to be acceptable in form and substance.

 

(g)           All fees and expenses required to be
paid by Borrowers hereunder on the Closing Date shall have been paid in full.

 

Section 10.2           Conditions
Precedent to All Credit Extensions. 
Notwithstanding any other provision of this Agreement or any of the
other DIP Financing Documents, and without affecting in any manner the rights
of Lender under other sections of this Agreement, Lender shall not be required
to fund any Post-Petition Loan, unless and until each of the following
conditions has been and continues to be satisfied:

 

(a)           No Default or Event of Default exists
at the time, or would result from the funding, of any Post-Petition Loan or
other extension of credit.

 

(b)           No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court or Governmental Authority to enjoin, restrain or prohibit any
of the DIP Financing Documents or the consummation of any of the transactions
contemplated thereby.

 

(c)           No event shall have occurred and no
condition shall exist that could reasonably be expected to have a Material
Adverse Effect.

 

(d)           With respect to all Post-Petition
Loans requested after the sooner to occur of (i) the final hearing on the DIP
Motion or (ii) 30 days following the entry of the Interim Financing Order, the
Final Financing Order shall have been entered, shall be in full force and
effect and shall not have been vacated, reversed, modified, amended or stayed
without the prior written consent of Lender.

 

(e)           Lender shall have received an
officer’s certificate from Borrowers (i) demonstrating Borrowers’ compliance
with the Budget, (ii) certifying that Borrowers shall apply the proceeds of the
Post-Petition Loans only to Budgeted Expenses and (iii) containing a comparison
of the Budgeted Expenses to actual expenditures for the most recent week then
ended, all certified by a Senior Officer, in form and substance satisfactory to
Lender. The certificate required by this Section shall be provided to Lender on
a weekly basis.

 

(f)            All representations and warranties
contained within the Agreement and the Acquisition Agreement shall be true and
correct in all material respects.

 

(g)           Lender shall have received such other
information or documents regarding the requested Post-Petition Loan as Lender
may reasonably request.

 

Section 10.3           Limited
Waiver of Conditions Precedent.  If
Lender shall make any Post-Petition Loan or otherwise extend any credit to
Borrowers under this Agreement at a time when

 

24

 

any
of the foregoing conditions precedent are not satisfied (regardless of whether
the failure of satisfaction of any of such conditions precedent is known or
unknown to Lender), the funding of such Post-Petition Loan shall not operate as
a waiver of the right of Lender to insist upon the satisfaction of all
conditions precedent with respect to each subsequent Borrowing requested by
Borrowers or a waiver of any Default or Event of Default as a consequence of
the failure of any such conditions to be satisfied.

 

ARTICLE 11

EVENTS OF DEFAULT;

RIGHTS AND REMEDIES ON DEFAULT

 

Section 11.1           Events
of Default.  The occurrence of any
one or more of the following events shall constitute an “Event of Default”:

 

(a)           Payment of Obligations.  Borrowers shall fail to pay (i) the
principal of or accrued interest with respect to any Post-Petition Loan on the
due date thereof (whether due at stated maturity, on demand, upon acceleration
or otherwise) or within three Business Days of such due date or (ii) any of the
other Obligations on the due date thereof (whether due at stated maturity, upon
acceleration or otherwise), but if no due date is specified therefor, within
three Business Days after demand for payment of such Obligation.

 

(b)           Misrepresentations.  Any warranty, representation, or other
statement made or furnished to Lender by or on behalf of any Borrower or any
other Obligor or in any instrument, certificate or financial statement
furnished in compliance with or in reference to this Agreement or any of the
DIP Financing Documents proves to have been false or misleading in any material
respect when made or furnished.

 

(c)           Breach of Specific Covenants.  Any Borrower or any other Obligor shall fail
or neglect to perform, keep or observe any covenant contained in Section
1.l(b), Section 6.4, Section 7.1(a), 
Section 7.1(b), Section 7.4(b), Section 7.5(a), Section 9.1(a), Section
9.l(c), Section 9.l(d), Section 9.1(e), Section 9.1(g), Section 9.l(i), Section
9.1(t), Section 9.l(k) or Section 9.2 hereof on the date that such Borrower or
such Obligor is required to perform, keep or observe such covenant.

 

(d)           Breach of Other Covenants.  Any Borrower or any other Obligor shall fail
or neglect to perform, keep or observe any covenant contained in this Agreement
(other than a covenant which is dealt with specifically elsewhere in Section
11.1 hereof) and the breach of such other covenant is not cured to Lender’s
satisfaction within 10 days after the sooner to occur of any Senior Officer’s receipt
of notice of such breach from Lender or the date on which such failure or
neglect first becomes known to any Senior Officer; provided that if any such
breach is of a nature that is not reasonably susceptible of cure within such
10-day period, no Event of Default shall be deemed to have occurred hereunder
by reason thereof so long as Borrowers commence to cure such breach within such
10-day period and thereafter diligently pursue such cure to completion within
an additional 10-day period; and provided further, however, that such notice
and opportunity to cure shall not apply in the case of any failure to perform,
keep or observe any covenant which is not capable of being cured at all or
within such 10-day period or which is a willful and knowing breach by a
Borrower or such Obligor.

 

25

 

(e)           Default Under Other DIP Financing
Documents.  Any event of default
shall occur under, or any Borrower or any other Obligor shall default in the
performance or observance of any term, covenant, condition or agreement
contained in, any of the other DIP Financing Documents and such default shall
continue (i) beyond any applicable period of grace, or (ii) if no grace period
is specified within such DIP Financing Documents, within 10 days after the
sooner to occur of any Senior Officer’s receipt of notice of such breach from
Lender or the date on which such failure or neglect first becomes known to any
Senior Officer.

 

(f)            Cross-Defaults.  There shall occur any default or event of
default on the part of any Borrower or any other Obligor under any agreement,
document or instrument which is entered into after the Petition Date and which
relates to any Debt.

 

(g)           Uninsured Losses; Unauthorized
Dispositions.  There shall occur any
material loss, theft, damage or destruction not fully covered by insurance (as
required by this Agreement and subject to such deductibles as Lender shall have
agreed to in writing), or any sale, lease or encumbrance of any of the
Collateral or the making of any levy, seizure, or attachment thereof or
thereon, except as may be specifically permitted by other provisions of this
Agreement.

 

(h)           Certain Bankruptcy Events.  Any Borrower shall fail to comply with any
of the provisions of the Financing Orders in any material respect; a trustee
shall be appointed in any Chapter 11 Case; an examiner shall be appointed in
any Chapter 11 Case with enlarged powers (powers beyond those set forth in
Section 1106(a)(3) and (4) of the Bankruptcy Code) under Section 1106(b) of the
Bankruptcy Code; any Chapter 11 Case shall be dismissed or converted to a case
under Chapter 7; Borrowers shall obtain Court approval of a disclosure
statement for a Reorganization Plan other than an Acceptable Plan or a
Confirmation Order shall be entered with respect to a Reorganization Plan
proposed by a Person other than Borrowers if such Reorganization Plan is not an
Acceptable Plan; there shall be filed by Borrowers any motion to sell all or a
substantial part of the Collateral (excluding any Acquisition Transaction as
defined in the Acquisition Agreement) on terms that are not acceptable to
Lender in its sole discretion; the Final Financing Order is not entered by
October 22, 2002; any Borrower shall file any motion to alter, amend, vacate, supplement,
modify, or reconsider, in any respect, either of the Financing Orders or,
without Lender’s prior written consent, either of the Financing Orders is
amended, vacated, stayed, reversed or otherwise modified; the Court shall enter
an order granting to any Person (other than Lender) relief from the automatic
stay to foreclose upon a Lien with respect to any Property of any Borrower that
has an aggregate book value in excess of $250,000 or to terminate or otherwise
exercise remedies under any material agreement, document or instrument which is
entered into after the Petition Date, whether or not it relates to any Debt;
any Borrower shall file a motion or other request with the Court seeking
authority to use any cash proceeds of the Collateral or to obtain any financing
under Section 364(c) or Section 364(d) of the Bankruptcy Code or otherwise
secured by a Lien upon any Collateral (in each case (i) without Lender’s prior
written consent or (ii) if such motion fails to contemplate payment in full of
the Obligations); or, without Lender’s consent, any Obligor shall discontinue
or suspend all or any material part of its business operations or commence an
orderly wind-down or liquidation of any material part of the Collateral.

 

26

 

(i)            Failure of DIP Financing
Documents.  Any material covenant,
agreement or obligation of any Obligor contained in or evidenced by any of the
DIP Financing Documents shall cease to be enforceable or shall be determined to
be unenforceable in accordance with its terms other than by reason of Lender’s
actions; any Obligor shall deny or disaffirm its obligations under any of the
DIP Financing Documents or Liens granted in connection therewith; any Obligor
shall initiate or support (in any such case by way of any motion or other
pleading filed with the Court or any other writing to another party-in-interest
executed by or behalf of an Obligor) any other Person’s opposition of or
challenge to the enforceability, validity and priority of the DIP Financing
Documents or the Liens granted thereby; or the Liens granted in any of the
Collateral owned by any Obligor shall be determined to be voidable, invalid or
subordinated or shall be determined, with respect to any material part of the
Collateral owned by any Obligor, to be unperfected or not to have the priority
contemplated by this Agreement.

 

(j)            Guarantor Defaults.  Any Guarantor shall be in default under the
terms of any agreement, document or instrument which relates to any Debt for
Money Borrowed; or any Insolvency Proceeding shall be commenced by or against
any Guarantor.

 

(k)           Material Contracts.  Any Material Contract shall be terminated or
amended in any material respect without the prior written consent of Lender,
unless said contract is concurrently replaced with a comparable agreement on
comparable terms.

 

Section 11.2           Acceleration
of the Obligations.  Without in any
way limiting the right of Lender to demand payment of any portion of the
Obligations payable on demand in accordance with this Agreement, upon or at any
time after the occurrence of an Event of Default as above provided, Lender may,
in its discretion, (i) declare the principal of and any accrued interest on the
Post-Petition Loans and all other Obligations owing under any of the DIP
Financing Documents to be, whereupon the same shall become, without further
notice or demand (all of which notice and demand each Obligor expressly
waives), forthwith due and payable and Borrowers shall forthwith pay to Lender
the entire principal of and accrued and unpaid interest on the Post-Petition
Loans and other Obligations plus reasonable attorneys’ fees and expenses if
such principal and interest are collected by or through an attomey-at-law; and
(ii) terminate the Commitment.

 

Section 11.3           Remedies.  Subject to the Financing Orders, upon or at
any time after the occurrence of an Event of Default, Lender may, in its
discretion, exercise from time to time the following rights and remedies to
enforce collection of the Obligations (without prejudice to the rights of
Lender to enforce its Claims against any or all Obligors):

 

(a)           All of the rights and remedies of a
secured party under the UCC or under other Applicable Law, and all other legal
and equitable rights to which Lender may be entitled under any of the DIP
Financing Documents or the Financing Orders, all of which rights and remedies
shall be cumulative and shall be in addition to any other rights and remedies
contained in this Agreement or any of the other DIP Financing Documents, and none
of which shall be exclusive.

 

27

 

(b)           The right to collect Accounts,
Chattel Paper, Instruments and General Intangibles and all other rights of any
Obligor to the payment of money from any Person obligated therefor.

 

(c)           The right to take immediate
possession of all tangible items of the Collateral and (i) to require any
Obligor to assemble such Collateral, at such Obligor’s expense, and make it
available to Lender at a place designated by Lender that is reasonably
convenient to both parties and (ii) to enter any of the premises of any Obligor
or wherever any of the Collateral shall be located, and to keep and store the
same on said premises until sold (and if said premises be the Property of any
Obligor, such Obligor agrees not to charge Lender for storage thereof).

 

(d)           The right to sell or otherwise
dispose of all or any Inventory in its then condition, or after any further
manufacturing or processing thereof, at public or private sale or sales, with
such notice as may be required by law, in lots or in bulk, for cash or on
credit, all as Lender, in its sole discretion, may deem advisable; each Obligor
agrees that 10 days written notice to such Obligor of any public or private
sale or other disposition of such Collateral shall be reasonable notice
thereof, and such sale shall be at such locations as Lender may designate in
said notice. Lender shall have the right to conduct such sales on any Obligor’s
premises, without charge therefor, and such sales may be adjourned from time to
time in accordance with Applicable Law; Lender may sell, lease or otherwise
dispose of such Collateral, or any part thereof, for cash, credit or any
combination thereof, and Lender may purchase all or any part of such Collateral
at public or, if permitted by Applicable Law, private sale and, in lieu of
actual payment of such purchase price,, may set off the amount of such price
against the Obligations.

 

Section 11.4           Licenses
and Sale of Collateral.  Lender is
hereby irrevocably granted a license or other right to use, without charge,
which license or right can only be exercised upon an Event of Default, each
Obligor’s labels, patents, copyrights, rights of use of any name, trade
secrets, tradenames, trademarks and advertising matter, or any Property of a
similar nature, as it pertains to the Collateral, in advertising for sale and
selling any Collateral and each Obligor’s rights under all licenses and all
franchise agreements shall inure to Lender’s benefit, to the extent permissible
under the applicable agreement(s) and Applicable Law. Any proceeds realized
from the sale of any Collateral may be applied to the Obligations, after
allowing 2 Business Days for collection, to principal, interest, fees and
expenses (including Extraordinary Expenses) in such order and manner as Lender,
in its sole discretion, may determine.

 

Section 11.5           Setoff.  In addition to any Liens granted under any
of the DIP Financing Documents and any rights now or hereafter available under
Applicable Law, Lender (and each of its Affiliates) is hereby authorized by
each Obligor at any time that an Event of Default exists, without notice,
except as required by the Financing Orders, to such Obligor or any other Person
(any such notice being hereby expressly waived) to set off and to appropriate
and to apply any and all deposits, general or special (including Debt evidenced
by certificates of deposit whether matured or unmatured (but not including
trust accounts)) and any other Debt at any time held or owing by Lender, such Lender
or any of its Affiliates to or for the credit or the account of such Obligor
against and on account of the Obligations of such Obligor arising under the DIP
Financing Documents to Lender, or any of its Affiliates, including all
Post-Petition Loans and all claims of any nature or description arising out of
or in connection with this Agreement, irrespective of whether or not (i) Lender
shall have made any demand hereunder, (ii) Lender

 

28

 

shall have declared the
principal of and interest on the Post-Petition Loans and other amounts due
hereunder to be due and payable as permitted by this Agreement and even though
such Obligations may be contingent or unmatured or (iii) the Collateral for the
Obligations is adequate.

 

Section 11.6           Pledged
Securities.

 

(a)           After the occurrence of an Event of
Default, if Lender shall have given notice of its intent to exercise such
rights to the relevant Obligor or Obligors, (i) Lender shall have the right to
receive any and all cash dividends, payments or other proceeds paid in respect
of the Pledged Securities and make application thereof to the Obligations in
the order set forth herein, and (ii) Lender or its nominee may exercise (A) all
voting, consensual, corporate and other rights pertaining to the Pledged
Securities at any meeting of shareholders, partners or members, as the case may
be, of the relevant issuers of Pledged Securities or otherwise and (B) any and
all rights of conversion, exchange and subscription and any other rights,
privileges or options pertaining to the Pledged Securities as if it were the
absolute owner thereof (including the right to exchange at its discretion any
and all of the Pledged Securities upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate
structure of any issuer of Pledged Securities, the right to deposit and deliver
any and all of the Pledged Securities with any committee, depository, transfer
agent, registrar or other designated agency upon such terms and conditions as
Lender may determine), all without liability except to account for Property
actually received by it, but Lender shall have no duty to any Obligor to
exercise any such right, privilege or option and shall not be responsible for
any failure to do so or delay in so doing.

 

(b)           In order to permit Lender to exercise
the voting and other consensual rights which it may be entitled to exercise
pursuant hereto and to receive all dividends and other distributions which it
may be entitled to receive hereunder, (i) each Obligor shall promptly execute
and deliver (or cause to be executed and delivered) to Lender all such proxies,
dividend payment orders and other instruments as Lender may from time to time
reasonably request and (ii) without limiting the effect of clause (i) above,
each Obligor hereby grants to Lender an irrevocable proxy to vote all or any
part of the Pledged Securities and to exercise all of the rights, powers,
privileges and remedies to which a holder of the Pledged Securities would be
entitled, which proxy shall be effective, automatically and without the
necessity of any action (including any transfer of any Pledged Securities on
the record books of the issuer thereof) by any other Person (including the
issuer of such Pledged Securities or any officer or agent thereof), after the
occurrence of an Event of Default and which proxy shall only terminate upon the
Full Payment of the Obligations.

 

(c)           Each Obligor hereby expressly
authorizes and instructs each issuer of any Pledged Securities pledged
hereunder by such Obligor to (i) comply with any instruction received by it
from Lender in writing that (a) states that an Event of Default has occurred
and is continuing and (b) is otherwise in accordance with the terms of this
Agreement, without any other or further instructions from such Obligor, and
each Obligor agrees that such issuer shall be fully protected in so complying
and (ii) unless otherwise expressly permitted hereby, pay any dividends or
other payments with respect to the Pledged Securities directly to Lender.

 

29

 

Section 11.7           Remedies
Cumulative: No Waiver.

 

(a)           All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Obligors contained in this Agreement and the other DIP Financing Documents, or
in any document referred to herein or contained in any agreement supplementary
hereto or in any schedule given to Lender or contained in any other agreement
between Lender and any Obligor, heretofore, concurrently, or hereafter entered
into, shall be deemed cumulative to and not in derogation or substitution of
any of the terms, covenants, conditions, or agreements of Obligors herein
contained. The rights and remedies of Lender under this Agreement and the other
DIP Financing Documents shall be cumulative and not exclusive of any rights or
remedies that Lender would otherwise have.

 

(b)           The failure or delay of Lender to
require strict performance by any Obligor of any provision of any of the DIP
Financing Documents or to exercise or enforce any rights, Liens, powers or
remedies under any of the DIP Financing Documents or with respect to any
Collateral shall not operate as a waiver of such performance, Liens, rights,
powers and remedies, but all such requirements, Liens, rights, powers, and
remedies shall continue in full force and effect until all Loans and all other
Obligations owing or to become owing from Obligors to Lender shall have been
fully satisfied.  None of the undertakings,
agreements, warranties, covenants and representations of any Obligor contained
in this Agreement or any of the other DIP Financing Documents and no Event of
Default by Borrowers under this Agreement or any other DIP Financing Documents
shall be deemed to have been suspended or waived by Lender, unless such
suspension or waiver is by an instrument in writing specifying such suspension
or waiver and is signed by a duly authorized representative of Lender and
directed to Borrowers.

 

(c)           If Lender shall accept performance by
any Obligor, in whole or in part, of any obligation that such Obligor is
required by any of the DIP Financing Documents to perform only when a Default
or Event of Default exists, or if Lender shall exercise any right or remedy
under any of the DIP Financing Documents that may not be exercised other than
when a Default or Event of Default exists, Lender’s acceptance of such
performance by such Obligor or Lender’s exercise of any such right or remedy
shall not operate to waive any such Event of Default or to preclude the
exercise by Lender of any other right or remedy, unless otherwise expressly
agreed in writing by Lender, as the case may be.

 

ARTICLE 12

BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS

 

Section 12.1           Successors
and Assigns.  This Agreement shall
be binding upon and inure to the benefit of Obligors, Lender and their
respective successors and assigns, except that (a) no Obligor shall have any
right to assign its rights or delegate performance of any of its obligations
under any of the DIP Financing Documents and (b) any assignment by Lender must
be made in compliance with Section 12.3 hereof. Any assignee or transferee of a
Note agrees by acceptance thereof to be bound by all the terms and provisions
of the DIP Financing Documents. Any request, authority or consent of any
Person, who at the time of making such request or giving such authority or
consent is the holder of a Note, shall be conclusive and binding on any

 

30

 

subsequent holder,
transferee or assignee of such Note or of any Note or Notes issued in exchange
therefor.

 

Section 12.2           Participations.

 

(a)           Permitted Participants;  Effect. 
Lender may, in accordance with Applicable Law, at any time sell to one
or more Affiliates, banks or other financial institutions (each a “Participant”) a participating interest
in any of the Obligations owing to Lender, any Commitment of Lender or any
other interest of Lender under any of the DIP Financing Documents.  In the event of any such sale by Lender of
participating interests to a Participant, Lender’s obligations under the DIP.
Financing Documents shall remain unchanged, Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, Lender shall remain the holder of any Note for all purposes under
the DIP Financing Documents, all amounts payable by any Obligor under this
Agreement and any of the Notes shall be determined as if Lender had not sold
such participating interests, and Borrowers shall continue to deal solely and
directly with Lender in connection with Lender’s rights and obligations under
the DIP Financing Documents. If Lender sells a participation to a Person other
than an Affiliate of Lender, then Lender shall give prompt written notice
thereof to Borrowers.

 

(b)           Voting Rights.  Lender shall retain the sole right to
approve, without the consent of any Participant, any amendment, modification or
waiver of any provision of the DIP Financing Documents other than an amendment,
modification or waiver with respect to any Post-Petition Loans or Commitment in
which such Participant has an interest which forgives principal, interest or
fees or reduces the stated interest rate or the stated rates at which fees are
payable with respect to any such Post-Petition Loan or Commitment, postpones
the Commitment Termination Date, or any date fixed for any regularly scheduled
payment of interest or fees on such Post-Petition Loan or Commitment, or
releases from liability Borrowers or any Guarantor or releases any substantial
portion of any of the Collateral.

 

(c)           Benefit of Set-Off.  Each Obligor agrees that each Participant
shall be deemed to have the right of set-off provided in Section 11.5 hereof in
respect of its participating interest in amounts owing under the DIP Financing
Documents to the same extent and subject to the same requirements under this
Agreement as if the amount of its participating interest were owing directly to
it as Lender under the DIP Financing Documents, provided that Lender shall
retain the right of set-off provided in Section 11.5 hereof with respect to the
amount of participating interests sold to each Participant.  Lender agrees to share with each
Participant, and each Participant by exercising the right of set-off provided
in Section 11.5 agrees to share with Lender, any amount received pursuant to
the exercise of its right of set-off.

 

Section 12.3  Assignments.

 

(a)           Permitted Assignments.  Lender may, in accordance with Applicable
Law, at any time assign to any Eligible Assignee any part (but not all) of its
rights and obligations under the DIP Financing Documents, so long as (i) each
assignment is of a constant, and not a varying, ratable percentage of all of
the transferor Lender’s rights and obligations under the DIP Financing
Documents with respect to the Post-Petition Loans and is in a minimum principal
amount of $1,000,000; and (ii) immediately after giving effect to any
assignment, the aggregate

 

31

 

amount of the Commitment
retained by the transferor Lender shall in no event be less than $500,000. Each
assignee shall be deemed to have consented and be subject to, and to be bound
by the terms of, all of the DIP Financing Documents.

 

(b)           Effect; Effective Date. On and
after the effective date of any assignment, such Eligible Assignee shall for
all purposes be a Lender party to the Agreement and any other DIP Financing
Document executed by Lender and shall have all the rights and obligations of
Lender under the DIP Financing Documents to the same extent as if it were an
original party thereto, and no further consent or action by any Obligor shall
be required to release the transferor Lender with respect to the Commitment (or
portion thereof) of such Lender and Obligations assigned to such Eligible
Assignee.  Upon the consummation of any
assignment to an Eligible Assignee pursuant to this Section 12.3(b), the
transferor Lender and Borrowers shall make appropriate arrangements so that
replacement Notes are issued to such transferor Lender and new Notes or, as
appropriate, replacement Notes, are issued to such Eligible Assignee, in each
case in principal amounts reflecting their respective Commitments, as adjusted
pursuant to such assignment.  The
transferring Lender shall continue to be entitled to the benefits of all
indemnities applicable to the period prior to the effective date of the
assignment.

 

(c)           Dissemination of Information.  Borrowers authorize Lender to disclose to
any Participant, any Eligible Assignee or any other Person acquiring an
interest in the DIP Financing Documents by operation of law (each a “Transferee”), and any prospective Transferee,
any and all information in Lender’s possession concerning Borrowers, the
Subsidiaries of Borrowers or the Collateral, subject to appropriate
confidentiality undertakings on the part of such Transferee.

 

ARTICLE 13

MISCELLANEOUS

 

Section 13.1          Power
of Attorney.  Each Obligor hereby
irrevocably designates, makes, constitutes and appoints Lender (and all Persons
designated by Lender) as such Obligor’s true and lawful attorney (and
Lender-in-fact) and Lender, or Lender’s designee, may, without notice to such
Obligor and in either such Obligor’s or Lender’s name, but at the cost and
expense of such Obligor:

 

(a)           At such time or times as Lender or
said designee, in its sole discretion, may determine, endorse such Obligor’s
name on any Payment Item or proceeds of the Collateral which come into the
possession of Lender or under Lender’s control.

 

(b)           At any time that an Event of Default
exists and subject to any notice  required under the Financing Orders: 
(i) demand payment of the Accounts from the Account Debtors, enforce
payment of the Accounts by legal proceedings or otherwise, and generally
exercise all of such Obligor’s rights and remedies with respect to the
collection of the Accounts; (ii) settle, adjust, compromise, discharge or
release any of the Accounts or other Collateral or any legal proceedings
brought to collect any of the Accounts or other Collateral; (iii) sell or
assign any of the Accounts and other Collateral upon such terms, for such
amounts and at such time or times as Lender deems advisable; (iv) take control,
in any manner, of any item of payment or proceeds relating to any Collateral;
(v) prepare, file and sign such Obligor’s name to a proof of

 

32

 

claim in bankruptcy or
similar document against any Account Debtor or to any notice of lien,
assignment or satisfaction of Lien or similar document in connection with any
of the Collateral; (vi) receive, open and dispose of all mail addressed to such
Obligor and to notify postal authorities to change the address for delivery
thereof to such address as Lender may designate; (vii) endorse the name of such
Obligor upon any of the items of payment or proceeds relating to any Collateral
and deposit the same to the account of Lender on account of the Obligations;
(viii) endorse the name of such Obligor upon any chattel paper, document,
instrument, invoice, freight bill, bill of lading or similar document or
agreement relating to any Accounts or Inventory of any Obligor and any other
Collateral; (ix) use such Obligor’s stationery and sign the name of such
Obligor to verifications of the Accounts and notices thereof to Account
Debtors; (x) use the information recorded on or contained in any data
processing equipment and computer hardware and software relating to the
Accounts, Inventory and any other Collateral; (xi) make and adjust claims under
policies of insurance; and (xii) do all other acts and things necessary, in
Lender’s determination, to fulfill such Obligor’s obligations under this
Agreement.

 

Section 13.2           General
Indemnity.  Each Obligor hereby
agrees to indemnify and defend the Indemnitees and to hold the Indemnitees
harmless from and against any Claim ever suffered or incurred by any of the
Indemnitees arising out of or related to this Agreement or any of the other DIP
Financing Documents, the performance by Lender of its duties or the exercise of
any of its rights or remedies hereunder, or the result of such Obligor’s
failure to observe, perform or discharge any of such Obligor’s duties
hereunder. Each Obligor shall also indemnify and defend the Indemnitees against
and save the Indemnitees harmless from all Claims of any Person arising out of,
related to, or with respect to any transactions entered into pursuant to this
Agreement or Lender’s Lien arising from the DIP Financing Documents upon the
Collateral. Without limiting the generality of the foregoing, these indemnities
shall extend to any Claims asserted against any of the Indemnitees by any
Person under any Environmental Laws or similar laws by reason of such Obligor’s
or any other Person’s failure to comply with laws applicable to Hazardous
Materials. Additionally, if any Taxes (excluding Taxes imposed upon or measured
solely by the net income of Lender, but including, any intangibles tax, stamp
tax, recording tax or franchise tax) shall be payable by Lender, or any Obligor
on account of the execution or delivery of this Agreement, or the execution,
delivery, issuance or recording of any of the other DIP Financing Documents, or
the creation or repayment of any of the Obligations hereunder, by reason of any
Applicable Law now or hereafter in effect, such Obligor shall pay (or will
promptly reimburse Lender for the payment of) all such Taxes, including any
interest and penalties thereon, and will indemnify and hold Indemnitees
harmless from and against liability in connection therewith. The foregoing
indemnities shall not apply to protect any of the Indemnitees for the
consequences of their own gross negligence or willful misconduct.

 

Section 13.3           Survival
of All Indemnities.  Notwithstanding
anything to the contrary in this Agreement or any of the other DIP Financing
Documents, the obligation of each Obligor and Lender with respect to each
indemnity given by it in this Agreement shall survive the Full Payment of the
Obligations and the termination of any of the Commitment.

 

Section 13.4           Indulgences
Not Waivers.  Lender’s failure at
any time or times hereafter to require strict performance by any Obligor of any
provision of this Agreement shall not waive, affect or diminish any right of
Lender thereafter to demand strict compliance and performance therewith.

 

33

 

Section 13.5           Modification
of Agreement.  This Agreement may
not be modified, altered or amended, except by an agreement in writing signed
by Obligors and Lender.

 

Section 13.6           Severability.  Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under Applicable Law, but if any provision of this Agreement shall be
prohibited by or invalid under Applicable Law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.

 

Section 13.7           Cumulative
Effect: Conflict of Terms.  To the
fullest extent permitted by Applicable Law, the provisions of the Security
Documents are hereby made cumulative with the provisions of this Agreement.
Except as otherwise provided in any of the other DIP Financing Documents by
specific reference to the applicable provision of this Agreement, if any provision
contained in this Agreement is in direct conflict with, or inconsistent with,
any provision in any of the other DIP Financing Documents (other than the
Financing Orders), the provision contained in this Agreement shall govern and
control; in the event that any provision in this Agreement is in direct
conflict with, or inconsistent with, any provisions of the Financing Orders,
the provisions of the Financing Orders shall govern and control.

 

Section 13.8           Execution
in Counterparts.  This Agreement and
any amendments hereto may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same instrument.

 

Section 13.9           Lender’s
Consent.  Whenever Lender’s consent
is required to be obtained under this Agreement or any of the other DIP
Financing Documents as a condition to any action, inaction, condition or event,
Lender shall be authorized to give or withhold its consent in its sole and
absolute discretion, unless expressly stated otherwise.

 

Section 13.10         Notices.  All notices, requests and demands to or upon
a party hereto shall be in writing and shall be sent by certified or registered
mail, return receipt requested, personal delivery against receipt or by
telecopier or other facsimile transmission and shall be deemed to have been
validly served, given or delivered when delivered against receipt or 3 Business
Days after deposit in the U.S. mail, certified mail postage prepaid, or, in the
case of facsimile transmission, when received (if on a Business Day and, if not
received on a Business Day, then on the next Business Day after receipt) at the
office where the noticed party’s telecopier is located, in each case addressed
to the noticed party at the address shown for such party on the signature page
hereof. Notwithstanding the foregoing, no notice to or upon Lender pursuant to
Section 3.1 or Section 5.2(b) shall be effective until actually received by the
individual to whose attention at Lender such notice is required to be sent. Any
written notice or demand that is not sent in conformity with the provisions
hereof shall nevertheless be effective on the date that such notice is actually
received by the noticed party.

 

Section 13.11         Performance
of Borrowers’ Obligations.  If any
Obligor shall fail to discharge any covenant, duty or obligation hereunder or
under any of the other DIP Financing Documents, Lender may, in its sole
discretion at any time or from time to time, for the Obligor’s account and at
the Obligor’s expense, pay any amount or do any act required of Obligor

 

34

 

hereunder
or under any of the DIP Financing Documents or otherwise lawfully requested by
Lender to enforce any of the DIP Financing Documents or Obligations, preserve,
protect, insure or maintain any of the Collateral, or preserve, defend, protect
or maintain the validity or priority of Lender’s Liens in any of the
Collateral, including the payment of any judgment against any Obligor, any
insurance premium, any warehouse charge, any finishing or processing charge,
any landlord claim, any other Lien upon or with respect to any of the
Collateral. All payments that Lender may make under this Section and all
out-of-pocket costs and expenses (including Extraordinary Expenses) that Lender
pays or incurs in connection with any action taken by it hereunder shall be
reimbursed to Lender by any Obligor on demand with interest from the date such
payment is made or such costs or expenses are incurred to the date of payment
thereof at the Default Rate applicable for Post-Petition Loans. Any payment
made or other action taken by Lender under this Section shall be without
prejudice to any right to assert, and without waiver of, an Event of Default
hereunder and to proceed thereafter as provided herein or in any of the other
DIP Financing Documents.

 

Section 13.12         Time
of Essence.  Time is of the essence
of this Agreement and the Security Documents.

 

Section 13.13         Entire
Agreement: Appendix A, Exhibits and Schedules.  This Agreement and the other DIP Financing Documents, together
with all other instruments, agreements and certificates executed by the parties
in connection therewith or with reference thereto, embody the entire
understanding and agreement between the parties hereto and thereto with respect
to the subject matter hereof and thereof and supersede all prior agreements,
understandings and inducements, whether express or implied, oral or written.
Appendix A, each of the Exhibits and each of the Schedules attached hereto are
incorporated into this Agreement and by this reference made a part hereof.

 

Section 13.14         Interpretation.  No provision of this Agreement or any of the
other DIP Financing Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having, or being deemed to have, structured,
drafted or dictated such provision.

 

Section 13.15         Governing
Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware.

 

Section 13.16         Waivers
by Obligors.  To the fullest extent
permitted by Applicable Law, each Obligor waives (a) the right to trial by jury
(which Lender hereby also waives) in any action, suit, proceeding or
counterclaim of any kind arising out of or related to any of the DIP Financing
Documents, the Obligations or the Collateral; (b) presentment, demand and
protest and notice of presentment, protest, default, non payment, maturity,
release, compromise, settlement, extension or renewal of any or all commercial
paper, accounts, contract rights, documents, instruments, chattel paper and
guaranties at any time held by Lender on which each Obligor may in any way be
liable and hereby ratifies and confirms whatever Lender may do in this regard;
(c) except as provided in the Financing Orders, notice prior to taking
possession or control of the Collateral or any bond or security which might be
required by any court prior to allowing Lender to exercise any of Lender’s
remedies; (d) the benefit of all valuation, appraisement and exemption laws;
and (e) notice of acceptance hereof. Each Obligor

 

35

 

acknowledges that the
foregoing waivers are a material inducement to Lender’s entering into this
Agreement and that Lender is relying upon the foregoing waivers in its future
dealings with Obligors. Each Obligor warrants and represents that it has
reviewed the foregoing waivers with its legal counsel and has knowingly and
voluntarily waived its jury trial rights following consultation with legal
counsel. In the event of litigation, this Agreement may be filed as a written
consent to a trial by the court in which such litigation is brought.

 

Section 13.17  Release.  BORROWERS, IN THEIR OWN RIGHT AND ON BEHALF OF THEIR RESPECTIVE
ESTATES, REPRESENTATIVES, DIRECTORS, OFFICERS, EMPLOYEES, INDEPENDENT
CONTRACTORS, ATTORNEYS AND AGENTS, AND THEIR SUCCESSORS AND ASSIGNS
(COLLECTIVELY, THE “RELEASING PARTIES”),  HEREBY JOINTLY AND SEVERALLY RELEASE,
ACQUIT, AND FOREVER DISCHARGE LENDER AND ITS REPRESENTATIVES, DIRECTORS,
OFFICERS, EMPLOYEES, INDEPENDENT CONTRACTORS, ATTORNEYS AND AGENTS, AND THEIR
SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE “RELEASED
PARTIES”). FROM ANY  AND
ALL ACTS AND OMISSIONS OF THE RELEASED PARTIES, AND FROM ANY AND ALL CLAIMS,
CAUSES OF ACTION, AVOIDANCE ACTIONS, COUNTERCLAIMS, DEMANDS, CONTROVERSIES,
COSTS, DEBTS, SUMS OF MONEY, ACCOUNTS, RECKONINGS, BONDS, BILLS, DAMAGES,
OBLIGATIONS, LIABILITIES, OBJECTIONS, LEGAL PROCEEDINGS, EQUITABLE PROCEEDINGS,
AND EXECUTIONS OF ANY NATURE, TYPE, OR DESCRIPTION WHICH THE RELEASING PARTIES
HAVE OR MAY COME TO HAVE AGAINST THE RELEASED PARTIES, WHETHER DIRECTLY,
INDIRECTLY OR DERIVATIVELY, WHETHER OR NOT IN CONNECTION WITH OR RELATED TO THE
DIP FINANCING DOCUMENTS OR ANY MATTER OR DOCUMENT RELATED HERETO, AT LAW OR IN
EQUITY, BY STATUTE OR COMMON LAW, IN CONTRACT, IN TORT, WHETHER THE LAW OF THE
UNITD STATES OR ANY OTHER COUNTRY, UNION, ORGANIZATION OF FOREIGN COUNTRIES OR
OTHERWISE, KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED, BUT EXCLUDING
OBLIGATIONS OF LENDER UNDER THE ACQUISITION AGREEMENT AND THE DIP FINANCING
DOCUMENTS (THE “RELEASED CLAIMS”).
BORROWERS FURTHER COVENANT NOT TO SUE THE RELEASED PARTIES ON ACCOUNT OF ANY
RELEASED CLAIM. THIS SECTION IS IN ADDITION TO AND SHALL NOT IN ANY WAY LIMIT
ANY OTHER RELEASE, COVENANT NOT TO SUE, OR WAIVER BY THE RELEASING PARTIES IN FAVOR
OF THE RELEASED PARTIES.

 

[The remainder of this page is intentionally left blank. Signature
pages follow.]

 

36

 

IN
WITNESS WHEREOF, this Agreement has been duly executed on the day and year
specified at the beginning of this Agreement.

 

	
   

  	
  BORROWERS:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PEREGRINE
  SYSTEMS, INC., a
  Delaware corporation

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ken Sexton

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
  Telecopier No:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PEREGRINE
  REMEDY, INC., a
  Delaware corporation

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ken
  Sexton

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
  Telecopier No:

  	
   

  	
   

  
							

 

 

IN
WITNESS WHEREOF, this Agreement has been duly executed on the day and year
specified at the beginning of this Agreement.

 

	
   

  	
  BORROWERS:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PEREGRINE
  SYSTEMS, INC., a
  Delaware corporation

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:
  2611 Valley Centre Drive, Floor 5

  	
   

  
	
   

  	
   

  	
  San Diego, California
  92130 

  	
   

  
	
   

  	
   

  	
  Telecopier
  No: 858-481-1751

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PEREGRINE
  REMEDY, INC., a
  Delaware corporation

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:
  1585 Charleston Road

  	
   

  
	
   

  	
   

  	
  Mountain View, California
  94043 

  	
   

  
	
   

  	
   

  	
  Telecopier
  No: 650-903-5200

  	
   

  
						

 

 

	
   

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  PEREGRINE
  SYSTEMS GLOBAL LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ken Sexton

  	
   

  
	
   

  	
  Name:

  	
  Ken Sexton

  	
   

  
	
   

  	
  Title:

  	
  Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Address:
  2611 Valley Centre Drive, Floor 5

  
	
   

  	
   

  	
  San Diego, California
  92130

  
	
   

  	
   

  	
  Telecopier
  No: 858-481 -1751

  
	
   

  	
   

  
	
   

  	
  REMEDY
  SOFTWARE IRELAND, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ken Sexton

  	
   

  
	
   

  	
  Name:

  	
  Ken Sexton

  	
   

  
	
   

  	
  Title:

  	
  Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Address:
  1585 Charleston Road

  
	
   

  	
   

  	
  Mountain
  View, California 94043 

  	 

	
   

  	
   

  	
  Telecopier
  No: 650-903-5200

  
						

 

 

	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  BMC SOFTWARE, INC., a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert
  H. [ILLEGIBILE]

  	
   

  
	
   

  	
  Name:

  	
  Robert H.
  [ILLEGIBILE]

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice
  President Land General Counsel

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Address:
  2101 City West Boulevard

  
	
   

  	
   

  	
  Houston, Texas 77042-2827

  
	
   

  	
   

  	
  Telecopier
  No: 713-918-8000

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00065-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00065-of-00352.parquet"}]]