-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TSSBhsxp28d/EwKsgzYnl+hyEIEGd4lo/GuGvzhw7ydpgdnZJZuLAXxV3AwS13Cj DX9PXXAlUYzrhFCZZ2nPgA== 0001012870-02-001823.txt : 20020417 0001012870-02-001823.hdr.sgml : 20020417 ACCESSION NUMBER: 0001012870-02-001823 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20011130 FILED AS OF DATE: 20020417 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PALM INC CENTRAL INDEX KEY: 0001100389 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER TERMINALS [3575] IRS NUMBER: 943150688 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-29597 FILM NUMBER: 02613609 BUSINESS ADDRESS: STREET 1: 5470 GREAT AMERICA PARKWAY CITY: SANTA CLARA STATE: CA ZIP: 95052 BUSINESS PHONE: 4088789000 MAIL ADDRESS: STREET 1: 5470 GREAT AMERICA PARKWAY CITY: SANTA CLARA STATE: CA ZIP: 95052-8145 10-Q/A 1 d10qa.txt FORM 10-Q/A ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended November 30, 2001 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 000-29597 ------------------------------- Palm, Inc. (Exact name of registrant as specified in its charter) Delaware 94-3150688 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5470 Great America Parkway 95052 Santa Clara, California ----- -------------------------- (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (408) 878-9000 Former name, former address and former fiscal year, if changed since last report: N/A Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of December 28, 2001, 577,508,708 shares of the Registrant's Common Stock were outstanding. ================================================================================ Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. Exhibit Number Description ------- ----------- 2.1(1) Master Separation and Distribution Agreement between 3Com and the registrant effective as of December 13, 1999, as amended. 2.2(2) General Assignment and Assumption Agreement between 3Com and the registrant, as amended. 2.3(2) Master Technology Ownership and License Agreement between 3Com and the registrant. 2.4(2) Master Patent Ownership and License Agreement between 3Com and the registrant. 2.5(2) Master Trademark Ownership and License Agreement between 3Com and the registrant. 2.6(2) Employee Matters Agreement between 3Com and the registrant. 2.7(2) Tax Sharing Agreement between 3Com and the registrant. 2.8(2) Master Transitional Services Agreement between 3Com and the registrant. 2.9(2) Real Estate Matters Agreement between 3Com and the registrant. 2.10(2) Master Confidential Disclosure Agreement between 3Com and the registrant. 2.11(2) Indemnification and Insurance Matters Agreement between 3Com and the registrant. 2.12(1) Form of Non-U.S. Plan. 3.1(1) Amended and Restated Certificate of Incorporation. 3.2(9) Amended and Restated Bylaws. 3.3(5) Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock. 4.1 Reference is made to Exhibits 3.1, 3.2 and 3.3 hereof. 4.2 * Specimen Stock Certificate. 4.3(5) Preferred Stock Rights Agreement between the Registrant and Fleet National Bank. 4.4 5% Convertible Subordinated Note Due 2006, dated as of December 6, 2001. 10.1(9) 1999 Stock Plan, as amended. 10.2(1) Form of 1999 Stock Plan Agreements. 10.3(1) 1999 Employee Stock Purchase Plan. 10.4(1) Form of 1999 Employee Stock Purchase Plan Agreements. 10.5(3) Amended and Restated 1999 Director Option Plan. 10.6(1) Form of 1999 Director Option Plan Agreements. 10.7(1) Management Retention Agreement dated as of December 1, 1999 by and between Carl J. Yankowski and the registrant. 10.8(1) Form of Indemnification Agreement entered into by the registrant with each of its directors and executive officers. 10.9(1)** RAM Mobile Data USA Limited Partnership Value Added Reseller Agreement between RAM Mobile Data USA Limited Partnership (now Cingular Wireless) and the registrant. 2 10.10(1)** Supply Agreement between Manufacturers' Services Salt Lake City Operations, Inc. and the registrant. 10.11(1) Common Stock Purchase Agreement between America Online (now AOL Time Warner) and the registrant. 10.12(1) Common Stock Purchase Agreement between Motorola and the registrant. 10.13(1) Common Stock Purchase Agreement Between Nokia and the registrant. 10.14(1) Form of Management Retention Agreement. 10.15(4) Agreement for Purchase and Sale of Land between 3Com Corporation and the registrant. 10.16(6) Master Lease dated as of November 16, 2000 by and between the registrant and Societe Generale Financial Corporation, as supplemented. 10.17(6) Participation Agreement dated as of November 16, 2000 by and among the registrant, Societe Generale Financial Corporation, Societe Generale and certain other parties. 10.18(6) Guaranty dated as of November 16, 2000 by and between the registrant and Societe Generale, New York Branch. 10.19(7)** First Amendment to Supply Agreement between Manufacturers' Services Salt Lake City Operations, Inc. and the registrant. 10.20(8) Amended and Restated Lease, dated as of May 31, 2001, between the registrant and Societe Generale Financial Corporation, as supplemented. 10.21(8) Termination Agreement, dated as of May 31, 2001, between the registrant, Societe Generale Financial Corporation, Societe Generale and certain other parties. 10.22(9)+ Loan and Security Agreement by and among the registrant, Foothill Capital Corporation, Heller Financial, Inc. and The CIT Group/Business Credit, Inc. dated as of June 25, 2001. 10.23(9)+ Amendment Number One to Loan Agreement by and among the registrant, Foothill Capital Corporation, Heller Financial, Inc. and The CIT Group/Business Credit, Inc. dated as of August 6, 2001. 10.24(9) Employment Offer Letter for David C. Nagel dated September 13, 2001. 10.25 + Agreement and General Release of All Claims between the registrant and Carl J. Yanowski dated as of November 8, 2001. 10.26 + Convertible Note Purchase Agreement dated December 6, 2001. 10.27 Registration Rights Agreement dated as of December 6, 2001. 10.28 + Amendment Number Two to Loan Agreement by and among the registrant, Foothill Capital Corporation, Heller Financial, Inc. and The CIT Group/Business Credit, Inc. dated as of November 30, 2001. 10.29 + Loan Agreement by and among Palm Europe Limited, Foothill Capital Corporation, Heller Financial, Inc. and The CIT Group/Business Credit, Inc. dated as of November 30, 2001. 10.30* + Guarantee and Debenture by and between Palm Europe Limited and Foothill Capital Corporation dated as of November 30, 2001. 10.31* General Continuing Guaranty by the registrant in favor of Foothill Capital Corporation, Heller Financial, Inc. and The CIT Group/Business Credit, Inc. dated as of November 30, 2001. 10.32* Share Charge by and between Palm Ireland Investment and Foothill Capital Corporation dated as of November 30, 2001. 10.33 + Loan Agreement by and among Palm Global Operations Ltd., Foothill Capital Corporation, Heller Financial, Inc., and The CIT Group/Business Credit, Inc. dated as of November 30, 2001. 10.34* Guarantee and Debenture by and between Palm Global Operations Limited and Foothill Capital Corporation dated as of January 7, 2002. 3 10.35* General Continuing Guaranty by the registrant in favor of Foothill Capital Corporation, Heller Financial, Inc. and The CIT Group/Business Credit, Inc. dated as of November 30, 2001. 10.36* Share Charge by and between Palm Ireland Investment and Foothill Capital Corporation dated as of November 30, 2001. 10.37*+ Amendment Number One to Value Added Reseller Agreement between Cingular Interactive, L.P. (formerly known as BellSouth Wireless Data, L.P., which was formerly known as RAM Mobile Data USA Limited Partnership) and the registrant. (1)- Incorporated by reference from the Registrant's Registration Statement on Form S-1 (No. 333-92657) filed with the Commission on December 13, 1999, as amended. (2)- Incorporated by reference from the Registrant's Report on Form 10-Q filed with the Commission on April 10, 2000. (3)- Incorporated by reference from the Registration Statement on Form S-8 filed with the Commission on October 2, 2000. (4)- Incorporated by reference from the Registrant's Report on Form 10-Q filed with the Commission on October 12, 2000. (5)- Incorporated by reference from the Registrant's Report on Form 8-K filed with the Commission on November 22, 2000. (6)- Incorporated by reference from the Registrant's Report on Form 8-K filed with the Commission on December 1, 2000. (7)- Incorporated by reference from the Registrant's Report on Form 10-Q filed with the Commission on April 11, 2001. (8)- Incorporated by reference from the Registrant's Report on Form 8-K filed with the Commission on June 15, 2001. (9)- Incorporated by reference from the Registrant's Report on Form 10-Q filed with the Commission on October 15, 2001, as amended. *- Previously filed. **- Confidential treatment granted on portions of this exhibit. +- Confidential treatment requested on portions of this exhibit. Unredacted versions of this exhibit have been filed separately with the Commission. 4 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Palm, Inc. (Registrant) Dated: April 17, 2002 By: /s/ Judy Bruner -------------------------- ---------------------------------------- Judy Bruner Senior Vice President, Finance and Chief Financial Officer (Principal Financial and Accounting Officer) 5 INDEX OF EXHIBITS Exhibit Number Description ------- ----------- 2.1(1) Master Separation and Distribution Agreement between 3Com and the registrant effective as of December 13, 1999, as amended. 2.2(2) General Assignment and Assumption Agreement between 3Com and the registrant, as amended. 2.3(2) Master Technology Ownership and License Agreement between 3Com and the registrant. 2.4(2) Master Patent Ownership and License Agreement between 3Com and the registrant. 2.5(2) Master Trademark Ownership and License Agreement between 3Com and the registrant. 2.6(2) Employee Matters Agreement between 3Com and the registrant. 2.7(2) Tax Sharing Agreement between 3Com and the registrant. 2.8(2) Master Transitional Services Agreement between 3Com and the registrant. 2.9(2) Real Estate Matters Agreement between 3Com and the registrant. 2.10(2) Master Confidential Disclosure Agreement between 3Com and the registrant. 2.11(2) Indemnification and Insurance Matters Agreement between 3Com and the registrant. 2.12(1) Form of Non-U.S. Plan. 3.1(1) Amended and Restated Certificate of Incorporation. 3.2(9) Amended and Restated Bylaws. 3.3(5) Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock. 4.1 Reference is made to Exhibits 3.1, 3.2 and 3.3 hereof. 4.2* Specimen Stock Certificate. 4.3(5) Preferred Stock Rights Agreement between the Registrant and Fleet National Bank. 4.4 5% Convertible Subordinated Note Due 2006, dated as of December 6, 2001. 10.1(9) 1999 Stock Plan, as amended. 10.2(1) Form of 1999 Stock Plan Agreements. 10.3(1) 1999 Employee Stock Purchase Plan. 10.4(1) Form of 1999 Employee Stock Purchase Plan Agreements. 10.5(3) Amended and Restated 1999 Director Option Plan. 10.6(1) Form of 1999 Director Option Plan Agreements. 10.7(1) Management Retention Agreement dated as of December 1, 1999 by and between Carl J. Yankowski and the registrant. 10.8(1) Form of Indemnification Agreement entered into by the registrant with each of its directors and executive officers. 10.9(1)** RAM Mobile Data USA Limited Partnership Value Added Reseller Agreement between RAM Mobile Data USA Limited Partnership (now Cingular Wireless) and the registrant. 10.10(1)** Supply Agreement between Manufacturers' Services Salt Lake City Operations, Inc. and the registrant. 10.11(1) Common Stock Purchase Agreement between America Online (now AOL Time Warner) and the registrant. 10.12(1) Common Stock Purchase Agreement between Motorola and the registrant. 6 10.13(1) Common Stock Purchase Agreement Between Nokia and the registrant. 10.14(1) Form of Management Retention Agreement. 10.15(4) Agreement for Purchase and Sale of Land between 3Com Corporation and the registrant. 10.16(6) Master Lease dated as of November 16, 2000 by and between the registrant and Societe Generale Financial Corporation, as supplemented. 10.17(6) Participation Agreement dated as of November 16, 2000 by and among the registrant, Societe Generale Financial Corporation, Societe Generale and certain other parties. 10.18(6) Guaranty dated as of November 16, 2000 by and between the registrant and Societe Generale, New York Branch. 10.19(7)** First Amendment to Supply Agreement between Manufacturers' Services Salt Lake City Operations, Inc. and the registrant. 10.20(8) Amended and Restated Lease, dated as of May 31, 2001, between the registrant and Societe Generale Financial Corporation, as supplemented. 10.21(8) Termination Agreement, dated as of May 31, 2001, between the registrant, Societe Generale Financial Corporation, Societe Generale and certain other parties. 10.22(9)+ Loan and Security Agreement by and among the registrant, Foothill Capital Corporation, Heller Financial, Inc. and The CIT Group/Business Credit, Inc. dated as of June 25, 2001. 10.23(9)+ Amendment Number One to Loan Agreement by and among the registrant, Foothill Capital Corporation, Heller Financial, Inc. and The CIT Group/Business Credit, Inc. dated as of August 6, 2001. 10.24(9) Employment Offer Letter for David C. Nagel dated September 13, 2001. 10.25 + Agreement and General Release of All Claims between the registrant and Carl J. Yanowski dated as of November 8, 2001. 10.26 + Convertible Note Purchase Agreement dated December 6, 2001. 10.27 Registration Rights Agreement dated as of December 6, 2001. 10.28 + Amendment Number Two to Loan Agreement by and among the registrant, Foothill Capital Corporation, Heller Financial, Inc. and The CIT Group/Business Credit, Inc. dated as of November 30, 2001. 10.29 + Loan Agreement by and among Palm Europe Limited, Foothill Capital Corporation, Heller Financial, Inc. and The CIT Group/Business Credit, Inc. dated as of November 30, 2001. 10.30* + Guarantee and Debenture by and between Palm Europe Limited and Foothill Capital Corporation dated as of November 30, 2001. 10.31* General Continuing Guaranty by the registrant in favor of Foothill Capital Corporation, Heller Financial, Inc. and The CIT Group/Business Credit, Inc. dated as of November 30, 2001. 10.32* Share Charge by and between Palm Ireland Investment and Foothill Capital Corporation dated as of November 30, 2001. 10.33 + Loan Agreement by and among Palm Global Operations Ltd., Foothill Capital Corporation, Heller Financial, Inc., and The CIT Group/Business Credit, Inc. dated as of November 30, 2001. 10.34* Guarantee and Debenture by and between Palm Global Operations Limited and Foothill Capital Corporation dated as of January 7, 2002. 10.35* General Continuing Guaranty by the registrant in favor of Foothill Capital Corporation, Heller Financial, Inc. and The CIT Group/Business Credit, Inc. dated as of November 30, 2001. 10.36* Share Charge by and between Palm Ireland Investment and Foothill Capital Corporation dated as of November 30, 2001. 7 10.37*+ Amendment Number One to Value Added Reseller Agreement between Cingular Interactive, L.P. (formerly known as BellSouth Wireless Data, L.P., which was formerly known as RAM Mobile Data USA Limited Partnership) and the registrant. (1)- Incorporated by reference from the Registrant's Registration Statement on Form S-1 (No. 333-92657) filed with the Commission on December 13, 1999, as amended. (2)- Incorporated by reference from the Registrant's Report on Form 10-Q filed with the Commission on April 10, 2000. (3)- Incorporated by reference from the Registration Statement on Form S-8 filed with the Commission on October 2, 2000. (4)- Incorporated by reference from the Registrant's Report on Form 10-Q filed with the Commission on October 12, 2000. (5)- Incorporated by reference from the Registrant's Report on Form 8-K filed with the Commission on November 22, 2000. (6)- Incorporated by reference from the Registrant's Report on Form 8-K filed with the Commission on December 1, 2000. (7)- Incorporated by reference from the Registrant's Report on Form 10-Q filed with the Commission on April 11, 2001. (8)- Incorporated by reference from the Registrant's Report on Form 8-K filed with the Commission on June 15, 2001. (9)- Incorporated by reference from the Registrant's Report on Form 10-Q filed with the Commission on October 15, 2001, as amended. *- Previously filed. **- Confidential treatment granted on portions of this exhibit. +- Confidential treatment requested on portions of this exhibit. Unredacted versions of this exhibit have been filed separately with the Commission. 8 EX-4.4 3 dex44.txt 5% CONVERTIBLE SUBORDINATED NOTE EXHIBIT 4.4 THIS SECURITY AND THE COMMON STOCK ISSUABLE UPON ITS CONVERSION HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS. PALM, INC. 5% CONVERTIBLE SUBORDINATED NOTE DUE 2006 No. A-1 $50,000,000 Palm, Inc., a Delaware corporation (the "Company"), for value received, hereby promises to pay to Texas Instruments Incorporated, or registered assigns, the principal sum of Fifty Million Dollars ($50,000,000) on December 6, 2006 and to pay interest thereon, from December 6, 2001, or from the most recent interest payment date to which interest has been paid, semi-annually on June 15 and December 15 in each year, commencing June 15, 2002, at the rate of 5% per annum until the principal hereof is due. The interest so payable on any interest payment date will be paid to the Person in whose name this Security (or one or more predecessor Securities) is registered at 5:00 p.m., San Francisco time, on the regular record date for such interest, which shall be the date five (5) Business Days immediately prior to the interest payment date. Payment of the principal of (and premium, if any, on) this Security shall be made upon the surrender of this Security to the Company, at its chief executive office (or such other office within the United States as shall be designated by the Company to the holder hereof) (the "Designated Office"), in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. Payment of interest and all other amounts payable with respect to this Security shall be made by wire transfer to the holder, provided that if the holder shall not have furnished wire instructions in writing to the Company on or prior to the third Business Day immediately prior to the date on which the Company makes such payment, such payment may be made by U.S. dollar check mailed to the address of the Person entitled thereto as such address shall appear in the Company security register. Capitalized terms used and not otherwise defined herein, shall have the respective meanings given to those terms in Section 7 hereof. This Security may not be redeemed, in whole or in part, at the election of the Company prior to the stated maturity date set forth above. 1. Conversion. (a) (1) Subject to the terms and conditions of Section 1(a)(5) hereof, the holder of this Security is entitled at any time and from time to time before the close of business on December 6, 2006 (or, in case the holder hereof has exercised its right to require the Company to repurchase this Security or a portion hereof pursuant to Section 2 hereof, then in respect of this Security or such portion hereof, as the case may be, until and including, but (unless the Company defaults in making the payment due upon repurchase) not after, 5:00 p.m., New York City time, on the Business Day prior to the the Repurchase Date), to convert this Security (or any portion of the principal amount hereof that is an integral multiple of $1,000), into fully paid and nonassessable Common Stock (as hereinafter defined) (calculated as to each conversion to the nearest 1/1000 of a share) of the Company at the rate of 215.909 shares of Common Stock for each $1,000 principal amount of Security (or at the then current adjusted rate if an adjustment has been made as provided below) (the "Conversion Rate") by surrender of this Security, duly endorsed or assigned to the Company or in blank to the Company at the Designated Office, accompanied by written notice to the Company that the holder hereof elects to convert this Security (or if less than the entire principal amount hereof is to be converted, specifying the portion hereof to be converted). (2) Subject to the terms and conditions of Section 1(a)(5) hereof, the Company is entitled by giving written notice as specified below at any time on or after December 6, 2002 to cause this Security to be converted in whole but not in part into fully paid and nonassessable shares of Common Stock (calculated as to the nearest 1/1000 of a share) of the Company at the Conversion Rate then in effect (the "Company Conversion") if the Closing Price of the Common Stock of the Company shall have exceeded 154% of the then applicable Conversion Price (i) for twenty (20) Trading Days in any thirty (30) consecutive Trading Days ending on any Trading Day within five (5) Business Days immediately prior to the date of notice and (ii) on the last Trading Day of such thirty (30) consecutive Trading Day period referred to in the preceding clause (i). The Company shall give to all holders of Securities, in the manner provided in Section 8(b) hereof, notice (the "Company Conversion Notice") of the Company Conversion. Each Company Conversion Notice shall state (i) the date of the Company Conversion which shall be a date no more than thirty (30) but not less than fifteen (15) days after the date of the mailing of the Company Conversion Notice (the "Company Conversion Date"), (ii) the amount of interest, if any, to be paid by the Company on the Company Conversion Date, (iii) the place or places where such Securities are to be surrendered for conversion, and (iv) the Conversion Rate then in effect. The holder shall surrender this Security to the Company, duly endorsed or assigned to the Company or in blank, at the Designated Office on or prior to the close of business on the Company Conversion Date; provided that any failure of the holder to surrender the Security as provided herein shall not invalidate the conversion or the effective date thereof. The Company shall deliver to the holders of this Security not more than five (5) Trading Days after delivery by the holder of this Security to the Company the certificates representing shares of Common Stock issuable upon conversion of this Security. (3) Upon surrender of this Security for conversion, the holder will be entitled to payment in cash of the interest accruing on the principal amount of this Security then being converted and unpaid to such date of conversion. (4) Subject to Section 1(b) below, no payment or adjustment is to be made on conversion for dividends on the Common Stock issued on conversion 2 hereof. No fractions of shares or scrip representing fractions of shares will be issued on conversion, but instead of any fractional interest, the Company shall pay a cash adjustment, computed on the basis of the Closing Price of the Common Stock on the Trading Day immediately prior to the Company Conversion Date, or, at its option, the Company shall round up to the next higher whole share. The Company shall, if the holder so elects, deliver the Common Stock issuable upon conversion of this Security to any third party designated by the holder, subject to compliance with Sections 1(f) and 8(c) hereof. (5) In the event that the conversion of this Security into shares of Common Stock would require the Company and the holder of this Security to file notification and report forms with the Federal Trade Commission and Antitrust Division of the Department of Justice (the "FTC") pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), then the holder of this Security and the Company agree (i) to use their reasonable best efforts to complete promptly all applicable filings and provide all necessary information as required pursuant to the HSR Act, and (ii) such conversion of this Security into shares of Common Stock shall not occur until such time as the required filings are made pursuant to the HSR Act and the required waiting periods have passed or early termination notifications have been granted by the FTC. (b) The Conversion Rate will be subject to adjustments from time to time as follows: (1) In case the Company shall pay or make a dividend or other distribution on Common Stock of the Company payable in Common Stock, the Conversion Rate in effect at the opening of business on the day following the Determination Date (as hereinafter defined) for such dividend or other distribution shall be increased by dividing such Conversion Rate by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on such Determination Date and the denominator shall be the sum of such number of shares of Common Stock and the total number of shares of Common Stock constituting such dividend or other distribution, such increase to become effective immediately after the opening of business on the day following such Determination Date. For the purposes of this paragraph (1), the number of shares of Common Stock at any time outstanding shall not include Common Stock held in the treasury of the Company but shall include Common Stock issuable in respect of scrip certificates issued in lieu of fractions of Common Stock. The Company will not pay any dividend or make any distribution on Common Stock held in the treasury of the Company. (2) In case the Company shall issue rights, options or warrants to all holders of its Common Stock entitling them to subscribe for or purchase Common Stock at a price per share less than the current market price per share (determined as provided in paragraph (7) of this Section 1(b)) of the Common Stock on the Determination Date for such distribution, the Conversion Rate in effect at the opening of business on the day following such Determination Date shall be increased by dividing 3 such Conversion Rate by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on such Determination Date plus the number of shares of Common Stock which the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such current market price and the denominator shall be the number of shares of Common Stock outstanding at the close of business on such Determination Date plus the number of shares of Common Stock so offered for subscription or purchase, such increase to become effective immediately after the opening of business on the day following such Determination Date. For the purposes of this paragraph (2), the number of shares of Common Stock at any time outstanding shall not include Common Stock held in the treasury of the Company but shall include Common Stock issuable in respect of scrip certificates issued in lieu of fractions of Common Stock. The Company will not issue any rights, options or warrants in respect of Common Stock held in the treasury of the Company. Upon the expiration of any right, option or warrant to purchase Common Stock the issuance of which resulted in an adjustment to the Conversion Rate pursuant to this paragraph (2) of Section 1(b), if any such right, option or warrant shall expire and shall not have been exercised, the Conversion Rate shall immediately upon such expiration be recomputed to the Conversion Rate which would have been in effect had the adjustment of the Conversion Rate made upon the issuance of such right, option or warrant been made on the basis of offering for subscription or purchase only that number of shares of Common Stock actually purchased upon the exercise of such right, option and warrant actually exercised. (3) In case outstanding Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion Rate in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately increased, and, conversely, in case outstanding Common Stock shall each be combined into a smaller number of shares of Common Stock, the Conversion Rate in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately reduced, such increase or reduction, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (4) In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock evidences of its Indebtedness, shares of any class of capital stock, or other property, including securities, but excluding (i) any rights, options or warrants referred to in paragraph (2) of this Section 1(b), (ii) any dividend or distribution paid exclusively in cash, (iii) any dividend or distribution referred to in paragraph (1) of this Section 1(b) and (iv) any merger or consolidation to which Section 1(h) applies (the "Distributed Property"), the Conversion Rate shall be adjusted so that the same shall equal the rate determined by dividing the Conversion Rate in effect immediately prior to the close of business on the Determination Date for such distribution by a fraction of which the numerator shall be the current market price per share (determined as provided in paragraph (7) of this Section 1(b)) of the Common Stock on such Determination Date less the then fair market value (as determined in good faith by the Board of Directors of the Company in accordance with the provisions of this 4 paragraph (4) of Section 1(b)) of the portion of the assets, shares or evidences of Indebtedness so distributed applicable to one share of Common Stock and the denominator shall be such current market price per share of the Common Stock, such adjustment to become effective immediately prior to the opening of business on the day following such Determination Date. If the Board of Directors determines the fair market value of any distribution for purposes of this paragraph (4) by reference to the actual or when issued trading market for any securities constituting such distribution, it must in doing so consider the prices in such market over the same period used in computing the current market price per share pursuant to paragraph (7) of this Section 1(b). Notwithstanding the foregoing, if the distribution of Distributed Property is a Subsidiary Distribution (as defined in Section 3(g)), the Conversion Rate shall be adjusted under Section 3(g)(4). Under the provisions of the Company's Rights Plan, upon conversion of the Securities into Common Stock, to the extent that the Rights Plan is still in effect upon such conversion, the holder of this Security will receive, in addition to the Common Stock, the rights described therein (whether or not the rights have separated from the Common Stock at the time of conversion), subject to the limitations set forth in the Rights Plan. Any distribution of rights or warrants pursuant to the Rights Plan in compliance with the requirements set forth in the immediately preceding sentence of this paragraph shall not constitute a distribution of rights or warrants pursuant to this Section 1(b). Rights or warrants distributed by the Company to all holders of Common Stock entitling the holders thereof to subscribe for or purchase shares of the Company's capital stock (either initially or under certain circumstances), which rights or warrants, until the occurrence of a specified event or events ("Trigger Event"): (i) are deemed to be transferred with such shares of Common Stock; (ii) are not exercisable; and (iii) are also issued in respect of future issuances of Common Stock, shall be deemed not to have been distributed for purposes of this Section 1(b) (and no adjustment to the Conversion Rate under this Section 1(b) will be required) until the occurrence of the earliest Trigger Event, whereupon such rights and warrants shall be deemed to have been distributed and an appropriate adjustment (if any is required) to the Conversion Rate shall be made under this Section 1(b). If any such right or warrant, including any such existing rights or warrants distributed prior to the original issue date of this Security, are subject to events, upon the occurrence of which such rights or warrants become exercisable to purchase different securities, evidences of Indebtedness or other assets, then the date of the occurrence of any and each such event shall be deemed to be the date of distribution and record date with respect to new rights or warrants with such rights (and a termination or expiration of the existing rights or warrants without exercise by any of the holders thereof). In addition, in the event of any distribution (or deemed distribution) of rights or warrants, or any Trigger Event or other event (of the type described in the preceding sentence) with respect thereto that was counted for purposes of calculating a distribution amount for which an adjustment to the Conversion Rate under this Section was made, (x) in the case of any such rights or warrants which shall all have been redeemed or repurchased without exercise by any holders thereof, the Conversion Rate shall be readjusted upon such final redemption or repurchase to give effect to such distribution or 5 Trigger Event, as the case may be, as though it were a cash distribution, equal to the per share redemption or repurchase price received by a holder or holders of Common Stock with respect to such rights or warrants (assuming such holder had retained such rights or warrants), made to all holders of Common Stock as of the date of such redemption or repurchase, and (y) in the case of such rights or warrants which shall have expired or been terminated without exercise by any holders thereof, the Conversion Rate shall be readjusted as if such rights and warrants had not been issued. (5) In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock cash (excluding any cash that is distributed as part of a distribution referred to in paragraph (4) of Section 1(b)) in aggregate amount that, combined together with (I) the aggregate amount of any other cash distributions to all holders of its Common Stock made exclusively in cash within the twelve (12) months preceding the date of payment of such distribution and in respect of which no adjustment pursuant to this paragraph (5) of Section 1(b) has been made and (II) the aggregate of any cash plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a board resolution) of consideration payable in respect of any tender offer by the Company or any of its subsidiaries for all or any portion of the Common Stock concluded within the twelve (12) months preceding the date of payment of such distribution and in respect of which no adjustment pursuant to paragraph (6) of Section 1(b) has been made (the "combined cash and tender amount"), exceeds ten percent (10%) of the product of the current market price per share of the Common Stock (determined as provided in paragraph (7) of this Section 1(b)) on the date for the determination of holders of shares of Common Stock entitled to receive such distribution times the number of shares of Common Stock outstanding on such date (the "aggregate current market price"), then, and in each such case, immediately after the close of business on such date for determination, the Conversion Rate shall be adjusted so that the same shall equal the rate determined by dividing the Conversion Rate in effect immediately prior to the close of business on the date fixed for determination of the stockholders entitled to receive such distribution by a fraction (i) the numerator of which shall be equal to the current market price per share of the Common Stock on the date fixed for such determination less an amount equal to the quotient of (x) the excess of such combined cash and tender amount over ten percent (10%) of such aggregate current market price divided by (y) the number of shares of Common Stock outstanding on such date for determination and (ii) the denominator of which shall be equal to the current market price per share of the Common Stock on such date for determination. (6) In case of a tender offer made by the Company or any Subsidiary of the Company for all or any portion of the Common Stock shall expire and such tender offer or exchange (as amended upon the expiration thereof) shall require the payment to stockholders (based on the acceptance (up to any maximum specified in the terms of the tender offer) of Purchased Shares (as defined below)) of an aggregate consideration having a fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a board resolution), that combined together with (I) the aggregate of the cash plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a board resolution), as of the expiration of such tender or exchange offer, of consideration 6 payable in respect of any other tender or exchange offer by the Company or any Subsidiary of the Company for all or any portion of the Common Stock expiring within the 12 months preceding the expiration of such tender or exchange offer and in respect of which no adjustment pursuant to this paragraph (6) of Section 1(b) has been made and (II) the aggregate amount of any cash distributions to all holders of the Company's Common Stock within twelve (12) months preceding the expiration of such tender or exchange offer and in respect of which no adjustment pursuant to paragraph (5) of Section 1(b) has been made (the "combined tender and cash amount") exceeds ten percent (10%) of the product of the current market price per share of the Common Stock (determined as provided in paragraph (7) of this Section 1(b)) as of the last time (the "Expiration Time") tenders or exchange could have been made pursuant to such tender or exchange offer (as it may be amended) times the number of shares of Common Stock outstanding (including any tendered or exchange shares) as of the Expiration Time, then, and in each such case, immediately prior to the opening of business on the day after the date of the Expiration Time, the Conversion Rate shall be adjusted so that the same shall equal the rate determined by dividing the Conversion Rate immediately prior to close of business on the date of the Expiration Time by a fraction (i) the numerator of which shall be equal to (A) the product of (I) the current market price per share of Common Stock on the date of the Expiration Time multiplied by (II) the number of shares of Common Stock outstanding (including any tendered or exchanged shares) on the date of the Expiration Time less (B) the combined tender and cash amount, and (ii) the denominator of which shall be equal to the product of (A) the current market price per share of the Common Stock as of the Expiration Time multiplied by (B) the number of shares of Common Stock outstanding (including any tendered or exchanged shares) as of the Expiration Time less the number of all shares validly tendered or exchanged and not withdrawn as of the Expiration Time (the shares deemed so accepted up to and any such maximum, being referred to as the "Purchased Shares"). (7) For the purpose of any computation under paragraphs (2), (4), (5) or (6) of this Section 1(b), the current market price per share of Common Stock on any date shall be calculated by the Company and be deemed to be the average of the daily Closing Prices for the five (5) consecutive Trading Days commencing ten (10) Trading Days before the earlier of (i) the day in question and (ii) the day before the "ex" date with respect to the issuance or distribution requiring such computation. For purposes of this paragraph, the term "ex date", when used with respect to any issuance or distribution, means the first date on which the Common Stock trades regular way in the applicable securities market or on the applicable securities exchange without the right to receive such issuance or distribution. (8) No adjustment in the Conversion Rate shall be required unless such adjustment (plus any adjustments not previously made by reason of this paragraph (8)) would require an increase or decrease of at least one percent (1%) in such rate; provided, however, that any adjustments which by reason of this paragraph (8) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 1 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. 7 (9) The Company may make such increases in the Conversion Rate, for the remaining term of the Securities or any shorter term, in addition to those required by paragraphs (1), (2), (3), (4), (5) and (6) of this Section 1(b) as it considers to be advisable in order to avoid or diminish any income tax to any holders of Common Stock resulting from any dividend or distribution of stock or issuance of rights or warrants to purchase or subscribe for stock or from any event treated as such for income tax purposes. (c) Whenever the Conversion Rate is adjusted as provided in Section 1(b), the Company shall compute the adjusted Conversion Rate in accordance with Section 1(b) and shall prepare a certificate signed by an officer of the Company setting forth the adjusted Conversion Rate and showing in reasonable detail the facts upon which such adjustment is based, and shall promptly deliver such certificate to the holder of this Security. (d) In case: (1) the Company shall declare a dividend or other distribution on its Common Stock that would require any adjustment pursuant to Section 1(b); or (2) the Company shall authorize the granting to the holders of its Common Stock of rights, options or warrants to subscribe for or purchase any shares of capital stock of any class or of any other rights; or (3) of any reclassification of the Common Stock of the Company, or of any consolidation, merger or share exchange to which the Company is a party and for which approval of any shareholders of the Company is required, or of the conveyance, sale, transfer or lease of all or substantially all of the assets of the Company; or (4) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or (5) the Company or any Subsidiary shall commence a tender offer for all or a portion of the Company's outstanding Common Stock (or shall amend any such tender offer); then the Company shall cause to be delivered to the holder of this Security, at least twenty (20) days (or ten (10) days in any case specified in clause (1) or (2) above) prior to the applicable record, expiration or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, rights, options or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights, options or warrants are to be determined, (y) the date on which the right to make tenders under such tender offer expires or (z) the date on which such reclassification, consolidation, merger, conveyance, transfer, sale, lease, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their 8 Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, conveyance, transfer, sale, lease, dissolution, liquidation or winding up. Neither the failure to give such notice nor any defect therein shall affect the legality or validity of the proceedings described in clauses (1) through (5) of this Section 1(d). (e) The Company shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of the Security, the full number of shares of Common Stock then issuable upon the conversion of this Security. (f) Except as provided in the next sentence, the Company will pay any and all taxes and duties that may be payable in respect of the issue or delivery of Common Stock on conversion of the Security. The Company shall not, however, be required to pay any tax or duty which may be payable in respect of any transfer involved in the issue and delivery of Common Stock in a name other than that of the holder of this Security, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Company the amount of any such tax or duty, or has established to the satisfaction of the Company that such tax or duty has been paid. (g) The Company agrees that all Common Stock which may be delivered upon conversion of the Security, upon such delivery, will have been duly authorized and validly issued and will be fully paid, nonassessable and free of preemptive rights (and shall be issued out of the Company's authorized but unissued Common Stock) and, except as provided in Section 1(f), the Company will pay all taxes, liens and charges with respect to the issue thereof. (h) In case of any recapitalization or reclassification of the Common Stock (other than a change in par value or as a result of a subdivision or combination covered by paragraph (3) of Section 1(b)), or any consolidation of the Company with any other Person, any merger of the Company into another Person or of another Person into the Company (other than a merger which does not result in a reclassification, conversion, exchange or cancellation of the outstanding Common Stock), or any conveyance, sale, transfer or lease of all or substantially all of the properties and assets of the Company (collectively, a "Capital Reorganization"), the Company or the Person formed by such Capital Reorganization, as the case may be, shall execute and deliver to the holder of this Security a supplemental agreement providing that such holder has the right thereafter, during the period this Security shall be convertible as specified in Section 1(a), to convert this Security only into the kind and amount of securities, cash and other property receivable upon such Capital Reorganization by a holder of the number of shares of Common Stock of the Company into which this Security might have been converted immediately prior to such Capital Reorganization, assuming such holder of Common Stock of the Company (i) is not a Person with which the Company consolidated, into which the Company merged or which merged into the Company or to which any conveyance, sale, transfer or lease was made, as the case may be (a "Constituent Person"), or an Affiliate of a Constituent Person and (ii) failed to exercise its rights of election, if any, as to the kind or amount of securities, cash and other property receivable 9 upon such Capital Reorganization (provided that if the kind or amount of securities, cash and other property receivable upon such Capital Reorganization is not the same for each share of Common Stock of the Company held immediately prior to such Capital Reorganization by others than a Constituent Person or an Affiliate thereof and in respect of which such rights of election shall not have been exercised ("Non-electing Share"), then for the purpose of this Section 1(h) the kind and amount of securities, cash and other property receivable upon such Capital Reorganization by the holders of each Non-electing Share shall be deemed to be the kind and amount so receivable per share by a plurality of the Non-electing Shares). Such supplemental agreement shall provide for adjustments which, for events subsequent to the effective date of such supplemental agreement, shall be equivalent to the adjustments provided for in this Section 1. The above provisions of this Section 1(h) shall similarly apply to successive Capital Reorganizations. If this Section 1(h) applies to any event or occurrence, then the other provisions of Section 1(b) shall not apply. (i) The Company (i) will effect all registrations with, and obtain all approvals by, all governmental authorities that may be necessary under any United States Federal or state law (including the Securities Act, the Securities Exchange Act of 1934 and state securities and Blue Sky laws) for the Common Stock issuable upon conversion of this Security to be lawfully issued and delivered as provided herein, and thereafter publicly traded (if permissible under the Securities Act) and qualified or listed as contemplated by clause (ii) (it being understood that the Company shall not be required to register the Common Stock issuable on conversion hereof under the Securities Act except pursuant to the Registration Rights Agreement between the Company and the initial holder of this Security); and (ii) if required, will list the Common Stock required to be issued and delivered upon conversion of Securities, prior to such issuance or delivery, on each national securities exchange on which outstanding Common Stock is listed or quoted at the time of such delivery, or if the Common Stock is not then listed on any securities exchange, to qualify the Common Stock for quotation on the Nasdaq National Market or such other inter-dealer quotation system, if any, on which the Common Stock is then quoted. 2. Right to Require Repurchase. (a) In the event that a Change in Control (as hereinafter defined) shall occur, then the holder of this Security shall have the right, at such holder's option, to require the Company to repurchase, and upon the exercise of such right the Company shall repurchase, this Security, or any portion of the principal amount hereof that is equal to $1,000 or any integral multiple thereof, on the date (the "Repurchase Date") that is thirty (30) Trading Days (or such longer period as required by applicable law) after the date on which the Company gives notice of such Change of Control to the holder of this Security, at a purchase price equal to the Repurchase Price (as hereinafter defined). The Company agrees to give the holder of this Security notice, in the manner provided in Section 8(b), of any Change in Control, promptly and in any event within five (5) Trading Days of the occurrence thereof. 10 (b) To exercise a repurchase right, the holder shall deliver to the Company on or before the third (3rd) Business Day prior to the Repurchase Date, together with this Security, written notice of the holder's exercise of such right, which notice shall set forth the name of the holder, the principal amount of this Security to be repurchased (and, if this Security is to be repurchased in part, the portion of the principal amount thereof to be repurchased) and a statement that an election to exercise the repurchase right is being made thereby. Such written notice shall be irrevocable, except that the right of the holder to convert this Security (or the portion hereof with respect to which the repurchase right is being exercised) shall continue until the close of business on the Trading Day prior to the Repurchase Date. (c) In the event a repurchase right shall be exercised in accordance with the terms hereof, the Company shall pay or cause to be paid to the holder the Repurchase Price in cash on the Repurchase Date in the manner set forth in the introductory paragraph to this Security. (d) If this Security is to be repurchased only in part, it shall be surrendered to the Company at the Designated Office (with, if the Company so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company duly executed by, the holder hereof or his attorney duly authorized in writing), and the Company shall execute and make available for delivery to the holder without service charge, a new Security or Securities, containing identical terms and conditions, each in an authorized denomination in aggregate principal amount equal to and in exchange for the unrepurchased portion of the principal of the Security so surrendered. (e) For purposes of this Section 2: (1) the term "beneficial owner" shall be determined in accordance with Rule 13d-3 promulgated by the Securities and Exchange Commission pursuant to the Exchange; (2) a "Change in Control" shall be deemed to have occurred at the time, after the original issuance of this Security, of: (i) the acquisition by any Person of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of transactions, of shares of capital stock of the Company entitling such Person to exercise 50% or more of the total voting power of all shares of capital stock of the Company entitled to vote generally in the elections of directors (any shares of voting stock of which such Person is the beneficial owner that are not then outstanding being deemed outstanding for purposes of calculating such percentage) other than any such acquisition by the Company or any employee benefit plan of the Company; or (ii) any consolidation or merger of the Company with or into, any other Person, any merger of another Person with or into the Company, or any conveyance, transfer, sale, lease or other disposition of all or substantially all of the assets of the Company to another Person (other than (a) any such transaction pursuant to which 11 holders of Common Stock immediately prior to such transaction have the entitlement to exercise, directly or indirectly, 50% or more of the total voting power of all shares of capital stock entitled to vote generally in the election of directors of the continuing or surviving Person immediately after such transaction and (b) any merger (x) which does not result in any reclassification, conversion, exchange or cancellation of outstanding Common Stock or (y) which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding Common Stock into solely shares of common stock); or (iii) the occupation of a majority of the seats (other than vacant seats) on the board of directors of the Company by Persons who were neither (i) nominated by the board of directors of the Company nor (ii) appointed by directors so nominated. However, a Change in Control will not be deemed to have occurred if (i) the Closing Price per share of the Company's Common Stock for any five (5) Trading Days within the period of ten (10) consecutive Trading Days ending immediately after the later of the Change in Control or the public announcement of the Change in Control, in the case of a Change in Control relating to an acquisition of capital stock, or the period of ten (10) consecutive Trading Days ending immediately before the Change in Control, in the case of Change in Control relating to a merger, consolidation or asset sale, equals or exceeds 105% of the conversion price of the Securities (for purposes hereof the Conversion Price being equal to $1,000 divided by the Conversion Rate then in effect); or (ii) 95% of the consideration (excluding cash payments for fractional shares and cash payments made pursuant to dissenters' appraisal rights) in a merger or consolidation otherwise constituting the Change of Control described in clause (ii) above consists of shares of common stock traded or to be traded immediately following such Change of Control on a national securities exchange or quoted on the Nasdaq National Market and as a result of such transaction or transactions this Security becomes convertible solely into such common stock. (3) the "current market price" of a share of Common Stock shall be the Closing Price of the Common Stock on the Trading Day immediately preceding the Repurchase Date; and (4) "Repurchase Price" means the sum of (a) 100% of the principal amount of this Security to be repurchased pursuant to this Section 2 and (b) accrued and unpaid interest on this Security to the date of payment. 3. Covenants of the Company. (a) The Company covenants and agrees that it will duly and punctually pay or cause to be paid the principal of, premium (if any) and interest on this Security, at the respective times and in the manner provided for herein. 12 (b) Unless otherwise permitted herein, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence and rights (charter and statutory). (c) The Company will cause all properties used or useful in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary improvements thereof, all as in the reasonable judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times, provided, however, that nothing in this paragraph (c) shall prevent the Company from discontinuing the operation and maintenance of any such properties if such discontinuance is, in the reasonable judgment of the Company, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any respect to the holder of this Security. (d) Within the period prior to the expiration of the holding period applicable to sales of this Security or any Common Stock issuable upon conversion of this Security under Rule 144(k) under the Securities Act (or any successor provision), the Company covenants and agrees that it shall, during any period in which it is not subject to Section 13 or 15(d) of the Exchange Act, make available to any holder or beneficial holder of this Security or such Common Stock which continue to be "Restricted Securities" as defined in Rule 144 in connection with any sale thereof and any purchaser of this Security or such Common Stock designated by such holder or beneficial holder, the information required pursuant to Rule 144A(d)(4) under the Securities Act upon request of any holder or beneficial holder of this Security or such Common Stock and it will take such further action as any holder or beneficial holder of this Security or such Common Stock may reasonably request, all to the extent required from time to time to enable such holder or beneficial holder to sell this Security or such Common Stock without registration under the Securities Act within the limitation of the exemption provided by Rule 144A, as such rule may be amended from time to time. Upon the request of any holder or any beneficial holder of this Security or such Common Stock, the Company will deliver to such holder a written statement as to whether it has complied with such requirements. (e) The Company covenants that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of, premium (if any) or interest on this Security as contemplated herein, whenever enacted, now or at any time hereinafter in force, or which may affect the covenants of performance in this Security and the Company hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, be resort to any such law, hinder, delay or impede the execution of any power granted herein to the holder of this Security, but will suffer and permit the execution of every such power as though no such law had been enacted. 13 (f) The Company shall not issue or incur any Indebtedness which is convertible into Common Stock or other capital stock of the Company and by its terms is senior in right or payment to this Security. (g) If the Company determines at any time while this Security is outstanding to distribute to all holders of its Common Stock shares of capital stock of a Subsidiary (a "Subsidiary Distribution"), then the following provisions shall apply: (1) The Company shall have prepared and filed a registration statement or an information statement or other applicable document (the "SEC Document") with the Commission describing the proposed Subsidiary Distribution including the expected valuation of such Subsidiary in relation to the expected valuation of the Company after the Subsidiary Distribution. (2) In the SEC Document, the Company shall have described its choice of one of the following options (the "Company Election") with respect to this Security: (i) Causing this Security to be exchanged as of the date of the Subsidiary Distribution for two convertible notes, (A) one of which shall be issued by the Company and shall have terms and conditions identical to this Security other than the principal amount (the "New Company Note"), and (B) one of which the Company shall cause to be issued by such Subsidiary and which shall be convertible into the common stock of such Subsidiary but which shall otherwise have terms and conditions identical to this Security other than the principal amount (the "New Subsidiary Note"). The combined principal amounts of the New Company Note and the New Subsidiary Note shall equal the principal amount of this Security and the principal amounts shall be divided between the New Company Note and such New Subsidiary Note based upon pro-forma valuations of the Company and such new Subsidiary (collectively, the "Valuations") prepared by a nationally recognized investment bank chosen by the Company. Upon the Subsidiary Distribution, the conversion rate of the New Company Note shall be adjusted from the Conversion Rate then applicable to this Security pursuant to the terms of Section 3(g)(4). The conversion rate of the New Subsidiary Note shall be equal to the product of (A) (I) 1,000 divided by (II) the product of (x) the Subsidiary FMV Per Share and (y) one minus a fraction, the numerator of which is the difference between the Company Prior FMV Per Share and the Conversion Price (before giving effect to any adjustment of the Conversion Price resulting from the Subsidiary Distribution) and the denominator of which is the Company Prior FMV Per Share multiplied by (B) the number of shares of Subsidiary capital stock issued in respect of each share of Common Stock in the Subsidiary Distribution. For purposes of this paragraph, the following terms shall have the following meanings: (A) "Company Ex FMV Per Share" means the average of the daily Closing Prices for the five (5) consecutive Trading Days commencing on the "ex date" with respect to the Subsidiary Distribution; 14 (B) "Company Prior FMV Per Share" means the average of the daily Closing Prices for the five (5) consecutive Trading Days before the "ex date" with respect to the Subsidiary Distribution; (C) "Subsidiary FMV Per Share" means the difference between (i) the Company Prior FMV Per Share and (ii) the Company Ex FMV Per Share; and (D) "ex date", with respect to the Subsidiary Distribution, means the first date on which the Common Stock trades regular way in the applicable securities market or on the applicable securities exchange without the right to receive the Subsidiary Distribution. (ii) Repurchasing that percentage of this Security as is equal to a fraction (expressed as a percentage), the numerator of which is the Subsidiary FMV Per Share and the denominator of which is equal to the Company Prior FMV Per Share. If this paragraph becomes applicable to this Security, then the Company shall make the required repurchase in cash in the manner set forth in the introductory paragraph of this Security on the date which is the later of (A) the fifth (5th) Trading Day after the date of the Subsidiary Distribution or (B) the date on which this Security is surrendered to the Company at the Designated Office (with, if the Company so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company duly executed by, the holder hereof or its attorney duly authorized in writing). Promptly, thereafter, the Company shall execute and make available for delivery to the holder without service charge, a new Security or Securities, containing identical terms and conditions, each in an authorized denomination in aggregate principal amount equal to and in exchange for the unrepurchased portion of the principal of the Security so surrendered. Upon the Subsidiary Distribution, the conversion rate of this Note shall be adjusted from the Conversion rate then applicable to this Security pursuant to the terms of Section 3(g)(4). (iii) If (A) the Closing Price of the Common Stock of the Company shall have exceeded 154% of the then applicable Conversion Price (aa) for twenty (20) Trading Days in any thirty (30) consecutive Trading Days ending on any Trading Day within the thirty (30) day period ending on the date of filing of the SEC Document and (bb) on the last Trading Day of such thirty (30) consecutive Trading Day period referred to in the preceding clause (i) and (B) a shelf registration statement with respect to the resale by the holder of the Common Stock of the Company issuable upon conversion of this Security has been declared effective under the Securities Act by the Commission in accordance with the Registration Rights Agreement and remains effective, causing this Security to be converted effective as of the date of the Subsidiary Distribution, in whole but not in part, into fully paid and nonassessable shares of Common Stock (calculated as to the nearest 1/1000 of a share) of the Company at the Adjusted Conversion Rate which would be effective upon the date of the Subsidiary Distribution. Upon the conversion of this Security pursuant to this Section 3(g)(2)(iii), the holder of the Common Stock issuable upon conversion of this Security shall receive the shares of capital stock distributed in the Subsidiary Distribution that it would have 15 received had such conversion occurred immediately prior to the record date for the Subsidiary Distribution. For purposes of this paragraph, the term "Adjusted Conversion Rate" shall mean the product of (A) the Conversion Rate in effect immediately prior to the date of the Subsidiary Distribution and (B) 1.04. (3) Contemporaneously with the filing of the SEC Document with the Securities and Exchange Commission, the Company shall deliver the SEC Document to the holder of this Security together with a statement briefly describing the Company Election with a reference to the more detailed description set forth in the SEC Document. The terms of the Company Election under Section 3(g)(2) as described in the SEC Document shall be applicable to and shall be deemed a part of this Security unless, on or prior to 5:00 p.m., New York City time, on the 20th day (or if such day is not a Business Day the next Business Day thereafter) after receipt of the SEC Document together with the statement described in the previous sentence, the holder of this Security gives notice to the Company in the manner specified in Section 8(b) to the effect that the holder elects not to make this Security subject to the Company Election. If the holder of this Security elects not to make this Security subject to the Company Election, then, upon the occurrence of the Subsidiary Distribution, the Company Election shall not be applicable to this Security and the Conversion Rate of this Note shall be adjusted according to the provisions of Section 3(g)(4). Notwithstanding anything contained in this Section 3(g), if the holder of this Security disagrees with the Valuations referred to in Section 3(g)(2)(i), then such holder may retain, at such holder's expense, a nationally recognized investment bank to provide additional pro-forma valuations of the Company and such new Subsidiary (collectively, the "Additional Valuations"). Such holder shall deliver the Additional Valuations to the Company on or prior to the 10th day after receipt of the SEC Document and the Company shall in good faith take into account such Additional Valuations in determining changes, if any, to the final allocation of the principal amounts of the New Company Note and the New Subsidiary Note and shall notify such holder of any changes in the allocation of the principal amounts of the New Company Note and the New Subsidiary Note on or prior to the 15th day after receipt of the SEC Document. (4) Upon the Subsidiary Distribution, the conversion rate of the New Company Note shall be adjusted by dividing the Conversion rate in effect immediately prior to the "ex-date" by a fraction, the numerator of which is the Company Ex FMV Per Share and the denominator of which is the Company Prior FMV Per Share. (5) Notwithstanding the foregoing provisions of this Section 3(g), in the event that in calculating the adjustment of its outstanding employee stock options or other securities that are convertible into Common Stock in connection with the Subsidiary Distribution (the "Option Adjustment"), the Company uses, in the calculation of the pre- and post-Subsidiary Distribution value of the Common Stock, a different date than the "ex date" and/or a different number of trading days or trading prices than those used in the calculation of the Company Ex FMV Per Share and the Company Prior FMV Per Share as set forth above, then such different date, number of trading days or prices shall instead be employed in the calculation of the Company Ex FMV Per Share and the Company Prior FMV Per Share. Upon a determination of the 16 methodology for any Option Adjustment, the Company shall promptly provide such methodology and any related information to the holder of this Security. 4. Events of Default. (a) "Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of principal on this Security when due at its stated maturity or upon required repurchase under Section 2 hereof; or (2) a default in the payment of any interest or premium (if any) upon this Security when it becomes due and payable, and the continuance of such default for a period of 30 days; or (3) default by the Company in the performance of its obligations in respect of any conversion of this Security (or any portion hereof) in accordance with Section 1 for a period of 10 days; or (4) default by the Company in the performance, or breach, of any representation, warranty, covenant or agreement of the Company (other than a default in the performance, or breach, of any representation, warranty, covenant or agreement of the Company which is specifically dealt with elsewhere in this Section 4(a)) contained in (i) this Security, (ii) the Convertible Note Purchase Agreement, dated as of the date hereof, between the Company and the initial holder of this Security, or (iii) Section 4(a) of the Registration Rights Agreement, dated as of the date hereof, between the Company and the initial holder of this Security, and continuance of such default or breach for a period of sixty (60) days after there has been given, by registered or certified mail, to the Company by the holder of this Security a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (5) any indebtedness under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company in a principal amount then outstanding in excess of $10,000,000 is not paid at final maturity thereof (either at its stated maturity or upon acceleration thereof), and such indebtedness is not discharged, or such acceleration is not rescinded or annulled, within a period of 30 days after there has been given, by registered or certified mail, to the Company by the holder of this Security a written notice specifying such default and requiring the Company to cause such indebtedness to be discharged or cause such acceleration to be rescinded or annulled and stating that such notice is a "Notice of Default" hereunder; or (6) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization 17 or other similar law or (B) a decree or order approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of sixty (60) consecutive days; or (7) the commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by the Company to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Company, or the filing by the Company of a petition or answer or consent seeking reorganization or similar relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of the property of the Company, or the making by the Company of an assignment for the benefit of creditors, or the admission by the Company in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action. (8) a judgment in excess of $10,000,000 (not covered by insurance) is rendered against the Company and, within sixty (60) days after the entry thereof, such judgment is not discharged or execution thereof is not stayed pending appeal, or within sixty (60) days after the expiration of any such stay, such judgment is not discharged or void. (b) If an Event of Default (other than an Event of Default specified in Sections 4(a)(6) or 4(a)(7)) occurs and is continuing, then in every such case the holders of at least twenty-five percent (25%) of the outstanding principal amount of all then outstanding Securities may declare the principal amount of this Security and all other Securities then outstanding to be due and payable immediately, by a notice in writing to the Company, and upon any such declaration such principal and all accrued interest thereon shall become immediately due and payable. If an Event of Default specified in Section 4(a)(6) or 4(a)(7) occurs and is continuing with respect to the Company, the principal of, and accrued interest on, this Security shall ipso facto become immediately due and payable without any declaration or other act of the holders. During the continuance of an Event of Default specified in Sections 4(a)(1) or 4(a)(2), the principal, premium (if any) and interest that is due and payable (collectively, the "Overdue Amount") shall, until paid, bear interest from the date of the occurrence of such Event of Default at the rate of 7.5% per annum, payable in cash, and this Security shall remain convertible into Common Stock until the Overdue Amount and any interest thereon shall have been paid or duly provided for. The holder of this Security need not provide, and the Company hereby waives, and presentment, demand, protest or other notice of any 18 kind, and the holder of this Security may immediately and without the expiration of any grace period (other than any grace period specified in any Event of Default) enforce any and all rights and remedies hereunder. The holder of this Security shall also have, upon the occurrence and during the continuance of an Event of Default, any other rights which such holder may have pursuant to applicable law or contract. (c) The Company will give the holder of this Security notice, within ten (10) Trading Days of the occurrence thereof, of any Event of Default or any event that, with the giving of notice or passage of time or both, would become an Event of Default. Such notice shall be given in the manner provided in Section 8(b). 5. Consolidation, Merger, Etc. (a) The Company shall not consolidate with or merge into any other Person or, directly or indirectly, convey, transfer, sell or lease all or substantially all of its properties and assets to any Person, and the Company shall not permit any Person to consolidate with or merge into the Company or, directly or indirectly, convey, transfer, sell or lease all or substantially all of its properties and assets to the Company, unless: (1) in case the Company shall consolidate with or merge into another Person or convey, transfer, sell or lease all or substantially all of its properties and assets to any Person, the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer or sale, or which leases, all or substantially all the properties and assets of the Company shall be a corporation, limited liability company, partnership or trust, shall be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia, and shall expressly assume, if other than the Company, by an agreement supplemental hereto, executed and delivered to the holder of this Security in form satisfactory to the holder, the due and punctual payment of the principal of and any interest on this Security and the performance or observance of every covenant of this Security on the part of the Company to be performed or observed, including the conversion rights provided herein; (2) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; and (b) Upon any consolidation of the Company with, or merger of the Company into, any other Person or any conveyance, transfer, sale or lease of all or substantially all of the properties and assets of the Company in accordance with Section 4(a), the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer, sale or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Security with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Security. 19 6. Subordination. (a) The Company covenants and agrees, and the holder of this Security by its acceptance hereof likewise covenants and agrees, that this Security is subject to the provisions of this Section 6; and each Person holding this Security, whether upon original issue or upon transfer, assignment or exchange thereof, accepts and agrees to be bound by such provisions. The payment of the principal of, premium, if any, and interest on this Security (including, but not limited to, the repurchase price with respect to this Security) shall, to the extent and in the manner hereinafter set forth, be subordinated in right of payment to the prior payment in full, in cash or in such other form of payment as may be acceptable to the holders of Senior Indebtedness, of all Senior Indebtedness, whether outstanding at the date of original issuance of this Security or thereafter incurred or created. The expression "payment in full" or "paid in full" or any similar term or phrase when used in this Security with respect to Senior Indebtedness shall mean the payment in full of all such Senior Indebtedness in cash or such other form of payment as may be acceptable to the holders of Senior Indebtedness, or, in the case of Senior Indebtedness consisting of contingent obligations in respect of letters of credit or other reimbursement obligations, the setting apart of cash sufficient to discharge such portion of Senior Indebtedness in an account for the exclusive benefit of the holders thereof, in which account such holders shall be granted a first priority perfected security interest in a manner reasonably acceptable to such holders No provision of this Section 6 shall prevent the occurrence of any default or Event of Default under this Security. (b) Payments to Holders. No payment (including pursuant to any repurchase of this Security) shall be made with respect to the principal of, or premium, if any, or interest on this Security, if: (1) a default in the payment of principal, premium, if any, or interest or other payment due on Senior Indebtedness occurs and is continuing beyond any applicable period of grace (a "Payment Default"); or (2) a default, other than a Payment Default, occurs and is continuing with respect to Designated Senior Indebtedness that then permits holders of the Designated Senior Indebtedness as to which such default related to accelerate its maturity and the holder of this Security and the Company receive a written notice of such default (a "Payment Blockage Notice") from a representative of Designated Senior Indebtedness or a holder of Designated Senior Indebtedness or the Company (a "Non-Payment Default"). The Company may and shall resume payments on this Security (1) in the case of a Payment Default, on the date upon which such default is cured or waived or ceases to exist, and (2) in the case of a Non-Payment Default with respect to Designated 20 Senior Indebtedness, on the earlier of the date on which the Non-Payment Default is cured or waived or ceases to exist or 179 days have passed after the date on which the applicable Payment Blockage Notice is received. No new period of payment blockage may be commenced pursuant to a Payment Blockage Notice unless at least 365 days shall have elapsed since the Company's receipt of the immediately prior Payment Blockage Notice. No default (whether or not such event of default is on the same issue of Designated Senior Indebtedness) that existed or was continuing on the date of delivery of any Payment Blockage Notice to the holder of this Security shall be, or be made, the basis for a subsequent Payment Blockage Notice. If payment of this Security is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Indebtedness of the acceleration. (c) Bankruptcy and Dissolution, Etc. Upon any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution, winding-up, liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due or to become due upon all Senior Indebtedness shall first be paid in full, in cash or in such other form of payment as may be acceptable to the holders of Senior Indebtedness, before any payment is made on account of the principal or premium, if any, and interest on this Security; and upon any such dissolution, winding-up, liquidation or reorganization or bankruptcy, insolvency, receivership or other such proceedings, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the holders of this Security would be entitled, except for the provisions of this Section 5, shall (except as aforesaid) be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the holder of this Security if received by it, directly to the holders of Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, or as otherwise required by law or a court order) or their respective representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay all Senior Indebtedness in full in cash or in such other form of payment as may be acceptable to the holders of Senior Indebtedness after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness, before any payment or distribution is made to the holder of this Security. Notwithstanding the foregoing, in the event that the holder of this Security receives any payment or distribution of assets of the Company of any kind in contravention of any term of this Security, whether in cash, property or securities, including, without limitation, by way of setoff or otherwise, before all Senior Indebtedness is paid in full, in cash or such other form of payment as may be acceptable to the holders of Senior Indebtedness, then such payment or distribution shall be held by the recipient or recipients in trust for the benefit of, and shall immediately be paid over or 21 delivered to, the holders of Senior Indebtedness or their respective representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to make payment in full, in cash or such other form of payment as may be acceptable to the holders of Senior Indebtedness, of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution, or provision therefor, to or for the holders of such Senior Indebtedness. For purposes of Section 6(b) hereof and this Section 6(c), the words "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated (at least to the extent provided in this Section 6 with respect to this Security) to the payment of all Senior Indebtedness which may at the time be outstanding. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Section 5 shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 6(c) if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Section 5. (d) Subrogation. Subject to the payment in full in cash, or in such other form of payment as may be acceptable to the holders of Senior Indebtedness, of all Senior Indebtedness, the rights of the holder of this Security shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Indebtedness pursuant to the provisions of this Section 6 (equally and ratably with the holders of all Indebtedness of the Company which by its express terms is subordinated to other Indebtedness of the Company to substantially the same extent as this Security is subordinated and is entitled to like rights of subrogation) to the rights of the holders of Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company applicable to the Senior Indebtedness until the principal of, and premium, if any, and interest on this Security shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the holder of this Security would be entitled except for the provisions of this Section 6, and no payment over pursuant to the provisions of this Section 6, to or for the benefit of the holders of Senior Indebtedness by holders of this Security, shall, as between the Company, its creditors other than holders of Senior Indebtedness, and the holder of this Security, be deemed to be a payment by the Company to or on account of the Senior Indebtedness; and no payments or distributions of cash, property or securities to or for the benefit of the holder of this Security pursuant to the subrogation provisions of this Section 6, which would otherwise have been paid to the holders of Senior Indebtedness shall be deemed to be a payment by the Company to or for the account of this Security. It is understood that the provisions of this Section 6 are and are intended 22 solely for the purposes of defining the relative rights of the holder of this Security, on the one hand, and the holders of the Senior Indebtedness, on the other hand. Nothing contained in this Section 6 or elsewhere in this Security is intended to or shall impair, as among the Company, its creditors other than the holders of Senior Indebtedness, and the holder of this Security, the obligation of the Company, which is absolute and unconditional, to pay to the holder of this Security the principal of, and premium, if any, and interest on the Security as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holder of this Security and creditors of the Company other than the holders of the Senior Indebtedness, nor shall anything herein or therein prevent the holder of this Security from exercising all remedies otherwise permitted by applicable law upon default under this Security, subject to the rights, if any, under this Section 6 of the holders of Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy. Upon any payment or distribution of assets of the Company referred to in this Section 6, the holder of this Security shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, delivered to the holder of this Security, for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Section 6. (e) Notice. The Company shall give prompt written notice to the holder of this Security of any fact known to the Company which would prohibit the making of any payment of monies to in respect of this Security pursuant to the provisions of this Section 6. The holder of this Security shall be entitled to rely on the delivery to it of a written notice by a Person representing itself to be a holder of Senior Indebtedness (or a trustee on behalf of such holder) to establish that such notice has been given by a holder of Senior Indebtedness or a trustee on behalf of any such holder or holders. In the event that the holder of this Security determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Section 6, the holder of this Security may request such Person to furnish evidence to the reasonable satisfaction of the holder of this Security as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Section 6, and if such evidence is not furnished the holder of this Security may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. 23 (f) No Impairment of Subordination. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Security, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of the Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the holder of this Security, without incurring responsibility to the holder of this Security, and without impairing or releasing the subordination provided in this Security or the obligations of the holder of this Security to the holders of the Senior Indebtedness, do any one or more of the following: (a) change the manner, place, or terms of payment (including any change in the rate of interest) or extend the time of payment of, or renew, amend, modify, alter, or grant any waiver or release with respect to, or consent to any departure from, any Senior Indebtedness or any instrument evidencing the same or any agreement evidencing, governing, creating, guaranteeing or securing any Senior Indebtedness; (b) sell, exchange, release, or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (c) release any Person liable under or in respect of the Senior Indebtedness; (d) fail or delay in the perfection of liens securing the Senior Indebtedness; (e) exercise or refrain from exercising any rights against Company and any other Person; or (f) amend, or grant any waiver or release with respect to, or consent to any departure from, any guarantee for all or any of the Senior Indebtedness. (g) Certain Conversions Deemed Payment. For the purposes of this Section 6 only, (1) the issuance and delivery of junior securities upon conversion of this Security in accordance with Section 1 shall not be deemed to constitute a payment or distribution on account of the principal of (or premium, if any) or interest on this Security or on account of the purchase or other acquisition of this Security, and (2) the payment, issuance or delivery of cash (including cash paid for fractional shares upon conversion of this Security in accordance with Section 1), property or securities (other than junior securities) upon conversion of this Security in accordance with Section 1 shall be deemed to constitute payment on account of the principal of this Security. For the purposes of this Section, the term "junior securities" means (a) shares of any stock of any class of the Company and (b) securities of the Company which are subordinated in right of payment to all Senior Indebtedness which may be outstanding at the time of issuance or delivery of such securities to substantially the same extent as, or to a greater extent than, this Security is so subordinated as provided in this Section 6. Nothing contained in this Section 6 or elsewhere in this Security is intended to or shall impair, as among the Company, its creditors other than holders of Senior Indebtedness and the holder of this Security, the right, which is absolute and unconditional, of the holder of this Security to convert this Security in accordance with Section 1. 7. Definitions. Unless otherwise defined in this Security, the following capitalized terms shall have the following respective meanings when used herein: 24 "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Business Day" means any day except a Saturday, Sunday or other day on which the commercial banks in the State of California are required or authorized by law to close or be closed. "Cash Distribution" means the distribution by the Company to all holders of its Common Stock of cash, other than any cash that is distributed upon a merger or consolidation to which Section 1(h) applies or as part of a distribution referred to in paragraph (4) of Section 1(b). "Closing Price" means, with respect to the Common Stock of the Company, for any day, the reported last sale price per share on the Nasdaq National Market, or, if the Common Stock is not admitted to trading on the Nasdaq National Market, on the principal national securities exchange or inter-dealer quotation system on which the Common Stock is listed or admitted to trading, or if not admitted to trading on the Nasdaq National Market, or listed or admitted to trading on any national securities exchange or inter-dealer quotation system, the closing bid price per share in the over-the-counter market as furnished by any New York Stock Exchange member firm selected from time to time by the Company for that purpose. "Commission" means the United States Securities and Exchange Commission, or any other federal agency at the time administering the Securities and Exchange Act of 1934, as amended, or the Securities Act, whichever is the relevant statute for the particular purpose. "Common Stock" means the Common Stock, par value $.001 per share, of the Company authorized at the date of this instrument as originally executed. Subject to the provisions of this Section 7, shares issuable on conversion of this Security shall include only Common Stock or shares of any class or classes of common stock resulting from any reclassification or reclassifications thereof; provided, however, that if at any time there shall be more than one such resulting class, the shares so issuable on conversion of this Security shall include shares of all such classes, and the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. "Conversion Price" means 1,000 divided by the Conversion Rate in effect immediately prior to the applicable determination date. 25 "Credit Agreement" means that certain Loan and Security Agreement, dated as of June 25, 2001, among the Company, the lenders from time to time party thereto (the "Lenders") and Foothill Capital Corporation, as agent for the Lenders, as such agreement may be amended, modified, restated or supplemented from time to time and any deferral, renewal, extension, refunding, refinancing or replacement thereof. "Designated Senior Indebtedness" means the Company's obligations under (i) any Senior Indebtedness outstanding from time to time under the Credit Agreement and (ii) any other Senior Indebtedness with a principal amount in excess of Twenty-Five Million Dollars ($25,000,000) in which the instrument creating or evidencing the same or the assumption or guarantee thereof (or related agreements or documents to which the Company is a party) expressly provides that such Senior Indebtedness shall be "Designated Senior Indebtedness" for purposes of this Security (provided that such instrument, agreement or other document may place limitations and conditions on the right of such Senior Indebtedness to exercise the rights of Designated Senior Indebtedness). "Determination Date" means, in the case of a dividend or other distribution, including the issuance of rights, options or warrants, to shareholders, the date fixed for the determination of shareholders entitled to receive such dividend or other distribution and, in the case of a tender offer, the last time that tenders could have been made pursuant to such tender offer. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Indebtedness" means, with respect to any Person: (a) All obligations, contingent or otherwise, of such Person (i) for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), (ii) evidenced by a note, debenture, bond or written instrument (including a purchase money obligation), (iii) in respect of leases of such Person required, in conformity with generally accepted accounting principles, to be accounted for as capitalized lease obligations on the balance sheet of such Person and all obligations and other liabilities (contingent or otherwise) under any lease or related document (including a purchase agreement) in connection with the lease of real property which provides that such Person is contractually obligated to purchase or cause a third party to purchase the leased property and thereby guarantee a minimum residual value of the leased property to the lessor and the obligations of such Person under such lease or related document to purchase or to cause a third party to purchase such leased property; or (iv) in respect of letters of credit (including reimbursement obligations with respect thereto), local guarantees or bankers' acceptances; (b) All obligations secured by a mortgage, pledge, lien, encumbrance, charge or adverse claim affecting title or resulting in an encumbrance to which the property or assets of such Person are subject, whether or not the obligations 26 secured thereby shall have been assumed by or shall otherwise be such Person's legal liability; (c) To the extent not otherwise included, all obligations of such Person under interest rate and currency swap agreements, cap, floor and collar agreements, spot and forward contracts and similar agreements and arrangements; (d) All obligations of others of the type described in clauses (a), (b), or (c) above assumed by or guaranteed in any manner by such Person or in effect guaranteed by such Person through an agreement to purchase, contingent or otherwise (and the obligations of such Person under any such assumptions, guarantees or other such arrangements); and (e) All obligations, contingent or otherwise, of such Person under or in respect of any and all deferrals, renewals, extensions and refundings of, or amendments, modifications or supplements to, any liability of the kinds described in any of the preceding clauses (a), (b), (c) or (d); "Person" shall mean and include an individual, a partnership, a corporation (including a business trust), a joint stock company, a limited liability company, an unincorporated association, a joint venture or other entity or a governmental authority. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of December 6, 2001, between the Company and the initial holder of this Security. "Repurchase Date" has the meaning given to such term in Section 2(a) hereof. "Rights Plan" means the Company's Preferred Stock Rights Agreement, dated as of September 25, 2000, between the Company and Fleet National Bank. "Securities Act" means the Securities Act of 1933, as amended. "Senior Indebtedness" means the principal of, premium, if any, interest on (including any interest accruing after the filing of a petition by or against the Company under any bankruptcy law, whether or not allowed as a claim after such filing in any proceeding under such bankruptcy law) and any other payment due pursuant to, any Indebtedness, whether outstanding on the date of this Security or thereafter incurred or created; provided that Senior Indebtedness shall not include (i) any indebtedness of any kind of the Company to any Subsidiary of the Company,(ii) any liability for federal, state, foreign, local or other taxes owed or owing by the Company or any Subsidiary, (iii) indebtedness for trade payables or constituting the deferred purchase price of assets or services incurred in the ordinary course of business, (iv) any Indebtedness which by its terms is pari passu in right of payment with or subordinate in right of payment to this Security, or (v) any Indebtedness incurred in violation of the provisions of this Security. "Subsidiary" shall mean (a) any corporation of which more than 50% of the issued and outstanding equity securities having ordinary voting power to elect a majority of the board of directors of such corporation is at the time directly or indirectly owned or 27 controlled by the Company, (b) any partnership, joint venture, limited liability company or other association of which more than 50% of the equity interests having the power to vote, direct or control the management of such partnership, joint venture, limited liability company or other association is at the time directly or indirectly owned and controlled by the Company, and (c) any other entity included in the financial statements of the Company on a consolidated basis. "Trading Day" means (i) if the Common Stock is admitted to trading on the Nasdaq National Market or any other system of automated dissemination of quotations of securities prices, a day on which trades may be effected through such system; (ii) if the Common Stock is listed or admitted for trading on the New York Stock Exchange or any other national securities exchange, a day on which such exchange is open for business; or (iii) if the Common Stock is not admitted to trading on the Nasdaq National Market or listed or admitted for trading on any national securities exchange or any other system of automated dissemination of quotation of securities prices, a day on which the Common Stock is traded regular way in the over-the-counter market and for which a closing bid and a closing asked price for the Common Stock are available. 8. Miscellaneous. (a) No provision of this Security shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest, if any, on this Security at the times, places and rate, and in the coin or currency, herein prescribed or to convert this Security as herein provided. (b) The Company will give prompt written notice to the holder of this Security of any change in the location of the Designated Office. Any notice to the Company or to the holder of this Security shall be given in the manner set forth in the Convertible Note Purchase Agreement, dated as of December 6, 2001, among the Company and the initial holder of this Security, provided that the holder of this Security, if not a party to such Convertible Note Purchase Agreement, may specify alternative notice instructions to the Company. (c) (1) The transfer of this Security is registrable on the register maintained by the Company upon surrender of this Security for registration of transfer at the Designated Office, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company duly executed by, the holder hereof or such holder's attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. Such Securities are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. No service charge shall be made for any such registration of transfer, but the Company may require payment of a sum sufficient to recover any tax or other governmental charge payable in connection therewith. Prior to due presentation of this Security for registration of transfer, the Company and any agent of the Company may treat the Person in whose name this Security is registered as the owner thereof for all purposes, whether or not this 28 Security be overdue, and neither the Company nor any such agent shall be affected by notice to the contrary. (2) This Security and the Common Stock issuable upon conversion of this Security have not been registered under the Securities Act, or the securities laws of any state or other jurisdiction. Neither this Security nor the Common Stock issuable upon conversion of this Security nor any interest or participation herein may be reoffered, sold, assigned, transferred, pledged, encumbered or otherwise disposed of (a "Transfer") in the absence of such registration or unless such transaction is exempt from, or not subject to, registration. The holder by its acceptance of this Security or the Common Stock issuable upon conversion of this Security agrees that it shall not offer, sell, assign, transfer, pledge, encumber or otherwise dispose of this Security or any portion thereof or interest therein other than in a minimum denomination of $5,000,000 principal amount (or any integral multiple of $1,000,000 in excess thereof) and then (other than with respect to a Transfer pursuant to a registration statement that is effective at the time of such Transfer) only (a) to the Company, (b) pursuant to a person it reasonably believes to be an institutional "accredited investor" within the meaning of Rule (501(a)(1)(2)(3) or (7) under the Securities Act or a qualified institutional buyer (as defined in Rule 144A under the Securities Act), and in the case of (b) above in which the transferor furnishes the Company with such certifications, legal opinions or other information as the Company may reasonably request to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. (3) Upon presentation of this Security for registration of transfer at the office of the Company specified herein accompanied by (i) certification by the transferor that such transfer is in compliance with the terms hereof and (ii) by a written instrument of transfer in a form approved by the Company executed by the registered holder, in person or by such holder's attorney thereunto duly authorized in writing, and including the name, address and telephone and fax numbers of the transferee and name of the contact person of the transferee, such Security shall be transferred on the Security register, and a new Security of like tenor and bearing the same legends shall be issued in the name of the transferee and sent to the transferee at the address and c/o the contact person so indicated. Transfers and exchanges of Securities shall be subject to such additional restrictions as are set forth in the legends on the Securities and to such additional reasonable regulations as may be prescribed by the Company as specified in Section 6(c)(2) hereof. Successive registrations of transfers as aforesaid may be made from time to time as desired, and each such registration shall be noted on the Security register. (4) Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Security, and in the case of loss, theft or destruction, receipt of indemnity or security reasonably satisfactory to the Company, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of such Security, if mutilated, the Company will deliver a new Security of like tenor and dated as of such cancellation, in lieu of such Security. 29 (5) Such holder represents that it is an institutional "accredited investor" within the meaning of Rule 501(a)(1)(3)(5) or (7) of the Securities Act or a qualified institutional buyer (as defined in Rule 144A under the Securities Act). Such holder has been advised that this Security has not been registered under the Securities Act, or any state securities laws and, therefore, cannot be resold unless it is registered under the Securities Act and applicable state securities laws or unless an exemption from such registration requirements is available. Such holder is aware that the Company is under no obligation to effect any such registration or to file for or comply with any exemption from registration. Such holder has not been formed solely for the purpose of making this investment and is acquiring the Security for its own account for investment, and not with a view to, or for resale in connection with, the distribution thereof. (6) Neither this Security nor any term hereof may be amended or waived orally or in writing, except that any term of the Securities may be amended and the observance of any term of the Securities may be waived (either generally or in a particular instance and either retroactively or prospectively), and such amendment or waiver shall be applicable to all of the Securities, upon the approval of the Company and the holders of fifty percent (50%) or more of the outstanding principal amount of all then outstanding Securities; provided, however, that any amendment that would (i) reduce the outstanding principal amount or premium (if any) of the Securities, (ii) reduce the rate of interest borne by the Securities, (iii) change the date of maturity or interest payment dates of the Securities, (iv) reduce any amount payable upon repurchase of the Securities, (v) impair the right of any holder of this Security to institute suit for the payment thereof, (vi) make the principal, premium (if any) or interest payable on the Securities in a coin or currency other than as set forth in the Securities, (vii) modify the provisions of the Securities with respect to subordination or seniority of the Securities in a manner adverse to the holders of the Securities in any material respect, (viii) change in any respect the obligation of the Company to repurchase the Securities, (ix) impair the right of the holders of the Securities to convert the Securities into Common Stock or (x) modify this Section 9 shall require the approval of the holder of each Security to which such amendment shall apply. The Company will not amend any provision of any other Security in a manner favorable to any holder thereof unless a similar amendment is made or offered with respect to all of the Securities. Each holder of this Security by its acceptance hereof acknowledges and agrees that the subordination provisions of this instrument are for the benefit of the holders of the Senior Indebtedness and that, accordingly, no provision of Section 6 hereof may be amended or otherwise modified without the prior written consent of each holder of Senior Indebtedness at such time outstanding. (d) THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND NEW YORK CIVIL PRACTICE LAWS AND RULES 327(B). THE COMPANY AND EACH HOLDER OF THE SECURITY IRREVOCABLY AND UNCONDITIONALLY 30 CONSENTS TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES OF AMERICA, IN EACH CASE LOCATED IN THE COUNTY OF NEW YORK, FOR ANY DISPUTE ARISING OUT OF OR RELATING TO THIS SECURITY. [Remainder of page intentionally left blank.] 31 IN WITNESS WHEREOF, the Company has caused this Security to be duly executed. Dated: December 6, 2001 PALM, INC. By: /s/ Judy Bruner ----------------------- Name: Judy Bruner Title: Senior Vice President and Chief Financial Officer Attest: /s/ David Vadasz ------------------- Name: David Vadasz Title: Director, Corporate Development [Signature Page to Palm, Inc. 5% Convertible Subordinated Note due 2006] ELECTION OF HOLDER TO REQUIRE REPURCHASE 1. Pursuant to Section 2(a) of this Security, the undersigned hereby elects to have all or a portion of this Security repurchased by the Company. 2. The undersigned hereby directs the Company to pay [choose one] (a) it or (b) Name: __________________; address: __________________; Social Security or Other Taxpayer Identification Number, if any: ____________, an amount in cash equal to the Repurchase Price, as provided herein. Dated: _____________________________ [Holder] By: _______________________________ Name: Title: Number of shares of Common Stock owned by the holder and its affiliates: ______________________ Principal amount to be repurchased (an integral multiple of $1,000): ______________________ Remaining principal amount following such repurchase (not less than $1,000): ______________________ NOTICE: The signature to the foregoing Election must correspond to the name as written upon the face of this Security in every particular, without alteration or any change whatsoever. CONVERSION NOTICE The undersigned holder of this Security hereby irrevocably exercises the option to convert this Security, or any portion of the principal amount hereof (which is an integral multiple of $1,000) below designated, into Common Stock in accordance with the terms of this Security, and directs that such shares, together with a check in payment for any fractional share and any Security representing any unconverted principal amount hereof, be delivered to and be registered in the name of the undersigned unless a different name has been indicated below. If Common Stock or Securities are to be registered in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Dated: _________________________________ [Holder] By: ____________________________________ Name: Title: If shares or Securities are to be registered in the name of a Person other than the holder, please print such Person's name and address: _________________________ Name _________________________ Address _________________________ Social Security or other Taxpayer Identification Number, if any If only a portion of the Securities is to be converted, please indicate: 1. Principal amount to be converted: $___________ 2. Principal amount and denomination of Security representing unconverted principal amount to be issued: Amount: $________ Denominations: $________ (any integral multiple of $1,000) EX-10.25 4 dex1025.txt AGREEMENT AND GENERAL RELEASE OF ALL CLAIMS EXHIBIT 10.25 [*] = information redacted pursuant to a confidential treatment request. Such omitted information has been filed separately with the Securities and Exchange Commission. AGREEMENT AND GENERAL RELEASE OF ALL CLAIMS This Agreement and General Release of All Claims agreement (the "Release") is entered into between Carl J. Yankowski ("Employee" or "I") and Palm, Inc. ("Palm") who wish to end their employment relationship in a manner that fully and finally settles any and all differences between them that may have arisen out of Employee's employment with Palm and the termination of that employment. CONSIDERATION This Release is given in consideration of the following promises from Palm: Employee shall continue as a full time Palm employee and perform all assigned duties until November 9, 2001 at which time Employee's employment will terminate, Employee will cease to be an officer of Palm, and Employee will cease to be a member of the Board of Directors of Palm. Employee's last date of employment shall be the "Termination Date." In consideration for this Release, Palm will provide to Employee: (1) the sum of $1,400,000 (an amount equivalent to 200% of annual salary); (2) Any shares covered by Palm stock options that are unvested and unexpired on the Termination Date, except for options that vest solely upon the achievement of a performance objective or objectives or options that have their vesting accelerate upon the achievement of a performance objective or objectives, will become fully vested and exercisable upon the expiration of the Revocation Period (defined below) if the shares otherwise would have vested (solely by virtue of Employee's continued employment with Palm and not, directly or indirectly, due to a change of control of Palm) during the two-year period commencing on the Termination Date. Any other unvested options will be forfeited on the Termination Date; (3) Any shares of restricted stock that Employee purchased from Palm that remain subject to a right of repurchase by Palm on the Termination Date will vest and Palm's right of repurchase will terminate, except for shares that are scheduled to vest and have Palm's right of repurchase terminate solely upon the achievement of a performance objective or objectives; (4) A lump sum payment equal to the amount it would have cost Palm to provide Employee and his dependents, if dependent coverage is in effect on the payment date, with health, dental and vision benefits coverage at the same level (and with Palm paying the same level of premiums) as in effect on the day immediately preceding the Termination Date during the 24 month period following the Termination Date under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), whether or not Employee elects COBRA coverage; (5) Ownership of the four personal computers (including peripherals) that Palm previously installed in Employee's homes, plus an additional amount such that the value of the four personal computers (including peripherals) retained by Employee, after deduction of any U.S. federal, state and for local income or payroll tax resulting equals the value of the four computers (including peripherals); (6) Payment of reasonable costs (the "Payment for Moving Costs") for moving Employee's personal property and two automobiles from California to Employee's home in Dover, Massachusetts pursuant to arrangements approved by Palm's Vice President of Human Resources or his delegate, plus an additional amount such that the net amount retained by Employee, after deduction of any U.S. federal, state and for local income or payroll tax equals to the Payment for Moving Costs; and (7) (a) any unpaid base salary due for periods prior to the Termination Date, (b) all of Employee's accrued and unused vacation through the Termination Date, (c) all of Employee's accrued amounts deducted through payroll that have not been used to purchase shares under Palm's employee stock purchase plan, and (d) following Employee's submission of proper expense reports, the total unreimbursed amount of all expenses incurred by Employee in his duties of employment with Palm that are reimbursable in accordance with Palm's existing policies. The above payments and benefits, less deductions authorized or required by law, will be paid in a lump sum, single payment on or about ten (10) days after the Termination Date or ten (10) days after expiration of any revocation period applicable to this Release, whichever is later. Notwithstanding the preceding sentence, the payments described in 7 (a) through (c) will be made promptly upon termination of employment and within the period of time mandated by law. Employee will not be required to seek other employment or otherwise mitigate the value of the payments and benefits contemplated by this Release, nor shall any such payments and benefits be reduced by any earnings or benefits that Employee may receive from other employment. If Employee dies, any payments or benefits then or thereafter due hereunder will be paid to his designated beneficiary or beneficiaries or, if none are designated or non survive Employee, his estate. Employee shall be entitled to exercise any vested Palm options in accordance with the terms of the applicable stock option plan, option agreements and Palm's securities trading policy. A schedule listing each outstanding Palm stock option and award of restricted stock held by Employee as of the Termination Date and (a) the number of shares covered by each option and grant of restricted stock, (b) the exercise price of each option, (c) the date on which each stock option or award of restricted stock was granted, and (d) the applicable vesting schedule and the extent to which the options and restricted stock are vested and exercisable as of the Termination Date, and (e) the extent to which the options are scheduled to vest upon the expiration of the Revocation Period (defined below) is attached hereto as Exhibit A. Employee understands that the payments and benefits described in 1 through 6 above are payments and benefits for which he is not eligible or entitled unless he executes, and subsequently does not revoke, this Release. RELEASE BY EMPLOYEE In consideration of the additional benefits described above, I (Employee), on behalf of my heirs, spouse and assigns, hereby completely release and forever discharge Palm, Inc., its past and present affiliates, agents, officers, directors, shareholders, employees, attorneys, insurers, successors and assigns (collectively referred to as "Palm") from any and all claims, of any and every kind, nature and character, known or unknown, foreseen or unforeseen, based on any act or omission occurring prior to the effective 2 date of this Release, including but not limited to any claims arising out of my offer of employment, my employment or termination of my employment with Palm. I expressly agree and consent to the termination of my employment on the Termination Date in exchange for the compensation described above. Accordingly, this Release shall not take effect until my Termination Date, or upon execution of this Release, whichever is later. The matters released include, but are not limited to, any claims under federal, state or local laws, including claims arising under, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Civil Rights Act of 1991, the Employee Retirement and Income Security Act of 1974, the Americans with Disabilities Act, the Age Discrimination in Employment Act of 1967 ("ADEA") as amended, including but not limited by, the Older Workers' Benefit Protection Act ("OWBPA") and any common law tort or contract or statutory claims, and any claims for attorneys' fees and costs. The only exceptions are any claims I may have (i) for unemployment compensation, (ii) workers compensation, (iii) under Palm's health plans (including the right to elect COBRA coverage for myself and/or my covered dependents), Palm's tax-qualified retirement plan and, to the extent such items survive the Termination Date, Palm's restricted stock and stock option plans, (iv) any rights I may have as a vested shareholder, (v) for indemnification in accordance with the "Palm, Inc. Indemnification Agreement" dated January 25, 2000 and Palm's certificate of incorporation and bylaws, and (vi) to enforce my rights under this Release and to assert any affirmative defenses in connection with claims brought against me (collectively, the "Non-Released Claims"). I understand and agree that this Release extinguishes all claims, whether known or unknown, foreseen or unforeseen, except for those claims expressly described above. I expressly waive any rights or benefits under Section 1542 of the California Civil Code, or any other equivalent statute. California Civil Code Section 1542 provides as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." I fully understand that if any fact with respect to any matter covered by this Release is found hereafter to be other than or different from the facts now believed by me to be true, I expressly accept and assume that this Release shall be and remain effective, notwithstanding such difference in the facts. I expressly warrant and agree that I will not, at any time in the future, file or maintain any lawsuit, claim or action of any kind whatsoever against Palm or any of its agents, affiliates, employees, successors, shareholders, directors and assigns based on claims released in this Release (other than the Non-Released Claims), nor will I cause or knowingly permit any such lawsuit, claim or action to be filed or maintained on my behalf in any federal, state or municipal court, administrative agency or other tribunal, arising out of any claim released in this Release with the exception of any claim that I may have as to the validity of this Release under the ADEA as amended by the OWBPA. If I have previously filed any such claim, I agree to take all reasonable steps to cause them to be withdrawn without delay. In the event I bring a lawsuit in contravention of this covenant not to sue, I shall be required to repay Palm the consideration described above, regardless of the outcome of the legal action. I expressly warrant that I have not assigned any claim I may have against Palm to any other person or entity. I further acknowledge that during my employment, I may have obtained confidential, proprietary and trade secret information, including information relating to Palm products, plans, designs and other valuable confidential information. I agree not to disclose any such confidential information unless 3 required by subpoena or court order, and that I will first give Palm written notice of such subpoena or court order with reasonable advance notice to permit Palm, Inc. to oppose such subpoena or court order if it chooses to do so. Immediately following the Termination Date, I will destroy or return to Palm any Palm confidential, proprietary or trade secret information that I possess in hard copy or in electronic form (including, but not limited to, confidential, proprietary or trade secret information on the computers described in 5 above). I agree that for a period of one (1) year after the Termination Date I shall not, directly or indirectly, induce or attempt to induce any employee, agent or consultant of Palm or any subsidiary to terminate his or his association with Palm or any affiliates. Palm and I agree that the provisions of this paragraph contain restrictions that are not greater than necessary to protect the interests of Palm. In the event of the breach or threatened breach by me of this paragraph, Palm, in addition to all other remedies available to it at law or in equity, will be entitled to seek injunctive relief and/or specific performance to enforce this paragraph. Prior to execution of this Release, I have apprised myself of sufficient relevant information in order that I might intelligently exercise my own judgment regarding such execution. Palm has informed me in writing to consult an attorney before signing this Agreement if I wish. Palm has also given me at least 45 days in which to consider this Release, if I wish. I also understand that for a period of seven (7) days after I sign this Release (the "Revocation Period") I may revoke this Release Agreement and that the Release shall not become effective until my Termination Date or seven (7) days from my signature, whichever is later. I have read this Release and understand all of its terms. I understand and agree that this Release may not be modified or amended during the Revocation Period without my written consent. I further acknowledge and agree that this Release is executed voluntarily and with full knowledge of its legal significance. I also understand and agree that if any suit is brought to enforce the provisions of this Release, with the exception of a claim brought by me as to the validity of this Release under the ADEA as amended by the OWBPA, the prevailing party shall be entitled to its costs, expenses, and attorneys' fees as well as any and all other remedies specifically authorized under the law. [*] Further, I agree that until Palm discloses the terms of the Release as required by law, I will not voluntarily disclose or allow anyone else to disclose to the media or otherwise either the existence, reason for or contents of this Release without Palm's prior written consent, unless required to do so by law. Notwithstanding this provision, I am authorized to disclose this Release to my spouse, attorneys and tax advisors on a "need to know" basis, on the condition that they agree to hold the terms of the Release, including the settlement payments, in strictest confidence and to make appropriate disclosures as required by law, provided that I notify Palm in writing of such legal obligations to disclose at least five (5) business days in advance of disclosure. [*] [*] Employee acknowledges that Palm will be required by law to disclose the terms of the Release. [*] [*] This Release (and the plans and agreements referenced herein) constitutes the entire agreement between Palm and myself with respect to any matters referred to in this Release. This Release supersedes any and all of the other agreements between myself and Palm, except for (1) any confidentiality, assignment of inventions, or similar agreement(s) entered into by me (such as the Conflicts, Confidential Information and Assignment of Inventions Agreement), and (2) the "Palm, Inc. Indemnification Agreement" dated January 25, 2000, all of which remain in full force and effect until terminated according to the terms set forth therein, if any. No other consideration, agreements, representations, oral statements, understandings or course of conduct that are not expressly set forth in 4 this Release should be implied or are binding. I am not relying upon any other agreement, representation, statement, omission, understanding or course of conduct which is not expressly set forth in this Release. I understand and agree that this Release shall not be deemed or construed at any time or for any purposes as an admission of any liability or wrongdoing by either Palm or myself. I also agree that if any provision of this Agreement is deemed invalid, the remaining provisions will still be given full force and effect. The terms and conditions of this Agreement and release will be interpreted and construed in accordance with the laws of California (except with respect to its conflict of laws provisions). 5 EMPLOYEE'S ACCEPTANCE OF RELEASE I HAVE CAREFULLY READ AND FULLY UNDERSTAND AND VOLUNTARILY AGREE TO ALL THE TERMS OF THE RELEASE IN EXCHANGE FOR THE ADDITIONAL BENEFITS TO WHICH I WOULD OTHERWISE NOT BE ENTITLED. FACSIMILE SIGNATURES EXECUTED IN COUNTERPART WILL HAVE THE SAME FORCE AND EFFECT AS AN ORIGINAL SIGNATURE. Dated: November 8, 2001 /s/ Carl J. Yankowski ---------------------------------------- Carl J. Yankowski, Employee Agreed for Palm, Inc. Dated: November 8, 2001 /s/ Gordon A. Campbell ---------------------------------------- Gordon A. Campbell Chairman, Compensation Committee 6 Palm, Inc. PERSONNEL SUMMARY EXHIBIT A REVISED to Reflect 100% Vest of Restricted Stock Dated 3/1/2000 Carl Yankowski ID 21732 Page: 1 File: Persnl Date: 11/08/2001
OPTIONS AND AWARDS STATUS AS OF 11/9/2001 Option Option Number Date Plan/Type Shares Price Exercised Vested Options S0000002 03/01/2000 P99/NQ 1,500,000 $38.00 0 375,000 EI10 05/11/2000 P99/NQ 500,000 $25.31 0 177,083 EI1460 07/11/2000 P99/NQ 500,000 $29.44 0 156,250 EI000009 04/19/2001 P99/NQ 500,000 $7.70 0 83,333 P0000001 08/06/2001 P99/NQ 498,575 $5.24 0 0 RT001155 08/06/2001 P99/NQ 398,860 $5.24 0 0 Subtotal Options 11/9/2001 3,897,435 0 791,666 Restricted Awards R0000006 03/01/2000 RSP 25,000 $0.00 6,250 R0000126 08/06/2001 RSP 15,000 $0.00 0 Subtotal Awards 11/9/2001 40,000 6,250 OPTIONS AND AWARDS STATUS AS OF 11/9/2001 Option Option Number Date Plan/Type Cancelled Unvested Outstanding Exercisable Options S0000002 03/01/2000 P99/NQ 0 1,125,000 1,500,000 375,000 EI10 05/11/2000 P99/NQ 0 322,917 500,000 177,083 EI1460 07/11/2000 P99/NQ 0 343,750 500,000 156,250 EI000009 04/19/2001 P99/NQ 0 416,667 500,000 83,333 P0000001 08/06/2001 P99/NQ 0 498,575 498,575 0 RT001155 08/06/2001 P99/NQ 0 398,860 398,860 0 Subtotal Options 11/9/2001 0 3,105,769 3,897,435 791,666 Restricted Awards R0000006 03/01/2000 RSP 18,750 18,750 R0000126 08/06/2001 RSP 15,000 15,000 Subtotal Awards 11/9/2001 33,750 33,750 OPTIONS AND AWARDS STATUS AS OF 11/9/2003 Option Option Number Date Plan/Type Shares Price Exercised Vested Options S0000002 03/01/2000 P99/NQ 1,500,000 $38.00 0 1,125,000 EI10 05/11/2000 P99/NQ 500,000 $25.31 0 427,083 EI1460 07/11/2000 P99/NQ 500,000 $29.44 0 406,250 EI000009 04/19/2001 P99/NQ 500,000 $7.70 0 500,000 P0000001 08/06/2001 P99/NQ 498,575 $5.24 0 0 RT001155 08/06/2001 P99/NQ 398,860 $5.24 0 398,860 Subtotal Options 11/9/2003 3,897,435 0 2,857,193 Restricted Awards R0000006 03/01/2000 RSP 25,000 $0.00 25,000 R0000126 08/06/2001 RSP 15,000 $0.00 0 Subtotal Awards 11/9/2003 40,000 25,000 OPTIONS AND AWARDS STATUS AS OF 11/9/2003 Option Option Number Date Plan/Type Cancelled Unvested Outstanding Exercisable Options S0000002 03/01/2000 P99/NQ 0 375,000 1,500,000 1,125,000 EI10 05/11/2000 P99/NQ 0 72,917 500,000 427,083 EI1460 07/11/2000 P99/NQ 0 93,750 500,000 406,250 EI000009 04/19/2001 P99/NQ 0 0 500,000 500,000 P0000001 08/06/2001 P99/NQ 0 498,575 498,575 0 RT001155 08/06/2001 P99/NQ 0 0 398,860 398,860 Subtotal Options 11/9/2003 0 1,040,242 3,897,435 2,857,193 Restricted Awards R0000006 03/01/2000 RSP 0 0 R0000126 08/06/2001 RSP 15,000 15,000 Subtotal Awards 11/9/2003 15,000 15,000
EXHIBIT B --------- MEDIA CONTACT: Marlene Somsak 408.878.2592 Marlene.Somsak@corp.palm.com Palm CEO Carl Yankowski Resigns; Chairman Eric Benhamou to Serve as CEO Palm Platform Separation in Final Phase; Company Confirms Previous Q2 Revenue Guidance SANTA CLARA, Calif., Nov. 8 /PRNewswire/ -- Palm, Inc. (Nasdaq: PALM) today announced that Carl Yankowski has decided to resign as chief executive officer. Eric Benhamou, Palm chairman of the board, will serve in his place until a permanent successor is named. A search has begun for a new CEO of Palm, Inc. The company also announced that it is in the final stages of its internal separation into two businesses. "We thank Carl for his industry vision, for keeping Palm(TM) handhelds and the Palm OS(R) the most popular choice among individuals and businesses around the world, and for setting the stage for future new OS and solutions growth," said Benhamou. "We wish him success in his future endeavors." "With Palm's transition into two individual businesses almost complete, my role has changed, and it no longer matches my aspirations," Yankowski said. "I leave confident that our separation and solutions strategies, combined with the new leadership at the helm of both businesses, will result in increased shareholder value. It has been an honor to lead Palm." Yankowski did not announce his future plans. Benhamou will chair an Executive Council that will help him lead the company until a new CEO is named. The council comprises David Nagel, Platform Solutions Group chief executive officer; Todd Bradley, Palm executive vice president and chief operating officer of the Solutions Group; and Judy Bruner, Palm senior vice president and chief financial officer. Palm is made of two business groups: The Solutions Group is responsible for designing and delivering the popular Palm family of products, including the Palm m100 and Palm m500 series handhelds and the Palm VIIx handheld, the industry's only fully featured handheld with integrated wireless capability, as well as hardware add-ons, software and accessories. The Platform Solutions Group is responsible for developing the Palm operating system and licensing it to a growing number of companies working to make handheld computing pervasive. By the end of calendar year 2001, the Platform Solutions Group is expected to become an internal subsidiary of Palm, a move that increases focus and drives innovation in both of Palm's businesses. More than 175,000 software developers have registered to develop software that runs on the Palm OS platform, and more than 12,000 software titles are available commercially today. Financial Update - ---------------- "While the economic slowdown persists, and consumer confidence has fallen following the Sept. 11 terrorist attacks, we are encouraged that sell-through has rebounded to levels above that of the summer months," Benhamou said. The company confirmed that the second fiscal quarter remains on track with the revenue guidance provided on Sept. 20, 2001. "We also are pleased that recent market research reports from Gartner and Jupiter Media Metrics reconfirm the strength of the Palm brand with both consumers and enterprises," said Benhamou. According to Jupiter Research's report published Sept. 26, 2001, "Palm remains the runaway platform of choice for companies developing mobile applications. 83 percent of such companies said that they planned to support Palm-based PDAs." According to a Gartner Dataquest press release issued Nov. 5, 2001, Palm continues to be the No. 1 vendor in the PDA market worldwide and in the United States. Gartner Dataquest's recently published October 2001 report states that devices based on the Palm OS comprised about 52 percent of worldwide PDA shipments in the third quarter of 2001, up from 49 percent in the second quarter of 2001. Platform Separation Background - ------------------------------ On July 27, 2001, Palm announced plans to separate its platform business from its hardware solutions business. Under the new structure, the Platform Solutions Group would operate independently but would continue to leverage Palm's infrastructure and staff services. Palm believes the separate subsidiary structure for the platform translates into greater clarity of mission, increased ability to serve licensees and, over time, to increased shareholder value. Palm expects to begin reporting revenues and operating results separately for the two businesses for its third fiscal quarter ending March 1, 2002. On Aug. 27, 2001, Palm named Nagel to be chief executive officer of the platform business, and since then, the company has been working to identify and separate the activities and support services necessary to run both businesses. Nagel had been at AT&T, where he was the company's chief -2- technology officer and president of AT&T Labs. He has been a member of the Palm board of directors since February 2000. About Palm, Inc. - ---------------- Palm, Inc. is a pioneer in the field of mobile and wireless Internet solutions and a leading provider of handheld computers, according to IDC (December 2000). Based on the Palm OS(R) platform, Palm's handheld solutions allow people to carry and access their most critical information wherever they go. Palm(TM) handhelds address the needs of individuals, enterprises and educational institutions through thousands of application solutions. The Palm OS platform is also the foundation for products from Palm's licensees and strategic partners, such as Acer, Franklin Covey, HandEra (formerly TRG), Handspring, IBM, Kyocera, Samsung, Sony and Symbol Technologies. Platform licensees also include AlphaSmart, Garmin and Nokia. The Palm Economy is a growing global community of industry-leading licensees, world-class OEM customers, and approximately 175,000 innovative developers and solution providers that have registered to develop solutions based on the Palm OS platform. Palm went public on March 2, 2000. Its stock is traded on the Nasdaq national market under the symbol PALM. More information is available at http://www.palm.com. Safe Harbor Statement - --------------------- This press release contains forward-looking statements within the meaning of the federal securities laws, including statements regarding the economy, competition, Palm's device and OS leadership, Palm's intentions and expectations regarding the separation of its businesses, including the expected timing of the separation and the effect of the separation on Palm's business, licensees and shareholder value, Palm's expectations regarding the effect of this change in leadership on shareholder value; Palm's expectations regarding revenues for the second quarter of fiscal year 2002; Palm's intentions and expectations regarding financial reporting of its separated businesses, Palm's intentions and expectations regarding delivering shareholder value. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially, including possible fluctuations in the demand for Palm's products and services, possible fluctuations in economic conditions affecting the markets for Palm's products and services, Palm's ability to compete with existing and new competitors and possible future price-cutting or other actions by Palm's competitors, possible difficulty in adjusting to a leadership change, and possible risks related to the separation of the businesses. A detailed discussion of other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in Palm's most recent filings with the Securities and Exchange Commission, including Palm's quarterly report on Form 10-Q for the fiscal quarter ended August 31, 2001, as amended, and Palm's Registration Statement on Form S-4 filed on Sept. 10, 2001, as amended. Palm undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this press release. Palm OS is a registered trademark and Palm is a trademark of Palm, Inc. -3- EX-10.26 5 dex1026.txt CONVERTIBLE NOTE PURCHASE AGREEMENT EXHIBIT 10.26 [*] = information redacted pursuant to a confidential treatment request. Such omitted information has been filed separately with the Securities and Exchange Commission. CONVERTIBLE NOTE PURCHASE AGREEMENT December 6, 2001 Texas Instruments Incorporated 12500 TI Boulevard P.O. Box 660199 Dallas, TX 75266-0199 Ladies and Gentlemen: Palm, Inc. (the "Company") wishes to confirm its arrangement with you (the "Purchaser") in connection with the issuance to you, against payment in immediately available funds of the purchase price of 100% of the principal amount thereof, of a convertible subordinated note in the form attached hereto as Annex I (the "Convertible Note"), in a principal amount of $50,000,000, and convertible into fully paid and non-assessable shares (each a "Share") of the Company's Common Stock, par value $.001 (the "Common Stock"), at a rate determined as set forth herein, subject to adjustment as set forth in the Convertible Note. Simultaneously with the execution and delivery of this Agreement, you and the Company have entered into a Registration Rights Agreement, dated as of the date hereof (the "Registration Rights Agreement"), pursuant to which the Company has agreed to register the Shares under certain circumstances. All capitalized terms not defined herein shall have the meaning ascribed in the Convertible Note. 1. Agreement to Issue and Accept. (a) On the basis of the representations and warranties and subject to the terms and conditions set forth herein, the Company agrees to issue to you, and you agree to purchase from the Company, a Convertible Note in the principal amount of $50,000,000 and having a Conversion Rate determined as set forth in Section 1(b) below, and to pay the above specified purchase price therefor. The closing of the issuance and purchase of the Convertible Note against such payment shall take place on the date hereof, or such other date agreed by you and the Company in writing (the "Closing Date"), at which time the Company shall deliver to you the Convertible Note, against delivery by each of you of a wire transfer of the purchase price to an account designated in writing by the Company. (b) The Conversion Rate of the Convertible Note shall be determined in accordance with the following formula: CR = 1000 ------------ (AVWAP x 1.3) where CR = the Conversion Rate and AVWAP = the arithmetic average of the daily volume weighted average prices for the Common Stock, as reported by Bloomberg L.P., for each Trading Day in the Averaging Period. The "Averaging Period" shall mean the period of 5 consecutive Trading Days immediately prior to the Closing Date. (c) The Company covenants and agrees that it shall, until further notice from the Purchaser, make all payments of principal, premium, if any, and interest owing on the Convertible Note to the account set forth on Annex II. 2. Representations and Warranties of the Company. The Company hereby makes the following representations and warranties to you as of the date hereof: (a) The Company has filed all reports required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months preceding the date hereof (the foregoing materials being collectively referred to herein as the "SEC Documents" and, together with the Transaction Documents (as defined) and the disclosure letter delivered to the Purchaser, the "Disclosure Materials") on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Documents prior to the expiration of any such extension. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Securities and Exchange Commission (the "Commission") promulgated thereunder, and none of the SEC Documents, when filed (or, if an amendment with respect to any such document was filed, when such amendment was filed), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company has filed as exhibits to the SEC Documents all material agreements to which the Company is a party or to which the property or assets of the Company are subject as required pursuant to Item 601 of Regulation S-K ("Regulation S-K") promulgated under the Securities Act ("Material Agreements"). The financial statements of the Company included in the SEC Documents comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing (or, if an amendment with respect to any such document was filed, when such amendment was filed). Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved ("GAAP"), except as may be otherwise specified in such financial -2- statements or the notes thereto, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. Since October 12, 2001, except as specifically disclosed in the Disclosure Materials, (a) there has been no event, occurrence or development that has or that could reasonably be expected to result in a Material Adverse Effect (as defined), (b) the Company has not incurred any liabilities (contingent or otherwise) other than (x) liabilities incurred in the ordinary course of business consistent with past practice and (y) liabilities not required to be reflected in the Company's financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (c) the Company has not altered its method of accounting or the identity of its auditors and (d) the Company has not declared or made any payment or distribution of cash or other property to its stockholders or officers or directors (other than in compliance with existing Company stock option plans) with respect to its capital stock, or purchased, redeemed (or made any agreements to purchase or redeem) any shares of its capital stock. (b) The number of authorized, issued and outstanding capital stock of the Company as of the date hereof is set forth in Schedule 2(b) of the disclosure letter provided to the Purchaser. Other than an immaterial number of shares of capital stock held by Persons other than the Company as required by applicable laws of the relevant jurisdictions, the Company owns all of the capital stock of each Subsidiary (as defined). No shares of Common Stock are entitled to preemptive or similar rights, nor is any holder of the Common Stock entitled to preemptive or similar rights arising out of any agreement or understanding with the Company by virtue of any of the Transaction Documents. Except as a result of the purchase and sale of the Convertible Note and except as disclosed in Schedule 2(b) of the disclosure letter provided to the Purchaser, or otherwise set forth in the SEC Documents, there are no outstanding options, warrants, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings, or arrangements by which the Company or any Subsidiary (as defined) is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. (c) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of Delaware, has the corporate power and corporate authority to own its property and to conduct its business as currently conducted and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not be reasonably expected to have a material adverse effect on the consolidated financial position, stockholders' equity, results of operations or business of the Company and its Subsidiaries (as defined), taken as a whole (a "Material Adverse Effect"). For the purposes of this Agreement, Subsidiaries means the entities controlled by the Company which are required to be disclosed pursuant to Item 601(b)(21) of Regulation S-K (each a "Subsidiary," and collectively, the "Subsidiaries"). Each of the Subsidiaries is an entity, duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the corporate power and authority to own its -3- property and to conduct its business as currently conducted and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or to be in good standing would not be reasonably expected to have a Material Adverse Effect. (d) The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Business Collaboration Agreement by and between the Company and the Purchaser (the "Business Collaboration Agreement"), Convertible Note, this Agreement and the Registration Rights Agreement (each a "Transaction Document," and collectively, the "Transaction Documents") and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby or thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company to authorize the Transaction Documents. Each of the Transaction Documents has been duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and general equity principles. The Company is not in violation of any of the provisions of its respective certificate or articles of incorporation, by-laws or other organizational or charter documents. (e) The Company has on the date hereof and will, at all times while the Convertible Note is outstanding, maintain an adequate reserve of duly authorized shares of Common Stock, reserved for issuance to the Purchaser or any permitted subsequent holder of the Convertible Note, to enable the Company to perform its conversion, exercise and other obligations under this Agreement and the Convertible Note. The Shares reserved for issuance upon conversion of the Convertible Note have been duly authorized and reserved and, when issued upon conversion of the Convertible Note in accordance with the terms of the Convertible Note will be validly issued, fully paid and non-assessable, and the issuance of the Shares will not be subject to any preemptive or similar rights. (f) The execution, delivery and performance of the Transaction Documents, compliance by the Company with all provisions hereof and thereof and the consummation of the transactions contemplated hereby and thereby and the issuance and delivery of the Convertible Note, will not violate or constitute a breach of any of the terms or provisions of, or a default under (or an event which with notice or lapse of time or both would become a default under), (i) the charter or by-laws of the Company or any of its Subsidiaries, (ii) any Material Agreement, or (iii) to the Company's knowledge, violate or conflict with any laws, administrative regulations or rulings or court decrees applicable to the Company, any of its Subsidiaries or their respective properties; and, except (A) as required pursuant to the Registration Rights Agreement, (B) as required by applicable blue sky laws and any filing of Form D under Regulation D under the Securities Act, or (C) for the disclosure required to be included in the Company's next Quarterly Report on Form 10-Q, when filed, pursuant to Item 2(c) of Form 10-Q, no consent, approval, authorization or order of or filing or registration with, any such court or governmental agency or body or third party is required for the -4- execution, delivery and performance of the Transaction Documents by the Company and the consummation of the transactions contemplated hereby and thereby. (g) Except as otherwise set forth in the SEC Documents, there are no legal or governmental proceedings pending to which the Company or any of its Subsidiaries is a party or of which any of their respective properties are subject which could (i) reasonably be expected to have a Material Adverse Effect or (ii) adversely affect or challenge the legality, validity or enforceability of any of the Transaction Documents, and, to the Company's knowledge, no such proceedings are threatened or contemplated. (h) The Company has filed all federal, state and local income and franchise tax returns required to be filed through the date hereof and has paid all taxes shown thereon, as due and no tax deficiency has been determined adversely to the Company or any of its Subsidiaries which has had (nor does the Company have any knowledge of any tax deficiency which will have) a Material Adverse Effect. (i) The Company and each of its Subsidiaries possesses all consents, licenses, certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, except as would not reasonably be expected to have a Material Adverse Effect and neither the Company nor any of its Subsidiaries has received any notice of proceedings relating to the revocation or modification of any such consent, license, certificate, authorization or permit, which, singly or in the aggregate, would reasonably be expected to have a Material Adverse Effect. (j) The Company is not and, after giving effect to the offering and sale of the Convertible Note, will not be required to register as, an "investment company" as such term is defined in the Investment Company Act of 1940, as amended. (k) The Company is subject to Section 13 or 15(d) of the Exchange Act. (l) Neither the Company nor any Person acting on its behalf has offered or sold any Convertible Note by means of any general solicitation or general advertising within the meaning of Rule 502(c) under the Act. (m) It is not necessary in connection with the offer, sale and delivery of the Convertible Note to the Purchaser to register the offer or sale of the Securities under the Securities Act or to qualify an indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). (n) Neither the Company nor any Subsidiary (i) is in default under or in violation of (and no event has occurred which has not been waived which, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under any Material Agreement, (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is in violation of any -5- statute, rule or regulation of any governmental authority, in each case of clause (i), (ii) or (iii) above, except as would not reasonably be expected to have or result in a Material Adverse Effect. (o) Neither the Company nor any of its Subsidiaries has employed any broker or finder, or incurred any liability for any brokerage or finders' fees or any similar fees or commissions in connection with the transactions contemplated by the Transaction Documents. (p) Except as set forth in the SEC Documents, the Company has not, in the twelve months preceding the date hereof, received notice (written or oral) from any stock exchange, market or trading facility on which the Common Stock is or has been listed (or on which it has been quoted) to the effect that the Company is not in compliance with the listing or maintenance requirements of such exchange or market. (q) Except as set forth in the SEC Documents, the Company and its Subsidiaries have, or have rights to use (or reasonably expect to be able to obtain such rights on commercially reasonable terms) all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and rights which are necessary or material for use in connection with their respective businesses, as described in the SEC Documents and which the failure to so have could reasonably be expected to have a Material Adverse Effect (collectively, the "Intellectual Property Rights"). Except as would not reasonably be expected to have a Material Adverse Effect and except as set forth in the SEC Documents, neither the Company nor any Subsidiary has received a written notice that the Intellectual Property Rights used by the Company or its Subsidiaries violates or infringes upon the rights of any Person. To the knowledge of the Company and except as set forth in the SEC Documents, all such Intellectual Property Rights are enforceable except to the extent that any unenforceability thereof would not reasonably be expected to have a Material Adverse Effect and there is no existing infringement by another Person of any of the Intellectual Property Rights that would reasonably be expected to result in a Material Adverse Effect. For the purposes of this paragraph (q), the term "Material Adverse Effect" shall be deemed to include a material adverse effect on the Company's ability to execute and deliver or consummate the transactions contemplated by the Business Collaboration Agreement. (r) Except as set forth in the SEC Documents or in Schedule 2(r) of the disclosure letter provided to the Purchaser, the Company has not granted or agreed to grant to any Person any rights (including "piggy-back" registration rights) to have any securities of the Company registered with the Commission or any other governmental authority which has not been satisfied. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. (s) The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them which is material to the business of the Company and its Subsidiaries and good and marketable title in all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens or encumbrances of any kind ("Liens"), except for Liens as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its Subsidiaries. Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases of which the Company and -6- its Subsidiaries are in compliance and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries. (t) The Company is eligible to file the Form S-3 Registration Statement (as defined in the Registration Rights Agreement) under the Securities Act and the rules promulgated thereunder. 3. Agreements, Representations and Warranties of Purchaser. You covenant and agree with (and in the case of Sections 3(c) through 3(g) represent and warrant to) the Company that: (a) You will not offer, sell, assign, hypothecate or otherwise transfer the Convertible Note except in compliance with applicable state securities laws and (i) pursuant to an effective registration statement under the Securities Act of 1933 (the "Act"), (ii) to a Person you reasonably believe to be an "accredited investor" within the meaning of Rule 501 under the Act, pursuant to an available exemption under the Act, or (iii) to non-U.S. Persons in an offshore transaction within the meaning and meeting the requirements of Rule 903 under the Act. (b) You will not offer, sell, assign, hypothecate or otherwise transfer any Shares issued upon conversion of the Convertible Note except in compliance with applicable state securities laws and (i) pursuant to an effective registration statement under the Act; (ii) to a Person you reasonably believe to be an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Act, pursuant to an available exemption under the Act; or (iii) to a "qualified institutional buyer" (as defined in Rule 144A of the Act). (c) You are an "accredited investor" within the meaning of Rule 501 under the Act. (d) You understand that the purchase of the Convertible Note involves substantial risk. You acknowledge that you are able to fend for yourself in the transactions contemplated by this Agreement and have the ability to bear the economic risks of your investment pursuant to this Agreement and have such knowledge and experience in financial or business matters that you are capable of evaluating the merits and risks of this investment in the Convertible Note and the Shares into which it is convertible and protecting your own interests in connection with this investment. (e) The Convertible Note and the Shares that you may acquire upon conversion of the Convertible Note will be acquired for your own account, not as a nominee or agent, and not with a view to or in connection with the sale or distribution of any part thereof. (f) You understand that the sale of the Convertible Note and the issuance of the Shares upon conversion thereof will not be registered under the Securities Act on the ground that the sale provided for in this Agreement is exempt from registration under the Securities Act, and that the reliance of the Company on such exemption is predicated in part on your representations set forth in this Agreement. You understand that the Convertible Note and the Shares issuable upon conversion thereof are restricted securities within the meaning of Rule 144 under the Act, and must be held -7- indefinitely unless they are subsequently registered or an exemption from such registration is available. You understand that the Company is under no obligation to register any of the securities sold hereunder except with respect to the Shares as provided in the Registration Rights Agreement. (g) You agree that the Convertible Note and the Shares issuable upon conversion thereof will bear legends and be subject to the restrictions on transfer. In addition you agree that the Company may place stop transfer orders with its transfer agents with respect to such instruments. The appropriate portion of the legend shall be removed in accordance with the provisions of the Convertible Note and the stop transfer orders shall be removed promptly upon delivery to the Company of such satisfactory evidence as reasonably may be required by the Company that such stop orders are not required to ensure compliance with the Securities Act. 4. Deliveries. (a) Concurrently with its execution and delivery of this Agreement against delivery of the documents by the Purchaser pursuant to paragraph (b) below, the Company is delivering the following: (i) a written opinion of the Company's counsel, dated as of the date hereof, in form and substance satisfactory to the Purchaser; (ii) an officer's certificate, in form and substance satisfactory to the Purchaser, certifying as to incumbency of signing officers and the true, correct and complete nature of the attached charter, bylaws and authorizing resolutions of the Company; (iii) a duly executed copy of the Convertible Note; (iv) a duly executed copy of the Registration Rights Agreement; and (v) a duly executed copy of the Business Collaboration Agreement. (b) Concurrently with its execution and delivery of the Agreement against delivery of the documents by the Company pursuant to paragraph (a) above, the Purchaser is delivering the following: (i) a duly executed copy of the Registration Rights Agreement; (ii) a duly executed copy of the Business Collaboration Agreement; and (iii) $50,000,000 by wire transfer of immediately available funds to the account referenced in Section 1(a). 5. Miscellaneous. (a) This Agreement shall be binding upon, and inure solely to the benefit of, you and the Company and the respective executors, administrators, successors and assigns thereof. -8- (b) Any notice or other communication required or permitted to be given hereunder shall be given in writing by certified mail, facsimile, or overnight courier service addressed as follows (as applicable) and shall be effective upon receipt: If to the Company, to: Palm, Inc. 5470 Great America Parkway Santa Clara, California 95054 Attention: Chief Financial Officer Telephone: 408-878-2764 Facsimile Transmission Number: 408-878-2790 With a copy of written communications to: Palm, Inc. 5470 Great America Parkway Santa Clara, California 95054 Attention: General Counsel Facsimile Transmission Number: 408-878-2180 If to Texas Instruments Incorporated: 12500 TI Boulevard P.O. Box 660199 Dallas, Texas 75266-0199 Attention: Joseph F. Hubach Telephone: (972) 995-3773 Facsimile Transmission Number: (972) 480-5061 With a copy to: Texas Instruments Incorporated 7839 Churchill Way, Mail Station 3994 Dallas, Texas 75251 P.O. Box 650311, Mail Station 3994 Dallas, Texas 75265 Attention: Manager, Treasury Services Telephone: (972) 917-6938 Facsimile Transmission Number: (972) 917-6945 or to such other address or number and to the attention of such other Person as either party may designate by written notice to the other party. Notice shall be effective upon actual receipt. (c) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND NEW YORK CIVIL PRACTICE LAWS AND RULES 327(B). EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES OF -9- AMERICA, IN EACH CASE LOCATED IN THE COUNTY OF NEW YORK, FOR ANY DISPUTE ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY (AND AGREES NOT TO COMMENCE ANY ACTION OR PROCEEDING RELATING THERETO EXCEPT IN SUCH COURTS). (d) Time shall be of the essence in the performance of this Agreement. (e) This Agreement may be executed by the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument. (f) Each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation preparation, execution, delivery and performance of this Agreement. (g) The Transaction Documents, together with the Annexes hereto and thereto and the disclosure letter delivered to Purchaser, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. (h) No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchaser or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (i) The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (j) The representations, warranties, agreements and covenants contained herein shall survive the Closing and the delivery and conversion of the Convertible Note. (k) In case any one or more of the provisions of this Agreement shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affecting or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision which shall be a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement. -10- Very truly yours, PALM, INC. By: /s/ Judy Bruner ------------------------------------ Name: Judy Bruner Title: Senior Vice President & Chief Financial Officer Accepted as of the date hereof: TEXAS INSTRUMENTS INCORPORATED By: /s/ William A. Aylesworth -------------------------------- Name: William A. Aylesworth Title: Senior Vice President, Treasurer & Chief Financial Officer -11- ANNEX I FORM OF CONVERTIBLE SUBORDINATED NOTE ANNEX II WIRE INSTRUCTIONS [*] Branch ABA #: [*] For the account of Texas Instruments Incorporated Account #: [*] EX-10.27 6 dex1027.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT 10.27 PALM, INC. REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is made effective as of December 6, 2001 (the "Effective Date"), by and between Palm, Inc., a Delaware corporation (the "Company") and Texas Instruments Incorporated, a Delaware corporation (the "Holder"). RECITALS A. The Company has entered into a Convertible Note Purchase Agreement with the Holder dated as of the date hereof (the "Purchase Agreement") pursuant to which it will issue a convertible subordinated note (the "Convertible Note") to Holder dated of even date herewith and convertible into fully paid and non-assessable shares of the Company's common stock, par value $0.001 per share (the "Common Stock"), at a rate determined as set forth in the Convertible Note. B. The Purchase Agreement contemplates the simultaneous execution of this Agreement. AGREEMENT NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, the parties hereto agree as follows: 1. Certain Definitions. As used in this Agreement, the terms below shall have the following respective meanings: "Business Day" means any day other than Saturday, Sunday or other day on which commercial banks in the State of California are required or authorized by law to be closed. "Commission" means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "Effectiveness Period" means the period commencing on the date hereof and ending on the date that all Registrable Securities have ceased to be Registrable Securities. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar federal rule or statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Prospectus" means the prospectus included in a Registration Statement (including without limitation, a prospectus that discloses information previously omitted from a prospectus filed as a part of an effective Registration Statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by amendment or prospectus supplement, including post-effective amendments, and all materials incorporated by reference or explicitly deemed to be incorporated by reference in such prospectus. "Registrable Securities" means the Common Stock issuable upon conversion of the Convertible Note and any securities into or for which such Common Stock has been converted or exchanged and any security issued, with respect thereto upon any stock dividend, split or similar event, until (i) in the case of any such security, (A) the earliest of (i) the effective registration under the Securities Act and resale thereof in accordance with the Registration Statement covering it, (ii) the resale thereof in accordance with Rule 144 or (iii) the expiration of the holding period that would be applicable thereto under Rule 144(k) under the Securities Act and (B) as a result of the event or circumstance described in any of the foregoing clauses (i)-(iii) the legend with respect to transfer restrictions required under the Convertible Note are removed or removable in accordance with the terms of the Convertible Note or such legends as the case may be; provided, however, that any Registrable Securities (x) not specified in the Registration Request or a Joining Request, if applicable, within the time period specified in Section 4(a)(ii) or (y) the holder of which fails to provide the Company the information of such holder requested by the Company as is required in order to effect the registration pursuant to this Agreement on or prior to the later of (i) twenty (20) days following the delivery or mailing of the Registration Notice (as defined in Section 4(a)(i)), if applicable, and (ii) 9:00 a.m., San Francisco time, on the second Business Day prior to the filing of the Shelf Registration Statement (as defined in Section 4(a)(i)) shall cease to be treated as Registrable Securities. "Register," "registered" and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement. "Registration Statement" means a registration statement of the Company, on Form S-3 or any successor form (and in the event that pursuant to the Securities Act the Company is unable to use Form S-3 (or any successor form), another appropriate form permitting registration of the Registrable Securities for resale by the Holder), that covers all or any of the Registrable Securities pursuant to the provisions of this Agreement, including any Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all materials incorporated by reference or explicitly deemed to be incorporated by reference in such registration statement. "Rule 144" means Rule 144 promulgated under the Securities Act, as such rule may be amended from time to time. "Securities Act" means the Securities Act of 1933, as amended, or any similar federal rule or statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. -2- "Significant Holder" means any person that is the record owner of at least 500,000 shares of Registrable Securities. 2. Restrictions on Transferability. The Registrable Securities shall be subject to the restrictions on transfer set forth in the Convertible Note. Each certificate evidencing the securities so transferred shall bear, except if such transfer is made pursuant to Rule 144 or pursuant to an effective registration statement, the restrictive legend set forth in Section 3 below, except that such certificate shall not bear such restrictive legend if, in the opinion of counsel for the Holder and counsel for the Company, such legend is not required in order to establish or ensure compliance with the provisions of the Securities Act. 3. Restrictive Legend. Each certificate representing the Registrable Securities shall be stamped or otherwise imprinted with the following or similar legend: THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS. The Holder consents to the making of a notation by the Company on its records and the giving of instructions to any transfer agent of its capital stock in order to implement the restrictions on transfer established in this Agreement. 4. Registration on Form S-3. Registration on Form S-3. (a) If the Company receives from a Significant Holder a written request (the "Registration Request") that the Company file a Registration Statement (the date that the Company receives such request, the "Request Date"), the Company shall: (i) Promptly give notice of the proposed registration to all holders of Registrable Securities (at the address of such holders contained in the Company's books and records or provided to the Company (in writing) by such holders for the purposes of this notice) and request such information from such holders, including the Significant Holder(s) submitting the Registration Request, as is required in order to effect the registration (the "Registration Notice"); (ii) Prepare and file or cause to be prepared and filed with the Commission not more than ninety (90) days after the Request Date (the "Filing Deadline Date") a Registration Statement for an offering to be made on a delayed or continuous basis pursuant to Rule 415 of the Securities Act registering the resale from time to time by the Holder thereof of all of the Registrable Securities as are specified in Registration Request, together with the Registrable Securities of any -3- holders of Registrable Securities joining in the Registration Request as are specified in a written request (a "Joining Request") received by the Company within twenty (20) days after the Registration Notice is mailed or delivered (the "Shelf Registration Statement"); and (iii) Use its reasonable best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act as promptly as is reasonably practicable but in any event by the date (the "Effectiveness Deadline Date") that is one hundred eighty (180) days after the Request Date, and to keep the Shelf Registration Statement (or any Subsequent Shelf Registration Statement (as defined)) continuously effective under the Securities Act until the expiration of the Effectiveness Period. (b) At the time the Shelf Registration Statement is declared effective, the holders of Registrable Securities shall be named as selling securityholders in the Shelf Registration Statement and the related Prospectus in such a manner as to permit such holders to deliver such Prospectus to purchasers of Registrable Securities in accordance with applicable law. None of the Company's securityholders (other than the holders of Registrable Securities at the time the Shelf Registration Statement is declared effective) shall have the right to include any of the Company's securities in the Shelf Registration Statement. (c) If the Shelf Registration Statement or any Subsequent Shelf Registration Statement (as defined below) ceases to be effective for any reason at any time during the Effectiveness Period (other than because all Registrable Securities registered thereunder shall have been resold pursuant thereto or shall have otherwise ceased to be Registrable Securities), the Company shall use its reasonable best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event (subject to Section 5(g)) shall as promptly as reasonably practicable amend the Shelf Registration Statement in a manner reasonably expected to obtain the withdrawal of the order suspending the effectiveness thereof, or (subject to Section 5(g)) file an additional Shelf Registration Statement covering all of the securities that as of the date of such filing are Registrable Securities (a "Subsequent Shelf Registration Statement"). If a Subsequent Shelf Registration Statement is filed, the Company shall use its reasonable best efforts to cause the Subsequent Shelf Registration Statement to become effective as promptly as is reasonably practicable after such filing and to keep such Subsequent Shelf Registration Statement continuously effective until the end of the Effectiveness Period. (d) Subject to Section 5(g), the Company shall supplement and amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement, if required by the Securities Act or as reasonably requested by the Holder or counsel for the Holder. 5. Registration Procedures. In connection with the registration obligations of the Company under Section 4, the Company shall: (a) Prepare and file with the Commission the Shelf Registration Statement (and any Subsequent Shelf Registration Statement, if required) not more than ninety (90) days after the Request Date and use its reasonable best efforts to cause the Shelf Registration Statement to become -4- effective not more than one hundred eighty (180) days after the Request Date and remain effective as provided herein; provided, that before filing the Shelf Registration Statement or Prospectus or any amendments or supplements thereto with the Commission, the Company shall furnish to the Holder and counsel for the Holder, if any, copies of all such documents proposed to be filed and use reasonable efforts to reflect in each such document when so filed with the Commission such comments, if any, as counsel for the Holder reasonably shall propose within five (5) Business Days of the delivery of such copies to the Holder and counsel for the Holder; (b) Subject to Section 5(g), prepare and file with the Commission such amendments and post-effective amendments to the Shelf Registration Statement as may be necessary to keep the Shelf Registration Statement continuously effective for the applicable period specified in Section 4(a); subject to Section 5(g), cause the related Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; and use its reasonable best efforts to comply with the provisions of the Securities Act applicable to it with respect to the disposition of all Registrable Securities covered by the Shelf Registration Statement during the Effectiveness Period in accordance with the intended methods of disposition by the sellers thereof set forth in the Shelf Registration Statement as so amended or such Prospectus as so supplemented; (c) As promptly as reasonably practicable give notice to the Holder and counsel for the Holder, (i) when any Prospectus, Prospectus supplement, Shelf Registration Statement or post-effective amendment to the Shelf Registration Statement has been filed with the Commission and, with respect to the Shelf Registration Statement or any post-effective amendment, when the same has been declared effective, (ii) of any written request, following the effectiveness of the Shelf Registration Statement under the Securities Act, by the Commission or any other federal or state governmental authority for amendments or supplements to any Registration Statement or related Prospectus or for additional information, (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of the Shelf Registration Statement or the initiation or written threat of any proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or the written threat of any proceeding for such purpose, (v) of the occurrence of a Material Event (as defined below) (but not the nature of or details concerning such Material Event) and (vi) of the determination by the Company that a post-effective amendment to the Shelf Registration Statement will be filed with the Commission, which notice may, at the discretion of the Company (or as required pursuant to Section 5(g)), state that it constitutes a Deferral Notice (as defined below), in which event the provisions of Section 5(g) shall apply; (d) Use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of the Shelf Registration Statement or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction in which they have been qualified for sale and provide reasonably prompt notice to the Holder and counsel for the Holder of the withdrawal of any such order; -5- (e) Subject to Section 5(g), if reasonably requested by the Holder, as promptly as reasonably practicable incorporate in a Prospectus supplement or post-effective amendment to the Shelf Registration Statement such information as the Holder and counsel for the Holder shall determine to be required to be included therein by applicable law and make any required filings of such Prospectus supplement or post-effective amendment; (f) Furnish to the Holder and each underwriter, if any, of Registrable Securities covered by the Shelf Registration Statement (a) promptly after the same is prepared and publicly distributed, filed with the Commission, or received by the Company, one conformed copy of the Shelf Registration Statement and any amendment thereto, each Prospectus and each amendment or supplement thereto, and, as promptly as reasonably practicable after the date of effectiveness of the Shelf Registration Statement or any amendment thereto, a notice stating that the Shelf Registration Statement or amendment thereto has been declared effective, and (b) such number of copies of Registration Statement, each amendment and supplement thereto (in each case including all exhibits thereto), and the Prospectus included in the Shelf Registration Statement (including each preliminary prospectus), in conformity with the requirements of the Securities Act, and such other documents as the Holder may reasonably request in order to facilitate the disposition of the Registrable Securities owned by the Holder. Such delivery of documents pursuant to (b) above shall be made by the Company within three (3) trading days of receipt of a request therefor from the Holder; (g) Upon (i) the issuance by the Commission of a stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of proceedings with respect to the Shelf Registration Statement under Section 8(d) or 8(e) of the Securities Act, (ii) the occurrence of any event or the existence of any fact or circumstance as a result of which the Shelf Registration Statement shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or any Prospectus shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (a "Material Event"), or (iii) the occurrence, existence or pendency of any corporate development that, in the reasonable discretion of the Company, makes it detrimental to the Company for the Shelf Registration Statement and the related Prospectus to be available for a discrete period of time, (A) in the case of clause (ii) above, subject to the next sentence, as promptly as practicable prepare and file, if necessary pursuant to applicable law, a post-effective amendment to the Shelf Registration Statement or a supplement to the related Prospectus or any document incorporated therein by reference or file any other required document that would be incorporated by reference into the Shelf Registration Statement and Prospectus so that the Shelf Registration Statement does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and such Prospectus does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, and, in the case of a post-effective amendment to a Registration Statement, subject to the next sentence, use its reasonable best efforts to cause it to be declared effective as promptly as is reasonably practicable, -6- and (B) give notice to the Holder, counsel for the Holder and underwriter, if any, that the availability of the Shelf Registration Statement is suspended (a "Deferral Notice") and, upon receipt of any Deferral Notice, the Holder agrees not to sell any Registrable Securities pursuant to the Registration Statement until the Holder's receipt of copies of the supplemented or amended Prospectus provided for in clause (A) above, or until it is advised in writing by the Company that the Prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such Prospectus. The Company will use its reasonable best efforts to ensure that the use of the Prospectus may be resumed (x) in the case of clause (i) above, as promptly as is reasonably practicable, (y) in the case of clause (ii) above, as soon as, in the sole judgment of the Company, public disclosure of such Material Event would not be prejudicial to or contrary to the interests of the Company or, if necessary to avoid unreasonable burden or expense, as soon as reasonably practicable thereafter and (z) in the case of clause (iii) above, as soon as in the reasonable discretion of the Company, such suspension is no longer appropriate. The Company shall be entitled to exercise its right under this Section 5(g) to suspend the availability of the Shelf Registration Statement or any Prospectus no more than one (1) time in any three-month period or three (3) times in any twelve-month period, and any such period during which the availability of the Registration Statement and any Prospectus is suspended (the "Deferral Period") shall not exceed 45 days; provided, that the aggregate duration of any Deferral Periods shall not exceed 45 days in any three-month period (or 60 days in any three-month period in the event of a Material Event pursuant to which the Company has delivered a second notice as required below) or 90 days in any twelve-month period; provided, that in the case of a Material Event relating to an acquisition or a probable acquisition or financing, recapitalization, business combination or other similar transaction, the Company may deliver to the Holder a second notice to the effect set forth above, which shall have the effect of extending the Deferral Period by up to an additional 15 days, or such shorter period of time as is specified in such second notice; (h) Use its reasonable best efforts to register or qualify the Registrable Securities under the securities or "blue sky" laws of each state of the United States of America as any of the Holder or underwriters, if any, of the Registrable Securities covered by the Shelf Registration Statement reasonably requests, and shall do any and all other acts and things which may be reasonably necessary or advisable to enable the Holder and each underwriter, if any, to consummate the disposition in such states of the Registrable Securities owned by the Holder; provided that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (h), (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction; (i) Comply with all applicable rules and regulations of the Commission and make generally available to its securityholders earning statements (which need not be audited) satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 3-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) commencing on the first day of the first fiscal quarter of the Company commencing after the effective date of the Shelf Registration Statement, which statements shall cover said periods; -7- (j) Cooperate with the Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities sold or to be sold pursuant to the Shelf Registration Statement, which certificates shall not bear any restrictive legends, and use reasonable efforts to cause such Registrable Securities to be in such denominations and registered in such names as the Holder may request in writing at least one (1) trading day prior to any sale of such Registrable Securities; (k) Provide a CUSIP number for all Registrable Securities covered by the Shelf Registration Statement not later than the effective date of the Shelf Registration Statement and provide the transfer agent for the Common Stock with printed certificates for the Registrable Securities that are in a form eligible for deposit with The Depository Trust Company; (l) Cooperate and assist in any filings required to be made with the National Association of Securities Dealers, Inc. and take any reasonable acts which may be necessary to list the Common Stock underlying the Convertible Note on the Nasdaq National Market as required by Nasdaq National Market, or such other principal market or exchange as the Common Stock shall then be listed or traded, and take such other reasonable acts as may be necessary to secure such listing; (m) Enter into customary agreements (including an underwriting agreement in customary form) and take all such other reasonable and customary actions as the Holder or the underwriters, if any, may reasonably request in order to expedite or facilitate the disposition of the Registrable Securities in accordance with the terms of this Agreement; (n) Make reasonably available for inspection during normal business hours by a representative for the Holder, and any broker-dealers, counsel for the Holder, accountants or underwriter, all relevant financial and other records and pertinent corporate documents and properties of the Company and its subsidiaries, and cause the appropriate officers, directors and employees of the Company and its subsidiaries to make reasonably available for inspection during normal business hours on reasonable notice all relevant information reasonably requested by such representative for the Holder, or any such broker-dealers, counsel for the Holder, accountants or underwriter in connection with such disposition, in each case as is customary for similar "due diligence" examinations; provided, however, that the Holder (and its agents and representatives) shall hold in confidence and shall not make any disclosure (except to another Holder, if any) of any such information, unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) disclosure of such information is necessary to avoid or to correct a misstatement or omission in any Registration Statement, (iii) release of such information is ordered pursuant to a subpoena or other order from a court or government body of competent jurisdiction, (iv) such information has been made generally available to the public other than by disclosure in violation of this or any other agreement, or (v) the Company consents to any such disclosure. The Holder agrees that it shall, upon learning that disclosure of such information is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the information deemed confidential. Nothing -8- herein shall be deemed to limit the Holder's ability to sell Registrable Securities in a manner which is otherwise consistent with applicable laws and regulations; and (o) Hold in confidence and not make any disclosure of information concerning the Holder provided to the Company pursuant to this Agreement unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) disclosure of such information is necessary to avoid or to correct a misstatement or omission in the Registration Statement, (iii) release of such information is ordered pursuant to a subpoena or other order from a court or governmental body of competent jurisdiction, (iv) such information has been made generally available to the public other than by disclosure in violation of this or any other agreement, or (v) the Holder consents to the form and content of any such disclosure. The Company agrees that it shall, upon learning that disclosure of such information concerning the Holder is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Holder prior to making such disclosure, and allow the Holder, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information. 6. Company Registration on Form S-3. At its own initiative, the Company may effect the registration of the Registrable Securities pursuant to a Registration Statement in order to comply with Section 3(g)(2)(iii) of the Convertible Note and the holders of Registrable Securities will cooperate with the Company in its efforts to effect such registration. In the event that the Company elects to initiate a registration of the Registrable Securities pursuant to this Section 6, no later than twenty (20) days prior to the filing of the Registration Statement in connection with such registration, the Company shall provide notice of the proposed registration to all holders of Registrable Securities (at the address of such holders contained in the books and records of the Company or provided to the Company (in writing) by such holders for the purposes of this Notice) and request such information from such holders as is required in order to effect the registration. Any Registration Statement initiated by the Company pursuant to this Section 6 shall be deemed to be a Shelf Registration Statement and shall be subject to the provisions of this Agreement applicable to a Shelf Registration Statement to the extent that such provisions do not conflict with Section 3(g)(2)(iii) of the Convertible Note. 7. Other Registration Rights. The Company is not, as of the date hereof, a party to, nor shall it, on or after the date of this Agreement, enter into, any agreement with respect to its securities that conflicts with the rights granted to the Holder in this Agreement. The Company represents and warrants that the rights granted to the Holder hereunder do not in any way conflict with the rights granted to the holders of the Company's securities under any other agreements. 8. Expenses of Registration. The Company shall bear all fees and expenses incurred in connection with the performance by the Company of its obligations under Section 4 and 6 of this Agreement whether or not the Shelf Registration Statement is declared effective. Such fees and expenses shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (x) with respect to filings required to be made with the National Association of Securities Dealers, Inc., (y) any fees for the additional listing of the shares of Common Stock underlying the Convertible Note on the Nasdaq National Market as required by the -9- Nasdaq National Market, or such other principal market as the Company's Common Stock may then be listed or traded, and (z) of compliance with federal and state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of one counsel for the Holder in connection with Blue Sky qualifications of the Registrable Securities under the laws of such jurisdictions as Notice Holders of a majority of the Registrable Securities being sold pursuant to the Shelf Registration Statement may designate), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities in a form eligible for deposit with The Depository Trust Company, (iii) duplication expenses relating to copies of any Registration Statement or Prospectus delivered to the Holder hereunder, (iv) fees and disbursements of counsel for the Company and counsel for the Holder in connection with the Shelf Registration Statement (provided that the Company shall not be liable for the fees and expenses of more than one separate firm for all parties participating in any transaction hereunder), (v) reasonable fees and disbursements of the transfer agent for the Common Stock and (vi) Securities Act liability insurance obtained by the Company in its sole discretion. In addition, the Company shall pay the internal expenses of the Company (including, without limitation, all salaries and expenses of officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing by the Company of the Registrable Securities on any securities exchange on which similar securities of the Company are then listed and the fees and expenses of any person, including special experts, retained by the Company. Notwithstanding the provisions of this Section 8, the Holder shall pay all selling expenses, including but not limited to all underwriting discounts (if any), selling commissions and stock transfer taxes. 9. Indemnification. (a) The Company will indemnify the Holder, each of its officers and directors, employees, partners, advisors and agents, and each person controlling the Holder within the meaning of Section 15 of the Securities Act, with respect to registration which has been effected pursuant to this Agreement, against all expenses, claims, losses, damages or liabilities (or actions or proceedings in respect thereof), including reasonable costs of investigation and reasonable legal fees and expenses and any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on (i) any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, preliminary prospectus, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, or arising out of or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading or (ii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any other applicable securities law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities and, in either case, the Company will reimburse each Indemnified Party (as defined in Section 9(c)), for any legal and any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and contained in written information furnished to the -10- Company by an instrument duly executed by the Holder or controlling person or their agent, and stated to be specifically for use therein; and provided, further, that the foregoing indemnity agreement is subject to the condition that, insofar as it relates to any such untrue statement, alleged untrue statement, omission or alleged omission made in a preliminary prospectus, such indemnity agreement shall not inure to the benefit of any person, if a copy of the final prospectus or an amended or supplemented prospectus, as applicable, was furnished to the Holder or an underwriter within the period of time required by the Securities Act, and if the final prospectus or the amended or supplemented prospectus, as applicable, would have cured the defect giving rise to the loss, liability, claim or damage. The Company also agrees to indemnify underwriters participating in the distribution, their officers, directors, employees, partners and agents, and each person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above, if so requested. (b) The Holder will indemnify the Company, each of its directors and officers, employees, partners, advisors and agents and each person controlling the Company within the meaning of Section 15 of the Securities Act against all claims, losses, damages and liabilities (or actions or proceedings in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, preliminary prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Indemnified Party for any legal or any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, but only to the extent that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in reliance upon and contained in written information furnished to the Company by an instrument duly executed by such Holder or controlling person or their agent and stated to be specifically for use therein; provided, however, that the Holder shall be liable for only that amount as does not exceed the net proceeds actually received by the Holder as a result of the offering of Registrable Securities to which the loss, liability, claim or damage relates. The Holder also agrees to indemnify underwriters participating in the distribution, their officers, directors, employees, partners and agents, and each person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above, if so requested. (c) Each party entitled to indemnification under this Section 9 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that (i) counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party's expense, (ii) that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 9 unless the failure to give such notice is materially prejudicial to an Indemnifying Party's ability to defend such action, and then only to the extent that such Indemnifying Party is materially prejudiced, and -11- (iii) that the Indemnifying Party shall not assume the defense for matters as to which, in the reasonable opinion of counsel retained by the Indemnified Party, there is a conflict of interest or there are separate and different defenses. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which (i) does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation and a covenant not to sue or (ii) includes admission of fault by the Indemnified Party. The indemnification required by this Section 9 shall be made by periodic payments of expenses, losses, damage or liability incurred during the course of the investigation or defense, as such expenses, losses, damage or liability are incurred and are due and payable. 10. Contribution. If for any reason the indemnification provided for in Section 9 is unavailable to an Indemnified Party or insufficient to hold it harmless as contemplated by Section 9, then the Indemnifying Party shall contribute to the amount paid or payable by the Indemnified Party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by the Indemnifying Party and the Indemnified Party, but also the relative fault of the Indemnifying Party and the Indemnified Party, as well as any other relevant equitable considerations, provided that the Holder shall not be required to contribute an amount greater than the dollar amount of the net proceeds received by the Holder with respect to the sale of the Registrable Securities giving rise to such indemnification obligation. The relative fault of any Indemnifying Party or of any Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such Indemnifying Party or by the Indemnified Party or their affiliates or representatives, and the parties' relative intent, knowledge, access to information and the opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 10 were determined by (i) pro rata allocation (even if all Holders or any agents for the Holders or any underwriters of the Registrable Securities, or all of them, were treated as one entity for such purpose), or (ii) by any other method that does not take into account the equitable considerations referred to in this Section 10. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action, proceeding or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person. 11. Liquidated Damages. (a) If on or prior to (i) the Filing Deadline Date, the Company has not filed the Shelf Registration Statement with the Commission, or (ii) the Effectiveness Deadline Date, the Shelf Registration Statement is not declared effective by the Commission (each of (i) and (ii) a "Registration Default"), the Company shall be required to pay liquidated damages ("Liquidated Damages"), from and including the day following such Registration Default until the earlier of (i) the time that the Shelf Registration Statement is filed or declared effective, as applicable, (ii) the -12- time the Effectiveness Period expires or (iii) the time of the acceleration of the Convertible Note at a rate per annum equal to an additional one-half of one percent (0.50%) of the principal amount of the Convertible Note, or portion thereof, corresponding to the Registrable Securities. (b) In the event that the Shelf Registration Statement ceases to be effective for more than 40 days, whether or not consecutive, in any 90-day period (an "Effectiveness Default"), then the Company shall pay Liquidated Damages at a rate per annum equal to an additional one-half of one percent (0.50%) of the principal amount of the Convertible Note, or portion thereof, corresponding to the Registrable Securities from the 41st day of the applicable 90-day period that such Shelf Registration Statement ceases to be effective until the earlier of (i) the time the Shelf Registration Statement again becomes effective, (ii) the time the Effectiveness Period expires or (iii) the time the Convertible Note is accelerated. (c) Any amounts to be paid as Liquidated Damages pursuant to paragraphs (a) or (b) of this Section 11 shall be paid upon the earlier of (i) the first interest payment date (as described in the Convertible Note) following the date of such Registration Default or Effectiveness Default, as the case may be, and (ii) at such time as the outstanding principal amount and accrued interest in respect of the Convertible Note are due and payable. Such Liquidated Damages will accrue (1) in respect of the Convertible Note at the rates set forth in paragraphs (a) or (b) of this Section 11, as applicable, on the principal amount of the Convertible Note and (2) in respect of the Common Stock issued upon conversion of the Convertible Note, at the rates set forth in paragraphs (a) or (b) of this Section 11, as applicable, applied to the Conversion Rate (as defined in the Convertible Note) at that time. (d) The Liquidated Damages as set forth in this Section 11 shall be the exclusive remedy available to the Holder for such Registration Default or Effectiveness Default, as the case may be, for the periods for which the Liquidated Damages are applicable. In no event shall the Company be required to pay Liquidated Damages in excess of the applicable maximum amount of one-half of one percent (0.50%) of the principal amount of the Convertible Note, or portion thereof, corresponding to the Registrable Securities set forth above, regardless of whether one or multiple Registration Defaults or Effectiveness Defaults exist. 12. Information by Holder. The Holder shall furnish to the Company such information regarding the Holder, the Registrable Securities held by it and the distribution proposed by the Holder as the Company may reasonably request in writing and as shall be required in connection with any registration referred to in this Agreement. 13. Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission which may permit the sale of the Registrable Securities to the public without registration, the Company agrees to use reasonable best efforts to: (a) Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act; (b) File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and -13- (c) Furnish to the Holder, so long as the Holder owns or has the right to acquire any Registrable Securities, within a reasonable time after the Holder's written request, a written statement by the Company as to its compliance with the foregoing requirements. 14. Transfer of Registration Rights. This Agreement may be assigned to a transferee or assignee in connection with any transfer or assignment of all or a portion of the Convertible Note or the Registrable Securities by the Holder, provided, that (i) such transfer is otherwise effected in accordance with applicable securities laws and the terms of this Agreement, the Purchase Agreement and the Convertible Note, (ii) such assignee or transferee acquired at least 500,000 shares of Registrable Securities (as adjusted for stock splits, stock dividends, stock combinations and the like), (iii) written notice is promptly given to the Company and (iv) such transferee agrees to be bound by the provisions of this Agreement. 15. Amendment. Except as otherwise provided above, any provision of this Agreement may be amended only with the written consent of the Company and the Holder. The observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only by the written consent of the party against whom enforcement is sought. 16. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND NEW YORK CIVIL PRACTICE LAWS AND RULES 327(B). EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES OF AMERICA, IN EACH CASE LOCATED IN THE COUNTY OF NEW YORK, FOR ANY DISPUTE ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY (AND AGREES NOT TO COMMENCE ANY ACTION OR PROCEEDING RELATING THERETO EXCEPT IN SUCH COURTS). 17. Entire Agreement. This Agreement, the Convertible Note, the Purchase Agreement, and the Annexes, Exhibits and Schedules attached hereto and thereto and delivered in connection herewith and therewith, as the case may be, constitute the full and entire understanding and Agreement between the parties regarding the matters set forth herein. Except as otherwise expressly provided herein or therein, all other agreements regarding the registration rights of the Holder shall hereby expire. The provisions hereof shall inure to the benefit of, and be binding upon the successors, permitted assigns, heirs, executors and administrators of the parties hereto. 18. Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be sent via facsimile, mailed by registered or certified mail, return receipt requested, postage prepaid, by hand or by messenger, addressed: -14- (a) if to the Holder, to: Texas Instruments Incorporated 12500 TI Boulevard P.O. Box 660199 Dallas, Texas 75266-0199 Attention: Joseph F. Hubach Telephone Number: (214)480-6030 Facsimile Transmission Number: (214) 480-5061 With a copy to: Texas Instruments Incorporated 7879 Churchill Way, Mail Station 3994 Dallas, Texas 75251 P.O. Box 650311, Mail Station 3994 Dallas, Texas 75265 Attention: Manager, Treasury Services Telephone Number: (972) 917-6938 Facsimile Transmission Number: (972) 917-6945 or at such other address as the Holder shall have furnished to the Company. (b) if to the Company, to: Palm, Inc. 5470 Great America Parkway Santa Clara, CA 95052 Attention: General Counsel Telephone Number: (408) 878-9000 Facsimile Number: (408) 878-2180 or at such other address as the Company shall have furnished to the Holder, with a copy to: Wilson Sonsini Goodrich & Rosati 650 Page Mill Road Palo Alto, CA 94304-1050 Attention: Katharine A. Martin, Esq. Facsimile Number: (650) 493-6811 Each such notice or other communication shall, for all purposes of this Agreement, be treated as effective or having been given when actually delivered as provided above, if delivered personally or by messenger, or, on the day shown on the return receipt, if sent by mail or other delivery service. 19. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. [remainder of page intentionally left blank] -15- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. PALM, INC. a Delaware corporation By: /s/ Judy Bruner ---------------------------- Name: Judy Bruner -------------------------- Title: Senior Vice President & Chief Financial Officer ------------------------- TEXAS INSTRUMENTS INCORPORATED a Delaware corporation By: /s/ William A. Aylesworth ---------------------------- Name: William A. Aylesworth -------------------------- Title: Senior Vice President, Treasurer & Chief Financial Officer ------------------------- [Signature Page to Registration Rights Agreement] EX-10.28 7 dex1028.txt AMENDMENT NUMBER TWO TO LOAN AGREEMENT EXHIBIT 10.28 [*] = information redacted pursuant to a confidential treatment request. Such omitted information has been filed separately with the Securities and Exchange Commission. AMENDMENT NUMBER TWO TO LOAN AGREEMENT THIS AMENDMENT NUMBER TWO TO LOAN AGREEMENT (this "Amendment"), dated as of November 30, 2001, is entered into between and among, on the one hand, the lenders identified on the signature pages hereof (such lenders, together with their respective successors and assigns, are referred to hereinafter each individually as a "Lender" and collectively as the "Lenders"), FOOTHILL CAPITAL CORPORATION, a California corporation, as the arranger and administrative agent for the Lenders ("Agent"), HELLER FINANCIAL, INC., a Delaware corporation ("Heller"), and THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation ("CITBC") and, on the other hand, PALM, INC., a Delaware corporation ("Borrower"), in light of the following: W I T N E S S E T H WHEREAS, the Borrower and the Lender Group are parties to that certain Loan Agreement, dated as of June 25, 2001, as amended by that certain Amendment Number One to Loan Agreement, dated as of August 6, 2001 (as amended, restated, supplemented, or modified from time to time, the "Loan Agreement"); WHEREAS, the Borrower has requested that the Lender Group consent to the amendments to the Loan Agreement set forth in Section 2 hereof; and WHEREAS, subject to the satisfaction of the conditions set forth herein, the Lender Group is willing to so consent to such amendments to the Loan Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree to amend the Loan Agreement as follows: 1. DEFINITIONS. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Loan Agreement, as amended hereby. 2. AMENDMENTS TO LOAN AGREEMENT. (a) Section 1.1 of the Loan Agreement hereby is amended by amending and restating the definitions of "Applicable Prepayment Premium", "Base Rate Margin", "LIBOR Rate Margin", "Designated Account", and "Eligible Accounts" as follows: "Applicable Prepayment Premium" means, as of any date of determination, an amount equal to (i) during the period of time from and after the date of the execution and delivery of this Agreement up to the date that is the first anniversary of the Closing Date, 2% times $150,000,000 (the "Maximum Amount") and (ii) during the period of time from and including the date that is the first anniversary of the Closing Date up to the date that is the second anniversary of the Closing Date, 1% times the Maximum Amount; provided, however, that if all or any portion of the Intellectual Property is sold or transferred other than pursuant to a Permitted IP Transaction or if thereafter, Borrower fails to maintain at least a majority equity interest in the IP Subsidiary or IP Subsidiaries, as the case may be, that are the subject of such Permitted IP Transaction or the IP Subsidiary or IP Subsidiaries, as the case may be, that are subject of such Permitted IP Transaction issue Prohibited Indebtedness or Prohibited Preferred Stock, then such amount will be reduced on a dollar for dollar basis up to a maximum of $50,000,000 by (i) the amount of proceeds received by Borrower in connection with such sale or transfer, or (ii) if Borrower makes such transfer pursuant to a partnership or joint venture with one or more third Persons, the amount equal to the fair market value of Intellectual Property contributed to such joint venture, measured in relation to the value of the interest received and capital contributions made by such third Person or Persons, as the case may be. "Base Rate Margin" means, as of any date of determination, for the 3 month period ended on the day prior to the applicable interest rate payment date, the percentage points determined by the following matrix: - -------------------------------------------------------------------------------- Average Amount of the Total Revolver Usage Base Rate Margin - -------------------------------------------------------------------------------- Less than $50,000,000 0.25 - -------------------------------------------------------------------------------- $50,000,000 or greater, up to and including $125,000,000 0.75 - -------------------------------------------------------------------------------- greater than $125,000,000 1.00 - -------------------------------------------------------------------------------- "Designated Account" means that certain deposit account of Borrower bearing the account number set forth on Schedule D-1 and maintained with Borrower's Designated Account Bank, or such other deposit account of Borrower (located within the United States) that has been designated as such, in writing, by Borrower to Agent. "Eligible Accounts" means those Domestic Accounts created by Borrower in the ordinary course of its business, that arise out of Borrower's sale of goods or rendition of services, that comply with each of the representations and warranties respecting Eligible Accounts made by Borrower in the Loan Documents, and that are not excluded as ineligible by virtue of one or more of the criteria set forth below; provided, however, that such criteria may be fixed and revised from time to time by Agent in Agent's Permitted Discretion to address the results of any audit performed by Agent from time to time after the Closing Date. In determining the amount to be included, Eligible Accounts shall be calculated net of customer deposits and unapplied cash remitted to Borrower. Eligible Accounts shall not include the following: 2 (a) Accounts that the Account Debtor has failed to pay within 90 days of original invoice date or Accounts with selling terms of more than 60 days, (b) Accounts owed by an Account Debtor (or its Affiliates) where 50% or more of all Accounts owed by that Account Debtor (or its Affiliates) are deemed ineligible under clause (a) above, (c) Accounts with respect to which the Account Debtor is an employee, Affiliate, or agent of Borrower, (d) Accounts arising in a transaction wherein goods are placed on consignment or are sold pursuant to a guaranteed sale, a sale or return, a sale on approval, a bill and hold, or any other terms by reason of which the payment by the Account Debtor may be conditional, (e) Accounts that are not payable in Dollars, (f) Accounts with respect to which the Account Debtor either (i) does not maintain its chief executive office in the United States, or (ii) is not organized under the laws of the United States or any state thereof, or (iii) is the government of any foreign country or sovereign state, or of any state, province, municipality, or other political subdivision thereof, or of any department, agency, public corporation, or other instrumentality thereof, (g) Accounts with respect to which the Account Debtor is (i) the United States or any department, agency, or instrumentality of the United States (exclusive, however, of Accounts with respect to which Borrower has complied, to the reasonable satisfaction of Agent, with the Assignment of Claims Act, 31 USC ss. 3727), or (ii) any state of the United States (exclusive, however, of (y) Accounts owed by any state that does not have a statutory counterpart to the Assignment of Claims Act, or (z) Accounts owed by any state that does have a statutory counterpart to the Assignment of Claims Act as to which Borrower has complied to Agent's satisfaction), (h) Accounts with respect to which the Account Debtor is a creditor of Borrower has or has asserted a right of setoff, has disputed its liability, or has made any claim with respect to its obligation to pay the Account, to the extent of such claim, right of setoff, or dispute, (i) Accounts with respect to an Account Debtor whose total obligations owing to Borrower, UK Borrower and Irish Borrower exceed 10% of all Eligible Accounts and Eligible Foreign Accounts, to the extent of the obligations owing by such Account Debtor in excess of such percentage; provided, however, that Agent may, in its Permitted Discretion, increase the foregoing percentage for any Account Debtor up to a maximum of 20%; provided further, that in the case of Ingram Micro, the foregoing percentage shall be deemed increased to 17% and, in the case of Staples and Best Buy, the foregoing percentage shall be deemed increased to 15% for each of such entities; provided 3 further, that Agent may, in its Permitted Discretion, decrease the foregoing percentage for any Account Debtor based on a determination of the credit worthiness of such Account Debtor, (j) Accounts with respect to which the Account Debtor is subject to an Insolvency Proceeding, is not Solvent, has gone out of business, or as to which Borrower has received notice of an imminent Insolvency Proceeding or a material impairment of the financial condition of such Account Debtor, (k) Accounts, the collection of which, Agent, in its Permitted Discretion, believes to be doubtful; provided, however, that Agent agrees to endeavor, in good faith, to provide Borrower with reasonably prompt verbal notice of those material Account Debtors of Borrower that Agent deems to be doubtful under the foregoing provision, (l) Accounts that are not subject to a valid and perfected first priority Agent's Lien, (m) Accounts with respect to which (i) the goods giving rise to such Account have not been shipped and billed to the Account Debtor, or (ii) the services giving rise to such Account have not been performed and billed to the Account Debtor, or (n) Accounts that represent the right to receive progress payments or other advance billings that are due prior to the completion of performance by Borrower of the subject contract for goods or services. "LIBOR Rate Margin" means, as of any date of determination, for the 3 month period ended on the day prior to the applicable interest payment date, the percentage points determined by the following matrix: - -------------------------------------------------------------------------------- Average Amount of the Total Revolver LIBOR Rate Margin Usage - -------------------------------------------------------------------------------- Less than $50,000,000 2.25 - -------------------------------------------------------------------------------- $50,000,000 or greater, up to and including $125,000,000 2.75 - -------------------------------------------------------------------------------- greater than $125,000,000 3.00 - -------------------------------------------------------------------------------- (b) Section 1.1 of the Loan Agreement hereby is amended by inserting the following defined terms in the appropriate alphabetical order: "Aggregate Capital Expenditures" means the aggregate amount of capital expenditures of Borrower, UK Borrower and Irish Borrower. 4 "Irish Loan Usage" means, as of any date of determination, the then extant amount of Indebtedness outstanding under the Irish Loan Agreement. "Total Revolver Usage" means, as of any date of determination, the sum of (a) the Revolver Usage, plus (b) the UK Loan Usage, plus (c) the Irish Loan Usage. "UK Loan Usage" means, as of any date of determination, the then extant amount of Indebtedness outstanding under the UK Loan Agreement. (c) Section 7.20(b) of the Loan Agreement hereby is amended and restated in its entirety as follows: (b) Make Capital expenditures (other than with the proceeds of Permitted Equipment Indebtedness and other than amounts extant in Borrower's construction in progress account as of June 1, 2001) in any fiscal year in excess of the amount set forth in the following table for the applicable period: ----------------------------------------------- Fiscal Year Aggregate Capital Expenditures ----------------------------------------------- 2002 $31,250,000 ----------------------------------------------- 2003 $51,250,000 ----------------------------------------------- 3. CONDITIONS PRECEDENT TO AMENDMENT. The satisfaction of each of the following shall constitute conditions precedent to the effectiveness of this Amendment and each and every provision hereof: (a) The representations and warranties in the Loan Agreement and the other Loan Documents shall be true and correct in all respects on and as of the date hereof, as though made on such date (except to the extent that such representations and warranties relate solely to an earlier date). (b) No Default or Event of Default shall have occurred and be continuing on the date hereof or as of the date of the effectiveness of this Amendment. (c) No injunction, writ, restraining order, or other order of any nature prohibiting, directly or indirectly, the consummation of the transactions contemplated herein shall have been issued and remain in force by any Governmental Authority against the Borrower or the Lender Group. 4. CONSTRUCTION. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF CALIFORNIA. 5 5. ENTIRE AMENDMENT; EFFECT OF AMENDMENT. This Amendment, and terms and provisions hereof, constitute the entire agreement among the parties pertaining to the subject matter hereof and supersedes any and all prior or contemporaneous amendments relating to the subject matter hereof. Except for the amendments to the Loan Agreement expressly set forth in Section 2 hereof, the Loan Agreement and other Loan Documents shall remain unchanged and in full force and effect. To the extent any terms or provisions of this Amendment conflict with those of the Loan Agreement or other Loan Documents, the terms and provisions of this Amendment shall control. This Amendment is a Loan Document. 6. COUNTERPARTS; TELEFACSIMILE EXECUTION. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Amendment by signing any such counterpart. Delivery of an executed counterpart of this Amendment by telefacsimile shall be equally as effective as delivery of an original executed counterpart of this Amendment. Any party delivering an executed counterpart of this Amendment by telefacsimile also shall deliver an original executed counterpart of this Amendment, but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Amendment. 7. MISCELLANEOUS. (a) Upon the effectiveness of this Amendment, each reference in the Loan Agreement to "this Agreement", "hereunder", "herein", "hereof" or words of like import referring to the Loan Agreement shall mean and refer to the Loan Agreement as amended by this Amendment. (b) Upon the effectiveness of this Amendment, each reference in the Loan Documents to the "Loan Agreement", "thereunder", "therein", "thereof" or words of like import referring to the Loan Agreement shall mean and refer to the Loan Agreement as amended by this Amendment. [Signature page follows.] 6 IN WITNESS WHEREOF, the parties have caused this Amendment to be executed and delivered as of the date first written above. PALM, INC. a Delaware corporation By: /s/ Judy Bruner ------------------------------------------ Name: Judy Bruner ---------------------------------------- Title: CFO --------------------------------------- FOOTHILL CAPITAL CORPORATION, a California corporation, as Agent and as a Lender By: /s/ John Nocita ------------------------------------------ Name: John Nocita ---------------------------------------- Title: Vice President --------------------------------------- HELLER FINANCIAL, INC., a Delaware corporation, as Syndication Agent and as a Lender By: /s/ Linde Reddle ------------------------------------------ Name: Linde Reddle ---------------------------------------- Title: Vice President --------------------------------------- THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation, as Documentation Agent and as a Lender By: /s/ Adrian Avalos ------------------------------------------ Name: Adrian Avalos ---------------------------------------- Title: Vice President --------------------------------------- SCHEDULE D-1 Designated Account Account Number: [*] EX-10.29 8 dex1029.txt LOAN AGREEMENT EXHIBIT 10.29 [*] = information redacted pursuant to a confidential treatment request. Such omitted information has been filed separately with the Securities and Exchange Commission. ================================================================================ LOAN AGREEMENT by and among PALM EUROPE LIMITED as Subsidiary Borrower, THE LENDERS THAT ARE SIGNATORIES HERETO as the Lenders, FOOTHILL CAPITAL CORPORATION as the Arranger and Administrative Agent, HELLER FINANCIAL, INC. as the Syndication Agent and THE CIT GROUP/BUSINESS CREDIT, INC. as the Documentation Agent Dated as of November 30, 2001 ================================================================================ TABLE OF CONTENTS 1. DEFINITIONS AND CONSTRUCTION.............................................1 1.1 Definitions.......................................................1 1.2 Accounting Terms.................................................23 1.3 [Intentionally omitted]..........................................24 1.4 Construction.....................................................24 1.5 Schedules and Exhibits...........................................24 2. LOAN AND TERMS OF PAYMENT...............................................24 2.1 Revolver Advances................................................24 2.2 [Intentionally omitted]..........................................25 2.3 Borrowing Procedures and Settlements.............................25 2.4 Payments.........................................................33 2.5 Overadvances.....................................................35 2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations.................................................36 2.7 Cash Management..................................................37 2.8 Crediting Payments...............................................38 2.9 Designated Account...............................................39 2.10 Maintenance of Loan Account; Statements of Obligations...........39 2.11 Fees.............................................................39 2.12 Letters of Credit................................................40 2.13 LIBOR Option.....................................................43 2.14 Capital Requirements.............................................46 3. CONDITIONS; TERM OF AGREEMENT...........................................47 3.1 Conditions Precedent to the Initial Extension of Credit..........47 3.2 [Intentionally omitted]..........................................49 3.3 Conditions Precedent to all Extensions of Credit.................50 3.4 Term.............................................................50 3.5 Effect of Termination............................................50 3.6 Early Termination by Subsidiary Borrower.........................51 4. PERFECTION OF SECURITY INTEREST; INSPECTION RIGHTS......................51 4.1 [Intentionally omitted]..........................................51 4.2 [Intentionally omitted]..........................................51 4.3 [Intentionally omitted]..........................................51 4.4 Delivery of Additional Documentation Required....................51 4.5 Power of Attorney................................................52 4.6 Right to Inspect.................................................52 4.7 [Intentionally omitted]..........................................52 -1- 5. REPRESENTATIONS AND WARRANTIES..........................................52 5.1 No Encumbrances..................................................53 5.2 Eligible Accounts................................................53 5.3 [Intentionally omitted]..........................................53 5.4 Equipment; Inventory.............................................53 5.5 [Intentionally omitted]..........................................53 5.6 [Intentionally omitted]..........................................53 5.7 Location of Head Office..........................................53 5.8 Due Organization and Qualification; Subsidiaries.................53 5.9 Due Authorization; No Conflict...................................54 5.10 Litigation.......................................................55 5.11 No Material Adverse Change.......................................55 5.12 Fraudulent Transfer..............................................56 5.13 [Intentionally omitted]..........................................56 5.14 [Intentionally omitted]..........................................56 5.15 Brokerage Fees...................................................56 5.16 Intellectual Property............................................56 5.17 Leases...........................................................56 5.18 DDAs.............................................................56 5.19 Complete Disclosure..............................................56 5.20 Indebtedness.....................................................57 5.21 [Intentionally omitted]..........................................57 5.22 Review and Approval of Domestic Loan Agreement...................57 6. AFFIRMATIVE COVENANTS...................................................57 6.1 Accounting System................................................57 6.2 Collateral Reporting.............................................58 6.3 Financial Statements, Reports, Certificates......................58 6.4 [Intentionally omitted]..........................................59 6.5 Return...........................................................59 6.6 Maintenance of Properties........................................60 6.7 Taxes............................................................60 6.8 Insurance........................................................60 6.9 Location of Equipment............................................61 6.10 Compliance with Laws.............................................61 6.11 Leases...........................................................62 6.12 Brokerage Commissions............................................62 6.13 Existence........................................................62 6.14 Environmental....................................................62 6.15 Disclosure Updates...............................................62 6.16 Compliance with Covenants of Domestic Loan Agreement.............62 -2- 7. NEGATIVE COVENANTS......................................................63 7.1 Indebtedness.....................................................63 7.2 Liens............................................................63 7.3 Restrictions on Fundamental Changes..............................64 7.4 Disposal of Assets...............................................64 7.5 Change Name......................................................64 7.6 Guarantee........................................................64 7.7 Nature of Business...............................................64 7.8 Prepayments and Amendments.......................................64 7.9 Change of Control................................................64 7.10 Consignments.....................................................65 7.11 Distributions....................................................65 7.12 Accounting Methods...............................................65 7.13 Investments......................................................65 7.14 Transactions with Affiliates.....................................65 7.15 Suspension.......................................................65 7.16 [Intentionally omitted]..........................................65 7.17 Use of Proceeds..................................................65 7.18 Change in Location of Head Office................................65 7.19 Inventory........................................................65 7.20 [Intentionally omitted]..........................................65 7.21 Issuance of Stock................................................66 7.22 Compliance with Covenants of Domestic Loan Agreement.............66 8. EVENTS OF DEFAULT.......................................................66 9. THE LENDER GROUP'S RIGHTS AND REMEDIES..................................68 9.1 Rights and Remedies..............................................68 9.2 Remedies Cumulative..............................................69 10. TAXES AND EXPENSES......................................................69 11. WAIVERS; INDEMNIFICATION................................................69 11.1 Demand; Protest; etc.............................................69 11.2 [Intentionally omitted]..........................................69 11.3 Indemnification..................................................69 12. NOTICES. ...............................................................70 13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER..............................71 14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS..............................72 14.1 Assignments and Participations...................................72 14.2 Successors.......................................................75 -3- 15. AMENDMENTS; WAIVERS.....................................................75 15.1 Amendments and Waivers...........................................75 15.2 Replacement of Holdout Lender....................................76 15.3 No Waivers; Cumulative Remedies..................................77 16. AGENT; THE LENDER GROUP.................................................77 16.1 Appointment and Authorization of Agent...........................77 16.2 Delegation of Duties.............................................78 16.3 Liability of Agent...............................................78 16.4 Reliance by Agent................................................79 16.5 Notice of Default or Event of Default............................79 16.6 Credit Decision..................................................79 16.7 Costs and Expenses; Indemnification..............................80 16.8 Agent in Individual Capacity.....................................81 16.9 Successor Agent..................................................81 16.10 Lender in Individual Capacity....................................81 16.11 Withholding Taxes................................................82 16.12 Collateral Matters...............................................85 16.13 Restrictions on Actions by Lenders; Sharing of Payments..........86 16.14 [Intentionally omitted]..........................................86 16.15 Payments by Agent to the Lenders.................................86 16.16 Concerning the Collateral and Related UK Loan Documents..........87 16.17 Field Audits and Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports and Information............87 16.18 Several Obligations; No Liability................................88 16.19 Legal Representation of Agent....................................89 17. GENERAL PROVISIONS......................................................89 17.1 Effectiveness....................................................89 17.2 Section Headings.................................................89 17.3 Interpretation...................................................89 17.4 Severability of Provisions.......................................89 17.5 Amendments in Writing............................................89 17.6 Counterparts; Telefacsimile Execution............................89 17.7 Revival and Reinstatement of Obligations.........................90 17.8 Integration......................................................90 17.9 Confidentiality..................................................90 -4- LOAN AGREEMENT THIS LOAN AGREEMENT (this "Agreement"), is entered into as of November 30, 2001, between and among, on the one hand, the lenders identified on the signature pages hereof (such lenders, together with their respective successors and assigns, are referred to hereinafter each individually as a "Lender" and collectively as the "Lenders"), FOOTHILL CAPITAL CORPORATION, a California corporation, as the arranger and administrative agent for the Lenders ("Agent"), HELLER FINANCIAL, INC., a Delaware corporation (hereinafter "Heller"), and THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation (hereinafter "CITBC") and, on the other hand, PALM EUROPE LIMITED, a corporation organized under the laws of England and Wales ("Subsidiary Borrower"), and is the "UK Loan Agreement" as that term is used in the Domestic Loan Agreement (as defined below). The parties agree as follows: 1. DEFINITIONS AND CONSTRUCTION. 1.1 Definitions. As used in this Agreement, the following terms shall have the following definitions: "Account Debtor" means any Person who is or who may become obligated under, with respect to, or on account of, an Account. "Accounts" means the accounts of the Subsidiary Borrower and any and all supporting obligations in respect thereof. "Acquisition" means any purchase or other acquisition by Domestic Parent or its Subsidiaries of the Stock of any other Person. "Additional Documents" has the meaning set forth in Section 4.4. "Advances" has the meaning set forth in Section 2.1. "Affiliate" means, as applied to any Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" means the possession, directly or indirectly, of the power to direct the management and policies of a Person, whether through the ownership of Stock, by contract, or otherwise; provided, however, that, for purposes of the definition of Eligible Accounts and Section 7.14 hereof: (a) any Person which owns directly or indirectly 10% or more of the securities having ordinary voting power for the election of directors or other members of the governing body of a Person or 10% or more of the partnership or other -1- ownership interests of a Person (other than as a limited partner of such Person) shall be deemed to control such Person, (b) each director (or comparable manager) of a Person shall be deemed to be an Affiliate of such Person, and (c) each partnership or joint venture in which a Person is a partner or joint venturer shall be deemed to be an Affiliate of such Person. "Agent" means Foothill, solely in its capacity as agent for the Lenders hereunder, and any successor thereto. "Agents" means Agent, Documentation Agent, and Syndication Agent. "Agent's Account" means an account at a bank designated by Agent from time to time as the account into which Subsidiary Borrower shall make all payments to Agent for the benefit of the Lender Group and into which the Lender Group shall make all payments to Agent under this Agreement and the other UK Loan Documents; unless and until Agent notifies Subsidiary Borrower and the Lender Group to the contrary, Agent's Account shall be that certain deposit account bearing the account number set forth on Schedule A-1 and maintained by Agent with the bank whose name, location and ABA number are set forth on Schedule A-1. "Agent Advances" has the meaning set forth in Section 2.3(e)(i). "Agent's Liens" means the charges and Liens granted by Subsidiary Borrower to Agent for the benefit of the Lender Group under the UK Security Documents or the other UK Loan Documents. "Agent-Related Persons" means Agent together with its Affiliates, officers, directors, employees, and agents. "Agreed Currency" means (i) Dollars, (ii) so long as such currencies remain Eligible Currencies, the lawful currency of each Specified State and the Euro, and (iii) any other Eligible Currency which Subsidiary Borrower requests Agent to include as an Agreed Currency hereunder and which is acceptable to Agents. If, after the designation by Agent of any currency as an Agreed Currency, (a) currency control or other exchange regulations are imposed in the country in which such currency is issued with the result that different types of such currency are introduced, (b) such currency is, in the determination of the Agent, no longer readily available or freely traded or (c) in the determination of the Agent, an equivalent amount of such currency valued in Dollars at the applicable Exchange Rate is not readily calculable, Agent shall promptly notify Subsidiary Borrower, and such currency shall no longer be an Agreed Currency until such time, if ever, as Agent agrees to reinstate such currency as an Agreed Currency. "Agreement" has the meaning set forth in the preamble hereto. "Assignee" has the meaning set forth in Section 14.1. -2- "Assignment and Acceptance" means an Assignment and Acceptance in the form of Exhibit A-1. "Authorized Person" means any director of Subsidiary Borrower or other Person authorised by the Board of Directors. "Availability" means, as of any date of determination, if such date is a Business Day, and determined at the close of business on the immediately preceding Business Day, if such date of determination is not a Business Day, the amount that Subsidiary Borrower is entitled to borrow as Advances under Section 2.1 (after giving effect to all then outstanding Obligations and all sublimits and reserves applicable hereunder). "Bankruptcy Code" means the English Insolvency Act of 1986, as in effect from time to time in England and Wales. "Base LIBOR Rate" means the rate per annum, determined by Agent in accordance with its customary procedures, and utilizing such electronic or other quotation sources as it considers appropriate (rounded upwards, if necessary, to the next 1/16%), on the basis of the rates at which Dollar deposits are offered to major banks in the London interbank market at 11:00 a.m. (London time) 2 Business Days prior to the commencement of the applicable Interest Period, for a term and in amounts comparable to the Interest Period and amount of the LIBOR Rate Loan requested by Subsidiary Borrower in accordance with this Agreement, which determination shall be conclusive in the absence of manifest error. "Base Rate" means the rate of interest announced within Wells Fargo at its principal office in San Francisco as its "prime rate", with the understanding that the "prime rate" is one of Wells Fargo's base rates (not necessarily the lowest of such rates) and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto and is evidenced by the recording thereof after its announcement in such internal publication or publications as Wells Fargo may designate. "Base Rate Loan" means each portion of an Advance that bears interest at a rate determined by reference to the Base Rate. "Base Rate Margin" means, as of any date of determination, for the 3 month period ended on the day prior to the applicable interest payment date, the percentage points determined by the following matrix: - -------------------------------------------------------------------------------- Average Amount of the Total Revolver Usage Base Rate Margin - -------------------------------------------------------------------------------- Less than $50,000,000 0.25 - -------------------------------------------------------------------------------- $50,000,000 or greater, up to and including $125,000,000 0.75 - -------------------------------------------------------------------------------- greater than $125,000,000 1.00 - -------------------------------------------------------------------------------- -3- "Board of Directors" means the board of directors of Subsidiary Borrower or any committee thereof duly authorized to act on behalf of such board of directors. "Books" means Subsidiary Borrower's now owned or hereafter acquired books and records indicating, summarizing, or evidencing the Collateral. "Borrowing" means a borrowing hereunder consisting of Advances made on the same day by the Lenders (or Agent on behalf thereof), or by Swing Lender in the case of a Swing Loan, or by Agent in the case of an Agent Advance. "Borrowing Base" has the meaning set forth in Section 2.1. "Borrowing Base Certificate" means a certificate in the form of Exhibit B-1. "Business Day" means any day that is not a Saturday, Sunday, or other day on which United States or United Kingdom national banks are authorized or required to close, except that, if a determination of a Business Day shall relate to a LIBOR Rate Loan, the term "Business Day" also shall exclude any day on which banks are closed for dealings in Dollar deposits in the London interbank market. "Capital Lease" means a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP. "Capitalized Lease Obligation" means any Indebtedness represented by obligations under a Capital Lease. "Cash Equivalents" means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within 1 year from the date of acquisition thereof, (b) marketable direct obligations issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within 1 year from the date of acquisition thereof and, at the time of acquisition, having the highest rating obtainable from either S&P or Moody's, (c) commercial paper maturing no more than 1 year from the date of acquisition thereof and, at the time of acquisition, having a rating of A-1 or P-1, or better, from S&P or Moody's, and (d) certificates of deposit or bankers' acceptances maturing within 1 year from the date of acquisition thereof either (i) issued by any bank organized under the laws of the United States or any state thereof which bank has a rating of A or A2, or better, from S&P or Moody's, or (ii) certificates of deposit less than or equal to $100,000 in the aggregate issued by any other bank insured by the Federal Deposit Insurance Corporation. "Change of Control" means (a) Domestic Parent ceases to directly own 100% of the outstanding shares of Irish Parent; (b) Irish Parent ceases to directly own 100% of the outstanding shares of Subsidiary Borrower; (c) a majority of the members of the Board of -4- Directors do not constitute Continuing Directors, or (d) the occurrence of a Change of Control (as defined in the Domestic Loan Agreement). "CITBC" has the meaning set forth in the preamble hereto. "Closing Date" means the date of the making of the initial Advance (or other extension of credit) hereunder. "Collateral" means any and all assets and rights and interests in or to property pledged from time to time as security for the Obligations pursuant to any pledge or security agreement that constitutes a UK Loan Document. "Collateral Access Agreement" means a landlord waiver, bailee letter, or acknowledgement agreement of any lessor, warehouseman, processor, consignee, or other Person in possession of, having a Lien upon, or having rights or interests in the Equipment, in each case, in form and substance satisfactory to Agent. "Collections" means all cash, cheques, drafts, and other customary items of payment (including insurance proceeds, proceeds of cash sales, rental proceeds, and tax refunds) of Subsidiary Borrower. "Commitment" means, with respect to each Lender, its Commitment and, with respect to all Lenders, their Commitments, in each case as such Dollar amounts are set forth beside such Lender's name under the applicable heading on Schedule C-1 or on the signature page of the Assignment and Acceptance pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 14.1. "Companies Act" means the Companies Act of 1985 of England and Wales, as amended. "Compliance Certificate" means a certificate substantially in the form of Exhibit C-1 delivered by the chief financial officer of Subsidiary Borrower to Agent. "Confidential Information" means written information that Subsidiary Borrower expressly furnishes to Agent or the Lenders on a confidential basis, information contained in the documents that Subsidiary Borrower furnishes to Agent pursuant to subsections (a) through (j) of Section 6.2, or written information that Subsidiary Borrower furnishes to Agent or the Lenders that relates to Subsidiary Borrower's forecasts, projections, strategic plans, or Intellectual Property, but does not include any such information that is or becomes generally available to the public (other than information that is or becomes available to the public as a result of disclosure by Agent or a Lender in violation of Section 17.9) or that is or becomes available to Agent or a Lender from a source other than Subsidiary Borrower or any agent of Subsidiary Borrower unless Agent or such Lender -5- knows, or reasonably should know, that such source is breaching a duty of confidentiality to Subsidiary Borrower. "Continuing Director" means (a) any member of the Board of Directors who was a director of Subsidiary Borrower on the date of this Agreement, and (b) any individual who becomes a member of the Board of Directors after the date of this Agreement if such individual was appointed or nominated for election to the Board of Directors by a majority of the Continuing Directors, but excluding any such individual originally proposed for election in opposition to the Board of Directors in office at the date of this Agreement in an actual or threatened election contest relating to the election of the directors (or comparable managers) of Subsidiary Borrower and whose initial assumption of office resulted from such contest or the settlement thereof. "Daily Balance" means, with respect to each day during the term of this Agreement, the amount of an Obligation owed at the end of such day. "DDA" means any cheque or other demand deposit account maintained by Subsidiary Borrower. "Default" means an event, condition, or default that, with the giving of notice, the passage of time, or both, would be an Event of Default. "Defaulting Lender" means any Lender that fails to make any Advance (or other extension of credit) that it is required to make hereunder on the date that it is required to do so hereunder. "Defaulting Lender Rate" means (a) the Base Rate for the first 3 days from and after the date the relevant payment is due, and (b) thereafter, at the interest rate then applicable to Advances that are Base Rate Loans (inclusive of the Base Rate Margin applicable thereto). "Designated Account" means that certain deposit account of Subsidiary Borrower bearing the account number and sort code set forth on Schedule D-1 and maintained with Subsidiary Borrower's Designated Account Bank, or such other deposit account of Subsidiary Borrower that has been designated as such, in writing, by Subsidiary Borrower to Agent. "Designated Account Bank" means the bank set forth on Schedule D-2. "Dilution" means, as of any date of determination, a percentage, based upon the experience of the applicable Dilution Look Back Period that is the result of dividing the Dollar amount of (a) bad debt write-downs, discounts, advertising allowances, credits, or other dilutive items with respect to Accounts of Subsidiary Borrower for goods sold or services rendered during such period, by (b) Subsidiary Borrower's Collections with respect -6- to Accounts for goods sold or services rendered during such period (excluding extraordinary items) plus the Dollar amount of clause (a). "Dilution Look Back Period" means the immediately prior 90 days. "Dilution Reserve" means, as of any date of determination, an amount sufficient to reduce the advance rate against Subsidiary Borrower's Eligible Accounts by one percentage point for each percentage point by which Dilution is in excess of 5%. "Documentation Agent" means CITBC in its capacity as the documentation agent under the UK Loan Documents, and its successors in such capacity. "Dollars" or "$" means United States dollars. "Domestic Eligible Accounts" means "Eligible Accounts" (as defined in the Domestic Loan Agreement). "Domestic Loan Agreement" means that certain Loan and Security Agreement dated as of June 25, 2001 by and among Domestic Parent, Lenders, and Agents. "Domestic Loan Documents" means the "Loan Documents" (as defined in the Domestic Loan Agreement). "Domestic Parent" means Palm, Inc., a Delaware corporation. "Domestic Revolver Usage" means, as of any date of determination, the "Revolver Usage" (as defined in the Domestic Loan Agreement). "Eligible Accounts" means those Accounts created by Subsidiary Borrower in the ordinary course of its business, that arise out of Subsidiary Borrower's sale of goods or rendition of services, that comply with each of the representations and warranties respecting Eligible Accounts made by Subsidiary Borrower in the UK Loan Documents, and that are not excluded as ineligible by virtue of one or more of the criteria set forth below; provided, however, that such criteria may be fixed and revised from time to time by Agent in Agent's Permitted Discretion to address the results of any audit performed by Agent from time to time after the Closing Date. In determining the amount to be included, Eligible Accounts shall be calculated net of customer deposits and unapplied cash remitted to Subsidiary Borrower. Eligible Accounts shall not include the following: (a) Accounts that the Account Debtor has failed to pay within 90 days of original invoice date or Accounts with selling terms of more than 60 days, (b) Accounts owed by an Account Debtor (or its Affiliates) where 50% or more of all Accounts owed by that Account Debtor (or its Affiliates) are deemed ineligible under clause (a) above, -7- (c) Accounts with respect to which the Account Debtor is an employee, Affiliate, or agent of Subsidiary Borrower, (d) Accounts arising in a transaction wherein goods are placed on consignment or are sold pursuant to a guaranteed sale, a sale or return, a sale on approval, a bill and hold, or any other terms by reason of which the payment by the Account Debtor may be conditional, (e) Accounts that are not payable in an Agreed Currency, (f) Accounts with respect to which the Account Debtor either (i) does not maintain its head office in a Specified State, or (ii) is not organized under the laws of a Specified State or any political subdivision thereof, or (iii) is the government of any country or sovereign state (other than that of the United Kingdom; provided, however, that the aggregate amount of such Accounts shall not exceed $2,000,000), or of any state, province, municipality, or other political subdivision thereof, or of any department, agency, public corporation, or other instrumentality thereof; (g) [Intentionally omitted], (h) Accounts with respect to which the Account Debtor is a creditor of Subsidiary Borrower has or has asserted a right of setoff, has disputed its liability, or has made any claim with respect to its obligation to pay the Account, to the extent of such claim, right of setoff, or dispute, (i) Accounts with respect to an Account Debtor whose total obligations owing to Subsidiary Borrower exceed 10% of (i) all Eligible Accounts, and (ii) all Eligible Accounts, Domestic Eligible Accounts and Irish Eligible Accounts, in each case to the extent of the obligations owing by such Account Debtor in excess of such percentage; provided, however, that Agent may, in its Permitted Discretion, increase the foregoing percentage for any Account Debtor up to a maximum of 20%; provided further, that in the case of Ingram Micro, the foregoing percentage shall be deemed increased to 17% and, in the case of Staples and Best Buy, the foregoing percentage shall be deemed increased to 15% for each of such entities; provided further, that Agent may, in its Permitted Discretion, decrease the foregoing percentage for any Account Debtor based on a determination of the credit worthiness of such Account Debtor, (j) Accounts with respect to which the Account Debtor is subject to an Insolvency Proceeding, is not Solvent, has gone out of business, or as to which Subsidiary Borrower has received notice of an imminent Insolvency Proceeding or a material impairment of the financial condition of such Account Debtor, (k) Accounts, the collection of which, Agent, in its Permitted Discretion, believes to be doubtful; provided, however, that Agent agrees to endeavor, in -8- good faith, to provide Subsidiary Borrower with reasonably prompt verbal notice of those material Account Debtors of Subsidiary Borrower that Agent deems to be doubtful under the foregoing provision, (l) Accounts that are not subject to a valid and perfected first priority Agent's Lien, (m) Accounts with respect to which (i) the goods giving rise to such Account have not been shipped and billed to the Account Debtor, or (ii) the services giving rise to such Account have not been performed and billed to the Account Debtor, or (n) Accounts that represent the right to receive progress payments or other advance billings that are due prior to the completion of performance by Subsidiary Borrower of the subject contract for goods or services. "Eligible Currency" means any currency other than Dollars (a) that is readily available, (b) that is freely traded, (c) in which deposits are customarily offered to banks in the London interbank market, (d) that is convertible into Dollars in the London interbank market, (e) as to which an equivalent amount valued in Dollars at the applicable Exchange Rate may be readily calculated, and (f) that is otherwise acceptable to Agent in its Permitted Discretion. "Eligible Transferee" means (a) a commercial bank organized under the laws of the United States, or any state thereof, and having total assets in excess of $250,000,000, (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development or a political subdivision of any such country and which has total assets in excess of $250,000,000, provided that such bank is acting through a branch or agency located in the United States, (c) a finance company, insurance company, or other financial institution or fund that is engaged in making, purchasing, or otherwise investing in commercial loans in the ordinary course of its business and having (together with its Affiliates) total assets in excess of $250,000,000, (d) any Affiliate (other than individuals) of a Lender that was party hereto as of the Closing Date, (e) so long as no Event of Default has occurred and is continuing, any other Person approved by Agent and Subsidiary Borrower, and (f) during the continuation of an Event of Default, any other Person approved by Agent. Notwithstanding anything to the contrary in Sections (b) and (c) hereof, an Eligible Transferee shall not include any Person who (i) is a resident of a country that does not have an income tax treaty with the United Kingdom providing zero withholding on interest payments and as a condition of assignment, and (ii) does not agree to complete any procedural formalities necessary for Subsidiary Borrower to qualify for zero withholding on interest payments, including, but not limited to, providing or updating relevant documentation pursuant to Section 16.11(f). "Equipment" means equipment, machinery, machine tools, motors, furniture, furnishings, fixtures, vehicles (including motor vehicles), tools, parts, goods (other than -9- consumer goods, farm products, or Inventory), wherever located, including all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing. "Environmental Actions" means any complaint, summons, citation, notice, directive, order, claim, litigation, investigation, judicial or administrative proceeding, judgment, letter, or other communication from any Governmental Authority, or any third party involving violations of Environmental Laws or releases of Hazardous Materials from (a) any assets, properties, or businesses of Subsidiary Borrower or any predecessor in interest, (b) from adjoining properties or businesses, or (c) from or onto any facilities which received Hazardous Materials generated by Subsidiary Borrower or any predecessor in interest. "Environmental Law" means any applicable federal, state, provincial, foreign or local statute, law, rule, regulation, ordinance, code, binding and enforceable guideline, binding and enforceable written policy, or rule of common law now or hereafter in effect and in each case as amended, or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, to the extent binding on Subsidiary Borrower, relating to the environment, employee health and safety, or Hazardous Materials, including Environment Act 1985; any state and local or foreign counterparts or equivalents, in each case as amended from time to time. "Environmental Liabilities and Costs" means all liabilities, monetary obligations, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts, or consultants, and costs of investigation and feasibility studies), fines, penalties, sanctions, and interest incurred as a result of any claim or demand by any Governmental Authority or any third party, and which relate to any Environmental Action. "Environmental Lien" means any Lien in favor of any Governmental Authority for Environmental Liabilities and Costs. "Event of Default" has the meaning set forth in Section 8. "Excess Availability" means the amount, as of the date any determination thereof is to be made, equal to Availability minus the aggregate amount, if any, of all trade payables of Subsidiary Borrower aged in excess of historical levels with respect thereto and all book overdrafts of Subsidiary Borrower in excess of historical practices with respect thereto, in each case as determined by Agent in its Permitted Discretion. "Exchange Rate" means and refers to the nominal rate of exchange (vis-a-vis Dollars) for a currency other than Dollars published in the Wall Street Journal (Western Edition) on the date of determination (which shall be a Business Day on which the Wall -10- Street Journal (Western Edition) is published), expressed as the number of units of such other currency per one Dollar. "Euro" means the euro referred to in Council Regulation (EC) No. 1103/97 dated June 17, 1997, passed by the Council of the European Union, or, if different, the then lawful currency of the member states of the European Union that participate in the third stage of Economic and Monetary Union. "Foothill" means Foothill Capital Corporation, a California corporation. "Foreign Exchange Reserve" means, as of any date of determination, a reserve for foreign currency exchange rate risk (in relation to Dollars) with respect to the Eligible Accounts and in such amount as shall be determined by Agent in its Permitted Discretion from time to time. "Funding Date" means the date on which a Borrowing occurs. "Funding Losses" has the meaning set forth in Section 2.13(b)(ii). "GAAP" means generally accepted accounting principles as in effect from time to time in the United States, consistently applied. "Governing Documents" means, with respect to any Person, the memorandum and articles of association, certificate or articles of incorporation, by-laws, or other organizational documents of such Person. "Governmental Authority" means any federal, state, local, or other governmental or administrative body, instrumentality, department, or agency or any court, tribunal, administrative hearing body, arbitration panel, commission, or other similar dispute-resolving panel or body. "Gross Up Amount" has the meaning set forth in Section 16.11(e). "Guarantors" means collectively, Domestic Parent and Irish Borrower, and "Guarantor" means either of them. "Hazardous Materials" means (a) substances that are defined or listed in, or otherwise classified pursuant to, any applicable laws or regulations as "hazardous substances," "hazardous materials," "hazardous wastes," "toxic substances," or any other formulation intended to define, list, or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas, natural gas liquids, synthetic gas, drilling fluids, produced waters, and other wastes associated with the exploration, development, or production of crude oil, natural gas, or geothermal resources, (c) any flammable substances or explosives or any radioactive materials, and (d) asbestos in -11- any form or electrical equipment that contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of 50 parts per million. "Heller" has the meaning set forth in the preamble hereto. "Indebtedness" means, with respect to any Person, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations of such Person in respect of letters of credit, bankers acceptances, interest rate swaps, or other financial products, (c) all obligations of such Person under Capital Leases, (d) all obligations or liabilities of any other Person secured by a Lien on any asset of such Person, irrespective of whether such obligation or liability is assumed, (e) all obligations of such Person for the deferred purchase price of assets (other than trade debt incurred in the ordinary course of such Person's business and repayable in accordance with customary trade practices), and (f) any obligation of such Person guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse to such Person) any obligation of any other Person. "Indemnified Liabilities" has the meaning set forth in Section 11.3. "Indemnified Person" has the meaning set forth in Section 11.3. "Insolvency Proceeding" means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other state or federal bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief. "Insolvent" means a Person which or who is unable to pay its debts as defined in the Insolvency Act of 1986. "Intellectual Property" means all of Subsidiary Borrower's patents, patent applications, trademarks, trademark applications, tradenames, tradedress, copyrights, copyright registrations, technology, know how and processes used in the conduct of the business of Subsidiary Borrower and its Subsidiaries. "Intercompany Advances" means loans or advances from Domestic Parent or one of its Subsidiaries to Domestic Parent or one of its Subsidiaries. "Interest Period" means, with respect to each LIBOR Rate Loan, a period commencing on the date of the making of such LIBOR Rate Loan and ending 1, 2, or 3 months thereafter; provided, however, that (a) if any Interest Period would end on a day that is not a Business Day, such Interest Period shall be extended (subject to clauses (c)-(e) below) to the next succeeding Business Day, (b) interest shall accrue at the applicable rate -12- based upon the LIBOR Rate from and including the first day of each Interest Period to, but excluding, the day on which any Interest Period expires, (c) any Interest Period that would end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day, (d) with respect to an Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period), the Interest Period shall end on the last Business Day of the calendar month that is 1, 2, or 3 months after the date on which the Interest Period began, as applicable, and (e) Subsidiary Borrower may not elect an Interest Period which will end after the Maturity Date. "Inventory" means all goods held for sale or lease or to be furnished under a contract of service, goods that are leased as lessor, goods that are furnished under a contract of service, and raw materials, work in process, or materials used or consumed in business. "Investment" means, with respect to any Person, any investment by such Person in any other Person (including Affiliates) in the form of loans, guarantees, advances, or capital contributions (excluding (a) commission, travel, and similar advances to officers and employees of such Person made in the ordinary course of business, and (b) bona fide Accounts arising from the sale of goods or rendition of services in the ordinary course of business consistent with past practice), purchases or other acquisitions for consideration of Indebtedness or Stock, and any other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. "IRC" means the Internal Revenue Code of 1986, as in effect from time to time. "Irish Borrower" means Palm Global Operations Ltd., a corporation organized under the laws of the Republic of Ireland. "Irish Debenture" means, collectively, those certain fixed and floating charge debentures, executed and delivered by Irish Borrower in favor of Agent, in form and substance satisfactory to Agent. "Irish Eligible Accounts" means "Eligible Accounts" (as defined in the Irish Loan Agreement"). "Irish Guaranty" means a guaranty executed and delivered by Domestic Parent of the Indebtedness of the Irish Borrower owing under the Irish Loan Documents, the form and substance of which is satisfactory to Agent. "Irish Loan Agreement" means a loan agreement between and among Agent, the Lenders, and Irish Borrower providing for the making of advances by the Lenders to Irish -13- Borrower in a maximum amount outstanding at any one time not to exceed the Maximum Irish Loan Amount. "Irish Loan Documents" means, collectively, such instruments, agreements, and documents (including a pledge of the Stock of Irish Borrower and a guaranty of the Indebtedness of UK Borrower under the UK Loan Agreement, in each case, if doing so is permitted by applicable law and would not create a material tax obligation) as Agent may require in order to evidence and secure the obligations of the Irish Borrower, including the Irish Loan Agreement, the Irish Security Documents and the Irish Guaranty. "Irish Loan Usage" means, as of any date of determination, the then extant amount of Indebtedness outstanding under the Irish Loan Agreement. "Irish Parent" means Palm Ireland Investment, a corporation organized under the laws of Ireland. "Irish Security Documents" means, collectively, such instruments, agreements, and documents governed by the laws of Ireland as Agent may require in order to secure the Indebtedness of Irish Borrower under the Irish Loan Agreement, including the Irish Debenture. "Issuing Lender" means Foothill or any other Lender that, at the request of Borrower and with the consent of Agent agrees, in such Lender's sole discretion, to become an Issuing Lender for the purpose of issuing L/Cs or L/C Undertakings pursuant to Section 2.12. "L/C" has the meaning set forth in Section 2.12(a). "L/C Disbursement" means a payment made by the Issuing Lender pursuant to a Letter of Credit. "L/C Undertaking" has the meaning set forth in Section 2.12(a). "Lender" and "Lenders" have the respective meanings set forth in the preamble to this Agreement, and shall include any other Person made a party to this Agreement in accordance with the provisions of Section 14.1. "Lender Group" means, individually and collectively, each of the Lenders and Agent. "Lender Group Expenses" means all (a) costs or expenses required to be paid by Subsidiary Borrower under any of the UK Loan Documents that are paid or incurred by the Lender Group, (b) actual fees or charges paid or incurred by Agent in connection with the Lender Group's transactions with Subsidiary Borrower, including, fees or charges for photocopying, notarization, couriers and messengers, telecommunication, public record -14- searches (including tax lien, litigation, and UCC searches, and including searches that are foreign equivalents thereof), filing, recording, publication, appraisal (including periodic Collateral appraisals or business valuations to the extent of the fees and charges (and up to the amount of any limitation) contained in this Agreement), real estate surveys, real estate title policies and endorsements, and environmental audits, (c) actual costs and expenses incurred by Agent in the disbursement of funds to Subsidiary Borrower (by wire transfer or otherwise), (d) actual charges paid or incurred by Agent resulting from the dishonor of cheques, (e) reasonable costs and expenses paid or incurred by the Lender Group to correct any default or enforce any provision of the UK Loan Documents, or in gaining possession of, maintaining, handling, preserving, storing, shipping, selling, preparing for sale, or advertising to sell the Collateral, or any portion thereof, irrespective of whether a sale is consummated, (f) audit fees and expenses of Agent related to audit examinations of the Books to the extent of the fees and charges (and up to the amount of any limitation) contained in this Agreement, (g) reasonable costs and expenses of third party claims or any other suit paid or incurred by the Lender Group in enforcing or defending the UK Loan Documents or in connection with the transactions contemplated by the UK Loan Documents or the Lender Group's relationship with Subsidiary Borrower or any guarantor of the Obligations, (h) Agent's reasonable fees and expenses (including attorneys fees) incurred in advising, structuring, drafting, reviewing, administering, or amending the UK Loan Documents, and (i) Agent's and each Lender's reasonable fees and expenses (including attorneys fees) incurred in terminating, enforcing (including attorneys fees and expenses incurred in connection with a "workout," a "restructuring," or an Insolvency Proceeding concerning Subsidiary Borrower or in exercising rights or remedies under the UK Loan Documents), or defending the UK Loan Documents, irrespective of whether suit is brought. "Lender-Related Person" means, with respect to any Lender, such Lender, together with such Lender's Affiliates, and the officers, directors, employees, and agents of such Lender. "Letter of Credit" means an L/C or an L/C Undertaking, as the context requires. "Letter of Credit Usage" means, as of any date of determination, the aggregate undrawn amount of all outstanding Letters of Credit plus 100% of the amount of outstanding time drafts accepted by an Underlying Issuer as a result of drawings under Underlying Letters of Credit. "LIBOR Deadline" has the meaning set forth in Section 2.13(b)(i). "LIBOR Notice" means a written notice in the form of Exhibit L-1. "LIBOR Rate" means, for each Interest Period for each LIBOR Rate Loan, the rate per annum determined by Agent (rounded upwards, if necessary, to the next 1/16%) by dividing (a) the Base LIBOR Rate for such Interest Period, by (b) 100% minus the Reserve -15- Percentage. The LIBOR Rate shall be adjusted on and as of the effective day of any change in the Reserve Percentage. "LIBOR Rate Loan" means each portion of an Advance that bears interest at a rate determined by reference to the LIBOR Rate. "LIBOR Rate Margin" means, as of any date of determination, for the 3 month period ended on the day prior to the applicable interest payment date, the percentage points determined by the following matrix: - -------------------------------------------------------------------------------- Average Amount of the Total Revolver Usage LIBOR Rate Margin - -------------------------------------------------------------------------------- Less than $50,000,000 2.25 - -------------------------------------------------------------------------------- $50,000,000 or greater, up to and including $125,000,000 2.75 - -------------------------------------------------------------------------------- greater than $125,000,000 3.00 - -------------------------------------------------------------------------------- "Lien" means any interest in an asset securing an obligation owed to, or a claim by, any Person other than the owner of the asset, whether such interest shall be based on the common law, statute, or contract, whether such interest shall be recorded or perfected, and whether such interest shall be contingent upon the occurrence of some future event or events or the existence of some future circumstance or circumstances, including the lien or security interest arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, security agreement, conditional sale or trust receipt, or from a lease, consignment, or bailment for security purposes and also including reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases, and other title exceptions and encumbrances affecting Real Property. "Loan Account" has the meaning set forth in Section 2.10. "Material Adverse Change" means (a) a material adverse change in the business, prospects, operations, results of operations, assets, liabilities or condition (financial or otherwise) of Subsidiary Borrower, (b) a material impairment of Subsidiary Borrower's ability to perform its obligations under the UK Loan Documents to which it is a party or of the Lender Group's ability to enforce the Obligations or realize upon the Collateral, (c) a material impairment of the enforceability or priority of the Agent's Liens with respect to the Collateral as a result of an action or failure to act on the part of Subsidiary Borrower, (d) a Material Adverse Change (as defined in the Domestic Loan Agreement), or (e) a Material Adverse Change (as defined in the Irish Loan Agreement). "Maturity Date" has the meaning set forth in Section 3.4. -16- "Maximum Domestic Revolver Amount" means the "Maximum Revolver Amount" (as defined in the Domestic Loan Agreement). "Maximum Irish Loan Amount" means, as of any date of determination, the result of (a) $10,000,000, minus (b) the amount by which the sum of the Domestic Revolver Usage plus the Subsidiary Borrower Revolver Usage exceeds $140,000,000. "Maximum Subsidiary Revolver Amount" means, as of any date of determination, the result of (a) $20,000,000, minus (b) the amount by which the sum of the Domestic Revolver Usage plus the Irish Loan Usage exceeds $130,000,000. "Obligations" means all loans, Advances, debts, principal, interest (including any interest that, but for the provisions of the Bankruptcy Code, would have accrued), premiums, liabilities (including all amounts charged to Subsidiary Borrower's Loan Account pursuant hereto), contingent reimbursement obligations with respect to outstanding Letters of Credit, obligations, fees, charges, costs, Lender Group Expenses (including any fees or expenses that, but for the provisions of the Bankruptcy Code, would have accrued), lease payments, guaranties, covenants, and duties of any kind and description owing by Subsidiary Borrower to the Lender Group pursuant to or evidenced by the UK Loan Documents and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including all interest not paid when due and all Lender Group Expenses that Subsidiary Borrower is required to pay or reimburse by the UK Loan Documents, by law, or otherwise. Any reference in this Agreement or in the UK Loan Documents to the Obligations shall include all amendments, changes, extensions, modifications, renewals replacements, substitutions, and supplements, thereto and thereof, as applicable, both prior and subsequent to any Insolvency Proceeding. "Originating Lender" has the meaning set forth in Section 14.1(e). "Overadvance" has the meaning set forth in Section 2.5. "Participant" has the meaning set forth in Section 14.1(e). "Permitted Discretion" means a determination made in good faith and in the exercise of reasonable (from the perspective of a secured asset-based lender) business judgment. "Permitted Dispositions" means (a) sales or other dispositions by Subsidiary Borrower of Equipment that is substantially worn, damaged, or obsolete in the ordinary course of business, (b) the use or transfer of money or Cash Equivalents by Subsidiary Borrower in a manner that is not prohibited by the terms of this Agreement or the other UK Loan Documents, and (c) the sale, licensing, or other disposition for fair market value by Subsidiary Borrower of patents, trademarks, copyrights, and other intellectual property rights; provided, however, that prior to or concurrent with any such sale, license, or other -17- disposition, Subsidiary Borrower must retain or obtain sufficient rights to use (as determined by Agent in its Permitted Discretion) the subject intellectual property as to enable Subsidiary Borrower to continue to conduct its business in the ordinary course and such rights shall assignable to Agent or inure to the benefit of Agent (as determined by Agents in their Permitted Discretion) in order to enable Agent to dispose of the Collateral in the event of an Event of Default. "Permitted Intercompany Advances" means Intercompany Advances so long as (a) no Default or Event of Default exists at the time of the making of any Intercompany Advance or would exist after giving effect thereto, (b) after giving effect to the making of such Intercompany Advance, the Person that is acting as the lender with respect thereto is Solvent, (c) the Intercompany Subordination Agreement (as defined in the Domestic Loan Agreement) is in full force and effect with respect to the proposed Intercompany Advance, (d) after giving effect to the making of such Intercompany Advance, the Person that is acting as the borrower with respect thereto is Solvent, (e) if Domestic Parent, Subsidiary Borrower or Irish Borrower is the Person acting as the lender with respect thereto and a Subsidiary of Domestic Parent that is not the Subsidiary Borrower or Irish Borrower is the Person acting as the borrower with respect thereto, such Intercompany Advance is made in the ordinary course of business and the amount of such Intercompany Advance does not exceed Subsidiary Borrower's or Irish Borrower's, as applicable, current working capital requirements and it does not have more than one month's worth of cash or Cash Equivalents after giving effect thereto, (f) in cases not covered by clause (e) above, if Domestic Parent is the Person acting as the lender with respect thereto, it has availability under the Domestic Loan Agreement plus cash and Cash Equivalents that have been pledged to Agent (and are subject to a control agreement in favor of Agent) in an amount not less than $75,000,000 after giving effect thereto, (g) in cases not covered by clause (e) above, if Irish Borrower is the Person acting as the lender with respect thereto, it has availability under the Irish Loan Agreement plus cash and Cash Equivalents that have been pledged to Agent (and are subject to a control agreement in favor of Agent) of not less than $5,000,000 after giving effect thereto, and (h) in cases not covered by clause (e) above, if Subsidiary Borrower is the Person acting as the lender with respect thereto, it has Availability plus cash and Cash Equivalents that have been pledged to Agent (and are subject to a control agreement in favor of Agent) of not less than $10,000,000 after giving effect thereto. "Permitted Liens" means (a) Liens held by Agent for the benefit of Agent and the Lenders, (b) Liens for unpaid taxes that either (i) are not yet delinquent, or (ii) do not constitute an Event of Default hereunder and are the subject of Permitted Protests, (c) Liens set forth on Schedule P-3, (d) the interests of lessors under operating leases, (e) Liens arising by operation of law in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course of business of Subsidiary Borrower and not in connection with the borrowing of money, and which Liens either (i) are for sums not yet delinquent, or (ii) are the subject of Permitted Protests, (f) Liens arising from deposits made in connection with obtaining employer's liability insurance or other unemployment insurance, (g) Liens or deposits to secure performance of bids, tenders, or leases incurred in -18- the ordinary course of business of Subsidiary Borrower and not in connection with the borrowing of money, (h) Liens granted as security for surety or appeal bonds in connection with obtaining such bonds in the ordinary course of business of Subsidiary Borrower, (i) Liens resulting from any judgment or award that is not an Event of Default hereunder, and (j) with respect to any Real Property, easements, rights of way, and zoning restrictions that do not materially interfere with or impair the use or operation thereof by Subsidiary Borrower. "Permitted Protest" means the right of Subsidiary Borrower to protest any Lien (other than any such Lien that secures the Obligations), taxes (other than payroll taxes or taxes that are the subject of an Inland Revenue tax lien), or rental payment, provided that (a) a reserve with respect to such obligation is established on the Books in such amount as is required under GAAP, (b) any such protest is instituted promptly and prosecuted diligently by Subsidiary Borrower in good faith, and (c) Agent is satisfied that, while any such protest is pending, there will be no impairment of the enforceability or validity of any of the Agent's Liens. "Person" means natural persons, corporations, limited liability companies, limited partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and governments and agencies and political subdivisions thereof. "Preferred Stock" means, as applied to the capital Stock of any Person, the capital Stock of any class or classes (however designated) that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of capital Stock of any other class of such Person. "Prohibited Indebtedness" means, with respect to any Person, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations of such Person in respect of letters of credit, bankers acceptances, interest rate swaps, or other financial products, (c) all obligations or liabilities of any other Person secured by a Lien on any asset of such Person, irrespective of whether such obligation or liability is assumed, and (d) any obligation of such Person guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse to such Person) any obligation of any other Person. "Pro Rata Share" means: (a) with respect to a Lender's obligation to make Advances and receive payments of principal, interest, fees, costs, and expenses with respect thereto, the percentage obtained by dividing (i) such Lender's Commitment, by (ii) the aggregate Commitments of all Lenders, -19- (b) with respect to a Lender's obligation to participate in Letters of Credit, to reimburse the Issuing Lender, and to receive payments of fees with respect thereto, the percentage obtained by dividing (i) such Lender's Commitment, by (ii) the aggregate Revolver of all Lenders, and (c) with respect to all other matters (including the indemnification obligations arising under Section 16.7), the percentage obtained by dividing (i) such Lender's Commitment, by (ii) the aggregate amount of Commitments of all Lenders; provided, however, that, in each case, in the event all Commitments have been terminated, Pro Rata Share shall be determined according to the Commitments in effect immediately prior to such termination. "Qualified Cash" means, as of any date of determination, the amount of unrestricted cash and Cash Equivalents of Subsidiary Borrower that is on deposit with banks, or in securities accounts with securities intermediaries, or any combination thereof, and which such deposit account or securities account is maintained by a branch office located within the United States. "Real Property" means any estates or interests in real property now owned or hereafter acquired by Subsidiary Borrower and the improvements thereto. "Real Property Collateral" means the parcel or parcels of Real Property identified on Schedule R-1 and any Real Property hereafter acquired by Borrower. "Record" means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form. "Remedial Action" means all actions taken to (a) clean up, remove, remediate, contain, treat, monitor, assess, evaluate, or in any way address Hazardous Materials in the indoor or outdoor environment, (b) prevent or minimize a release or threatened release of Hazardous Materials so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment, (c) perform any pre-remedial studies, investigations, or post-remedial operation and maintenance activities, or (d) conduct any other actions authorized by 42 USC ss. 9601 or any equivalent foreign legislation. "Report" has the meaning set forth in Section 16.17. "Required Lenders" means, at any time, any two or more Lenders whose Pro Rata Shares aggregate more than 50% of the Commitments, or if the Commitments have been terminated irrevocably, more than 50% of the Obligations then outstanding. "Reserve Percentage" means, on any day, for any Lender, the maximum percentage prescribed by the Board of Governors of the Federal Reserve System (or any successor Governmental Authority) for determining the reserve requirements (including any -20- basic, supplemental, marginal, or emergency reserves) that are in effect on such date with respect to eurocurrency funding (currently referred to as "eurocurrency liabilities") of that Lender, but so long as such Lender is not required or directed under applicable regulations to maintain such reserves, the Reserve Percentage shall be zero. "Risk Participation Liability" means, as to each Letter of Credit, all reimbursement obligations of Borrower to the Issuing Lender with respect to an L/C Undertaking, consisting of (a) the amount available to be drawn or which may become available to be drawn, (b) all amounts that have been paid by the Issuing Lender to the Underlying Issuer to the extent not reimbursed by Borrower, whether by the making of an Advance or otherwise, and (c) all accrued and unpaid interest, fees, and expenses payable with respect thereto. "SEC" means the United States Securities and Exchange Commission and any successor thereto. "Settlement" has the meaning set forth in Section 2.3(f)(i). "Settlement Date" has the meaning set forth in Section 2.3(f)(i). "Solvent" means, with respect to any Person on a particular date, that such Person is not Insolvent. "Specified State" means England, Scotland, Wales, Ireland, Australia, France, Germany, Italy, New Zealand, Canada, Norway, Finland, Switzerland, Sweden, Belgium, Japan, Singapore, the Netherlands United Kingdom and Ireland, or any other country approved by Agent in its sole discretion. "Stock" means all shares, options, warrants, interests, participations, or other equivalents (regardless of how designated) of or in a Person, whether voting or nonvoting, including common stock, preferred stock, or any other equity security. "Subsidiary" of a Person means a corporation, partnership, limited liability company, or other entity in which that Person directly or indirectly owns or controls the shares of Stock having ordinary voting power to elect a majority of the board of directors (or appoint other comparable managers) of such corporation, partnership, limited liability company, or other entity. "Subsidiary Borrower" has the meaning set forth in the preamble to this Agreement. "Subsidiary Borrower Collateral" means all of Subsidiary Borrower's now owned or hereafter acquired right, title, and interest in and to each of the following: (a) Accounts, -21- (b) Books, (c) Equipment, (d) Intercompany Advances, (e) Inventory, (f) Real Property Collateral, and (g) the proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance covering any or all of the foregoing, and all property resulting from the sale, exchange, collection, or other disposition of any of the foregoing, or any portion thereof or interest therein, and the proceeds thereof. "Subsidiary Borrower Revolver Usage" means, as of any date of determination, the sum of (a) the then extant amount of outstanding Advances, plus (b) the then extant amount of the Letter of Credit Usage. "Swing Lender" means Foothill or any other Lender that, at the request of Subsidiary Borrower and with the consent of Agent agrees, in such Lender's sole discretion, to become the Swing Lender hereunder. "Swing Loan" has the meaning set forth in Section 2.3(d)(i). "Syndication Agent" means Heller in its capacity as the syndication agent under the UK Loan Documents, and its successors in such capacity. "Taxes" has the meaning set forth in Section 16.11. "Total Revolver Usage" means, as of any date of determination, the sum of (a) the Domestic Revolver Usage, plus (b) the Subsidiary Borrower Revolver Usage, plus (c) the Irish Loan Usage. "Triggering Event" means either (a) the occurrence and continuation of an Event of Default, or (b) the first date on which the amount of Availability under the Domestic Loan Agreement, this Agreement and the Irish Loan Agreement (calculated, prior to the Closing Date of any such agreement, as if the conditions precedent in Section 3.1 of such agreement have been satisfied) plus Qualified Cash that has been pledged to Agent under the Domestic Loan Agreement, this Agreement and the Irish Loan Agreement and subject to a control agreement (in form and substance satisfactory to Agent) is equal to or less than $100,000,000, in the aggregate. "UK Cash Management Bank" has the meaning set forth in Section 2.7(a). -22- "UK Cash Management Account" has the meaning set forth in Section 2.7(a). "UK Cash Management Agreements" means those certain cash management service agreements, in form and substance satisfactory to Agent, each of which is among Subsidiary Borrower, Agent and one of the UK Cash Management Banks. "UK Debenture" means, collectively, a guarantee and those certain fixed and floating charge debentures, executed and delivered by Subsidiary Borrower in favor of Agent, in form and substance satisfactory to Agent. "UK Guaranty" means a guaranty executed and delivered by Domestic Parent of the Indebtedness of the Subsidiary Borrower owing under the UK Loan Documents, the form and substance of which is satisfactory to Agent. "UK Loan Documents" means this Agreement, the Letters of Credit, the UK Debenture, the UK Guaranty, the UK Stock Pledge Agreement, the UK Cash Management Agreements, any other UK Security Documents, any note or notes executed by Subsidiary Borrower in connection with this Agreement and payable to a member of the Lender Group, and any other agreement entered into, now or in the future, by Subsidiary Borrower and the Lender Group in connection with this Agreement. "UK Security Documents" means, collectively, such instruments, agreements, and documents as Agent may require in order to secure the Indebtedness of Subsidiary Borrower under this Agreement, including the UK Debenture. "UK Stock Pledge Agreement" means a share charge, in form and substance satisfactory to Agent, executed and delivered by Irish Parent with respect to 100% of the shares of Subsidiary Borrower. "Underlying Issuer" means a third Person which is the beneficiary of an L/C Undertaking and which has issued a letter of credit at the request of the Issuing Lender for the benefit of Subsidiary Borrower. "Voidable Transfer" has the meaning set forth in Section 17.7. "Wells Fargo" means Wells Fargo Bank, National Association, a national banking association. -23- 1.2 Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. When used herein, the term "financial statements" shall include the notes and schedules thereto. Whenever the term "Subsidiary Borrower" is used in respect of a financial covenant or a related definition, it shall be understood to mean Subsidiary Borrower and its Subsidiaries on a consolidated basis unless the context clearly requires otherwise. 1.3 [Intentionally omitted]. 1.4 Construction. Unless the context of this Agreement or any other UK Loan Document clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term "including" is not limiting, and the term "or" has, except where otherwise indicated, the inclusive meaning represented by the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement or any other UK Loan Document refer to this Agreement or such other UK Loan Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other UK Loan Document, as the case may be. Section, subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified. Any reference in this Agreement or in the other UK Loan Documents to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein). Any reference herein to any Person shall be construed to include such Person's successors and assigns. Any requirement of a writing contained herein or in the other UK Loan Documents shall be satisfied by the transmission of a Record and any Record transmitted shall constitute a representation and warranty as to the accuracy and completeness of the information contained therein. 1.5 Schedules and Exhibits. All of the schedules and exhibits attached to this Agreement shall be deemed incorporated herein by reference. 2. LOAN AND TERMS OF PAYMENT. 2.1 Revolver Advances. (a) Subject to the terms and conditions of this Agreement, and during the term of this Agreement, each Lender agrees (severally, not jointly or jointly and severally) to make advances ("Advances") to Subsidiary Borrower in an amount at any one time outstanding not to exceed such Lender's Pro Rata Share of an amount equal to the lesser of (i) the Maximum Subsidiary Revolver Amount less the Letter of Credit Usage, or (ii) the Borrowing Base less the Letter of Credit Usage. For purposes of this Agreement, "Borrowing Base," as of any date of determination, shall mean the result of: -24- (y) the lesser of (i) 75% of the Dollar equivalent amount of Subsidiary Borrower's Eligible Accounts, less the amount, if any, of the Dilution Reserve, and (ii) an amount equal to 83.3% of the Dollar equivalent amount of Subsidiary Borrower's Collections with respect to Subsidiary Borrower's Accounts for the immediately preceding 90 day period, minus (z) the aggregate amount of reserves, if any, established by Agent under Section 2.1(b). (b) Anything to the contrary in this Section 2.1 notwithstanding, Agent shall have the right to establish reserves in such amounts, and with respect to such matters, as Agent in its Permitted Discretion shall deem necessary or appropriate, against the Borrowing Base, including reserves with respect to (i) sums that Subsidiary Borrower is required to pay (such as taxes, assessments, insurance premiums, or, in the case of leased assets, rents or other amounts payable under such leases) and has failed to pay under any Section of this Agreement or any other Loan Document, (ii) amounts owing by Subsidiary Borrower to any Person to the extent secured by a Lien on, or trust over, any of the Collateral (including any existing Permitted Lien set forth on Schedule P-3 which Lien or trust would have a priority superior to the Agent's Liens (under applicable law) in and to such item of the Collateral, and (iii) the Foreign Exchange Reserve. (c) The Lenders shall have no obligation to make additional Advances hereunder to the extent such additional Advances would cause the Subsidiary Borrower Revolver Usage to exceed the Maximum Subsidiary Revolver Amount. (d) Amounts borrowed pursuant to this Section may be repaid and, subject to the terms and conditions of this Agreement, reborrowed at any time during the term of this Agreement. 2.2 [Intentionally omitted]. 2.3 Borrowing Procedures and Settlements. (a) Procedure for Borrowing. Each Borrowing shall be made by an irrevocable written request by an Authorized Person delivered to Agent (which notice must be received by Agent no later than 10:00 a.m. (California time) on the Business Day prior to the date that is the requested Funding Date in the case of a request for an Advance specifying (i) the amount of such Borrowing, and (ii) the requested Funding Date, which shall be a Business Day; provided, however, that in the case of a request for Swing Loan in -25- an amount of $10,000,000 or less, such notice will be timely received if it is received by Agent no later than 10:00 a.m. (California time) on the Business Day that is the requested Funding Date) specifying (i) the amount of such Borrowing, and (ii) the requested Funding Date, which shall be a Business Day. At Agent's election, in lieu of delivering the above-described written request, any Authorized Person may give Agent telephonic notice of such request by the required time, with such telephonic notice to be confirmed in writing within 24 hours of the giving of such notice. (b) Agent's Election. Promptly after receipt of a request for a Borrowing pursuant to Section 2.3(a), Agent shall elect, in its discretion, (i) to have the terms of Section 2.3(c) apply to such requested Borrowing, or (ii) if the Borrowing is for an Advance, to request Swing Lender to make a Swing Loan pursuant to the terms of Section 2.3(d) in the amount of the requested Borrowing; provided, however, that if Swing Lender declines in its sole discretion to make a Swing Loan pursuant to Section 2.3(d), Agent shall elect to have the terms of Section 2.3(c) apply to such requested Borrowing. (c) Making of Advances. (i) In the event that Agent shall elect to have the terms of this Section 2.3(c) apply to a requested Borrowing as described in Section 2.3(b), then promptly after receipt of a request for a Borrowing pursuant to Section 2.3(a), Agent shall notify the Lenders, not later than 1:00 p.m. (California time) on the Business Day immediately preceding the Funding Date applicable thereto, by telecopy, telephone, or other similar form of transmission, of the requested Borrowing. Each Lender shall make the amount of such Lender's Pro Rata Share of the requested Borrowing available to Agent in Dollars and immediately available funds, to Agent's Account, not later than 10:00 a.m. (California time) on the Funding Date applicable thereto. After Agent's receipt of the proceeds of such Advances, upon satisfaction of the applicable conditions precedent set forth in Section 3 hereof, Agent shall make the proceeds thereof available to Subsidiary Borrower on the applicable Funding Date by transferring immediately available funds in Dollars equal to such proceeds received by Agent to Subsidiary Borrower's Designated Account; provided, however, that, subject to the provisions of Section 2.3(i), Agent shall not request any Lender to make, and no Lender shall have the obligation to make, any Advance if Agent shall have actual knowledge that (1) one or more of the applicable conditions precedent set forth in Section 3 will not be satisfied on the requested Funding Date for the applicable Borrowing unless such condition has been waived, or (2) the requested Borrowing would exceed the Availability on such Funding Date. (ii) Unless Agent receives notice from a Lender on or prior to the Closing Date or, with respect to any Borrowing after the Closing Date, at least 1 Business Day prior to the date of such Borrowing, that such Lender will not -26- make available as and when required hereunder to Agent for the account of Subsidiary Borrower the amount of that Lender's Pro Rata Share of the Borrowing, Agent may assume that each Lender has made or will make such amount available to Agent in Dollars and immediately available funds on the Funding Date and Agent may (but shall not be so required), in reliance upon such assumption, make available to Subsidiary Borrower on such date a corresponding amount. If and to the extent any Lender shall not have made its full amount available to Agent in Dollars and immediately available funds and Agent in such circumstances has made available to Subsidiary Borrower such amount, that Lender shall on the Business Day following such Funding Date make such amount available to Agent, together with interest at the Defaulting Lender Rate for each day during such period. A notice submitted by Agent to any Lender with respect to amounts owing under this subsection shall be conclusive, absent manifest error. If such amount is so made available, such payment to Agent shall constitute such Lender's Advance on the date of Borrowing for all purposes of this Agreement. If such amount is not made available to Agent on the Business Day following the Funding Date, Agent will notify Subsidiary Borrower of such failure to fund and, upon demand by Agent, Subsidiary Borrower shall pay such amount to Agent for Agent's account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Advances composing such Borrowing. The failure of any Lender to make any Advance on any Funding Date shall not relieve any other Lender of any obligation hereunder to make an Advance on such Funding Date, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on any Funding Date. (iii) Agent shall not be obligated to transfer to a Defaulting Lender any payments made by Subsidiary Borrower to Agent for the Defaulting Lender's benefit, and, in the absence of such transfer to the Defaulting Lender, Agent shall transfer any such payments to each other non-Defaulting Lender member of the Lender Group ratably in accordance with their Commitments (but only to the extent that such Defaulting Lender's Advance was funded by the other members of the Lender Group) or, if so directed by Subsidiary Borrower and if no Default or Event of Default had occurred and is continuing (and to the extent such Defaulting Lender's Advance was not funded by the Lender Group), retain same to be re-advanced to Subsidiary Borrower as if such Defaulting Lender had made Advances to Subsidiary Borrower. Subject to the foregoing, Agent may hold and, in its Permitted Discretion, re-lend to Subsidiary Borrower for the account of such Defaulting Lender the amount of all such payments received and retained by it for the account of such Defaulting Lender. Solely for the purposes of voting or consenting to matters with respect to the UK Loan Documents, such Defaulting Lender shall be -27- deemed not to be a "Lender" and such Lender's Commitment shall be deemed to be zero. This Section shall remain effective with respect to such Lender until (x) the Obligations under this Agreement shall have been declared or shall have become immediately due and payable, (y) the non-Defaulting Lenders, Agent, and Subsidiary Borrower shall have waived such Defaulting Lender's default in writing, or (z) the Defaulting Lender makes its Pro Rata Share of the applicable Advance and pays to Agent all amounts owing by Defaulting Lender in respect thereof. The operation of this Section shall not be construed to increase or otherwise affect the Commitment of any Lender, to relieve or excuse the performance by such Defaulting Lender or any other Lender of its duties and obligations hereunder, or to relieve or excuse the performance by Subsidiary Borrower of its duties and obligations hereunder to Agent or to the Lenders other than such Defaulting Lender. Any such failure to fund by any Defaulting Lender shall constitute a material breach by such Defaulting Lender of this Agreement and shall entitle Subsidiary Borrower at its option, upon written notice to Agent, to arrange for a substitute Lender to assume the Commitment of such Defaulting Lender, such substitute Lender to be acceptable to Agent. In connection with the arrangement of such a substitute Lender, the Defaulting Lender shall have no right to refuse to be replaced hereunder, and agrees to execute and deliver a completed form of Assignment and Acceptance Agreement in favor of the substitute Lender (and agrees that it shall be deemed to have executed and delivered such document if it fails to do so) subject only to being repaid its share of the outstanding Obligations (including an assumption of its Pro Rata Share of the Risk Participation Liability) without any premium or penalty of any kind whatsoever; provided further, however, that any such assumption of the Commitment of such Defaulting Lender shall not be deemed to constitute a waiver of any of the Lender Groups' or Subsidiary Borrower's rights or remedies against any such Defaulting Lender arising out of or in relation to such failure to fund. (d) Making of Swing Loans. (i) In the event Agent shall elect, with the consent of Swing Lender, as a Lender, to have the terms of this Section 2.3(d) apply to a requested Borrowing as described in Section 2.3(b), Swing Lender as a Lender shall make such Advance in the amount of such Borrowing (any such Advance made solely by Swing Lender as a Lender pursuant to this Section 2.3(d) being referred to as a "Swing Loan" and such Advances being referred to collectively as "Swing Loans") available to Subsidiary Borrower on the Funding Date applicable thereto by transferring immediately available funds in Dollars to Subsidiary Borrower's Designated Account. Each Swing Loan is an Advance hereunder and shall be subject to all the terms and conditions -28- applicable to other Advances, except that no such Swing Loan shall be eligible for the LIBOR Option and all payments on any Swing Loan shall be payable to Swing Lender as a Lender solely for its own account (and for the account of the holder of any participation interest with respect to such Swing Loan). Subject to the provisions of Section 2.3(i), Agent shall not request Swing Lender as a Lender to make, and Swing Lender as a Lender shall not make, any Swing Loan if Agent has actual knowledge that (i) one or more of the applicable conditions precedent set forth in Section 3 will not be satisfied on the requested Funding Date for the applicable Borrowing unless such condition has been waived, or (ii) the requested Borrowing would exceed the Availability on such Funding Date. Swing Lender as a Lender shall not otherwise be required to determine whether the applicable conditions precedent set forth in Section 3 have been satisfied on the Funding Date applicable thereto prior to making, in its sole discretion, any Swing Loan. (ii) The Swing Loans shall be secured by the Agent's Liens, shall constitute Advances and Obligations hereunder, and shall bear interest at the rate applicable from time to time to Advances that are Base Rate Loans. (e) Agent Advances. (i) Agent hereby is authorized by Subsidiary Borrower and the Lenders, from time to time after the Closing Date, in Agent's sole discretion, (1) after the occurrence and during the continuance of a Default or an Event of Default, or (2) at any time that any of the other applicable conditions precedent set forth in Section 3 have not been satisfied, to make Advances to Subsidiary Borrower on behalf of the Lenders that Agent, in its Permitted Discretion deems necessary or desirable (A) to preserve or protect the Collateral, or any portion thereof, (B) to enhance the likelihood of repayment of the Obligations, or (C) to pay any other amount chargeable to Subsidiary Borrower pursuant to the terms of this Agreement, including Lender Group Expenses and the costs, fees, and expenses described in Section 10 (any of the Advances described in this Section 2.3(e) shall be referred to as "Agent Advances"). Each Agent Advance is an Advance hereunder and shall be subject to all the terms and conditions applicable to other Advances, except that no such Agent Advance shall be eligible for the LIBOR Option and all payments thereon shall be payable to Agent solely for its own account (and for the account of the holder of any participation interest with respect to such Agent Advance). (ii) The Agent Advances shall be repayable on demand and secured by the Agent's Liens granted to Agent under the UK Loan Documents, shall constitute Advances and Obligations hereunder, and shall bear interest at the rate applicable from time to time to Advances that are Base Rate Loans. -29- (f) Settlement. It is agreed that each Lender's funded portion of the Advances is intended by the Lenders to equal, at all times, such Lender's Pro Rata Share of the outstanding Advances. Such agreement notwithstanding, Agent, Swing Lender, and the other Lenders agree (which agreement shall not be for the benefit of or enforceable by Subsidiary Borrower) that in order to facilitate the administration of this Agreement and the other UK Loan Documents, settlement among them as to the Advances, the Swing Loans, and the Agent Advances shall take place on a periodic basis in accordance with the following provisions: (i) Agent shall request settlement ("Settlement") with the Lenders on a weekly basis (or on a more frequent basis if so determined by Agent) or upon termination of the Loan Agreement (1) on behalf of Swing Lender, with respect to each outstanding Swing Loan, (2) for itself, with respect to each Agent Advance, and (3) with respect to Collections received, as to each by notifying the Lenders by telecopy, telephone, or other similar form of transmission, of such requested Settlement, no later than 2:00 p.m. (California time) on the Business Day immediately prior to the date of such requested Settlement (the date of such requested Settlement being the "Settlement Date"). Such notice of a Settlement Date shall include a summary statement of the amount of outstanding Advances, Swing Loans, and Agent Advances for the period since the prior Settlement Date. Subject to the terms and conditions contained herein (including Section 2.3(c)(iii)): (y) if a Lender's balance of the Advances, Swing Loans, and Agent Advances exceeds such Lender's Pro Rata Share of the Advances, Swing Loans, and Agent Advances as of a Settlement Date, then Agent shall, by no later than 12:00 p.m. (California time) on the Settlement Date, transfer in immediately available funds to the account of such Lender as such Lender may designate, an amount such that each such Lender shall, upon receipt of such amount, have as of the Settlement Date, its Pro Rata Share of the Advances, Swing Loans, and Agent Advances, and (z) if a Lender's balance of the Advances, Swing Loans, and Agent Advances is less than such Lender's Pro Rata Share of the Advances, Swing Loans, and Agent Advances as of a Settlement Date, such Lender shall no later than 12:00 p.m. (California time) on the Settlement Date transfer in immediately available funds to the Agent's Account, an amount such that each such Lender shall, upon transfer of such amount, have as of the Settlement Date, its Pro Rata Share of the Advances, Swing Loans, and Agent Advances. Such amounts made available to Agent under clause (z) of the immediately preceding sentence shall be applied against the amounts of the applicable Swing Loan or Agent Advance and, together with the portion of such Swing Loan or Agent Advance representing Swing Lender's Pro Rata Share thereof, shall constitute Advances of such Lenders. If any such amount is not made available to Agent by any Lender on the Settlement Date applicable thereto to the extent required by the terms hereof, Agent shall be entitled to recover for -30- its account such amount on demand from such Lender together with interest thereon at the Defaulting Lender Rate. (ii) In determining whether a Lender's balance of the Advances, Swing Loans, and Agent Advances is less than, equal to, or greater than such Lender's Pro Rata Share of the Advances, Swing Loans, and Agent Advances as of a Settlement Date, Agent shall, as part of the relevant Settlement, apply to such balance the portion of payments actually received in good funds by Agent with respect to principal, interest, fees payable by Subsidiary Borrower and allocable to the Lenders hereunder, and proceeds of Collateral. To the extent that a net amount is owed to any such Lender after such application, such net amount shall be distributed by Agent to that Lender as part of such next Settlement. (iii) Between Settlement Dates, Agent, to the extent no Agent Advances or Swing Loans are outstanding, may pay over to Swing Lender any payments received by Agent, that in accordance with the terms of this Agreement would be applied to the reduction of the Advances, for application to Swing Lender's Pro Rata Share of the Advances. If, as of any Settlement Date, Collections received since the then immediately preceding Settlement Date have been applied to Swing Lender's Pro Rata Share of the Advances other than to Swing Loans, as provided for in the previous sentence, Swing Lender shall pay to Agent for the accounts of the Lenders, and Agent shall pay to the Lenders, to be applied to the outstanding Advances of such Lenders, an amount such that each Lender shall, upon receipt of such amount, have, as of such Settlement Date, its Pro Rata Share of the Advances. During the period between Settlement Dates, Swing Lender with respect to Swing Loans, Agent with respect to Agent Advances, and each Lender (subject to the effect of letter agreements between Agent and individual Lenders) with respect to the Advances other than Swing Loans and Agent Advances, shall be entitled to interest at the applicable rate or rates payable under this Agreement on the daily amount of funds employed by Swing Lender, Agent, or the Lenders, as applicable. (g) Notation. Agent shall record on its books the principal amount of the Advances owing to each Lender, including the Swing Loans owing to Swing Lender, and Agent Advances owing to Agent, and the interests therein of each Lender, from time to time. In addition, each Lender is authorized, at such Lender's option, to note the date and amount of each payment or prepayment of principal of such Lender's Advances in its books and records, including computer records, such books and records constituting conclusive evidence, absent manifest error, of the accuracy of the information contained therein. (h) Lenders' Failure to Perform. All Advances (other than Swing Loans and Agent Advances) shall be made by the Lenders contemporaneously and in -31- accordance with their Pro Rata Shares. It is understood that (i) no Lender shall be responsible for any failure by any other Lender to perform its obligation to make any Advance (or other extension of credit) hereunder, nor shall any Commitment of any Lender be increased or decreased as a result of any failure by any other Lender to perform its obligations hereunder, and (ii) no failure by any Lender to perform its obligations hereunder shall excuse any other Lender from its obligations hereunder. (i) Optional Overadvances. Any contrary provision of this Agreement notwithstanding, the Lenders hereby authorize Agent or Swing Lender, as applicable, and Agent or Swing Lender, as applicable, may, but is not obligated to, knowingly and intentionally, continue to make Advances (including Swing Loans) to Subsidiary Borrower notwithstanding that an Overadvance exists or thereby would be created, so long as (i) after giving effect to such Advances (including a Swing Loan), the outstanding Subsidiary Borrower Revolver Usage does not exceed the Borrowing Base by more than $1,000,000, (ii) after giving effect to such Advances (including a Swing Loan), the outstanding Subsidiary Borrower Revolver Usage (except for and excluding amounts charged to the Loan Account for interest, fees, or Lender Group Expenses) does not exceed the Maximum Subsidiary Revolver Amount, and (iii) at the time of the making of any such Advance (including any Swing Loan), Agent does not believe, in good faith, that the Overadvance created by such Advance will be outstanding for more than 30 days; provided, however, that the authorization described in this Section 2.3(i) may be revoked by the Required Lenders at any time by written notice to Agent. The foregoing provisions are for the exclusive benefit of Agent, Swing Lender, and the Lenders and are not intended to benefit Subsidiary Borrower in any way. The Advances and Swing Loans, as applicable, that are made pursuant to this Section 2.3(i) shall be subject to the same terms and conditions as any other Advance or Swing Loan, as applicable, except that they shall not be eligible for the LIBOR Option and the rate of interest applicable thereto shall be the rate applicable to Advances that are Base Rate Loans under Section 2.6(c) hereof without regard to the presence or absence of a Default or Event of Default. (i) In the event Agent obtains actual knowledge that the Subsidiary Borrower Revolver Usage exceeds the amounts permitted by the preceding paragraph, regardless of the amount of, or reason for, such excess, Agent shall notify Lenders as soon as practicable (and prior to making any (or any additional) intentional Overadvances (except for and excluding amounts charged to the Loan Account for interest, fees, or Lender Group Expenses) unless Agent determines that prior notice would result in imminent harm to the Collateral or its value), and the Lenders with Revolver Commitments thereupon shall, together with Agent, jointly determine the terms of arrangements that shall be implemented with Subsidiary Borrower intended to reduce, within a reasonable time, the outstanding principal amount of the Advances to Subsidiary Borrower to an amount permitted by the preceding paragraph. In the event Agent or any Lender disagrees over the terms of -32- reduction or repayment of any Overadvance, the terms of reduction or repayment thereof shall be implemented according to the determination of the Required Lenders. (ii) Each Lender with a Revolver Commitment shall be obligated to settle with Agent as provided in Section 2.3(f) for the amount of such Lender's Pro Rata Share of any unintentional Overadvances by Agent reported to such Lender, any intentional Overadvances made as permitted under this Section 2.3(i), and any Overadvances resulting from the charging to the Loan Account of interest, fees, or Lender Group Expenses. 2.4 Payments. (a) Payments by Subsidiary Borrower. (i) Except as otherwise expressly provided herein, all payments by Subsidiary Borrower shall be made to Agent's Account for the account of the Lender Group and shall be made in Dollars and immediately available funds, no later than 11:00 a.m. (California time) on the date specified herein. Any payment received by Agent later than 11:00 a.m. (California time) shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue until such following Business Day. (ii) Unless Agent receives notice from Subsidiary Borrower prior to the date on which any payment is due to the Lenders that Subsidiary Borrower will not make such payment in full as and when required, Agent may assume that Subsidiary Borrower has made (or will make) such payment in full to Agent on such date in Dollars and immediately available funds and Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent Subsidiary Borrower does not make such payment in full to Agent on the date when due, each Lender severally shall repay to Agent on demand such amount distributed to such Lender, together with interest thereon at the Defaulting Lender Rate for each day from the date such amount is distributed to such Lender until the date repaid. (b) Apportionment and Application of Payments. (i) Except as otherwise provided with respect to Defaulting Lenders and except as otherwise provided in the UK Loan Documents (including letter agreements between Agent and individual Lenders), aggregate principal and interest payments shall be apportioned ratably among the Lenders (according to the unpaid principal balance of the Obligations to -33- which such payments relate held by each Lender) and payments of fees and expenses (other than fees or expenses that are for Agent's separate account, after giving effect to any letter agreements between Agent and individual Lenders) shall be apportioned ratably among the Lenders having a Pro Rata Share of the type of Commitment or Obligation to which a particular fee relates. All payments shall be remitted to Agent and all such payments (other than payments received while no Default or Event of Default has occurred and is continuing and which relate to the payment of principal or interest of specific Obligations or which relate to the payment of specific fees), and all proceeds of Accounts or other Collateral received by Agent, shall be applied as follows: (A) first, to pay any Lender Group Expenses then due to Agent under the UK Loan Documents, until paid in full, (B) second, to pay any Lender Group Expenses then due to the Lenders under the UK Loan Documents, on a ratable basis, until paid in full, (C) third, to pay any fees then due to Agent (for its separate accounts, after giving effect to any letter agreements between Agent and individual Lenders) under the UK Loan Documents until paid in full, (D) fourth, to pay any fees then due to any or all of the Lenders (after giving effect to any letter agreements between Agent and individual Lenders) under the UK Loan Documents, on a ratable basis, until paid in full, (E) fifth, to pay interest due in respect of all Agent Advances, until paid in full, (F) sixth, ratably to pay interest due in respect of the Advances (other than Agent Advances) and the Swing Loans until paid in full, (G) seventh, to pay the principal of all Agent Advances until paid in full, (H) eighth, to pay the principal of all Swing Loans until paid in full, (I) ninth, to pay the principal of all Advances until paid in full, (J) tenth, if an Event of Default has occurred and is continuing, to Agent, to be held by Agent, for the ratable benefit of Issuing Lender and Lenders, as cash collateral in an amount up to 105% of the then extant Letter of Credit Usage until paid in full, -34- (K) eleventh, to pay any other Obligations (including the Obligations of Subsidiary Borrower then owing under the guarantee contained in the UK Debenture) until paid in full, and (L) twelfth, to Subsidiary Borrower (to be wired to the Designated Account) or such other Person entitled thereto under applicable law. (ii) Agent promptly shall distribute to each Lender, pursuant to the applicable wire instructions received from each Lender in writing, such funds as it may be entitled to receive, subject to a Settlement delay as provided in Section 2.3(h). (iii) In each instance, so long as no Default or Event of Default has occurred and is continuing, Section 2.4(b) shall not be deemed to apply to any payment by Subsidiary Borrower specified by Subsidiary Borrower to be for the payment of specific Obligations then due and payable (or prepayable) under any provision of this Agreement. (iv) For purposes of the foregoing, "paid in full" means payment of all amounts owing under the UK Loan Documents according to the terms thereof, including loan fees, service fees, professional fees, interest (and specifically including interest accrued after the commencement of any Insolvency Proceeding), default interest, interest on interest, and expense reimbursements, whether or not the same would be or is allowed or disallowed in whole or in part in any Insolvency Proceeding. (v) In the event of a direct conflict between the priority provisions of this Section 2.4 and other provisions contained in any other UK Loan Document, it is the intention of the parties hereto that such priority provisions in such documents shall be read together and construed, to the fullest extent possible, to be in concert with each other. In the event of any actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms and provisions of this Section 2.4 shall control and govern. 2.5 Overadvances. Subject to Section 2.3(i), if, at any time or for any reason, the amount of Obligations owed by Subsidiary Borrower to the Lender Group pursuant to Sections 2.1 and 2.12 is greater than either the Dollar or percentage limitations set forth in Sections 2.1 or 2.12, (an "Overadvance"), Subsidiary Borrower immediately shall pay to -35- Agent, in Dollars, the amount of such excess, which amount shall be used by Agent to reduce the Obligations in accordance with the priorities set forth in Section 2.4(b). In addition, Subsidiary Borrower hereby promises to pay the Obligations (including principal, interest, fees, costs, and expenses) in Dollars in full to the Lender Group as and when due and payable under the terms of this Agreement and the other UK Loan Documents. 2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations. (a) Interest Rates. Except as provided in clause (c) below, all Obligations (except for undrawn Letters of Credit) that have been charged to the Loan Account pursuant to the terms hereof shall bear interest on the Daily Balance thereof as follows (i) if the relevant Obligation is an Advance that is a LIBOR Rate Loan, at a per annum rate equal to the LIBOR Rate plus the LIBOR Rate Margin, and (ii) otherwise, at a per annum rate equal to the Base Rate plus the Base Rate Margin. The foregoing notwithstanding, at no time shall any portion of the Obligations bear interest on the Daily Balance thereof at a per annum rate less than 6% per annum. To the extent that interest accrued hereunder at the rate set forth herein would be less than the foregoing minimum daily rate, the interest rate chargeable hereunder for such day automatically shall be deemed increased to the minimum rate. (b) Letter of Credit Fee. Borrower shall pay Agent (for the ratable benefit of the Lenders with a Revolver Commitment, subject to any letter agreement between Agent and individual Lenders), a Letter of Credit fee (in addition to the charges, commissions, fees, and costs set forth in Section 2.12(e)) which shall accrue at a rate equal to 1.50% per annum times the Daily Balance of the undrawn amount of all outstanding Letters of Credit. (c) Default Rate. Upon the occurrence and during the continuation of an Event of Default (and at the election of Agent or the Required Lenders), (i) all Obligations (except for undrawn Letters of Credit) that have been charged to the Loan Account pursuant to the terms hereof shall bear interest on the Daily Balance thereof at a per annum rate equal to 3 percentage points above the per annum rate otherwise applicable hereunder, and (ii) the Letter of Credit Fee provided for above shall be increased to 3 percentage points above the per annum rate otherwise applicable hereunder. (d) Payment. Interest and all fees payable hereunder shall be earned monthly and (other than the Letter of Credit Fee) due and payable, in arrears, on the first day of each month at any time that Obligations or Commitments are outstanding. The -36- Letter of Credit Fees payable hereunder shall be earned monthly and due and payable, in arrears, on the first day of each third month (commencing with October 1, 2001) at any time that Obligations or Commitments are outstanding. Subsidiary Borrower hereby authorizes Agent, from time to time without prior notice to Subsidiary Borrower, to charge such interest and fees, all Lender Group Expenses (as and when incurred), the charges, commissions, fees, and costs provided for in Section 2.12(e) (as and when accrued or incurred), the fees and costs provided for in Section 2.11 (as and when accrued or incurred), and all other payments as and when due and payable under any Loan Document to Subsidiary Borrower's Loan Account, which amounts thereafter constitute Advances hereunder and shall accrue interest at the rate then applicable to Advances hereunder. Any interest not paid when due shall be compounded by being charged to Subsidiary Borrower's Loan Account and shall thereafter constitute Advances hereunder and shall accrue interest at the rate then applicable to Advances that are Base Rate Loans hereunder. (e) Computation. All interest and fees chargeable under the UK Loan Documents shall be computed on the basis of a 360 day year for the actual number of days elapsed. In the event the Base Rate is changed from time to time hereafter, the rates of interest hereunder based upon the Base Rate automatically and immediately shall be increased or decreased by an amount equal to such change in the Base Rate. (f) Intent to Limit Charges to Maximum Lawful Rate. In no event shall the interest rate or rates payable under this Agreement, plus any other amounts paid in connection herewith, exceed the highest rate permissible under any law that a court of competent jurisdiction shall, in a final determination, deem applicable. Subsidiary Borrower and the Lender Group, in executing and delivering this Agreement, intend legally to agree upon the rate or rates of interest and manner of payment stated within it; provided, however, that, anything contained herein to the contrary notwithstanding, if said rate or rates of interest or manner of payment exceeds the maximum allowable under applicable law, then, ipso facto, as of the date of this Agreement, Subsidiary Borrower is and shall be liable only for the payment of such maximum as allowed by law, and payment received from Subsidiary Borrower in excess of such legal maximum, whenever received, shall be applied to reduce the principal balance of the Obligations to the extent of such excess. 2.7 Cash Management. (a) Within 60 days of the date of this Agreement, Subsidiary Borrower shall (i) establish and maintain cash management services of a type and on terms satisfactory to Agent at one or more of the banks set forth on Schedule 2.7(a) (each, a "UK Cash Management Bank"), and shall request in writing and otherwise take such reasonable steps to ensure that all of its Account Debtors forward payment of the amounts owed by them directly to such UK Cash Management Bank, and (ii) deposit or cause to be deposited promptly, and in any event no later than the first Business Day after the date of receipt thereof, all Collections (including those sent directly by Account Debtors to a UK Cash -37- Management Bank) into a bank account in both Agent's name and Borrower's name (a "UK Cash Management Account") at one of the UK Cash Management Banks. (b) Within 60 days of the date of this Agreement, each UK Cash Management Bank shall establish and maintain UK Cash Management Agreements with Agent and Subsidiary Borrower, in form and substance acceptable to Agent. Each such UK Cash Management Agreement shall provide, among other things, that (i) all items of payment deposited in such UK Cash Management Account and proceeds thereof are held by such UK Cash Management Bank as agent or bailee-in-possession for Agent, (ii) the UK Cash Management Bank has no rights of setoff or recoupment or any other claim against the applicable UK Cash Management Account other than for payment of its service fees and other charges directly related to the administration of such UK Cash Management Account and for returned cheques or other items of payment, and (iii) from and after the date that it receives written notification from Agent, it immediately will forward by daily sweep all amounts in the applicable UK Cash Management Account to the Agent's Account. Anything contained herein or in the UK Debenture to the contrary notwithstanding, Agent agrees that it shall not provide the above-described notice to the UK Cash Management Bank unless and until a Triggering Event has occurred. Once a Triggering Event has occurred, Agent shall be free to exercise its right to issue such notice and the subsequent elimination of the subject Triggering Event shall not eliminate the effectiveness of such notice. (c) So long as no Default or Event of Default has occurred and is continuing, Subsidiary Borrower may amend Schedule 2.7(a) to add or replace a UK Cash Management Bank or UK Cash Management Account; provided, however, that (i) such prospective UK Cash Management Bank shall be satisfactory to Agent and Agent shall have consented in writing in advance to the opening of such UK Cash Management Account with the prospective UK Cash Management Bank, and (ii) prior to the time of the opening of such UK Cash Management Account, Subsidiary Borrower and such prospective UK Cash Management Bank shall have executed and delivered to Agent a UK Cash Management Agreement. Subsidiary Borrower shall close any of its UK Cash Management Accounts (and establish replacement cash management accounts in accordance with the foregoing sentence) promptly and in any event within 30 days of notice from Agent that the creditworthiness of any UK Cash Management Bank is no longer acceptable in Agent's reasonable judgment, or as promptly as practicable and in any event within 60 days of notice from Agent that the operating performance, funds transfer, or availability procedures or performance of the UK Cash Management Bank with respect to UK Cash Management Accounts or Agent's liability under any UK Cash Management Agreement with such UK Cash Management Bank is no longer acceptable in Agent's reasonable judgment. (d) The UK Cash Management Accounts shall be cash collateral accounts, with all cash, cheques and similar items of payment in such accounts securing payment of the Obligations. -38- 2.8 Crediting Payments. The receipt of any payment item by Agent (whether from transfers to Agent by the UK Cash Management Banks pursuant to the UK Cash Management Agreements or otherwise) shall not be considered a payment on account unless such payment item is a wire transfer of immediately available federal funds made to the Agent's Account or unless and until such payment item is honored when presented for payment. Should any payment item not be honored when presented for payment, then Subsidiary Borrower shall be deemed not to have made such payment and interest shall be calculated accordingly. Anything to the contrary contained herein notwithstanding, any payment item shall be deemed received by Agent only if it is received into the Agent's Account on a Business Day on or before 11:00 a.m. (California time). If any payment item is received into the Agent's Account on a non-Business Day or after 11:00 a.m. (California time) on a Business Day, it shall be deemed to have been received by Agent as of the opening of business on the immediately following Business Day. 2.9 Designated Account. Agent is authorized to make the Advances, and the Issuing Lender is authorized to issue the Letters of Credit, under this Agreement based upon telephonic or other instructions received from anyone purporting to be an Authorized Person, or without instructions if pursuant to Section 2.6(d). Subsidiary Borrower agrees to establish and maintain the Designated Account with the Designated Account Bank for the purpose of receiving the proceeds of the Advances requested by Subsidiary Borrower and made by Agent or the Lenders hereunder. Unless otherwise agreed by Agent and Subsidiary Borrower, any Advance, Agent Advance, or Swing Loan requested by Subsidiary Borrower and made by Agent or the Lenders hereunder shall be made to the Designated Account. 2.10 Maintenance of Loan Account; Statements of Obligations. Agent shall maintain an account on its books in the name of Subsidiary Borrower (the "Loan Account") on which Subsidiary Borrower will be charged with all Advances (including Agent Advances and Swing Loans) made by Agent, Swing Lender, or the Lenders to Subsidiary Borrower or for Subsidiary Borrower's account, the Letters of Credit issued by Issuing Lender for Subsidiary Borrower's account, and with all other payment Obligations hereunder or under the other UK Loan Documents, including, accrued interest, fees and expenses, and Lender Group Expenses. In accordance with Section 2.8, the Loan Account will be credited with all payments received by Agent from Subsidiary Borrower or for Subsidiary Borrower's account, including all amounts received in the Agent's Account from any UK Cash Management Bank. Agent shall render statements regarding the Loan Account to Subsidiary Borrower, including principal, interest, fees, and including an itemization of all charges and expenses constituting Lender Group Expenses owing, and such statements shall be conclusively presumed to be correct and accurate and constitute an account stated between Subsidiary Borrower and the Lender Group unless, within 30 days after receipt thereof by Subsidiary Borrower, Subsidiary Borrower shall deliver to Agent written objection thereto describing the error or errors contained in any such statements. -39- 2.11 Fees. Subsidiary Borrower shall pay to Agent the following fees and charges, which fees and charges shall be non-refundable when paid (irrespective of whether this Agreement is terminated thereafter) and, in the case of clause (a) below shall be apportioned ratably amongst the Lenders based upon their respective Pro Rata Shares, and in the case of clause (b) below shall be apportioned among the Lenders in accordance with the terms of letter agreements between Agent and individual Lenders: (a) Audit, Appraisal, and Valuation Charges. For the separate account of Agent, audit, appraisal, and valuation fees and charges as follows (i) a fee of $750 per day, per auditor, plus out-of-pocket expenses for each financial audit of Subsidiary Borrower performed by personnel employed by Agent; provided, however, that, so long as no Event of Default shall have occurred and be continuing, Subsidiary Borrower shall not be obligated to pay such fees and expenses in respect of more than 4 such audits in any calendar year, (ii) a fee of $1,500 per day per appraiser, plus out-of-pocket expenses, for each appraisal of the Collateral performed by personnel employed by Agent, and (iii) the actual charges paid or incurred by Agent if it elects to employ the services of one or more third Persons to perform financial audits of Subsidiary Borrower, to appraise the Collateral, or any portion thereof, or to assess Subsidiary Borrower's business valuation; provided, however, that, so long as no Event of Default shall have occurred and be continuing, Subsidiary Borrower shall not be obligated to pay such fees and expenses in respect of more than 1 such appraisal or valuation in any calendar year. 2.12 Letters of Credit (a) Subject to the terms and conditions of this Agreement, the Issuing Lender agrees to issue letters of credit for the account of Subsidiary Borrower (each, an "L/C") or to purchase participations or execute indemnities or reimbursement obligations (each such undertaking, an "L/C Undertaking") with respect to letters of credit issued by an Underlying Issuer (as of the Closing Date, the prospective Underlying Issuer is to be Wells Fargo) for the account of Subsidiary Borrower. To request the issuance of an L/C or an L/C Undertaking (or the amendment, renewal, or extension of an outstanding L/C or L/C Undertaking), Subsidiary Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Lender) to the Issuing Lender and Agent (reasonably in advance of the requested date of issuance, amendment, renewal, or extension) a notice requesting the issuance of an L/C or L/C Undertaking, or identifying the L/C or L/C Undertaking to be amended, renewed, or extended, the date of issuance, amendment, renewal, or extension, the date on which such L/C or L/C Undertaking is to expire, the amount of such L/C or L/C Undertaking, the name and address of the beneficiary thereof (or the beneficiary of the Underlying Letter of Credit, as applicable), and such other information as shall be necessary to prepare, amend, renew, or extend such L/C or L/C Undertaking. If requested by the Issuing Lender, Subsidiary Borrower also shall be an applicant under the application with respect to any Underlying Letter of Credit that is to be the subject of an L/C Undertaking. The Issuing Lender shall -40- have no obligation to issue a Letter of Credit if any of the following would result after giving effect to the requested Letter of Credit: (i) the Letter of Credit Usage would exceed the Borrowing Base less the amount of outstanding Advances, or (ii) the Letter of Credit Usage under this Agreement, the Domestic Loan Agreement and the Irish Loan Agreement would exceed $10,000,000 in the aggregate, or (iii) the Letter of Credit Usage would exceed the Maximum Subsidiary Revolver Amount less the then extant amount of outstanding Advances. Each Letter of Credit (and corresponding Underlying Letter of Credit) shall have an expiry date no later than 30 days prior to the Maturity Date and all such Letters of Credit (and corresponding Underlying Letter of Credit) shall be in form and substance acceptable to the Issuing Lender (in the exercise of its Permitted Discretion), including the requirement that the amounts payable thereunder must be payable in Dollars, Euros or English pounds. If the amounts payable thereunder are in Euros or English pounds, Agent shall have the right in its Permitted Discretion to establish Foreign Exchange Reserves against the Borrowing Base. If Issuing Lender is obligated to advance funds under a Letter of Credit, Subsidiary Borrower immediately shall reimburse such L/C Disbursement to Issuing Lender by paying to Agent an amount equal to such L/C Disbursement not later than 11:00 a.m., California time, on the date that such L/C Disbursement is made, if Subsidiary Borrower shall have received written or telephonic notice of such L/C Disbursement prior to 10:00 a.m., California time, on such date, or, if such notice has not been received by Subsidiary Borrower prior to such time on such date, then not later than 11:00 a.m., California time, on the Business Day that Subsidiary Borrower receives such notice, if such notice is received prior to 10:00 a.m., California time, on the date of receipt, and, in the absence of such reimbursement, the L/C Disbursement immediately and automatically shall be deemed to be an Advance hereunder and, thereafter, shall bear interest at the rate then applicable to Advances that are Base Rate Loans under Section 2.6. To the extent an L/C Disbursement is deemed to be an Advance hereunder, Subsidiary Borrower's obligation to reimburse such L/C Disbursement shall be discharged and replaced by the resulting Advance. Promptly following receipt by Agent of any payment from Subsidiary Borrower pursuant to this paragraph, Agent shall distribute such payment to the Issuing Lender or, to the extent that Lenders have made payments pursuant to Section 2.12(c) to reimburse the Issuing Lender, then to such Lenders and the Issuing Lender as their interest may appear. (b) Promptly following receipt of a notice of L/C Disbursement pursuant to Section 2.12(a), each Lender with a Revolver Commitment agrees to fund its Pro Rata Share of any Advance deemed made pursuant to the foregoing subsection on the same terms and conditions as if Subsidiary Borrower had requested such Advance and Agent shall -41- promptly pay to Issuing Lender the amounts so received by it from the Lenders. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Lender or the Lenders with Revolver Commitment, the Issuing Lender shall be deemed to have granted to each Lender with a Revolver Commitment, and each Lender with a Revolver Commitment shall be deemed to have purchased, a participation in each Letter of Credit, in an amount equal to its Pro Rata Share of the Risk Participation Liability of such Letter of Credit, and each such Lender agrees to pay to Agent, for the account of the Issuing Lender, such Lender's Pro Rata Share of any payments made by the Issuing Lender under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender with a Revolver Commitment hereby absolutely and unconditionally agrees to pay to Agent, for the account of the Issuing Lender, such Lender's Pro Rata Share of each L/C Disbursement made by the Issuing Lender and not reimbursed by Subsidiary Borrower on the date due as provided in clause (a) of this Section, or of any reimbursement payment required to be refunded to Subsidiary Borrower for any reason. Each Lender with a Revolver Commitment acknowledges and agrees that its obligation to deliver to Agent, for the account of the Issuing Lender, an amount equal to its respective Pro Rata Share pursuant to this Section 2.12(b) shall be absolute and unconditional and such remittance shall be made notwithstanding the occurrence or continuation of an Event of Default or Default or the failure to satisfy any condition set forth in Section 3 hereof. If any such Lender fails to make available to Agent the amount of such Lender's Pro Rata Share of any payments made by the Issuing Lender in respect of such Letter of Credit as provided in this Section, Agent (for the account of the Issuing Lender) shall be entitled to recover such amount on demand from such Lender together with interest thereon at the Defaulting Lender Rate until paid in full. (c) Subsidiary Borrower hereby agrees to indemnify, save, defend, and hold the Lender Group harmless from any loss, cost, expense, or liability, and reasonable attorneys fees incurred by the Lender Group arising out of or in connection with any Letter of Credit; provided, however, that Subsidiary Borrower shall not be obligated hereunder to indemnify for any loss, cost, expense, or liability that is caused by the gross negligence or wilful misconduct of the Issuing Lender or any other member of the Lender Group. Subsidiary Borrower agrees to be bound by the Underlying Issuer's regulations and interpretations of any Underlying Letter of Credit or by Issuing Lender's interpretations of any L/C issued by Issuing Lender to or for Subsidiary Borrower's account, even though this interpretation may be different from Subsidiary Borrower's own, and Subsidiary Borrower understands and agrees that the Lender Group shall not be liable for any error, negligence, or mistake, whether of omission or commission, in following Subsidiary Borrower's instructions or those contained in the Letter of Credit or any modifications, amendments, or supplements thereto. Subsidiary Borrower understands that the L/C Undertakings may require Issuing Lender to indemnify the Underlying Issuer for certain costs or liabilities arising out of claims by Subsidiary Borrower against such Underlying Issuer. Subsidiary Borrower hereby agrees to indemnify, save, defend, and hold the Lender Group harmless with respect to any loss, cost, expense (including reasonable attorneys fees), or liability -42- incurred by the Lender Group under any L/C Undertaking as a result of the Lender Group's indemnification of any Underlying Issuer; provided, however, that Subsidiary Borrower shall not be obligated hereunder to indemnify for any loss, cost, expense, or liability that is caused by the gross negligence or wilful misconduct of the Issuing Lender or any other member of the Lender Group. (d) Subsidiary Borrower hereby authorizes and directs any Underlying Issuer to deliver to the Issuing Lender all instruments, documents, and other writings and property received by such Underlying Issuer pursuant to such Underlying Letter of Credit and to accept and rely upon the Issuing Lender's instructions with respect to all matters arising in connection with such Underlying Letter of Credit and the related application. (e) Any and all charges, commissions, fees, and costs incurred by the Issuing Lender relating to Underlying Letters of Credit shall be Lender Group Expenses for purposes of this Agreement and immediately shall be reimbursable by Subsidiary Borrower to Agent for the account of the Issuing Lender; it being acknowledged and agreed by Subsidiary Borrower that, as of the date of this Agreement, the issuance charge imposed by the prospective Underlying Issuer is .825% per annum times the face amount of each Underlying Letter of Credit, that such issuance charge may be changed from time to time, and that the Underlying Issuer also imposes a schedule of charges for amendments, extensions, drawings, and renewals. (f) If by reason of (i) any change in any applicable law, treaty, rule, or regulation or any change in the interpretation or application thereof by any Governmental Authority, or (ii) compliance by the Underlying Issuer or the Lender Group with any direction, request, or requirement (irrespective of whether having the force of law) of any Governmental Authority or monetary authority including, Regulation D of the Federal Reserve Board as from time to time in effect (and any successor thereto): (i) any reserve, deposit, or similar requirement is or shall be imposed or modified in respect of any Letter of Credit issued hereunder, or (ii) there shall be imposed on the Underlying Issuer or the Lender Group any other condition regarding any Underlying Letter of Credit or any Letter of Credit issued pursuant hereto, and the result of the foregoing is to increase, directly or indirectly, the cost to the Lender Group of issuing, making, guaranteeing, or maintaining any Letter of Credit or to reduce the amount receivable in respect thereof by the Lender Group, then, and in any such case, Agent may, at any time within a reasonable period after the additional cost is incurred or the amount received is reduced, notify Subsidiary Borrower, and Subsidiary Borrower shall pay on demand such amounts as Agent may specify to be necessary to compensate the Lender Group for such additional cost or reduced receipt, together with interest on such amount from -43- the date of such demand until payment in full thereof at the rate then applicable to Base Rate Loans hereunder. The determination by Agent of any amount due pursuant to this Section, as set forth in a certificate setting forth the calculation thereof in reasonable detail, shall, in the absence of manifest or demonstrable error, be final and conclusive and binding on all of the parties hereto. 2.13 LIBOR Option. (a) Interest and Interest Payment Dates. In lieu of having interest charged at the rate based upon the Base Rate, Subsidiary Borrower shall have the option (the "LIBOR Option") to have interest on all or a portion of the Advances be charged at a rate of interest based upon the LIBOR Rate. Interest on LIBOR Rate Loans shall be payable on the earliest of (i) the last day of the Interest Period applicable thereto, (ii) the occurrence of an Event of Default in consequence of which the Required Lenders or Agent on behalf thereof elect to accelerate the maturity of the Obligations, (iii) termination of this Agreement pursuant to the terms hereof, or (iv) the first day of each month that such LIBOR Rate Loan is outstanding. On the last day of each applicable Interest Period, unless Subsidiary Borrower properly has exercised the LIBOR Option with respect thereto, the interest rate applicable to such LIBOR Rate Loan automatically shall convert to the rate of interest then applicable to Base Rate Loans of the same type hereunder. At any time that an Event of Default has occurred and is continuing, Subsidiary Borrower no longer shall have the option to request that Advances bear interest at the LIBOR Rate and Agent shall have the right to convert the interest rate on all outstanding LIBOR Rate Loans to the rate then applicable to Base Rate Loans hereunder. (b) LIBOR Election. (i) Subsidiary Borrower may, at any time and from time to time, so long as no Event of Default has occurred and is continuing, elect to exercise the LIBOR Option by notifying Agent prior to 11:00 a.m. (California time) on the date that is at least 3 Business Days prior to the commencement of the proposed Interest Period (the "LIBOR Deadline"). Notice of Subsidiary Borrower's election of the LIBOR Option for a permitted portion of the Advances and an Interest Period pursuant to this Section shall be made by delivery to Agent of a LIBOR Notice received by Agent before the LIBOR Deadline, or by telephonic notice received by Agent before the LIBOR Deadline (to be confirmed by delivery to Agent of a LIBOR Notice received by Agent prior to 5:00 p.m. (California time) on the same day. Promptly upon its receipt of each such LIBOR Notice, Agent shall provide a copy thereof to each of the Lenders having a Commitment. (ii) Each LIBOR Notice shall be irrevocable and binding on Subsidiary Borrower. In connection with each LIBOR Rate Loan, Subsidiary Borrower shall indemnify, defend, and hold Agent and the Lenders harmless -44- against any loss, cost, or expense incurred by Agent or any Lender as a result of (a) the payment of any principal of any LIBOR Rate Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any LIBOR Rate Loan other than on the last day of the Interest Period applicable thereto, or (c) the failure to borrow, convert, continue or prepay any LIBOR Rate Loan on the date specified in any LIBOR Notice delivered pursuant hereto (such losses, costs, and expenses, collectively, "Funding Losses"). Funding Losses shall, with respect to Agent or any Lender, be deemed to equal the amount determined by Agent or such Lender to be the excess, if any, of (i) the amount of interest that would have accrued on the principal amount of such LIBOR Rate Loan had such event not occurred, at the LIBOR Rate that would have been applicable thereto, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert, or continue, for the period that would have been the Interest Period therefor), minus (ii) the amount of interest that would accrue on such principal amount for such period at the interest rate which Agent or such Lender would be offered were it to be offered, at the commencement of such period, Dollar deposits of a comparable amount and period in the London interbank market. A certificate of Agent or a Lender delivered to Subsidiary Borrower setting forth any amount or amounts that Agent or such Lender is entitled to receive pursuant to this Section shall be conclusive absent manifest error. (iii) Subsidiary Borrower shall have not more than 5 LIBOR Rate Loans in effect at any given time. Subsidiary Borrower only may exercise the LIBOR Option for LIBOR Rate Loans of at least $1,000,000 and integral multiples of $500,000 in excess thereof. (c) Prepayments. Subsidiary Borrower may prepay LIBOR Rate Loans at any time; provided, however, that in the event that LIBOR Rate Loans are prepaid on any date that is not the last day of the Interest Period applicable thereto, including as a result of any automatic prepayment through the required application by Agent of proceeds of Collections in accordance with Section 2.4(b) or for any other reason, including early termination of the term of this Agreement or acceleration of the Obligations pursuant to the terms hereof, Subsidiary Borrower shall indemnify, defend, and hold Agent and the Lenders and their Participants harmless against any and all Funding Losses in accordance with clause (b)(ii) above. (d) Special Provisions Applicable to LIBOR Rate. (i) The LIBOR Rate may be adjusted by Agent with respect to any Lender on a prospective basis to take into account any additional or increased costs to such Lender of maintaining or obtaining any eurodollar deposits or increased costs due to changes in applicable law occurring subsequent to the -45- commencement of the then applicable Interest Period, including changes in tax laws (except changes of general applicability in corporate income tax laws) and changes in the reserve requirements imposed by the Board of Governors of the Federal Reserve System (or any successor), excluding the Reserve Percentage, which additional or increased costs would increase the cost of funding loans bearing interest at the LIBOR Rate. In any such event, the affected Lender shall give Subsidiary Borrower and Agent notice of such a determination and adjustment and Agent promptly shall transmit the notice to each other Lender and, upon its receipt of the notice from the affected Lender, Subsidiary Borrower may, by notice to such affected Lender (y) require such Lender to furnish to Subsidiary Borrower a statement setting forth the basis for adjusting such LIBOR Rate and the method for determining the amount of such adjustment, or (z) repay the LIBOR Rate Loans with respect to which such adjustment is made (together with any amounts due under clause (b)(ii) above). (ii) In the event that any change in market conditions or any law, regulation, treaty, or directive, or any change therein or in the interpretation of application thereof, shall at any time after the date hereof, in the reasonable opinion of any Lender, make it unlawful or impractical for such Lender to fund or maintain LIBOR Advances or to continue such funding or maintaining, or to determine or charge interest rates at the LIBOR Rate, such Lender shall give notice of such changed circumstances to Agent and Subsidiary Borrower and Agent promptly shall transmit the notice to each other Lender and (y) in the case of any LIBOR Rate Loans of such Lender that are outstanding, the date specified in such Lender's notice shall be deemed to be the last day of the Interest Period of such LIBOR Rate Loans, and interest upon the LIBOR Rate Loans of such Lender thereafter shall accrue interest at the rate then applicable to Base Rate Loans, and (z) Subsidiary Borrower shall not be entitled to elect the LIBOR Option until such Lender determines that it would no longer be unlawful or impractical to do so. (e) No Requirement of Matched Funding. Anything to the contrary contained herein notwithstanding, neither Agent, nor any Lender, nor any of their Participants, is required actually to acquire eurodollar deposits to fund or otherwise match fund any Obligation as to which interest accrues at the LIBOR Rate. The provisions of this Section shall apply as if each Lender or its Participants had match funded any Obligation as to which interest is accruing at the LIBOR Rate by acquiring eurodollar deposits for each Interest Period in the amount of the LIBOR Rate Loans. 2.14 Capital Requirements. If, after the date hereof, any Lender determines that (i) the adoption of or change in any law, rule, regulation or guideline regarding capital requirements for banks or bank holding companies, or any change in the interpretation or -46- application thereof by any Governmental Authority charged with the administration thereof, or (ii) compliance by such Lender or its parent bank holding company with any guideline, request, or directive of any such entity regarding capital adequacy (whether or not having the force of law), the effect of reducing the return on such Lender's or such holding company's capital as a consequence of such Lender's Commitments hereunder to a level below that which such Lender or such holding company could have achieved but for such adoption, change, or compliance (taking into consideration such Lender's or such holding company's then existing policies with respect to capital adequacy and assuming the full utilization of such entity's capital) by any amount deemed by such Lender to be material, then such Lender may notify Subsidiary Borrower and Agent thereof. Following receipt of such notice, Subsidiary Borrower agrees to pay such Lender on demand the amount of such reduction of return of capital as and when such reduction is determined, payable within 90 days after presentation by such Lender of a statement in the amount and setting forth in reasonable detail such Lender's calculation thereof and the assumptions upon which such calculation was based (which statement shall be deemed true and correct absent manifest error). In determining such amount, such Lender may use any reasonable averaging and attribution methods. 3. CONDITIONS; TERM OF AGREEMENT. 3.1 Conditions Precedent to the Initial Extension of Credit. The obligation of the Lender Group (or any member thereof) to make the initial Advance (or otherwise to extend any credit provided for hereunder), is subject to the fulfilment, to the satisfaction of Agent or Agents, as applicable below, of each of the conditions precedent set forth below: (a) each of the conditions precedent set forth in this Section 3.1 shall have been satisfied on or before the date that is 150 days after the date of the execution and delivery of the Domestic Loan Agreement by each of the original signatories hereto (the "Conditions Precedent Deadline"); (b) Agent shall have received search results from the registrar of Companies House in the United Kingdom indicating that no charges have been registered against Subsidiary Borrower; (c) Agent shall have received each of the following documents, in form and substance satisfactory to Agent (which, in the case of items (i), (ii), (iii), and (iv), shall have obtained the approval of the other Agents), duly executed, and each such document shall be in full force and effect: (i) UK Debenture together with other deeds and documents of title required to be deposited thereunder, (ii) UK Guaranty, (iii) UK Stock Pledge Agreement, together with all certificates representing the shares of Subsidiary Borrower pledged thereunder, as well as stock powers with respect thereto endorsed in blank, and (iv) UK Cash Management Agreement; (d) Agent shall have received a certificate from the Secretary of Subsidiary Borrower attesting to the resolutions of Subsidiary Borrower's Board of Directors -47- authorizing its execution, delivery, and performance of this Agreement and the other UK Loan Documents to which Subsidiary Borrower is a party and authorizing specific officers of Subsidiary Borrower to execute the same; (e) Agent shall have received copies of Subsidiary Borrower's Governing Documents, as amended, modified, or supplemented to the Closing Date, certified by the Secretary of Subsidiary Borrower; (f) Agent shall have received a certificate of status with respect to Subsidiary Borrower, dated within 10 days of the Closing Date, such certificate to be issued by the appropriate officer of the jurisdiction of organization of Subsidiary Borrower, which certificate shall indicate that Subsidiary Borrower is in good standing in such jurisdiction; (g) Agent shall have received a certificate from the Secretary of each Guarantor attesting to the resolutions of such Guarantor's Board of Directors authorizing its execution, delivery, and performance of the UK Loan Documents to which it is a party and authorizing specific officers of such Guarantor to execute the same; (h) Agent shall have received a certificate from the Secretary of Domestic Parent certifying that there have been no amendments, restatements, supplements, or modifications to the Governing Documents of Domestic Parent or Subsidiary Borrower since the "Closing Date" (as defined in the Domestic Loan Agreement); (i) Agent shall have received a certificate from the Secretary of Irish Parent attesting to the resolutions of Subsidiary Borrower's Board of Directors authorizing its execution, delivery, and performance of the UK Loan Documents to which Irish Parent is a party and authorizing specific officers of Irish Parent to execute the same; (j) Agent shall have received copies of Irish Parent's Governing Documents, as amended, modified, or supplemented to the Closing Date, certified by the Secretary of Irish Parent; (k) Agent shall have received a certificate of insurance, together with the endorsements thereto, as are required by Section 6.8, the form and substance of -48- which shall be satisfactory to Agent which shall have consulted with the other Agents prior to making such determination; (l) Agent shall have received an opinion of Subsidiary Borrower's counsel, and, in Agent's sole discretion, Agent's foreign counsel, in form and substance satisfactory to Agent which shall have consulted with the other Agents prior to making such determination; (m) Agent shall have received evidence in form and substance satisfactory to Agents (including a certificate of the chief financial officer of Subsidiary Borrower) that all tax returns required to be filed by Subsidiary Borrower have been timely filed and all taxes upon Subsidiary Borrower or its properties, assets, income, and franchises (including Real Property taxes and payroll taxes) have been paid prior to delinquency, except such taxes that are the subject of a Permitted Protest or are set forth on Schedule 6.7; (n) Domestic Parent, Subsidiary Borrower and Irish Borrower shall, in the aggregate, have Excess Availability and Qualified Cash in an amount of not less than $100,000,000 after giving effect to the initial extensions of credit under the Domestic Loan Agreement, this Agreement and the Irish Loan Agreement; (o) Agents shall have completed their collateral due diligence, including a collateral audit and review of Subsidiary Borrower's books and records and verification of Subsidiary Borrower's representations and warranties concerning Collateral to the Lender Group, the results of which shall be satisfactory to the Agents; (p) Agent shall have completed its business and legal due diligence, the results of which shall be satisfactory to Agent; (q) Agent shall have received completed reference checks with respect to Subsidiary Borrower's senior management, the results of which are satisfactory to Agent in its sole discretion; (r) Subsidiary Borrower shall pay all Lender Group Expenses incurred in connection with the transactions evidenced by this Agreement; (s) Agent shall have received copies of each of Subsidiary Borrower's material leases, financing agreements, supplier agreements, transition services agreements, and Intellectual Property licenses, together with a certificate of the Secretary of Subsidiary Borrower certifying each such document as being a true, correct, and complete copy thereof; (t) Subsidiary Borrower shall have received all licenses, approvals or evidence of other actions required by any Governmental Authority in connection with the execution and delivery by Subsidiary Borrower of this Agreement or any other UK Loan -49- Document or with the consummation of the transactions contemplated hereby and thereby; and (u) all other documents and legal matters in connection with the transactions contemplated by this Agreement shall have been delivered, executed, or recorded and shall be in form and substance satisfactory to Agent. 3.2 [Intentionally omitted]. 3.3 Conditions Precedent to all Extensions of Credit. The obligation of the Lender Group (or any member thereof) to make all Advances (or to extend any other credit hereunder) shall be subject to the following conditions precedent: (a) the representations and warranties contained in this Agreement and the other UK Loan Documents shall be true and correct in all material respects on and as of the date of such extension of credit, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date), (b) no Default or Event of Default shall have occurred and be continuing on the date of such extension of credit, nor shall either result from the making thereof, (c) no injunction, writ, restraining order, or other order of any nature prohibiting, directly or indirectly, the extending of such credit shall have been issued and remain in force by any Governmental Authority against Subsidiary Borrower, Agent, any Lender, or any of their Affiliates, and (d) no Material Adverse Change shall have occurred. 3.4 Term. This Agreement shall become effective upon the execution and delivery hereof by Subsidiary Borrower, Agent, and the Lenders and shall continue in full force and effect for a term ending on the earlier of (the "Maturity Date") (a) June 25, 2003, (b) the Conditions Precedent Deadline (as defined in Section 3.1(a)) if Subsidiary Borrower has failed to satisfy each of the conditions precedent in Section 3.1 on or before the Conditions Precedent Deadline, or (c) the date of termination of the Domestic Loan Agreement (including termination by Domestic Parent pursuant to Section 3.6 of the Domestic Loan Agreement). The foregoing notwithstanding, the Lender Group, upon the election of the Required Lenders, shall have the right to terminate its obligations under this Agreement immediately and without notice upon the occurrence and during the continuation of an Event of Default. 3.5 Effect of Termination. On the date of termination of this Agreement, all Obligations (including contingent reimbursement obligations of Subsidiary Borrower with respect to outstanding Letters of Credit) immediately shall become due and payable without -50- notice or demand. No termination of this Agreement, however, shall relieve or discharge Subsidiary Borrower of its duties, Obligations, or covenants hereunder and the Agent's Liens in the Collateral shall remain in effect until all Obligations have been fully and finally discharged and the Lender Group's obligations to provide additional credit hereunder have been terminated. When this Agreement has been terminated and all of the Obligations (other than contingent indemnification obligations) have been fully and finally discharged and the Lender Group's obligations to provide additional credit under the UK Loan Documents have been terminated irrevocably, Agent will, at Subsidiary Borrower's sole expense, execute and deliver any UCC termination statements, lien releases, mortgage releases, re-assignments of trademarks, discharges of security interests, and other similar discharge or release documents (and, if applicable, in recordable form) as are reasonably necessary to release, as of record, the Agent's Liens and all notices of security interests and liens previously filed by Agent with respect to the Obligations. 3.6 Early Termination by Subsidiary Borrower. Subsidiary Borrower has the option, at any time upon 90 days prior written notice to Agent, to terminate this Agreement by paying to Agent, for the benefit of the Lender Group, in cash, the Obligations (including either (i) providing cash collateral to be held by Agent for the benefit of those Lenders with a Revolver Commitment in an amount equal to 105% of the then extant Letter of Credit Usage, or (ii) causing the original Letters of Credit to be returned to the Issuing Lender) in full (to be allocated based upon letter agreements between Agent and individual Lenders). If Subsidiary Borrower has sent a notice of termination pursuant to the provisions of this Section, then the Commitments shall terminate and Subsidiary Borrower shall be obligated to repay the Obligations (including either (i) providing cash collateral to be held by Agent for the benefit of those Lenders with a Revolver Commitment in an amount equal to 105% of the then extant Letter of Credit Usage, or (ii) causing the original Letters of Credit to be returned to the Issuing Lender) in full on the date set forth as the date of termination of this Agreement in such notice. The foregoing to the contrary notwithstanding, Subsidiary Borrower shall not have the right to terminate this Agreement unless the Irish Loan Agreement concurrently is terminated and all of the Indebtedness thereunder repaid in full. 4. PERFECTION OF SECURITY INTEREST; INSPECTION RIGHTS. 4.1 [Intentionally omitted]. 4.2 [Intentionally omitted]. 4.3 [Intentionally omitted]. 4.4 Delivery of Additional Documentation Required. At any time upon the request of Agent, Subsidiary Borrower shall execute and deliver to Agent, any and all financing statements, original financing statements in lieu of continuation statements, fixture filings, security agreements, pledges, assignments, endorsements of certificates of title, and all other documents (the "Additional Documents") that Agent may request in its Permitted -51- Discretion, in form and substance satisfactory to Agent, to perfect and continue perfected or better perfect the Agent's Liens in the Collateral (whether now owned or hereafter arising or acquired), to create and perfect Liens in favor of Agent in any Real Property acquired after the date of this Agreement, and in order to fully consummate all of the transactions contemplated hereby and under the other UK Loan Documents. To the maximum extent permitted by applicable law, Subsidiary Borrower authorizes Agent to execute any such Additional Documents in Subsidiary Borrower's name and authorizes Agent to file such executed Additional Documents in any appropriate filing office. 4.5 Power of Attorney. Subsidiary Borrower hereby irrevocably makes, constitutes, and appoints Agent (and any of Agent's officers, employees, or agents designated by Agent) as Subsidiary Borrower's true and lawful attorney, with power to (a) if Subsidiary Borrower refuses to, or fails timely to execute and deliver any of the documents described in Section 4.4, sign the name of Subsidiary Borrower on any of the documents described in Section 4.4, (b) at any time that an Event of Default has occurred and is continuing, sign Subsidiary Borrower's name on any invoice or bill of lading relating to the Collateral, drafts against Account Debtors, or notices to Account Debtors, (c) send requests for verification of Accounts; provided, however, that, so long as no Event of Default has occurred and is continuing, Agent agrees to coordinate such verification activities with Subsidiary Borrower, (d) endorse Subsidiary Borrower's name on any Collection item that may come into the Lender Group's possession, (e) at any time that an Event of Default has occurred and is continuing, make, settle, and adjust all claims under Subsidiary Borrower's policies of insurance and make all determinations and decisions with respect to such policies of insurance, and (f) at any time that an Event of Default has occurred and is continuing, settle and adjust disputes and claims respecting Subsidiary Borrower's Accounts directly with Account Debtors, for amounts and upon terms that Agent determines to be reasonable, and Agent may cause to be executed and delivered any documents and releases that Agent determines to be necessary. The appointment of Agent as Subsidiary Borrower's attorney, and each and every one of its rights and powers, being coupled with an interest, is irrevocable until all of the Obligations have been fully and finally repaid and performed and the Lender Group's obligations to extend credit hereunder are terminated. 4.6 Right to Inspect. Agents (through any of their respective officers, employees, or agents) shall have the right, from time to time hereafter to inspect the Books and to check, test, and appraise the Collateral in order to verify Subsidiary Borrower's financial condition or the amount, quality, value, condition of, or any other matter relating to, the Collateral; provided however, that so long as no Event of Default has occurred which is continuing, any such inspection, check, test or appraisal shall be conducted during normal business hours in a manner so as not to interfere unreasonably with Subsidiary Borrower's business operations. 4.7 [Intentionally omitted]. -52- 5. REPRESENTATIONS AND WARRANTIES. In order to induce the Lender Group to enter into this Agreement, Subsidiary Borrower makes the following representations and warranties to the Lender Group which shall be true, correct, and complete, in all material respects, as of the date hereof, and shall be true, correct, and complete, in all material respects, as of the Closing Date, and at and as of the date of the making of each Advance (or other extension of credit) made thereafter, as though made on and as of the date of such Advance (or other extension of credit) (except to the extent that such representations and warranties relate solely to an earlier date) and such representations and warranties shall survive the execution and delivery of this Agreement: 5.1 No Encumbrances. Subsidiary Borrower has title to the Subsidiary Borrower Collateral and the Real Property, free and clear of Liens except for Permitted Liens. 5.2 Eligible Accounts. The Eligible Accounts are bona fide existing payment obligations of Account Debtors created by the sale and delivery of Inventory or the rendition of services to such Account Debtors in the ordinary course of Subsidiary Borrower's business, owed to Subsidiary Borrower without defenses, disputes, offsets, counterclaims, or rights of return or cancellation. As to each Eligible Account, such Account is not excluded as ineligible by virtue of one or more of the excluding criteria set forth in the definition of Eligible Accounts. 5.3 [Intentionally omitted]. 5.4 Equipment; Inventory. All of the Equipment of Subsidiary Borrower is used or held for use in its business and is fit for such purposes. Subsidiary Borrower's Equipment is not stored with a bailee, warehouseman, or similar party and is located only at the locations identified on Schedule 5.4. Subsidiary Borrower does not have any Inventory. 5.5 [Intentionally omitted]. 5.6 [Intentionally omitted]. 5.7 Location of Head Office. The principal place of business and registered office of Subsidiary Borrower is located at the address indicated in Schedule 5.7. 5.8 Due Organization and Qualification; Subsidiaries. (a) Subsidiary Borrower is validly incorporated and existing and in good standing under the laws of England and Wales and qualified to do business in any state where the failure to be so qualified reasonably could be expected to have a Material Adverse Change. (b) Set forth on Schedule 5.8(b), is a complete and accurate description of the authorized share capital of Subsidiary Borrower, by class, and, as of the -53- Closing Date, a description of the number of shares of each such class that are issued and outstanding. Other than as described on Schedule 5.8(b), there are no subscriptions, options, warrants, or calls relating to any shares of Subsidiary Borrower and such shares are fully paid up, including any right of conversion or exchange under any outstanding security or other instrument. Subsidiary Borrower is not subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any of its shares or any security convertible into or exchangeable for any of its shares. (c) Set forth on Schedule 5.8(c), is a complete and accurate list of Subsidiary Borrower's direct and indirect Subsidiaries, showing: (i) the jurisdiction of their organization, (ii) the number of shares of each class of common and preferred Stock authorized for each of such Subsidiaries, and (iii) the number and the percentage of the outstanding shares of each such class owned directly or indirectly by Subsidiary Borrower. All of the outstanding capital Stock of each such Subsidiary has been validly issued and is fully paid and non-assessable. (d) Except as set forth on Schedule 5.8(c), there are no subscriptions, options, warrants, or calls relating to any shares of Subsidiary Borrower's Subsidiaries' capital Stock, including any right of conversion or exchange under any outstanding security or other instrument. Neither Subsidiary Borrower nor any of its Subsidiaries is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of Subsidiary Borrower's Subsidiaries' capital Stock or any security convertible into or exchangeable for any such capital Stock. 5.9 Due Authorization; No Conflict. (a) The execution, delivery, and performance by Subsidiary Borrower of this Agreement and the UK Loan Documents to which it is a party have been duly authorized by all necessary action on the part of Subsidiary Borrower. (b) The execution, delivery, and performance by Subsidiary Borrower of this Agreement and the UK Loan Documents to which it is a party do not and will not (i) violate any provision of any law including federal, state, or local law or regulation applicable to Subsidiary Borrower, the Governing Documents of Subsidiary Borrower, or any order, judgment, or decree of any court or other Governmental Authority binding on Subsidiary Borrower, (ii) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material contractual obligation of Subsidiary Borrower, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any properties or assets of Subsidiary Borrower, other than Permitted Liens, or (iv) require any approval of Subsidiary Borrower's interest holders or any approval or consent of any Person under any material contractual obligation of Subsidiary Borrower. (c) Other than the filing of financing statements, fixture filings and certain of the UK Loan Documents with the SEC and filings with the registrar of Companies -54- House in the United Kingdom, the execution, delivery, and performance by Subsidiary Borrower of this Agreement and the UK Loan Documents to which Subsidiary Borrower is a party do not and will not require any registration with, consent, or approval of, or notice to, or other action with or by, any Governmental Authority or other Person. (d) This Agreement and the other UK Loan Documents to which Subsidiary Borrower is a party, and all other documents contemplated hereby and thereby, when executed and delivered by Subsidiary Borrower will be the legally valid and binding obligations of Subsidiary Borrower, enforceable against Subsidiary Borrower in accordance with their respective terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors' rights generally. (e) The Agent's Liens are validly created and no action is required to perfect the security except, where appropriate, for registration and notice and the security will be a first charge ranking ahead of any other Lien. (f) As to each Guarantor, the execution, delivery, and performance by such Guarantor of the UK Loan Documents to which it is a party have been duly authorized by all necessary action on the part of such Guarantor. (g) As to each Guarantor, the execution, delivery, and performance by such Guarantor of the UK Loan Documents to which it is a party do not and will not (i) violate any provision of law or regulation applicable to such Guarantor, the Governing Documents of such Guarantor, or any order judgment, or decree of any court or other Governmental Authority binding on such Guarantor, (ii) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material contractual obligation of such Guarantor, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any properties or assets of such Guarantor, other than Permitted Liens, or (iv) require any approval of such Guarantor's interestholders or any approval or consent of any Person under any material contractual obligation of such Guarantor. (h) As to each Guarantor, the execution, delivery, and performance by such Guarantor of the UK Loan Documents to which such Guarantor is a party do not and will not require any registration with, consent, or approval of, or notice to, or other action with or by, any Governmental Agency or other Person. (i) As to each Guarantor, the UK Loan Documents to which such Guarantor is a party, and all other documents contemplated hereby and thereby, when executed and delivered by such Guarantor will be legally valid and binding obligations of such Guarantor enforceable against such guarantor in accordance with their respective terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or omitting creditors' rights generally. -55- 5.10 Litigation. Other than those matters disclosed on Schedule 5.10, there are no actions, suits, or proceedings pending or, to the knowledge of senior officers of Subsidiary Borrower, threatened in writing against Subsidiary Borrower, except for (a) matters that are fully covered by insurance (subject to customary deductibles), and (b) matters arising after the Closing Date that, if decided adversely to Subsidiary Borrower, reasonably could not be expected to result in a Material Adverse Change. 5.11 No Material Adverse Change. All financial statements relating to Subsidiary Borrower and its Subsidiaries that have been delivered by Subsidiary Borrower to the Lender Group have been prepared in accordance with GAAP (except, in the case of unaudited financial statements, for the lack of footnotes and being subject to year-end audit adjustments) and present fairly in all material respects, Subsidiary Borrower's financial condition as of the date thereof and results of operations for the period then ended. There has not been a Material Adverse Change with respect to Subsidiary Borrower and its Subsidiaries since the date of the latest financial statements submitted to the Lender Group on or before the Closing Date. 5.12 Fraudulent Transfer. (a) Subsidiary Borrower is Solvent. (b) No transfer of property is being made by Subsidiary Borrower and no obligation is being incurred by Subsidiary Borrower in connection with the transactions contemplated by this Agreement or the other UK Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of Subsidiary Borrower . 5.13 [Intentionally omitted]. 5.14 [Intentionally omitted]. 5.15 Brokerage Fees. Subsidiary Borrower has not utilized the services of any broker or finder in connection with Subsidiary Borrower's obtaining financing from the Lender Group under this Agreement and no brokerage commission or finders fee is payable by Subsidiary Borrower in connection herewith. 5.16 Intellectual Property. Subsidiary Borrower does not own, or hold licenses in any licenses, trademarks, trade names, copyrights, patents, patent rights, or licenses and no trademarks, trade names, copyrights, patents, patent rights, or licenses are necessary to the conduct of Subsidiary Borrower's business as currently conducted. 5.17 Leases. Subsidiary Borrower has possession under all leases material to the business of Subsidiary Borrower and to which it is a party or under which it is operating. All of such leases are valid and subsisting and no material default by Subsidiary Borrower exists under any of them. -56- 5.18 DDAs. Set forth on Schedule 5.18 are all of Subsidiary Borrower's DDAs, including, with respect to each depository (i) the name and address of such depository, and (ii) the account numbers of the accounts maintained with such depository. 5.19 Complete Disclosure. All factual information (taken as a whole) furnished by or on behalf of Subsidiary Borrower in writing to Agent or any Lender (including all information contained in the Schedules hereto or in the other UK Loan Documents) for purposes of or in connection with this Agreement, the other UK Loan Documents, or any transaction contemplated herein or therein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of Subsidiary Borrower in writing to Agent or any Lender will be, true and accurate, in all material respects, on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading in any material respect at such time in light of the circumstances under which such information was provided. On the Closing Date, the Closing Date Projections represent, and as of the date on which any other Projections are delivered to Agent, such additional Projections represent Subsidiary Borrower's good faith best estimate of its future performance for the periods covered thereby. Anything in any Loan Document to the contrary notwithstanding, Subsidiary Borrower makes no representation or warranty as to any projection or forecast of results or other forward looking statement set forth in any document or statement delivered to made to Agent or the Lenders other than, in the case of any such projection, forecast or forward looking statement, that Subsidiary Borrower had a good faith belief at the time of such delivery that such projection, forecast or forward looking statement was reasonably supported based on the assumptions described in connection therewith at the time of such delivery. 5.20 Indebtedness. Set forth on Schedule 5.20 is a true and complete list of all Indebtedness of Subsidiary Borrower outstanding immediately prior to the Closing Date that is to remain outstanding after the Closing Date and such Schedule accurately reflects the aggregate principal amount of such Indebtedness and the principal terms thereof. 5.21 [Intentionally omitted]. 5.22 Review and Approval of Domestic Loan Agreement. Subsidiary Borrower has reviewed the Domestic Loan Agreement and all Exhibits and Schedules referred to therein and has approved all terms and conditions relating to or affecting Subsidiary Borrower contained therein. Subsidiary Borrower acknowledges and agrees that the credit facility evidenced hereby shall terminate automatically and be of no further force and effect in the event that the Domestic Loan Agreement shall terminate for any reason. -57- 6. AFFIRMATIVE COVENANTS. Subsidiary Borrower covenants and agrees that, so long as any credit hereunder shall be available and until full and final payment of the Obligations, Subsidiary Borrower shall do and shall cause each of its Subsidiaries to do all of the following: 6.1 Accounting System. Maintain a system of accounting that enables Subsidiary Borrower to produce financial statements in accordance with GAAP and maintain records pertaining to the Collateral that contain information as from time to time reasonably may be requested by Agent. 6.2 Collateral Reporting. Provide Agent (and if so requested by Agent, with copies for each Lender) with the following documents at the following times in form satisfactory to Agent: ================================================================================ Daily (from and (a) A sales journal, collection journal, and credit after the occurrence register since the last such schedule and a calculation of a Triggering of the Borrowing Base as of such date, and Event) or, otherwise, monthly (b) notice of all returns, deductions, disputes, or (not later than the claims including amounts in excess of $100,000. 15th day after the end of each fiscal month) - -------------------------------------------------------------------------------- Monthly (not later (c) A detailed calculation of the Subsidiary Borrowing than the 15th day Base (including detail regarding those Accounts that are after the end of not Eligible Accounts), each fiscal month) (d) a detailed aging, by total, of the Accounts, together with a reconciliation to the detailed calculation of the Subsidiary Borrowing Base previously provided to Agent, (e) a summary aging, by vendor, of Subsidiary Borrower's accounts payable and any book overdraft, and (f) a calculation of Dilution for the prior month. - -------------------------------------------------------------------------------- Quarterly (g) A report regarding Subsidiary Borrower's accrued, but unpaid, ad valorem taxes. - -------------------------------------------------------------------------------- Upon request by (h) Copies of invoices in connection with the Accounts, Agent credit memos, remittance advices, deposit slips, shipping and delivery documents in connection with the Accounts and, for Equipment acquired by Subsidiary Borrower, invoices, and ================================================================================ -58- ================================================================================ (i) such other reports as to the Collateral, or the financial condition of Subsidiary Borrower or its Subsidiaries, as Agent may request and the Subsidiary Borrower may lawfully supply. ================================================================================ In addition, Subsidiary Borrower agrees to cooperate fully with Agent to facilitate and implement a system of electronic collateral reporting in order to provide electronic reporting of each of the items set forth above. 6.3 Financial Statements, Reports, Certificates. (a) (i) prior to the occurrence of a Triggering Event, unless the average of the sum of the Subsidiary Borrower Revolver Usage, Irish Loan Usage and Domestic Loan Usage (taken as a whole) over the immediately preceding 30 day period does not exceed $75,000,000, as soon as possible, but in any event, within 45 days after the end of each fiscal quarter, and (ii) if clause (i) is not applicable, as soon as available, but in any event within 30 days (45 days in the case of a fiscal month that is the end of one of the first 3 fiscal quarters in a fiscal year) after the end of each fiscal month during each of Domestic Parent's fiscal years, a company prepared consolidated balance sheet, income statement, and statement of cash flow covering Domestic Parent's and its Subsidiaries' operations during such period, (b) if and when filed by Subsidiary Borrower, copies of Subsidiary Borrower's income tax returns, and any amendments thereto, filed with the Inland Revenue Service, (c) if and when filed by Subsidiary Borrower and as requested by Agent, satisfactory evidence of payment of applicable excise taxes in each jurisdictions in which (i) Subsidiary Borrower conducts business or is required to pay any such excise tax, (ii) where Subsidiary Borrower's failure to pay any such applicable excise tax would result in a Lien on the properties or assets of Subsidiary Borrower, or (iii) where Subsidiary Borrower's failure to pay any such applicable excise tax reasonably could be expected to result in a Material Adverse Change, (d) as soon as a senior officer of Subsidiary Borrower has knowledge of any event or condition that constitutes a Default or an Event of Default, notice thereof and a statement of the curative action that Subsidiary Borrower proposes to take with respect thereto, and (e) upon the request of Agent, any other report reasonably requested relating to the financial condition of Subsidiary Borrower. Subsidiary Borrower agrees that its independent certified public accountants are authorized to communicate with Agent and to release to Agent whatever financial information concerning Subsidiary Borrower Agent reasonably may request. Subsidiary -59- Borrower waives the right to assert a confidential relationship, if any, it may have with any accounting firm or service bureau in connection with any information requested by Agent pursuant to or in accordance with this Agreement, and agrees that Agent may contact directly any such accounting firm or service bureau in order to obtain such information. 6.4 [Intentionally omitted]. 6.5 Return. Cause returns and allowances, as between Subsidiary and its Account Debtors, to be on the same basis and in accordance with their usual customary practices as they exist at the time of the execution and delivery of this Agreement. If, at a time when an Event of Default has occurred and is continuing, any Account Debtor returns any Inventory to Subsidiary Borrower, Subsidiary Borrower promptly shall determine the reason for such return and, if Agent consents (which consent shall not be unreasonably withheld), issue a credit memorandum (with a copy to be sent to Agent) in the appropriate amount to such Account Debtor. 6.6 Maintenance of Properties. Maintain and preserve all of its properties which are necessary or useful in the proper conduct to its business in good working order and condition, ordinary wear and tear excepted, and comply at all times with the provisions of all leases to which it is a party as lessee so as to prevent any loss or forfeiture thereof or thereunder. 6.7 Taxes. Except as set forth on Schedule 6.7, cause all assessments and taxes, whether real, personal, or otherwise, due or payable by, or imposed, levied, or assessed against Subsidiary Borrower or any of its assets to be paid in full, before delinquency or before the expiration of any extension period, except to the extent that the validity of such assessment or tax shall be the subject of a Permitted Protest. Subsidiary Borrower will make timely payment or deposit of all tax payments and withholding taxes required of it or them by applicable laws, including those laws concerning PAYE, National Insurance and other social security payments, VAT, and United Kingdom and foreign income and corporation taxes, and will, upon request, furnish Agent with proof satisfactory to Agent indicating that Subsidiary Borrower has made such payments or deposits. Upon Agent's request, Subsidiary Borrower shall deliver satisfactory evidence of payment of applicable excise taxes in each jurisdictions in which Subsidiary Borrower is required to pay any such excise tax. 6.8 Insurance. (a) At Domestic Parent's expense, maintain insurance respecting Subsidiary Borrower's assets wherever located, covering loss or damage by fire, theft, explosion, and all other hazards and risks as ordinarily are insured against by other Persons engaged in the same or similar businesses. Subsidiary Borrower also shall maintain business interruption, public liability, and product liability insurance, as well as insurance against larceny, embezzlement, and criminal misappropriation. All such policies of insurance shall be in amounts maintained by companies of similar standing and shall be with such insurance -60- companies as are satisfactory to Agent in its Permitted Discretion. Subsidiary Borrower shall deliver copies of all such policies to Agent with a satisfactory lender's loss payable endorsement naming Agent as sole loss payee or additional insured, as appropriate. This Section 6.8 shall not require Subsidiary Borrower to deliver policies of insurance to Agent in addition to those policies of insurance delivered by Domestic Parent to Agent pursuant to Section 6.8 of the Domestic Loan Agreement. Notwithstanding the foregoing, if such policies delivered by Domestic Parent are amended or modified so that they no longer pertain to Subsidiary Borrower, Subsidiary Borrower must, at its expense, maintain the insurance described in this Section 6.8(a) and deliver such policies to Agent with a satisfactory lender's loss payable endorsement naming Agent as sole loss payee or additional insured, as appropriate. (b) Subsidiary Borrower shall give Agent prompt notice of any loss covered by such insurance. Following the Closing Date, Agent shall have the exclusive right to adjust any losses payable under any such insurance policies in excess of $250,000, without any liability to Subsidiary Borrower whatsoever in respect of such adjustments. Any monies received as payment for any loss under any insurance policy mentioned above (other than liability insurance policies) or as payment of any award or compensation for condemnation or taking by eminent domain, shall be paid over to Agent to be applied at the option of Required Lenders either to the prepayment of the Obligations or shall be disbursed to Subsidiary Borrower under staged payment terms reasonably satisfactory to the Required Lenders for application to the cost of repairs, replacements, or restorations; provided, however, that if Agent receives such monies in immediately available funds on a date that no Advance is outstanding, Agent shall disburse such monies to Subsidiary Borrower on the Business Day immediately following the date upon which Agent received such monies. Any such repairs, replacements, or restorations shall be effected with reasonable promptness and shall be of a value at least equal to the value of the items of property destroyed prior to such damage or destruction. Subsidiary Borrower will not take out separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this Section 6.8, unless Agent is included thereon as named insured with the loss payable to Agent under a lender's loss payable endorsement or its equivalent. Subsidiary Borrower immediately shall notify Agent whenever such separate insurance is taken out, specifying the insurer thereunder and full particulars as to the policies evidencing the same, and copies of such policies promptly shall be provided to Agent. 6.9 Location of Equipment. Keep Subsidiary Borrower's Equipment only at the locations identified on Schedule 5.4; provided, however, that Subsidiary Borrower may amend Schedule 5.4 so long as such amendment occurs by written notice to Agent not less than 15 days prior to the date on which Equipment is moved to such new location, so long as such new location is within the United Kingdom and so long as, at the time of such written notification, Subsidiary Borrower provides any filings necessary to perfect and continue -61- perfected the Agent's Liens on such assets and also provides to Agent a Collateral Access Agreement. 6.10 Compliance with Laws. Comply with the requirements of all applicable laws, rules, regulations, and orders of any Governmental Authority, other than laws, rules, regulations, and orders the non-compliance with which, individually or in the aggregate, would not result in and reasonably could not be expected to result in a Material Adverse Change. 6.11 Leases. Pay when due all rents and other amounts payable under any leases to which they are parties or by which their properties and assets are bound, unless such payments are the subject of a Permitted Protest. 6.12 Brokerage Commissions. Pay any and all brokerage commission or finders fees incurred in connection with or as a result of Subsidiary Borrower's obtaining financing from the Lender Group under this Agreement. Subsidiary Borrower agrees and acknowledges that payment of all such brokerage commissions or finders fees shall be the sole responsibility of Subsidiary Borrower, and Subsidiary Borrower agrees to indemnify, defend, and hold Agent and the Lender Group harmless from and against any claim of any broker or finder arising out of Subsidiary Borrower's obtaining financing from the Lender Group under this Agreement. 6.13 Existence. At all times preserve and keep in full force and effect Subsidiary Borrower's valid existence and good standing and any rights and franchises material to its business. 6.14 Environmental. (a) Keep any property either owned or operated by them free of any Environmental Liens or post bonds or other financial assurances sufficient to satisfy the obligations or liability evidenced by such Environmental Liens, (b) comply, in all material respects, with Environmental Laws and provide to Agent documentation of such compliance which Agent reasonably requests, (c) promptly notify Agent of any release of a Hazardous Material in any reportable quantity from or onto property owned or operated by Subsidiary Borrower and take any Remedial Actions required to abate said release or otherwise to come into compliance with applicable Environmental Law, and (d) promptly provide Agent with written notice within 10 days of the receipt of any of the following: (i) notice that an Environmental Lien has been filed against any of the real or personal property of Subsidiary Borrower, (ii) commencement of any Environmental Action or notice that an Environmental Action will be filed against Subsidiary Borrower, and (iii) notice of a violation, citation, or other administrative order which reasonably could be expected to result in a Material Adverse Change. 6.15 Disclosure Updates. Promptly and in no event later than 5 Business Days after a senior officer of Subsidiary Borrower obtains knowledge thereof, (a) notify Agent if any written information, exhibit, or report furnished to the Lender Group contained any -62- untrue statement of a material fact or omitted to state any material fact necessary to make the statements contained therein not misleading in light of the circumstances in which made, and (b) correct any defect or error that may be discovered therein or in any Loan Document or in the execution, acknowledgement, filing, or recordation thereof. 6.16 Compliance with Covenants of Domestic Loan Agreement. Promptly take all such actions as are necessary to assure that, as a Material Subsidiary (as defined in the Domestic Loan Agreement) of Domestic Parent, it is in compliance with all requirements applicable to Material Subsidiaries and other Subsidiaries of Domestic Parent pursuant to the Domestic Loan Agreement. 7. NEGATIVE COVENANTS. Subsidiary Borrower covenants and agrees that, so long as any credit hereunder shall be available and until full and final payment of the Obligations, Subsidiary Borrower will not and will not permit any of its Subsidiaries to do any of the following: 7.1 Indebtedness. Create, incur, assume, permit, guarantee, or otherwise become or remain, directly or indirectly, liable with respect to any Indebtedness, except: (a) Indebtedness evidenced by this Agreement and the other UK Loan Documents together with Indebtedness owed to Underlying Issuers with respect to Underlying Letters of Credit, (b) Indebtedness set forth on Schedule 5.20, (c) refinancings, renewals, or extensions of Indebtedness permitted under clauses (b) and (c) of this Section 7.1 (and continuance or renewal of any Permitted Liens associated therewith) so long as: (i) the terms and conditions of such refinancings, renewals, or extensions do not, in Agent's reasonable judgment, materially impair the prospects of repayment of the Obligations by Subsidiary Borrower or materially impair Subsidiary Borrower's creditworthiness, (ii) such refinancings, renewals, or extensions do not result in an increase in the principal amount of, or interest rate with respect to, the Indebtedness so refinanced, renewed, or extended, (iii) such refinancings, renewals, or extensions do not result in a shortening of the average weighted maturity of the Indebtedness so refinanced, renewed, or extended, nor are they on terms or conditions that, taken as a whole, are materially more burdensome or restrictive to Subsidiary Borrower, and (iv) if the Indebtedness that is refinanced, renewed, or extended was subordinated in right of payment to the Obligations, then the terms and conditions of the refinancing, renewal, or extension Indebtedness must include subordination terms and conditions that are at least as favorable to the Lender Group as those that were applicable to the refinanced, renewed, or extended Indebtedness, and (d) Indebtedness arising as a result of Permitted Intercompany Advances. 7.2 Liens. Create, incur, assume, or permit to exist, directly or indirectly, any Lien on or with respect to any of its assets, of any kind, whether now owned or hereafter acquired, or any income or profits therefrom, except for Permitted Liens (including Liens that are replacements of Permitted Liens to the extent that the original Indebtedness is refinanced, renewed, or extended under Section 7.1(d) and so long as the replacement Liens only encumber those assets that secured the refinanced, renewed, or extended Indebtedness). -63- 7.3 Restrictions on Fundamental Changes. (a) Enter into any merger, consolidation, reorganization, or recapitalization, or reclassify its Stock; (b) Liquidate, wind up, or dissolve itself (or suffer any liquidation or dissolution). (c) Except for Permitted Dispositions, convey, sell, lease, license, assign, transfer, or otherwise dispose of, in one transaction or a series of transactions, all or any substantial part of its assets. 7.4 Disposal of Assets. Other than Permitted Dispositions, convey, sell, lease, license, assign, transfer, or otherwise dispose of any of Subsidiary Borrower's assets. 7.5 Change Name. Change Subsidiary Borrower's name, corporate structure, or identity, or add any new fictitious name; provided, however, that Subsidiary Borrower may change its name upon at least 30 days prior written notice to Agent of such change and so long as, at the time of such written notification, Subsidiary Borrower provides any financing statements or fixture filings necessary to perfect and continue perfected the Agent's Liens as to the Collateral. 7.6 Guarantee. Except for (a) the guarantee contained in the UK Debenture and (b) those guarantees set forth on Schedule 7.6, guarantee or otherwise become in any way liable with respect to the obligations of any third Person except by endorsement of instruments or items of payment for deposit to the account of Subsidiary Borrower or which are transmitted or turned over to Agent. 7.7 Nature of Business. Make any change in the principal nature of its business. 7.8 Prepayments and Amendments. (a) Except in connection with a refinancing permitted by Section 7.1(c), prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness of Subsidiary Borrower, other than the Obligations in accordance with this Agreement, and -64- (b) Except in connection with a refinancing permitted by Section 7.1(c), directly or indirectly, amend, modify, alter, increase, or change any of the terms or conditions of any agreement, instrument, document, indenture, or other writing evidencing or concerning Indebtedness permitted under Sections 7.1(b), (c), or (e). 7.9 Change of Control. Cause, permit, or suffer, directly or indirectly, any Change of Control. 7.10 Consignments. Consign any of its Inventory or sell any of its Inventory on bill and hold, sale or return, sale on approval, or other conditional terms of sale. 7.11 Distributions. Make any distribution or declare or pay any dividends (in cash or other property) on, or purchase, acquire, redeem, or retire any of Subsidiary Borrower's Stock, of any class, whether now or hereafter outstanding. 7.12 Accounting Methods. Modify or change its method of accounting (other than as may be required to conform to GAAP or which would result in an improvement in Subsidiary Borrower's reporting abilities and practices) or enter into, modify, or terminate any agreement currently existing, or at any time hereafter entered into with any third party accounting firm or service bureau for the preparation or storage of its accounting records without said accounting firm or service bureau agreeing to provide Agent information regarding the Collateral or Subsidiary Borrower's financial condition. 7.13 Investments. Directly or indirectly, make or acquire any Investment or incur any liabilities (including contingent obligations) for or in connection with any Investment. 7.14 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any transaction with any Affiliate of Subsidiary Borrower except for transactions that are in the ordinary course of Subsidiary Borrower's business, upon fair and reasonable terms, that are fully disclosed to Agent, and that are no less favorable to Subsidiary Borrower than would be obtained in an arm's length transaction with a non-Affiliate. 7.15 Suspension. Go out of all or a substantial portion of its core business. 7.16 [Intentionally omitted]. 7.17 Use of Proceeds. Use the proceeds of the Advances for any purpose other than (a) to pay transactional fees, costs, and expenses incurred in connection with this Agreement, the other UK Loan Documents, and the transactions contemplated hereby and thereby, and (b) consistent with the terms and conditions hereof, for its lawful and permitted purposes. 7.18 Change in Location of Head Office. Relocate its head office to a new location without providing 30 days prior written notification thereof to Agent and so long as, at the time of such written notification, Subsidiary Borrower provides any amendments to the -65- UK Security Documents or provides such other documents as may be necessary or required to perfect and continue perfected the Agent's Liens and also provides to Agent a Collateral Access Agreement with respect to such new location. 7.19 Inventory. Purchase or otherwise acquire any Inventory. 7.20 [Intentionally omitted]. 7.21 Issuance of Stock. Issue or sell any of its Stock, of any Class. 7.22 Compliance with Covenants of Domestic Loan Agreement. Take any action which would cause Domestic Parent to be in violation of any material term or provision of the Domestic Loan Agreement or any other Domestic Loan Document to which Domestic Parent is party. 8. EVENTS OF DEFAULT. Any one or more of the following events shall constitute an event of default (each, an "Event of Default") under this Agreement: 8.1 If Subsidiary Borrower fails to pay when due and payable, or when declared due and payable, all or any portion of the Obligations (whether of principal, interest (including any interest which, but for the provisions of the Bankruptcy Code, would have accrued on such amounts), fees and charges due the Lender Group, reimbursement of Lender Group Expenses, or other amounts constituting Obligations); 8.2 If Subsidiary Borrower fails to (a) perform, keep, or observe any covenant or other provision contained in Sections 6.2, 6.3, 6.7, 6.9, 6.10, and 6.11 hereof and such failure or neglect continues for a period of 5 days after the date on which such failure or neglect first occurs, or (b) perform, keep, or observe any covenant or other provision contained in any Section of this Agreement (other than a Section that is expressly dealt with elsewhere in this Section 8) or the other UK Loan Documents (other than a Section of such other UK Loan Documents dealt with elsewhere in this Section 8) and such failure or neglect is not cured within 15 days after the date on which such failure or neglect first occurs, or (c) perform, keep, or observe any covenant or other provision contained in Section 6 (other than a subsection of Section 6 that is dealt with elsewhere in this Section 8), or Section 7 of this Agreement or any comparable provision contained in any of the other UK Loan Documents; 8.3 If any material portion of Subsidiary Borrower's assets is attached, seized, subjected to a writ or distress warrant, levied upon, or comes into the possession of any third Person; 8.4 If an Insolvency Proceeding is commenced by Subsidiary Borrower or any of its Subsidiaries; -66- 8.5 If an Insolvency Proceeding is commenced against Subsidiary Borrower, or any of its Subsidiaries, and any of the following events occur: (a) Subsidiary Borrower or the Subsidiary consents to the institution of such Insolvency Proceeding against it, (b) the petition commencing the Insolvency Proceeding is not timely controverted, (c) the petition commencing the Insolvency Proceeding is not dismissed within 45 calendar days of the date of the filing thereof; provided, however, that, during the pendency of such period, Agent (including any successor agent) and each other member of the Lender Group shall be relieved of their obligations to extend credit hereunder, (d) an interim trustee is appointed to take possession of all or any substantial portion of the properties or assets of, or to operate all or any substantial portion of the business of, Subsidiary Borrower or any of its Subsidiaries, or (e) an order for relief shall have been entered therein; 8.6 If Subsidiary Borrower is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of its business affairs; 8.7 If a notice of Lien, levy, or assessment is filed of record with respect to any of Subsidiary Borrower's assets by the United States, or any department, agency, or instrumentality thereof, or by any state, county, municipal, or governmental agency, or if any taxes or debts owing at any time hereafter to any one or more of such entities becomes a Lien, whether choate or otherwise, upon any of Subsidiary Borrower's assets and the same is not paid before such payment is delinquent; 8.8 If a judgment or other claim becomes a Lien or encumbrance upon any material portion of Subsidiary Borrower's assets; 8.9 If there is a default in any material financing agreement or lease to which Subsidiary Borrower is a party and such default (a) occurs at the final maturity of the obligations thereunder, or (b) results in a right by the other party thereto, irrespective of whether exercised, to accelerate the maturity of Subsidiary Borrower's obligations thereunder or to terminate such agreement or lease; 8.10 If Subsidiary Borrower makes any payment on account of Indebtedness that has been contractually subordinated in right of payment to the payment of the Obligations, except to the extent such payment is permitted by the terms of the subordination provisions applicable to such Indebtedness; 8.11 If any material misstatement or misrepresentation exists now or hereafter in any warranty, representation, statement, or Record made to the Lender Group by Subsidiary Borrower, or any officer, employee, agent, or director of Subsidiary Borrower; 8.12 If any UK Loan Document that purports to create a Lien shall, for any reason, fail or cease to create a valid and perfected charge, Lien or security interest in the Collateral covered hereby and thereby; -67- 8.13 Any provision of any Loan Document shall at any time for any reason be declared to be null and void, or the validity or enforceability thereof shall be contested by Subsidiary Borrower, or a proceeding shall be commenced by Subsidiary Borrower, or by any Governmental Authority having jurisdiction over Subsidiary Borrower, seeking to establish the invalidity or unenforceability thereof, or Subsidiary Borrower shall deny that Subsidiary Borrower has any liability or obligation purported to be created under any UK Loan Document; 8.14 If there is a default in any Domestic Loan Document and such default (a) occurs at the final maturity of the obligations thereunder, or (b) results in a right by Agent or any Lender, irrespective of whether exercised, to accelerate the maturity of the Domestic Parent's obligations thereunder, to terminate such agreement, or to refuse to renew such agreement pursuant to an automatic renewal right therein; or 8.15 If there is a default in any Irish Loan Document and such default (a) occurs at the final maturity of the obligations thereunder, or (b) results in a right by Agent or any Lender, irrespective of whether exercised, to accelerate the maturity of the Irish Borrower's obligations thereunder, to terminate such agreement, or to refuse to renew such agreement pursuant to an automatic renewal right therein. 9. THE LENDER GROUP'S RIGHTS AND REMEDIES. 9.1 Rights and Remedies. Upon the occurrence, and during the continuation, of an Event of Default, the Required Lenders (at their election but without notice of their election and without demand) may authorize and instruct Agent to do any one or more of the following on behalf of the Lender Group (and Agent, acting upon the instructions of the Required Lenders, shall do the same on behalf of the Lender Group), all of which are authorized by Subsidiary Borrower: (a) Declare all Obligations, whether evidenced by this Agreement, by any of the other UK Loan Documents, or otherwise, immediately due and payable; provided, however, that if an Event of Default occurs under Section 8.4 or Section 8.5, all such Obligations will automatically become immediately due and payable; (b) Cease advancing money or extending credit to or for the benefit of Subsidiary Borrower under this Agreement, under any of the UK Loan Documents, or under any other agreement between Subsidiary Borrower and the Lender Group; (c) Terminate this Agreement and any of the other UK Loan Documents as to any future liability or obligation of the Lender Group, but without affecting any of the Agent's Liens in the Collateral and without affecting the Obligations; (d) The Lender Group shall have all other rights and remedies available at law or in equity or pursuant to any other UK Loan Document; and -68- (e) Any deficiency that exists after disposition of the Subsidiary Borrower Collateral as provided above will be paid immediately by Subsidiary Borrower. Any excess will be returned, without interest and subject to the rights of third Persons, by Agent to Subsidiary Borrower. 9.2 Remedies Cumulative. The rights and remedies of the Lender Group under this Agreement, the other UK Loan Documents, and all other agreements shall be cumulative. The Lender Group shall have all other rights and remedies not inconsistent herewith as provided by law or in equity. No exercise by the Lender Group of one right or remedy shall be deemed an election, and no waiver by the Lender Group of any Event of Default shall be deemed a continuing waiver. No delay by the Lender Group shall constitute a waiver, election, or acquiescence by it. 10. TAXES AND EXPENSES. If Subsidiary Borrower fails to pay any monies (whether taxes, assessments, insurance premiums, or, in the case of leased properties or assets, rents or other amounts payable under such leases) due to third Persons, or fails to make any deposits or furnish any required proof of payment or deposit, all as required under the terms of this Agreement, then, Agent, in its sole discretion and without prior notice to Subsidiary Borrower, may do any or all of the following: (a) make payment of the same or any part thereof, (b) set up such reserves in Subsidiary Borrower's Loan Account as Agent deems necessary to protect the Lender Group from the exposure created by such failure, or (c) in the case of the failure to comply with Section 6.8 hereof, obtain and maintain insurance policies of the type described in Section 6.8 and take any action with respect to such policies as Agent deems prudent. Any such amounts paid by Agent shall constitute Lender Group Expenses and any such payments shall not constitute an agreement by the Lender Group to make similar payments in the future or a waiver by the Lender Group of any Event of Default under this Agreement. Agent need not inquire as to, or contest the validity of, any such expense, tax, or Lien and the receipt of the usual official notice for the payment thereof shall be conclusive evidence that the same was validly due and owing. 11. WAIVERS; INDEMNIFICATION. 11.1 Demand; Protest; etc. Subsidiary Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and non-payment, non-payment at maturity, release, compromise, settlement, extension, or renewal of documents, instruments, chattel paper, and guarantees at any time held by the Lender Group on which Subsidiary Borrower may in any way be liable. 11.2 [Intentionally omitted]. 11.3 Indemnification. Subsidiary Borrower shall pay, indemnify, defend, and hold the Agent-Related Persons, the Lender-Related Persons with respect to each Lender, each -69- Participant, and each of their respective officers, directors, employees, agents, and attorneys-in-fact (each, an "Indemnified Person") harmless (to the fullest extent permitted by law) from and against any and all claims, demands, suits, actions, investigations, proceedings, and damages, and all reasonable attorneys fees and disbursements and other costs and expenses actually incurred in connection therewith (as and when they are incurred and irrespective of whether suit is brought), at any time asserted against, imposed upon, or incurred by any of them (a) in connection with or as a result of or related to the execution, delivery, enforcement, performance, or administration of this Agreement, any of the other UK Loan Documents, or the transactions contemplated hereby or thereby, and (b) with respect to any investigation, litigation, or proceeding related to this Agreement, any other UK Loan Document, or the use of the proceeds of the credit provided hereunder (irrespective of whether any Indemnified Person is a party thereto), or any act, omission, event, or circumstance in any manner related thereto (all the foregoing, collectively, the "Indemnified Liabilities"). The foregoing to the contrary notwithstanding, Subsidiary Borrower shall have no obligation to any Indemnified Person under this Section 11.3 with respect to any Indemnified Liability that a court of competent jurisdiction finally determines to have resulted from the gross negligence or wilful misconduct of such Indemnified Person. This provision shall survive the termination of this Agreement and the repayment of the Obligations. If any Indemnified Person makes any payment to any other Indemnified Person with respect to an Indemnified Liability as to which Subsidiary Borrower was required to indemnify the Indemnified Person receiving such payment, the Indemnified Person making such payment is entitled to be indemnified and reimbursed by Subsidiary Borrower with respect thereto. WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON. 12. NOTICES. Unless otherwise provided in this Agreement, all notices or demands by Subsidiary Borrower or Agent to the other relating to this Agreement or any other Loan Document shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by registered or certified mail (postage prepaid, return receipt requested), overnight courier, electronic mail (at such email addresses as Subsidiary Borrower or Agent, as applicable, may designate to each other in accordance herewith), or telefacsimile to Subsidiary Borrower or Agent, as the case may be, at its address set forth below: -70- If to Subsidiary Borrower: PALM EUROPE LIMITED c/o Palm, Inc. 5470 Great America Parkway, MS 12106 Santa Clara CA 95052 Attn: Chief Financial Officer Fax No. 408.878.2790 with copies to: GRAY CARY WARE & FREIDENRICH, LLP 3340 Hillview Avenue Palo Alto, CA 94304-1203 Attn: Duc V. Trang, Esq. Fax No. 650.833.2301 If to Agent: FOOTHILL CAPITAL CORPORATION 2450 Colorado Avenue Suite 3000 Santa Monica, California 90404 Attn: Business Finance Division Manager Fax No.: 310.453.7443 with copies to: BROBECK, PHLEGER & HARRISON LLP 550 South Hope Street, Suite 2100 Los Angeles, California 90071 Attn: John Francis Hilson, Esq. Fax No. 213.745.3700 Agent and Subsidiary Borrower may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other party. All notices or demands sent in accordance with this Section 12 shall be deemed received on the earlier of the date of actual receipt or 3 Business Days after the deposit thereof in the mail. Subsidiary Borrower acknowledges and agrees that notices sent by the Lender Group in connection with the exercise of enforcement rights against Collateral shall be deemed sent when deposited in the mail or personally delivered, or, where permitted by law, transmitted by telefacsimile or any other method set forth above. 13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. (a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER UK LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR -71- THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. (b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER UK LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA, OR, AT THE OPTION OF THE AGENT SOLELY, THE COURTS OF ENGLAND; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. SUBSIDIARY BORROWER AND THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b). (c) SUBSIDIARY BORROWER AND THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE UK LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. SUBSIDIARY BORROWER AND THE LENDER GROUP REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. 14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS. 14.1 Assignments and Participations. (a) Any Lender may, with the written consent of Agent and, so long as no Event of Default has occurred and is continuing, with the written consent of Subsidiary Borrower (provided that no written consent of Agent or Subsidiary Borrower shall be required in connection with any assignment and delegation by a Lender to an Eligible Transferee), assign and delegate to one or more assignees (each an "Assignee") all, or any ratable part of all, of the Obligations, the Commitments and the other rights and obligations -72- of such Lender hereunder and under the other UK Loan Documents, in a minimum amount of $1,500,000; provided, however, that Subsidiary Borrower and Agent may continue to deal solely and directly with such Lender in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, together with payment instructions, addresses, and related information with respect to the Assignee, have been given to Subsidiary Borrower and Agent by such Lender and the Assignee, (ii) such Lender and its Assignee have delivered to Subsidiary Borrower and Agent an Assignment and Acceptance in form and substance satisfactory to Agent, and (iii) unless the assignment occurs prior to the date that is 90 days after the Closing Date, the assignor Lender or Assignee has paid to Agent for Agent's separate account a processing fee in the amount of $5,000. Anything contained herein to the contrary notwithstanding, the consent of Agent and Subsidiary Borrower shall not be required (and payment of any fees shall not be required) if such assignment is in connection with any merger, consolidation, sale, transfer, or other disposition of all or any substantial portion of the business or loan portfolio of such Lender and no Lender shall assign or participate all or any portion of its Commitment or portion of the Obligations to a Person which it knows is a direct competitor of Subsidiary Borrower. (b) From and after the date that Agent notifies the assignor Lender (with a copy to Subsidiary Borrower) that it has received an executed Assignment and Acceptance and payment of the above-referenced processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Lender under the UK Loan Documents, and (ii) the assignor Lender shall, to the extent that rights and obligations hereunder and under the other UK Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (except with respect to Section 11.3 hereof) and be released from its obligations under this Agreement (and in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement and the other UK Loan Documents, such Lender shall cease to be a party hereto and thereto), and such assignment shall affect a novation between Subsidiary Borrower and the Assignee. (c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the Assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (1) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other UK Loan Document furnished pursuant hereto, (2) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of Subsidiary Borrower or the performance or observance by Subsidiary Borrower of any of its obligations under this Agreement or any other Loan Document furnished pursuant hereto, (3) such Assignee confirms that it has received a copy of this Agreement, together with such other documents -73- and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance, (4) such Assignee will, independently and without reliance upon Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement, (5) such Assignee appoints and authorizes Agent to take such actions and to exercise such powers under this Agreement as are delegated to Agent, by the terms hereof, together with such powers as are reasonably incidental thereto, and (6) such Assignee agrees that it will perform all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (d) Immediately upon each Assignee's making its processing fee payment under the Assignment and Acceptance and receipt and acknowledgment by Agent of such fully executed Assignment and Acceptance, this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Commitments arising therefrom. The Commitment allocated to each Assignee shall reduce such Commitments of the assigning Lender pro tanto. (e) Any Lender may at any time, with the written consent of Agent, sell to one or more commercial banks, financial institutions, or other Persons not Affiliates of such Lender (a "Participant") participating interests in its Obligations, the Commitment, and the other rights and interests of that Lender (the "Originating Lender") hereunder and under the other UK Loan Documents (provided that no written consent of Agent shall be required in connection with any sale of any such participating interests by a Lender to an Eligible Transferee); provided, however, that (i) the Originating Lender shall remain a "Lender" for all purposes of this Agreement and the other UK Loan Documents and the Participant receiving the participating interest in the Obligations, the Commitments, and the other rights and interests of the Originating Lender hereunder shall not constitute a "Lender" hereunder or under the other UK Loan Documents and the Originating Lender's obligations under this Agreement shall remain unchanged, (ii) the Originating Lender shall remain solely responsible for the performance of such obligations, (iii) Subsidiary Borrower, Agent, and the Lenders shall continue to deal solely and directly with the Originating Lender in connection with the Originating Lender's rights and obligations under this Agreement and the other UK Loan Documents, (iv) no Lender shall transfer or grant any participating interest under which the Participant has the right to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other UK Loan Document, except to the extent such amendment to, or consent or waiver with respect to this Agreement or of any other UK Loan Document would (A) extend the final maturity date of the Obligations hereunder in which such Participant is participating, (B) reduce the interest rate applicable to the Obligations hereunder in which such Participant is participating, (C) release all or a material portion of the Collateral or guaranties (except to the extent expressly provided herein or in any of the UK Loan Documents) supporting the Obligations hereunder in which -74- such Participant is participating, (D) postpone the payment of, or reduce the amount of, the interest or fees payable to such Participant through such Lender, or (E) change the amount or due dates of scheduled principal repayments or prepayments or premiums, and (v) all amounts payable by Subsidiary Borrower hereunder shall be determined as if such Lender had not sold such participation, except that, if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement. The rights of any Participant only shall be derivative through the Originating Lender with whom such Participant participates and no Participant shall have any rights under this Agreement or the other UK Loan Documents or any direct rights as to the other Lenders, Agent, Subsidiary Borrower, the Collections, the Collateral, or otherwise in respect of the Obligations. No Participant shall have the right to participate directly in the making of decisions by the Lenders among themselves. (f) In connection with any such assignment or participation or proposed assignment or participation, a Lender may disclose all documents and information which it now or hereafter may have relating to Subsidiary Borrower or Subsidiary Borrower's business. 14.2 Successors. This Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties; provided, however, that Subsidiary Borrower may not assign this Agreement or any rights or duties hereunder without the Lenders' prior written consent and any prohibited assignment shall be absolutely void ab initio. No consent to assignment by the Lenders shall release Subsidiary Borrower from its Obligations. A Lender may assign this Agreement and the other UK Loan Documents and its rights and duties hereunder and thereunder pursuant to Section 14.1 hereof and, except as expressly required pursuant to Section 14.1 hereof, no consent or approval by Subsidiary Borrower is required in connection with any such assignment. 15. AMENDMENTS; WAIVERS. 15.1 Amendments and Waivers. No amendment or waiver of any provision of this Agreement or any other UK Loan Document, and no consent with respect to any departure by Subsidiary Borrower therefrom, shall be effective unless the same shall be in writing and signed by the Required Lenders (or by Agent at the written request of the Required Lenders) and Subsidiary Borrower and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such waiver, amendment, or consent shall, unless in writing and signed by all of the Lenders affected thereby and Subsidiary Borrower, do any of the following: (a) increase or extend any Commitment of any Lender, -75- (b) postpone or delay any date fixed by this Agreement or any other UK Loan Document for any payment of principal, interest, fees, or other amounts due hereunder or under any other UK Loan Document, (c) reduce the principal of, or the rate of interest on, any loan or other extension of credit hereunder, or reduce any fees or other amounts payable hereunder or under any other UK Loan Document, (d) change the percentage of the Commitments that is required to take any action hereunder, (e) amend this Section or any provision of the Agreement providing for consent or other action by all Lenders, (f) release Collateral other than as permitted by Section 16.12, (g) change the definition of "Required Lenders" or "Defaulting Lender Rate", (h) contractually subordinate any of the Agent's Liens, (i) release Subsidiary Borrower from any obligation for the payment of money, (j) change the definition of Borrowing Base or the definitions of Eligible Accounts, Maximum Subsidiary Revolver Amount, or change Section 2.1(b), or (k) amend any of the provisions of Section 16 or Section 3.1. and, provided further, however, that no amendment, waiver or consent shall, unless in writing and signed by Agent, or Swing Lender, as applicable, affect the rights or duties of Agent or Swing Lender, as applicable, under this Agreement or any other UK Loan Document. The foregoing notwithstanding, any amendment, modification, waiver, consent, termination, or release of, or with respect to, any provision of this Agreement or any other UK Loan Document that relates only to the relationship of the Lender Group among themselves, and that does not affect the rights or obligations of Subsidiary Borrower, shall not require consent by or the agreement of Subsidiary Borrower. 15.2 Replacement of Holdout Lender. (a) If any action to be taken by the Lender Group or Agent hereunder requires the unanimous consent, authorization, or agreement of all Lenders, and a Lender ("Holdout Lender") fails to give its consent, authorization, or agreement, then Agent, upon at least 5 Business Days prior irrevocable notice to the Holdout Lender, may permanently replace the Holdout Lender with one or more substitute Lenders (each, a -76- "Replacement Lender"), and the Holdout Lender shall have no right to refuse to be replaced hereunder. Such notice to replace the Holdout Lender shall specify an effective date for such replacement, which date shall not be later than 15 Business Days after the date such notice is given. (b) Prior to the effective date of such replacement, the Holdout Lender and each Replacement Lender shall execute and deliver an Assignment and Acceptance Agreement, subject only to the Holdout Lender being repaid its share of the outstanding Obligations (including an assumption of its Pro Rata Share of the Risk Participation Liability) without any premium or penalty of any kind whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver any such Assignment and Acceptance Agreement prior to the effective date of such replacement, the Holdout Lender shall be deemed to have executed and delivered such Assignment and Acceptance Agreement. The replacement of any Holdout Lender shall be made in accordance with the terms of Section 14.1. Until such time as the Replacement Lenders shall have acquired all of the Obligations, the Commitments, and the other rights and obligations of the Holdout Lender hereunder and under the other UK Loan Documents, the Holdout Lender shall remain obligated to make the Holdout Lender's Pro Rata Share of Advances, and to purchase a participation in each Letter of Credit, in an amount equal to its Pro Rata Share of the Risk Participation Liability of such Letter of Credit. 15.3 No Waivers; Cumulative Remedies. No failure by Agent or any Lender to exercise any right, remedy, or option under this Agreement or any other UK Loan Document, or delay by Agent or any Lender in exercising the same, will operate as a waiver thereof. No waiver by Agent or any Lender will be effective unless it is in writing, and then only to the extent specifically stated. No waiver by Agent or any Lender on any occasion shall affect or diminish Agent's and each Lender's rights thereafter to require strict performance by Subsidiary Borrower of any provision of this Agreement. Agent's and each Lender's rights under this Agreement and the other UK Loan Documents will be cumulative and not exclusive of any other right or remedy the Agent or any Lender may have. 16. AGENT; THE LENDER GROUP. 16.1 Appointment and Authorization of Agent. Each Lender hereby designates and appoints Foothill as its representative under this Agreement and the other UK Loan Documents and each Lender hereby irrevocably authorizes Agent to take such action on its behalf under the provisions of this Agreement and each other UK Loan Document and to exercise such powers and perform such duties as are expressly delegated to Agent by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Agent agrees to act as such on the express conditions contained in this Section 16. The provisions of this Section 16 are solely for the benefit of Agent, and the Lenders, and Subsidiary Borrower shall have no rights as a third party beneficiary of any of the provisions contained herein. Any provision to the contrary contained elsewhere in this Agreement or in any other UK Loan Document notwithstanding, -77- Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other UK Loan Document or otherwise exist against Agent; it being expressly understood and agreed that the use of the word "Agent" is for convenience only, that Foothill is merely the representative of the Lenders, and only has the contractual duties set forth herein. Except as expressly otherwise provided in this Agreement, Agent shall have and may use its sole discretion with respect to exercising or refraining from exercising any discretionary rights or taking or refraining from taking any actions that Agent expressly is entitled to take or assert under or pursuant to this Agreement and the other UK Loan Documents. Without limiting the generality of the foregoing, or of any other provision of the UK Loan Documents that provides rights or powers to Agent, Lenders agree that Agent shall have the right to exercise the following powers as long as this Agreement remains in effect: (a) maintain, in accordance with its customary business practices, ledgers and records reflecting the status of the Obligations, the Collateral, the Collections, and related matters, (b) execute or file any and all financing or similar statements or notices, amendments, renewals, supplements, documents, instruments, proofs of claim, notices and other written agreements with respect to the UK Loan Documents, (c) make Advances, for itself or on behalf of Lenders as provided in the UK Loan Documents, (d) exclusively receive, apply, and distribute the Collections as provided in the UK Loan Documents, (e) open and maintain such bank accounts and cash management arrangements as Agent deems necessary and appropriate in accordance with the UK Loan Documents for the foregoing purposes with respect to the Collateral and the Collections, (f) perform, exercise, and enforce any and all other rights and remedies of the Lender Group with respect to Subsidiary Borrower, the Obligations, the Collateral, the Collections, or otherwise related to any of same as provided in the UK Loan Documents, and (g) incur and pay such Lender Group Expenses as Agent may deem necessary or appropriate for the performance and fulfilment of its functions and powers pursuant to the UK Loan Documents. Documentation Agent, in its capacity as Documentation Agent, shall have no duties under the UK Loan Documents. Syndication Agent, in its capacity as Syndication Agent, shall have no duties under the UK Loan Documents. 16.2 Delegation of Duties. Agent may execute any of its duties under this Agreement or any other UK Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects as long as such selection was made without gross negligence or wilful misconduct. 16.3 Liability of Agent. None of the Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other UK Loan Document or the transactions contemplated hereby (except for its own gross negligence or wilful misconduct), or (ii) be responsible in any manner to -78- any of the Lenders for any recital, statement, representation or warranty made by Subsidiary Borrower or Affiliate of Subsidiary Borrower, or any officer or director thereof, contained in this Agreement or in any other UK Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by Agent under or in connection with, this Agreement or any other UK Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other UK Loan Document, or for any failure of Subsidiary Borrower or any other party to any UK Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other UK Loan Document, or to inspect the Books or properties of Subsidiary Borrower or the books or records or properties of any of Subsidiary Borrower's Subsidiaries or Affiliates. 16.4 Reliance by Agent. Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent, or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to Borrower or counsel to any Lender), independent accountants and other experts selected by Agent. Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other UK Loan Document unless Agent shall first receive such advice or concurrence of the Lenders as it deems appropriate and until such instructions are received, Agent shall act, or refrain from acting, as it deems advisable. If Agent so requests, it shall first be indemnified to its reasonable satisfaction by Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other UK Loan Document in accordance with a request or consent of the Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders. 16.5 Notice of Default or Event of Default. Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest, fees, and expenses required to be paid to Agent for the account of the Lenders, except with respect to Events of Default of which Agent has actual knowledge, unless Agent shall have received written notice from a Lender or Subsidiary Borrower referring to this Agreement, describing such Default or Event of Default, and stating that such notice is a "notice of default." Agent promptly will notify the Lenders of its receipt of any such notice or of any Event of Default of which Agent has actual knowledge. If any Lender obtains actual knowledge of any Event of Default, such Lender promptly shall notify the other Lenders and Agent of such Event of Default. Each Lender shall be solely responsible for giving any notices to its Participants, if any. Subject to Section 16.4, Agent shall take such action with respect to such Default or Event of Default as may be requested by the Required Lenders in accordance with Section 9; provided, however, -79- that unless and until Agent has received any such request, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable. 16.6 Credit Decision. Each Lender acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by Agent hereinafter taken, including any review of the affairs of Subsidiary Borrower and its Subsidiaries or Affiliates, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender. Each Lender represents to Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of Subsidiary Borrower and any other Person (other than the Lender Group) party to a UK Loan Document, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to Subsidiary Borrower. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other UK Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of Subsidiary Borrower and any other Person (other than the Lender Group) party to a UK Loan Document. Except for notices, reports, and other documents expressly herein required to be furnished to the Lenders by Agent, Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of Subsidiary Borrower and any other Person party to a UK Loan Document that may come into the possession of any of the Agent-Related Persons. 16.7 Costs and Expenses; Indemnification. Agent may incur and pay Lender Group Expenses to the extent Agent reasonably deems necessary or appropriate for the performance and fulfilment of its functions, powers, and obligations pursuant to the UK Loan Documents, including court costs, reasonable attorneys fees and expenses, costs of collection by outside collection agencies and auctioneer fees and costs of security guards or insurance premiums paid to maintain the Collateral, whether or not Subsidiary Borrower is obligated to reimburse Agent or Lenders for such expenses pursuant to the Loan Agreement or otherwise. Agent is authorized and directed to deduct and retain sufficient amounts from Collections received by Agent to reimburse Agent for such out-of-pocket costs and expenses prior to the distribution of any amounts to Lenders. In the event Agent is not reimbursed for such costs and expenses from Collections received by Agent, each Lender hereby agrees that it is and shall be obligated to pay to or reimburse Agent for the amount of such Lender's Pro Rata Share thereof. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand the Agent-Related Persons (to the extent not -80- reimbursed by or on behalf of Subsidiary Borrower and without limiting the obligation of Subsidiary Borrower to do so), according to their Pro Rata Shares, from and against any and all Indemnified Liabilities; provided, however, that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities resulting solely from such Person's gross negligence or wilful misconduct nor shall any Lender be liable for the obligations of any Defaulting Lender in failing to make an Advance or other extension of credit hereunder. Without limitation of the foregoing, each Lender shall reimburse Agent upon demand for such Lender's ratable share of any costs or out-of-pocket expenses (including attorneys fees and expenses) incurred by Agent in connection with the preparation, execution, delivery, administration, modification, amendment, or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other UK Loan Document, or any document contemplated by or referred to herein, to the extent that Agent is not reimbursed for such expenses by or on behalf of Subsidiary Borrower. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of Agent. 16.8 Agent in Individual Capacity. Foothill and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in, and generally engage in any kind of banking, trust, financial advisory, underwriting, or other business with Subsidiary Borrower and its Subsidiaries and Affiliates and any other Person (other than the Lender Group) party to any UK Loan Documents as though Foothill were not Agent hereunder, and, in each case, without notice to or consent of the other members of the Lender Group. The other members of the Lender Group acknowledge that, pursuant to such activities, Foothill or its Affiliates may receive information regarding Subsidiary Borrower or its Affiliates and any other Person (other than the Lender Group) party to any UK Loan Documents that is subject to confidentiality obligations in favor of Subsidiary Borrower or such other Person and that prohibit the disclosure of such information to the Lenders, and the Lenders acknowledge that, in such circumstances (and in the absence of a waiver of such confidentiality obligations, which waiver Agent will use its reasonable best efforts to obtain), Agent shall not be under any obligation to provide such information to them. The terms "Lender" and "Lenders" include Foothill in its individual capacity. 16.9 Successor Agent. Agent may resign as Agent upon 45 days notice to the Lenders. If Agent resigns under this Agreement, the Required Lenders shall appoint a successor Agent for the Lenders. If no successor Agent is appointed prior to the effective date of the resignation of Agent, Agent may appoint, after consulting with the Lenders, a successor Agent. If Agent has materially breached or failed to perform any material provision of this Agreement or of applicable law, the Required Lenders may agree in writing to remove and replace Agent with a successor Agent from among the Lenders. In any such event, upon the acceptance of its appointment as successor Agent hereunder, such successor Agent shall succeed to all the rights, powers, and duties of the retiring Agent and the term "Agent" shall mean such successor Agent and the retiring Agent's appointment, powers, and -81- duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 16 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor Agent has accepted appointment as Agent by the date which is 45 days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of Agent hereunder until such time, if any, as the Lenders appoint a successor Agent as provided for above. 16.10 Lender in Individual Capacity. Any Lender and its respective Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with Subsidiary Borrower and its Subsidiaries and Affiliates and any other Person (other than the Lender Group) party to any UK Loan Documents as though such Lender were not a Lender hereunder without notice to or consent of the other members of the Lender Group. The other members of the Lender Group acknowledge that, pursuant to such activities, such Lender and its respective Affiliates may receive information regarding Subsidiary Borrower or its Affiliates and any other Person (other than the Lender Group) party to any UK Loan Documents that is subject to confidentiality obligations in favor of Subsidiary Borrower or such other Person and that prohibit the disclosure of such information to the Lenders, and the Lenders acknowledge that, in such circumstances (and in the absence of a waiver of such confidentiality obligations, which waiver such Lender will use its reasonable best efforts to obtain), such Lender not shall be under any obligation to provide such information to them. With respect to the Swing Loans and Agent Advances, Swing Lender shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the sub-agent of Agent. 16.11 Withholding Taxes. (a) If any Lender is a "foreign corporation, partnership or trust" within the meaning of the IRC and such Lender claims exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or 1442 of the IRC, such Lender agrees with and in favor of Agent and Subsidiary Borrower, to deliver to Agent and Subsidiary Borrower: (i) if such Lender claims an exemption from withholding tax pursuant to its portfolio interest exception, (a) a statement of the Lender, signed under penalty of perjury, that it is not a (I) a "bank" as described in Section 881(c)(3)(A) of the IRC, (II) a 10% shareholder (within the meaning of Section 881(c)(3)(B) of the IRC), or (III) a controlled foreign corporation described in Section 881(c)(3)(C) of the IRC, and (B) a properly completed IRS Form W-8BEN, before the first payment of any interest under this Agreement and at any other time reasonably requested by Agent or Subsidiary Borrower; -82- (ii) if such Lender claims an exemption from, or a reduction of, withholding tax under a United States tax treaty, properly completed IRS Form W-8BEN before the first payment of any interest under this Agreement and at any other time reasonably requested by Agent or Subsidiary Borrower; (iii) if such Lender claims that interest paid under this Agreement is exempt from United States withholding tax because it is effectively connected with a United States trade or business of such Lender, two properly completed and executed copies of IRS Form W-8ECI before the first payment of any interest is due under this Agreement and at any other time reasonably requested by Agent or Subsidiary Borrower; (iv) such other form or forms as may be required under the IRC or other laws of the United States as a condition to exemption from, or reduction of, United States withholding tax. Such Lender agrees promptly to notify Agent and Subsidiary Borrower of any change in circumstances which would modify or render invalid any claimed exemption or reduction. (b) If any Lender claims exemption from, or reduction of, withholding tax under a United States tax treaty by providing IRS Form W-8BEN and such Lender sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of Subsidiary Borrower to such Lender, such Lender agrees to notify Agent of the percentage amount in which it is no longer the beneficial owner of Obligations of Subsidiary Borrower to such Lender. To the extent of such percentage amount, Agent will treat such Lender's IRS Form W-8BEN as no longer valid. (c) If any Lender is entitled to a reduction in the applicable withholding tax, Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable withholding tax after taking into account such reduction. If the forms or other documentation required by subsection (a) of this Section are not delivered to Agent, then Agent may withhold from any interest payment to such Lender not providing such forms or other documentation an amount equivalent to the applicable withholding tax. (d) If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Lender shall indemnify and hold Agent harmless for all amounts paid, directly or indirectly, by Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to Agent under this Section, together with all costs and expenses (including attorneys fees and expenses). The obligation of the Lenders under this subsection shall survive the -83- payment of all Obligations and the resignation or replacement of Agent. If any of the Lenders fail to properly report and file taxes imposed with respect to any payments made hereunder and as a result of such failure the IRS or any other Governmental Authority of the United States or any political subdivision or taxing authority thereof or therein asserts a claim that Subsidiary Borrower did not properly withhold tax from amounts paid to Agent or Lender hereunder, Agent shall indemnify and hold Subsidiary Borrower harmless for all amounts paid, directly or indirectly, by Subsidiary Borrower as tax or otherwise, including penalties, interest and related costs and expenses in connection with such claim. The obligation of Agent to Subsidiary Borrower under this subsection shall survive the payment of all Obligations and the resignation or replacement of Agent. (e) All payments made by Subsidiary Borrower hereunder or under any note will be made without setoff, counterclaim, or other defense, except as required by applicable law. All such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction (other than the United States) or by any political subdivision or taxing authority thereof or therein (other than of the United States) with respect to such payments (but excluding any tax imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein (i) measured by or based on the net income or net profits of a Lender or (ii) to the extent that such tax results from a change in the circumstances of the Lender, including a change in the residence, place of organization, or principal place of business of the Lender, or a change in the branch or lending office of the Lender participating in the transactions set forth herein) and all interest, penalties or similar liabilities with respect thereto (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges including, for the avoidance of doubt, UK deduction or withholding tax, being referred to collectively as "Taxes"). If any Taxes are so levied or imposed or required to be deducted or withheld, Subsidiary Borrower agrees to pay the full amount of such Taxes, and such additional amounts (the "Gross Up Amount") as may be necessary so that every payment of all amounts due under this Agreement or under any note, including any amount paid pursuant to this Section 16.11(e) after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein; provided, however, that Subsidiary Borrower shall not be required to increase any such amounts payable to Agent or any Lender (i) that is not organized under the laws of the United States, if such Person fails to comply with the other requirements of this Section 16.11, or (ii) if the increase in such amount payable results from Agent's or such Lender's own wilful misconduct or gross negligence. Subsidiary Borrower will furnish to Agent as promptly as possible after the date the payment of any Taxes is due pursuant to applicable law certified copies of tax receipts evidencing such payment by Subsidiary Borrower. (f) Without prejudice to the generality of the provisions in Section 16.11(e) above, the Lenders, the Agent and Subsidiary Borrower shall cooperate in completing any procedural formalities necessary to make an application for Subsidiary -84- Borrower to obtain authorisation to make its payment hereunder or under any note without deduction or withholding for or on account of applicable Taxes due on account of the making of a payment hereunder. In the period prior to the obtaining of such authorisation (such period not to exceed 6 months from the date of entering into this Agreement), any interest which accrues to the Lenders pursuant to the terms of this Agreement shall not be paid until such time as such authorisation is obtained, but shall then be paid in full. In circumstances where 6 months has elapsed since the date of entering into this Agreement and no such authorisation (for whatever reason other than failure by a Lender or the Agent to cooperate in completing any procedural formalities necessary for making an application under this Section 16.11(f)) has been obtained, the Subsidiary Borrower shall pay in full any interest which has accrued to the Lenders pursuant to the terms of this Agreement together with the Gross Up Amount and the provisions of Section 16.11(e) shall apply. Any documentation to be provided (i) under this Section 16.11(f) in order to obtain the relevant authorisation hereunder or (ii) pursuant to the requirements set forth in the definition of Eligible Transferee in Section 1.1 shall be provided or updated within 60 days of a written request by Subsidiary Borrower. If any Lender fails to provide or update the relevant documentation within such time period, the Gross Up Amount under Section 16.11(e) shall not be payable to the extent such Gross Up Amount obligation arises from the failure by a Lender to provide or update such documentation. 16.12 Collateral Matters. (a) The Lenders hereby irrevocably authorize Agent, at its option and in its sole discretion, to release any Lien on any Collateral (i) upon the termination of the Commitments and payment and satisfaction in full by Subsidiary Borrower of all Obligations, (ii) constituting property being sold or disposed of if a release is required or desirable in connection therewith and if Subsidiary Borrower certifies to Agent that the sale or disposition is permitted under Section 7.4 of this Agreement or the other UK Loan Documents (and Agent may rely conclusively on any such certificate, without further inquiry), (iii) constituting property in which Subsidiary Borrower owned no interest at the time the security interest was granted or at any time thereafter, or (iv) constituting property leased to Subsidiary Borrower under a lease that has expired or is terminated in a transaction permitted under this Agreement. Except as provided above, Agent will not execute and deliver a release of any Lien on any Collateral without the prior written authorization of (y) if the release is of all or substantially all of the Collateral, all of the Lenders, or (z) otherwise, the Required Lenders. Upon request by Agent or Subsidiary Borrower at any time, the Lenders will confirm in writing Agent's authority to release any such Liens on particular types or items of Collateral pursuant to this Section 16.12; provided, however, that (1) Agent shall not be required to execute any document necessary to evidence such release on terms that, in Agent's opinion, would expose Agent to liability or create any obligation or entail any consequence other than the release of such Lien without recourse, representation, or warranty, and (2) such release shall not in any manner discharge, affect, or impair the Obligations or any Liens (other than those expressly being released) upon (or obligations of -85- Subsidiary Borrower in respect of) all interests retained by Subsidiary Borrower, including, the proceeds of any sale, all of which shall continue to constitute part of the Collateral. (b) Agent shall have no obligation whatsoever to any of the Lenders to assure that the Collateral exists or is owned by Subsidiary Borrower or is cared for, protected, or insured or has been encumbered, or that the Agent's Liens have been properly or sufficiently or lawfully created, perfected, protected, or enforced or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent pursuant to any of the UK Loan Documents, it being understood and agreed that in respect of the Collateral, or any act, omission, or event related thereto, subject to the terms and conditions contained herein, Agent may act in any manner it may deem appropriate, in its sole discretion given Agent's own interest in the Collateral in its capacity as one of the Lenders and that Agent shall have no other duty or liability whatsoever to any Lender as to any of the foregoing, except as otherwise provided herein. 16.13 Restrictions on Actions by Lenders; Sharing of Payments. (a) Each of the Lenders agrees that it shall not, without the express consent of Agent, and that it shall, to the extent it is lawfully entitled to do so, upon the request of Agent, set off against the Obligations, any amounts owing by such Lender to Subsidiary Borrower or any deposit accounts of Subsidiary Borrower now or hereafter maintained with such Lender. Each of the Lenders further agrees that it shall not, unless specifically requested to do so by Agent, take or cause to be taken any action, including, the commencement of any legal or equitable proceedings, to foreclose any Lien on, or otherwise enforce any security interest in, any of the Collateral the purpose of which is, or could be, to give such Lender any preference or priority against the other Lenders with respect to the Collateral. (b) If, at any time or times any Lender shall receive (i) by payment, foreclosure, setoff, or otherwise, any proceeds of Collateral or any payments with respect to the Obligations arising under, or relating to, this Agreement or the other UK Loan Documents, except for any such proceeds or payments received by such Lender from Agent pursuant to the terms of this Agreement, or (ii) payments from Agent in excess of such Lender's ratable portion of all such distributions by Agent, such Lender promptly shall (1) turn the same over to Agent, in kind, and with such endorsements as may be required to negotiate the same to Agent, or in immediately available funds, as applicable, for the account of all of the Lenders and for application to the Obligations in accordance with the applicable provisions of this Agreement, or (2) purchase, without recourse or warranty, an undivided interest and participation in the Obligations owed to the other Lenders so that such excess payment received shall be applied ratably as among the Lenders in accordance with their Pro Rata Shares; provided, however, that if all or part of such excess payment received by the purchasing party is thereafter recovered from it, those purchases of participations shall be rescinded in whole or in part, as applicable, and the applicable portion of the purchase price -86- paid therefor shall be returned to such purchasing party, but without interest except to the extent that such purchasing party is required to pay interest in connection with the recovery of the excess payment. 16.14 [Intentionally omitted]. 16.15 Payments by Agent to the Lenders. All payments to be made by Agent to the Lenders shall be made by bank wire transfer or internal transfer of immediately available funds pursuant to such wire transfer instructions as each party may designate for itself by written notice to Agent. Concurrently with each such payment, Agent shall identify whether such payment (or any portion thereof) represents principal, premium, or interest of the Obligations. 16.16 Concerning the Collateral and Related UK Loan Documents. Each member of the Lender Group authorizes and directs Agent to enter into this Agreement and the other UK Loan Documents relating to the Collateral, for the benefit of the Lender Group. Each member of the Lender Group agrees that any action taken by Agent in accordance with the terms of this Agreement or the other UK Loan Documents relating to the Collateral and the exercise by Agent of its powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all of the Lenders. 16.17 Field Audits and Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports and Information. By becoming a party to this Agreement, each Lender: (a) is deemed to have requested that Agent furnish such Lender, promptly after it becomes available, a copy of each field audit or examination report (each a "Report" and collectively, "Reports") prepared by Agent, and Agent shall so furnish each Lender with such Reports, (b) expressly agrees and acknowledges that Agent does not (i) make any representation or warranty as to the accuracy of any Report, and (ii) shall not be liable for any information contained in any Report, (c) expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that Agent or other party performing any audit or examination will inspect only specific information regarding Subsidiary Borrower and will rely significantly upon the Books, as well as on representations of Subsidiary Borrower's personnel, (d) agrees to keep all Reports and other material, non-public information regarding Subsidiary Borrower and its Subsidiaries and their operations, assets, and existing and contemplated business plans in a confidential manner; it being understood and agreed by Subsidiary Borrower that in any event such Lender may make disclosures (a) -87- to counsel for and other advisors, accountants, and auditors to such Lender, (b) reasonably required by any bona fide potential or actual Assignee or Participant in connection with any contemplated or actual assignment or transfer by such Lender of an interest herein or any participation interest in such Lender's rights hereunder, (c) of information that has become public by disclosures made by Persons other than such Lender, its Affiliates, assignees, transferees, or Participants, or (d) as required or requested by any court, governmental or administrative agency, pursuant to any subpoena or other legal process, or by any law, statute, regulation, or court order; provided, however, that, unless prohibited by applicable law, statute, regulation, or court order, such Lender shall notify Subsidiary Borrower of any request by any court, governmental or administrative agency, or pursuant to any subpoena or other legal process for disclosure of any such non-public material information concurrent with, or where practicable, prior to the disclosure thereof, and (e) without limiting the generality of any other indemnification provision contained in this Agreement, agrees: (i) to hold Agent and any other Lender preparing a Report harmless from any action the indemnifying Lender may take or conclusion the indemnifying Lender may reach or draw from any Report in connection with any loans or other credit accommodations that the indemnifying Lender has made or may make to Subsidiary Borrower, or the indemnifying Lender's participation in, or the indemnifying Lender's purchase of, a loan or loans of Subsidiary Borrower, and (ii) to pay and protect, and indemnify, defend and hold Agent, and any such other Lender preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs, expenses, and other amounts (including, attorneys fees and costs) incurred by Agent and any such other Lender preparing a Report as the direct or indirect result of any third parties who might obtain all or part of any Report through the indemnifying Lender. In addition to the foregoing: (x) any Lender may from time to time request of Agent in writing that Agent provide to such Lender a copy of any report or document provided by Subsidiary Borrower to Agent that has not been contemporaneously provided by Subsidiary Borrower to such Lender, and, upon receipt of such request, Agent promptly shall provide a copy of same to such Lender, (y) to the extent that Agent is entitled, under any provision of the UK Loan Documents, to request additional reports or information from Subsidiary Borrower, any Lender may, from time to time, reasonably request Agent to exercise such right as specified in such Lender's notice to Agent, whereupon Agent promptly shall request of Subsidiary Borrower the additional reports or information reasonably specified by such Lender, and, upon receipt thereof from Subsidiary Borrower, Agent promptly shall provide a copy of same to such Lender, and (z) any time that Agent renders to Subsidiary Borrower a statement regarding the Loan Account, Agent shall send a copy of such statement to each Lender. 16.18 Several Obligations; No Liability. Notwithstanding that certain of the UK Loan Documents now or hereafter may have been or will be executed only by or in favor of Agent in its capacity as such, and not by or in favor of the Lenders, any and all obligations -88- on the part of Agent (if any) to make any credit available hereunder shall constitute the several (and not joint) obligations of the respective Lenders on a ratable basis, according to their respective Commitments, to make an amount of such credit not to exceed, in principal amount, at any one time outstanding, the amount of their respective Commitments. Nothing contained herein shall confer upon any Lender any interest in, or subject any Lender to any liability for, or in respect of, the business, assets, profits, losses, or liabilities of any other Lender. Each Lender shall be solely responsible for notifying its Participants of any matters relating to the UK Loan Documents to the extent any such notice may be required, and no Lender shall have any obligation, duty, or liability to any Participant of any other Lender. Except as provided in Section 16.7, no member of the Lender Group shall have any liability for the acts or any other member of the Lender Group. No Lender shall be responsible to Subsidiary Borrower or any other Person for any failure by any other Lender to fulfill its obligations to make credit available hereunder, nor to advance for it or on its behalf in connection with its Commitment, nor to take any other action on its behalf hereunder or in connection with the financing contemplated herein. 16.19 Legal Representation of Agent. In connection with the negotiation, drafting, and execution of this Agreement and the other UK Loan Documents, or in connection with future legal representation relating to loan administration, amendments, modifications, waivers, or enforcement of remedies, Brobeck, Phleger & Harrison LLP ("Brobeck") only has represented and only shall represent Foothill in its capacity as Agent and as a Lender. Each other Lender hereby acknowledges that Brobeck does not represent it in connection with any such matters. 17. GENERAL PROVISIONS. 17.1 Effectiveness. This Agreement shall be binding and deemed effective when executed by Subsidiary Borrower, Agent, and each Lender whose signature is provided for on the signature pages hereof. 17.2 Section Headings. Headings and numbers have been set forth herein for convenience only. Unless the contrary is compelled by the context, everything contained in each Section applies equally to this entire Agreement. 17.3 Interpretation. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed against the Lender Group or Subsidiary Borrower, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to accomplish fairly the purposes and intentions of all parties hereto. 17.4 Severability of Provisions. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision. -89- 17.5 Amendments in Writing. This Agreement only can be amended by a writing signed by Agent (on behalf of the requisite Lenders) and Subsidiary Borrower. 17.6 Counterparts; Telefacsimile Execution. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement. Delivery of an executed counterpart of this Agreement by telefacsimile shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by telefacsimile also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement. The foregoing shall apply to each other UK Loan Document mutatis mutandis. 17.7 Revival and Reinstatement of Obligations. If the incurrence or payment of the Obligations by Subsidiary Borrower or the transfer to the Lender Group of any property should for any reason subsequently be declared to be void or voidable under any law, including any state or federal law relating to creditors' rights, including provisions of the Bankruptcy Code relating to fraudulent conveyances, preferences, or other voidable or recoverable payments of money or transfers of property (collectively, a "Voidable Transfer"), and if the Lender Group is required to repay or restore, in whole or in part, any such Voidable Transfer, or elects to do so upon the reasonable advice of its counsel, then, as to any such Voidable Transfer, or the amount thereof that the Lender Group is required or elects to repay or restore, and as to all reasonable costs, expenses, and attorneys fees of the Lender Group related thereto, the liability of Subsidiary Borrower automatically shall be revived, reinstated, and restored and shall exist as though such Voidable Transfer had never been made. 17.8 Integration. This Agreement, together with the other UK Loan Documents, reflects the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement, oral or written, before the date hereof. 17.9 Confidentiality. Except as otherwise provided in this Agreement, Agent and each of the Lenders shall not disclose any Confidential Information to any Person without the consent of Subsidiary Borrower, other than (a) to Agent's or a Lender's Affiliates and their officers, directors, employees, agents and advisors and to actual or prospective assignees and participants, and then only on a confidential basis; (b) as required by any law, rule, or regulation or judicial process; and (c) as requested or required by any state, federal, or foreign authority or examiner regulating Agent or such Lender. If Agent or a Lender is required by any law, rule, or regulation or judicial process to disclose any Confidential Information, to the extent permitted by applicable law, it shall promptly give notice to Subsidiary Borrower so that Subsidiary Borrower may seek a protective order or other appropriate remedy. If Subsidiary Borrower does not obtain such a protective order or other -90- remedy, to the extent permitted by applicable law, Agent or the Lender, as applicable, will endeavor to furnish only that portion of the Confidential Information that it reasonably believes to be legally required. [Signature page to follow.] -91- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the date first above written. PALM EUROPE LIMITED, a corporation organized under the laws of England and Wales By: /s/ Judy Bruner Title: FOOTHILL CAPITAL CORPORATION, a California corporation, as Agent and as a Lender By: /s/ John Nocita Title: Vice President HELLER FINANCIAL, INC., a Delaware corporation, as Syndication Agent and as a Lender By: /s/ Heller Financial, Inc. Title: Vice President THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation, as Documentation Agent and as a Lender By: /s/ The CIT Group/Business Credit, Inc. Title: Vice President -92- EXHIBIT A-1 ----------- FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT This ASSIGNMENT AND ACCEPTANCE AGREEMENT ("Assignment Agreement") is entered into as of ________ between __________ ("Assignor") and ______________ ("Assignee"). Reference is made to the Agreement described in Item 2 of Annex I ------ ------- annexed hereto (the "Loan Agreement"). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Loan Agreement. 1. In accordance with the terms and conditions of Section 14 of the Loan Agreement, the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, that interest in and to the Assignor's rights and obligations under the UK Loan Documents as of the date hereof with respect to the Obligations owing to the Assignor, and Assignor's portion of the Total Commitments, Commitments to make Advances, and the sub-portion of Commitments to participate in Letters of Credit, all as specified in Item 4.b and Item 4.c of Annex I. After giving effect to such sale and -------- -------- ------- assignment, the Assignee's amount and portion of the Total Commitments, Commitments to make Advances, and the sub-portion of Commitments to participate in Letters of Credit will be as set forth in Item 4.d and Item 4.e of Annex I. -------- -------- ------- 2. The Assignor (a) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (b) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the UK Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the UK Loan Documents or any other instrument or document furnished pursuant thereto; and (c) makes no representation or warranty and assumes no responsibility with respect to the financial condition of Subsidiary Borrower or any of its Subsidiaries or the performance or observance by Subsidiary Borrower or any of its Subsidiaries of any of its obligations under the UK Loan Documents or any other instrument or document furnished pursuant thereto. 3. The Assignee (a) confirms that it has received copies of the Loan Agreement and the other UK Loan Documents, together with copies of the financial statements referred to therein and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment Agreement; (b) agrees that it will, independently and without reliance, as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the UK Loan Documents; (c) confirms that it is eligible as an assignee under the terms of the Loan Agreement; (d) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the UK Loan Documents as are delegated to Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (e) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the UK Loan Documents are required to be performed by it as a Lender [and (f) attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee's status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Loan Agreement or such other documents as are necessary to indicate that all such payments are subject to such rates at a rate reduced by an applicable tax treaty.] 4. Following the execution of this Assignment Agreement by the Assignor and Assignee, it will be delivered by the Assignor to the Agent for recording by the Agent. The effective date of this Assignment Agreement (the "Settlement Date") shall be the later of (a) the date of the execution hereof by the Assignor and the Assignee, the payment by Assignor or Assignee to Agent for Agent's sole and separate account a processing fee in the amount of $5,000, and the receipt of any required consent of the Agent, and (b) the date specified in Item 5 of Annex ----- I. Agent shall use its best efforts to provide Subsidiary Borrower written - - notice of the sale and assignment contemplated by this Assignment Agreement within five (5) days of the Settlement Date. 5. Upon recording by the Agent, as of the Settlement Date, (a) the Assignee shall be a party to the Loan Agreement and, to the extent of the interest assigned pursuant to this Assignment Agreement, have the rights and obligations of a Lender thereunder and under the other UK Loan Documents, and (b) the Assignor shall, to the extent of the interest assigned pursuant to this Assignment Agreement, relinquish its rights and be released from its obligations under the Loan Agreement and the other UK Loan Documents. 6. Upon recording by the Agent, from and after the Settlement Date, the Agent shall make all payments under the Loan Agreement and the other UK Loan Documents in respect of the interest assigned hereby (including, without limitation, all payments or principal, interest and commitment fees (if applicable) with respect thereto) to the Assignee. Upon the Settlement Date, the Assignee shall pay to the Assignor the Assigned Share (as set forth in Item 4.b -------- of Annex I) of the principal amount of any outstanding loans under the Loan ------- Agreement and the other UK Loan Documents. The Assignor and Assignee shall make all appropriate adjustments in payments under the Loan Agreement and the other UK Loan Documents for periods prior to the Settlement Date directly between themselves on the Settlement Date. 7. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA. [Remainder of page left intentionally blank.] 2 IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement and Annex I hereto to be executed by their respective officers ------- thereunto duly authorized, as of the first date above written. [NAME OF ASSIGNOR] as Assignor By: ------------------------------------------ Title: --------------------------------------- [NAME OF ASSIGNEE] as Assignee By: ------------------------------------------ Title: --------------------------------------- ACCEPTED THIS ____ DAY OF - ------------- FOOTHILL CAPITAL CORPORATION, AS AGENT By:___________________________ Title:________________________ 3 ANNEX FOR ASSIGNMENT AND ACCEPTANCE ANNEX I 1. Subsidiary Borrower: Palm Europe Limited 2. Name and Date of Loan Agreement: Loan Agreement, dated as of November 30, 2001, among the Subsidiary Borrower, the lenders signatory thereto as the Lenders, Foothill Capital Corporation, a California corporation, as the Arranger and Administrative Agent for the Lenders, Heller Financial, Inc., as the Syndication Agent, and The CIT Group/Business Credit, Inc., as the Documentation Agent. 3. Date of Assignment Agreement: ___________________ 4. Amounts: a. Assignor's Total Commitment $ ___________ i. Assignor's Commitment to make Advances $ ___________ ii. Sub-portion of Assignor's Commitment to participate in Letters of Credit $ ___________ b. Assigned Share of Total Commitment ___________% i. Assigned Share of Assignor's Commitment to make Advances ___________% ii. Assigned Share of sub-portion of Assignor's Commitment to participate in Letters of Credit ___________% c. Assigned Amount of Total Commitment $ ___________ i. Assigned Amount of Assignor's Commitment to make Advances $ ___________ ii. Assigned Amount of sub-portion of Assignor's Commitment to participate in Letters of Credit $ ___________ d. Assignee's Total Commitment $ ___________ i. Assignee's Commitment to make Advances $ ___________ ii. Sub-portion of Assignee's Commitment to participate in Letters of Credit $ ___________ e. Assignee's Share of Total Commitments ___________% i. Assignee's Share of Commitment to make Advances ___________% ii. Assignee's Share of Commitment to participate in Letters of Credit ___________% 4 5. Settlement Date: ______________________ 6. Notice and Payment Instructions, etc. Assignee: Assignor: ______________________________ ________________________________ ______________________________ ________________________________ ______________________________ ________________________________ 7. Agreed and Accepted: [ASSIGNOR] [ASSIGNEE] By:___________________________ By:_____________________________ Title:________________________ Title:__________________________ Accepted: FOOTHILL CAPITAL CORPORATION, AS AGENT By:_______________________________ Title:____________________________ 5 EXHIBIT B-1 (Form of Borrowing Base Certificate) Foothill Capital Corporation 2450 Colorado Avenue, Suite 3000 West Santa Monica, California 90404 The undersigned, the chief financial officer of Palm Europe Limited, a company organized under the laws of England and Wales ("Subsidiary Borrower"), pursuant to Section 6.2 of that certain ----------- Loan Agreement, dated as of November 30, 2001 (the "Loan Agreement"), entered into by Subsidiary Borrower, the lenders signatory thereto as the Lenders, Foothill Capital Corporation, a California corporation, as arranger and administrative agent for the Lenders ("Agent"), Heller Financial, Inc., a Delaware corporation, as the Syndication Agent, and The CIT Group/Business Credit, Inc., a New York corporation, as the Documentation Agent, hereby certifies to Agent that the following items, calculated in accordance with the terms and definitions set forth in the Loan Agreement for such items are true and correct, and that Subsidiary Borrower is in compliance with and, after giving effect to any currently requested Loans, will be in compliance with the terms, conditions, and provisions of the Loan Agreement. All initially capitalized terms used in this Borrowing Base Certificate have the meanings set forth in the Loan Agreement unless specifically defined herein. Effective Date of Calculation:____________________________ A. Borrowing Base Calculation 1. Accounts: a. (1) 75% of the amount of Eligible Accounts (as detailed on Schedule A.1 attached hereto ------------ and incorporated herein by this reference): $_________________ (2) Dilution Reserve: $_________________ (3) Item 1(a)(1) minus Item 1(a)(2): $_________________ ----- b. 83.3% of the amount of Collections with respect to Accounts for the immediately preceding 90 day period: $_________________ c. The lesser of Item 1(a) and Item 1(b): $_________________ 2. Reserves established by Agent under Section 2.1(b) of -------------- the Loan Agreement: $_________________ 3. Borrowing Base: Item 1 minus Item 2= $_________________ ----- B. AVAILABILITY CALCULATION 1. Maximum Permitted Advances: a. Maximum Subsidiary Revolver Amount: (i) An amount equal to: $ 20,000,000 (ii) Domestic Revolver Usage: $_________________ (iii) Irish Loan Usage: $_________________ -2- (iv) Item 1(a)(ii) plus Item 1(a)(iii): $_________________ ---- (v) Item 1(a)(iv) minus $130,000,000 (if a negative ----- number insert 0): $_________________ (vi) Item 1(a)(i) minus Item 1(a)(v): $_________________ ----- b. Letter of Credit Usage: $_________________ Item 1(a)(vi) minus Item 1(b)= $_________________ ----- 2. Advances Permitted Under Borrowing Base: a. Borrowing Base (from Section A, Item 3): $_________________ --------- ------ b. Letter of Credit Usage: $_________________ Item 2(a) minus Item 2(b)= $_________________ ----- 3. Availability: a. Permitted Advances: (The lesser of Item 1 and Item 2) $_________________ b. Aggregate amount of outstanding Advances: $_________________ Item 3(a) minus Item 3(b)= $_________________ ----- [Signature page follows.] - 3 - The undersigned hereby certifies that all of the foregoing is true and correct as of the effective date of the calculations set forth above and that such calculations have been made in accordance with the requirements of the Loan Agreement. PALM EUROPE LIMITED, a company organized under the laws of England and Wales, as Subsidiary Borrower By: ----------------------------------------- Title: -------------------------------------- Schedule A.1 ------------ (Eligible Accounts) EXHIBIT L-1 ----------- FORM OF LIBOR NOTICE Foothill Capital Corporation 2450 Colorado Avenue, Suite 3000 West Santa Monica, California 90404 Attention: Business Finance Division Manager --------------------------------- Ladies and Gentlemen: Reference hereby is made to that certain Loan Agreement, dated as of November 30, 2001 (the "Loan Agreement"), among Palm Europe Limited, a company -------------- organized under the laws of England and Wales ("Subsidiary Borrower"), the ------------------- lenders signatory thereto as the Lenders, Foothill Capital Corporation, a California corporation, as the arranger and administrative agent for the Lenders (the "Agent"), Heller Financial, Inc., a Delaware corporation, as the ----- Syndication Agent, and The CIT Group/Business Credit, Inc., a New York corporation, as the Documentation Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Loan Agreement. This LIBOR Notice represents Subsidiary Borrower's request to elect the LIBOR Option with respect to outstanding Advances in the amount of $____________ (the "LIBOR Rate Advance")[, and is a written confirmation of the telephonic notice of such election given to Agent]. Such LIBOR Rate Advance will have an Interest Period of [1, 2, or 3] month(s) commencing on ________________. This LIBOR Notice further confirms Subsidiary Borrower's acceptance, for purposes of determining the rate of interest based on the LIBOR Rate under the Loan Agreement, of the LIBOR Rate as determined pursuant to the Loan Agreement. Subsidiary Borrower represents and warrants that (i) as of the date hereof, each representation or warranty contained in or pursuant to any UK Loan Document, any agreement, instrument, certificate, document or other writing furnished at any time under or in connection with any UK Loan Document, and as of the effective date of any advance, continuation or conversion requested above is true and correct in all material respects (except to the extent any representation or warranty expressly related to an earlier date), (ii) each of the covenants and agreements contained in any UK Loan Document have been performed (to the extent required to be performed on or before the date hereof or each such effective date), and (iii) no Default or Event of Default has occurred and is continuing on the date hereof, nor will any thereof occur after giving effect to the request above. Dated: ------------------------------------- PALM EUROPE LIMITED, a company organized under the laws of England and Wales, as Subsidiary Borrower By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- Acknowledged by: FOOTHILL CAPITAL CORPORATION, a California corporation, as Agent By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 2 SCHEDULE C-1 ------------ COMMITMENTS ================================================================================ LENDER TOTAL COMMITMENT ================================================================================ FOOTHILL CAPITAL CORPORATION $ 6,666,666.67 ================================================================================ HELLER FINANCIAL, INC. $ 6,666,666.67 ================================================================================ THE CIT GROUP/BUSINESS CREDIT, INC. $ 6,666,666.67 ================================================================================ ALL LENDERS $20,000,000.00 ================================================================================ SCHEDULES AND EXCEPTIONS FOR PALM EUROPE LIMITED/FOOTHILL CAPITAL CORPORATION Schedule D-1 Designated Account Account#[*] at the Designated Account Bank Schedule D-2 Designated Account Bank [*] Schedule P-3 Permitted Liens The Eligible Inventory locations listed on Schedule E-1. Equipment Leases - NONE - ----------------------- Schedule R-1 Real Property Collateral None Schedule 2.7(a) UK Cash Management Banks Palm Europe Limited [*] Schedule 5.5 Locations of Inventory and Equipment The Eligible Inventory locations listed below are owned by third parties and, therefore, Inventory at such locations may be subject to warehousemen liens. INVENTORY LOCATIONS - ------------------- NONE. EQUIPMENT LOCATIONS - ------------------- 220 Wharfedale Road Winnersh, Workingham Berkshire RG41 5TP, UK [*] Schedule 5.7 Chief Executive Office 220 Wharfedale Road Winnersh, Workingham Berkshire RG41 5TP, UK Schedule 5.8(b) Capitalization of Subsidiary Borrower Palm Europe Limited is a corporation organized under the laws of England. As of 6/1/01, authorized share capital in Pounds Sterling 100,000, divided into 100,000 ordinary shares of 1 Pound Sterling each, of which all are issued. All issued share capital is owned by Palm Ireland Investment. Schedule 5.8(c) Capitalization of Subsidiary Borrower's Subsidiaries Palm Europe Limited - Branches and Subsidiaries (as of September 25, 2001)
- ---------------------------------------------------------------------------------------------------------------- Entity Name Country Type of Entity Authorized Capital Issued Capital - ---------------------------------------------------------------------------------------------------------------- Palm Europe Limited , United Arab Branch Not applicable Not applicable (Mid-East Branch) Emirates - ---------------------------------------------------------------------------------------------------------------- Palm France SAS France Subsidiary FF 250,000 divided See authorized into 2,500 shares with capital; entire a par value of FF 100 capital issued to each/1/ Palm Europe Limited - ---------------------------------------------------------------------------------------------------------------- Palm Germany GmbH Germany Subsidiary EUR 25,000 EUR 25,000, issued to Palm Europe Limited - ---------------------------------------------------------------------------------------------------------------- Palm Europe Limited Italy Branch Not applicable Not applicable (Italy Branch)/2/ - ---------------------------------------------------------------------------------------------------------------- Palm Benelux B.V. The Netherlands Subsidiary EUR 100,000 EUR 20,000; issued to Palm Europe Limited - ---------------------------------------------------------------------------------------------------------------- Palm Europe Limited Spain Branch Not applicable Assigned capital Sucursal en Espana 2,000,000 Spanish Pesetas/3/ - ---------------------------------------------------------------------------------------------------------------- Palm Nordic AB Sweden Subsidiary SEK 100,000 1,000 shares with a nominal value of SEK 100 each - ---------------------------------------------------------------------------------------------------------------- Palm Europe Limited Switzerland Branch Not applicable Not applicable (Zurich Branch) - ----------------------------------------------------------------------------------------------------------------
Further, Palm Europe Limited holds one share in Palm Mexico S.A. de C.V. (49,999 shares are being held by Palm, Inc.) _________________________ /1/ needs to be converted to EURO; will be done in Annual General Meeting /2/ a subsidiary is currently in the process of establishment; business of branch may be transferred to new subsidiary /3/ please note that this is a branch, the capital is a capital contribution of 2,000,000 Spanish Pesetas Schedule 5.10 Litigation NONE Schedule 5.18 Demand Deposit Accounts Palm Europe Limited - -------------------------------------------------------------------------------- [*] - -------------------------------------------------------------------------------- Schedule 5.20 Permitted Indebtedness Equipment Leases - ---------------- NONE Letters of Credit - ----------------- Palm Europe Limited
- ------------------------------------------------------------------------------------------------------- Issuer Letter of Credit # Purpose/Country Currency/Amount - ------------------------------------------------------------------------------------------------------- [*] [*] VAT/France EUR 91,469.41 - ------------------------------------------------------------------------------------------------------- [*] [*] Car Lease/France EUR 69,188.33 - ------------------------------------------------------------------------------------------------------- [*] [*] Car Lease/Netherlands EUR 2,949.57 - ------------------------------------------------------------------------------------------------------- [*] [*] Car Lease/Germany EUR 33,233.97 - ------------------------------------------------------------------------------------------------------- [*] [*] Car Lease/Germany EUR 3,834.69 - ------------------------------------------------------------------------------------------------------- [*] [*] Car Lease/Germany EUR 3,834.69 - ------------------------------------------------------------------------------------------------------- [*] [*] Customs Import/UK GBP 100,000.00 - ------------------------------------------------------------------------------------------------------- [*] [*] VAT/Belgium EUR 16,261.00 - -------------------------------------------------------------------------------------------------------
Schedule 6.7. Taxes Palm Europe Limited NONE Schedule 7.6 Guarantees . Additional guaranties entered into prior to the date hereof in the ordinary course of Borrower's business of obligations incurred by Subsidiaries in the ordinary course of business, which guaranties are not, in the aggregate, a material obligation of Borrower. EX-10.33 9 dex1033.txt LOAN AGREEMENT EXHIBIT 10.33 [*] = information redacted pursuant to a confidential treatment request. Such omitted information has been filed separately with the Securities and Exchange Commission. ================================================================================ LOAN AGREEMENT by and among PALM GLOBAL OPERATIONS LTD. as Subsidiary Borrower, THE LENDERS THAT ARE SIGNATORIES HERETO as the Lenders, FOOTHILL CAPITAL CORPORATION as the Arranger and Administrative Agent, HELLER FINANCIAL, INC. as the Syndication Agent and THE CIT GROUP/BUSINESS CREDIT, INC. as the Documentation Agent Dated as of November 30, 2001 ================================================================================ TABLE OF CONTENTS 1. DEFINITIONS AND CONSTRUCTION............................................1 1.1 Definitions......................................................1 1.2 Accounting Terms................................................23 1.3 [Intentionally omitted].........................................23 1.4 Construction....................................................23 1.5 Schedules and Exhibits..........................................23 2. LOAN AND TERMS OF PAYMENT..............................................24 2.1 Revolver Advances...............................................24 2.2 [Intentionally omitted].........................................24 2.3 Borrowing Procedures and Settlements............................25 2.4 Payments........................................................32 2.5 Overadvances....................................................35 2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations................................................35 2.7 Cash Management.................................................36 2.8 Crediting Payments..............................................38 2.9 Designated Account..............................................38 2.10 Maintenance of Loan Account; Statements of Obligations..........38 2.11 Fees............................................................39 2.12 Letters of Credit...............................................39 2.13 LIBOR Option....................................................43 2.14 Capital Requirements............................................46 3. CONDITIONS; TERM OF AGREEMENT..........................................46 3.1 Conditions Precedent to the Initial Extension of Credit.........46 3.2 [Intentionally omitted].........................................49 3.3 Conditions Precedent to all Extensions of Credit................49 3.4 Term............................................................50 3.5 Effect of Termination...........................................50 3.6 Early Termination by Subsidiary Borrower........................50 4. PERFECTION OF SECURITY INTEREST; INSPECTION RIGHTS.....................51 4.1 [Intentionally omitted].........................................51 4.2 [Intentionally omitted].........................................51 4.3 [Intentionally omitted].........................................51 4.4 Delivery of Additional Documentation Required...................51 4.5 Power of Attorney...............................................51 4.6 Right to Inspect................................................52 4.7 [Intentionally omitted].........................................52 -1- 5. REPRESENTATIONS AND WARRANTIES.........................................52 5.1 No Encumbrances.................................................52 5.2 [Intentionally omitted].........................................52 5.3 Eligible Inventory..............................................52 5.4 Equipment.......................................................52 5.5 Location of Inventory and Equipment.............................52 5.6 Inventory Records...............................................52 5.7 Location of Chief Executive Office..............................53 5.8 Due Organization and Qualification; Subsidiaries................53 5.9 Due Authorization; No Conflict..................................53 5.10 Litigation......................................................55 5.11 No Material Adverse Change......................................55 5.12 Fraudulent Transfer.............................................55 5.13 [Intentionally omitted].........................................55 5.14 [Intentionally omitted].........................................55 5.15 Brokerage Fees..................................................55 5.16 Intellectual Property...........................................56 5.17 Leases..........................................................56 5.18 DDAs............................................................56 5.19 Complete Disclosure.............................................56 5.20 Indebtedness....................................................56 5.21 [Intentionally omitted].........................................57 5.22 Review and Approval of Domestic Loan Agreement..................57 6. AFFIRMATIVE COVENANTS..................................................57 6.1 Accounting System...............................................57 6.2 Collateral Reporting............................................57 6.3 Financial Statements, Reports, Certificates.....................58 6.4 [Intentionally omitted].........................................59 6.5 [Intentionally omitted].........................................59 6.6 Maintenance of Properties.......................................59 6.7 Taxes...........................................................59 6.8 Insurance.......................................................59 6.9 Location of Inventory and Equipment.............................60 6.10 Compliance with Laws............................................60 6.11 Leases..........................................................61 6.12 Brokerage Commissions...........................................61 6.13 Existence.......................................................61 6.14 Environmental...................................................61 6.15 Disclosure Updates..............................................61 6.16 Compliance with Covenants of Domestic Loan Agreement............62 -2- 7. NEGATIVE COVENANTS.....................................................62 7.1 Indebtedness....................................................62 7.2 Liens...........................................................62 7.3 Restrictions on Fundamental Changes.............................63 7.4 Disposal of Assets..............................................63 7.5 Change Name.....................................................63 7.6 Guarantee.......................................................63 7.7 Nature of Business..............................................63 7.8 Prepayments and Amendments......................................63 7.9 Change of Control...............................................64 7.10 Consignments....................................................64 7.11 Distributions...................................................64 7.12 Accounting Methods..............................................64 7.13 Investments.....................................................64 7.14 Transactions with Affiliates....................................64 7.15 Suspension......................................................64 7.16 [Intentionally omitted].........................................64 7.17 Use of Proceeds.................................................64 7.18 Change in Location of Chief Executive Office; Inventory and Equipment with Bailees..........................................64 7.19 [Intentionally omitted].........................................65 7.20 [Intentionally omitted].........................................65 7.21 Preferred Stock.................................................65 7.22 Compliance with Covenants of Domestic Loan Agreement............65 8. EVENTS OF DEFAULT......................................................65 9. THE LENDER GROUP'S RIGHTS AND REMEDIES.................................67 9.1 Rights and Remedies.............................................67 9.2 Remedies Cumulative.............................................68 10. TAXES AND EXPENSES.....................................................68 11. WAIVERS; INDEMNIFICATION...............................................68 11.1 Demand; Protest; etc............................................68 11.2 [Intentionally omitted].........................................68 11.3 Indemnification.................................................68 12. NOTICES ...............................................................69 13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.............................70 14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.............................71 14.1 Assignments and Participations.................................71 -3- 14.2 Successors.....................................................74 15. AMENDMENTS; WAIVERS....................................................74 15.1 Amendments and Waivers..........................................74 15.2 Replacement of Holdout Lender...................................75 15.3 No Waivers; Cumulative Remedies.................................76 16. AGENT; THE LENDER GROUP................................................76 16.1 Appointment and Authorization of Agent..........................76 16.2 Delegation of Duties............................................77 16.3 Liability of Agent..............................................77 16.4 Reliance by Agent...............................................78 16.5 Notice of Default or Event of Default...........................78 16.6 Credit Decision.................................................79 16.7 Costs and Expenses; Indemnification.............................79 16.8 Agent in Individual Capacity....................................80 16.9 Successor Agent.................................................80 16.10 Lender in Individual Capacity...................................81 16.11 Withholding Taxes...............................................81 16.12 Collateral Matters..............................................85 16.13 Restrictions on Actions by Lenders; Sharing of Payments.........86 16.14 [Intentionally omitted].........................................87 16.15 Payments by Agent to the Lenders................................87 16.16 Concerning the Collateral and Related UK Loan Documents.........87 16.17 Field Audits and Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports and Information...........87 16.18 Several Obligations; No Liability...............................89 16.19 Legal Representation of Agent...................................89 17. GENERAL PROVISIONS.....................................................89 17.1 Effectiveness...................................................89 17.2 Section Headings................................................89 17.3 Interpretation..................................................89 17.4 Severability of Provisions......................................90 17.5 Amendments in Writing...........................................90 17.6 Counterparts; Telefacsimile Execution...........................90 17.7 Revival and Reinstatement of Obligations........................90 17.8 Integration.....................................................90 17.9 Confidentiality.................................................90 -4- LOAN AGREEMENT THIS LOAN AGREEMENT (this "Agreement"), is entered into as of November 30, 2001, between and among, on the one hand, the lenders identified on the signature pages hereof (such lenders, together with their respective successors and assigns, are referred to hereinafter each individually as a "Lender" and collectively as the "Lenders"), FOOTHILL CAPITAL CORPORATION, a California corporation, as the arranger and administrative agent for the Lenders ("Agent"), HELLER FINANCIAL, INC., a Delaware corporation (hereinafter "Heller"), and THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation (hereinafter "CITBC") and, on the other hand, PALM GLOBAL OPERATIONS LTD., a corporation organized under the laws of Ireland ("Subsidiary Borrower"), and is the "Irish Loan Agreement" as that term is used in the Domestic Loan Agreement (as defined below). The parties agree as follows: 1. DEFINITIONS AND CONSTRUCTION. 1.1 Definitions. As used in this Agreement, the following terms shall have the following definitions: "Accounts" means the accounts of the Subsidiary Borrower and any and all supporting obligations in respect thereof. "Acquisition" means any purchase or other acquisition by Domestic Parent or its Subsidiaries of the Stock of any other Person. "Additional Documents" has the meaning set forth in Section 4.4. "Advances" has the meaning set forth in Section 2.1. "Affiliate" means, as applied to any Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" means the possession, directly or indirectly, of the power to direct the management and policies of a Person, whether through the ownership of Stock, by contract, or otherwise; provided, however, that, for purposes of Section 7.14 hereof: (a) any Person which owns directly or indirectly 10% or more of the securities having ordinary voting power for the election of directors or other members of the governing body of a Person or 10% or more of the partnership or other ownership interests of a Person (other than as a limited partner of such Person) shall be deemed to control such Person, (b) each director (or comparable manager) of a Person shall be deemed to be an Affiliate of such Person, and (c) -1- each partnership or joint venture in which a Person is a partner or joint venturer shall be deemed to be an Affiliate of such Person. "Agent" means Foothill, solely in its capacity as agent for the Lenders hereunder, and any successor thereto. "Agents" means Agent, Documentation Agent, and Syndication Agent. "Agent's Account" means an account at a bank designated by Agent from time to time as the account into which Subsidiary Borrower shall make all payments to Agent for the benefit of the Lender Group and into which the Lender Group shall make all payments to Agent under this Agreement and the other Irish Loan Documents; unless and until Agent notifies Subsidiary Borrower and the Lender Group to the contrary, Agent's Account shall be that certain deposit account bearing the account number set forth on Schedule A-1. "Agent Advances" has the meaning set forth in Section 2.3(e)(i). "Agent's Liens" means the Liens granted by Subsidiary Borrower to Agent for the benefit of the Lender Group under the Irish Security Documents or the other Irish Loan Documents. "Agent-Related Persons" means Agent together with its Affiliates, officers, directors, employees, and agents. "Agreed Currency" means (i) Dollars, (ii) so long as such currencies remain Eligible Currencies, the lawful currency of each Specified State and the Euro, and (iii) any other Eligible Currency which Subsidiary Borrower requests Agent to include as an Agreed Currency hereunder and which is acceptable to Agents. If, after the designation by Agent of any currency as an Agreed Currency, (a) currency control or other exchange regulations are imposed in the country in which such currency is issued with the result that different types of such currency are introduced, (b) such currency is, in the determination of the Agent, no longer readily available or freely traded or (c) in the determination of the Agent, an equivalent amount of such currency valued in Dollars at the applicable Exchange Rate is not readily calculable, Agent shall promptly notify Subsidiary Borrower, and such currency shall no longer be an Agreed Currency until such time, if ever, as Agent agrees to reinstate such currency as an Agreed Currency. "Agreement" has the meaning set forth in the preamble hereto. "Assignee" has the meaning set forth in Section 14.1. "Assignment and Acceptance" means an Assignment and Acceptance in the form of Exhibit A-1. -2- "Authorized Person" means any director of Subsidiary Borrower or other Person authorised by the Board of Directors. "Availability" means, as of any date of determination, if such date is a Business Day, and determined at the close of business on the immediately preceding Business Day, if such date of determination is not a Business Day, the amount that Subsidiary Borrower is entitled to borrow as Advances under Section 2.1 (after giving effect to all then outstanding Obligations and all sublimits and reserves applicable hereunder). "Base LIBOR Rate" means the rate per annum, determined by Agent in accordance with its customary procedures, and utilizing such electronic or other quotation sources as it considers appropriate (rounded upwards, if necessary, to the next 1/16%), on the basis of the rates at which Dollar deposits are offered to major banks in the London interbank market at 11:00 a.m. (Dublin time) 2 Business Days prior to the commencement of the applicable Interest Period, for a term and in amounts comparable to the Interest Period and amount of the LIBOR Rate Loan requested by Subsidiary Borrower in accordance with this Agreement, which determination shall be conclusive in the absence of manifest error. "Base Rate" means the rate of interest announced within Wells Fargo at its principal office in San Francisco as its "prime rate", with the understanding that the "prime rate" is one of Wells Fargo's base rates (not necessarily the lowest of such rates) and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto and is evidenced by the recording thereof after its announcement in such internal publication or publications as Wells Fargo may designate. "Base Rate Loan" means each portion of an Advance that bears interest at a rate determined by reference to the Base Rate. "Base Rate Margin" means, as of any date of determination, for the 3 month period ended on the day prior to the applicable interest payment date, the percentage points determined by the following matrix: - -------------------------------------------------------------------------------- Average Amount of the Total Revolver Usage Base Rate Margin - -------------------------------------------------------------------------------- Less than $50,000,000 0.25 - -------------------------------------------------------------------------------- $50,000,000 or greater, up to and including $125,000,000 0.75 - -------------------------------------------------------------------------------- greater than $125,000,000 1.00 - -------------------------------------------------------------------------------- -3- "Board of Directors" means the board of directors of Subsidiary Borrower or any committee thereof duly authorized to act on behalf of such board of directors. "Books" means Subsidiary Borrower's now owned or hereafter acquired books and records indicating, summarizing, or evidencing the Collateral. "Borrowing" means a borrowing hereunder consisting of Advances made on the same day by the Lenders (or Agent on behalf thereof), or by Swing Lender in the case of a Swing Loan, or by Agent in the case of an Agent Advance. "Borrowing Base" has the meaning set forth in Section 2.1. "Borrowing Base Certificate" means a certificate in the form of Exhibit B-1. "Business Day" means any day that is not a Saturday, Sunday, or other day on which United States or Ireland national banks are authorized or required to close, except that, if a determination of a Business Day shall relate to a LIBOR Rate Loan, the term "Business Day" also shall exclude any day on which banks are closed for dealings in Dollar deposits in the London interbank market. "Capital Lease" means a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP. "Capitalized Lease Obligation" means any Indebtedness represented by obligations under a Capital Lease. "Cash Equivalents" means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within 1 year from the date of acquisition thereof, (b) marketable direct obligations issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within 1 year from the date of acquisition thereof and, at the time of acquisition, having the highest rating obtainable from either S&P or Moody's, (c) commercial paper maturing no more than 1 year from the date of acquisition thereof and, at the time of acquisition, having a rating of A-1 or P-1, or better, from S&P or Moody's, and (d) certificates of deposit or bankers' acceptances maturing within 1 year from the date of acquisition thereof either (i) issued by any bank organized under the laws of the United States or any state thereof which bank has a rating of A or A2, or better, from S&P or Moody's, or (ii) certificates of deposit less than or equal to $100,000 in the aggregate issued by any other bank insured by the Federal Deposit Insurance Corporation. "Change of Control" means (a) Domestic Parent ceases to directly own 100% of the outstanding shares of Irish Parent; (b) Irish Parent ceases to directly own 100% of the outstanding shares of Subsidiary Borrower; (c) a majority of the members of the Board of -4- Directors do not constitute Continuing Directors, or (d) the occurrence of a Change of Control (as defined in the Domestic Loan Agreement). "CITBC" has the meaning set forth in the preamble hereto. "Closing Date" means the date of the making of the initial Advance (or other extension of credit) hereunder. "Collateral" means any and all assets and rights and interests in or to property mortgaged, assigned, charged or pledged from time to time as security for the Obligations pursuant to any pledge or security agreement that constitutes a Irish Loan Document. "Collateral Access Agreement" means a landlord waiver, bailee letter, or acknowledgement agreement of any lessor, warehouseman, processor, consignee, or other Person in possession of, having a Lien upon, or having rights or interests in the Equipment, in each case, in form and substance satisfactory to Agent. "Collections" means all cash, cheques, drafts, and other customary items of payment (including insurance proceeds, proceeds of cash sales, rental proceeds, and tax refunds) of Subsidiary Borrower. "Commitment" means, with respect to each Lender, its Commitment and, with respect to all Lenders, their Commitments, in each case as such Dollar amounts are set forth beside such Lender's name under the applicable heading on Schedule C-1 or on the signature page of the Assignment and Acceptance pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 14.1. "Companies Acts" means the Companies Acts, 1963 to 2001 of Ireland. "Confidential Information" means written information that Subsidiary Borrower expressly furnishes to Agent or the Lenders on a confidential basis, information contained in the documents that Subsidiary Borrower furnishes to Agent pursuant to subsections (a) through (j) of Section 6.2, or written information that Subsidiary Borrower furnishes to Agent or the Lenders that relates to Subsidiary Borrower's forecasts, projections, strategic plans, or Intellectual Property, but does not include any such information that is or becomes generally available to the public (other than information that is or becomes available to the public as a result of disclosure by Agent or a Lender in violation of Section 17.9) or that is or becomes available to Agent or a Lender from a source other than Subsidiary Borrower or any agent of Subsidiary Borrower unless Agent or such Lender knows, or reasonably should know, that such source is breaching a duty of confidentiality to Subsidiary Borrower. "Continuing Director" means (a) any member of the Board of Directors who was a director of Subsidiary Borrower on the date of this Agreement, and (b) any individual -5- who becomes a member of the Board of Directors after the date of this Agreement if such individual was appointed or nominated for election to the Board of Directors by a majority of the Continuing Directors, but excluding any such individual originally proposed for election in opposition to the Board of Directors in office at the date of this Agreement in an actual or threatened election contest relating to the election of the directors (or comparable managers) of Subsidiary Borrower and whose initial assumption of office resulted from such contest or the settlement thereof. "Daily Balance" means, with respect to each day during the term of this Agreement, the amount of an Obligation owed at the end of such day. "DDA" means any cheque or other demand deposit account maintained by Subsidiary Borrower. "Default" means an event, condition, or default that, with the giving of notice, the passage of time, or both, would be an Event of Default. "Defaulting Lender" means any Lender that fails to make any Advance (or other extension of credit) that it is required to make hereunder on the date that it is required to do so hereunder. "Defaulting Lender Rate" means (a) the Base Rate for the first 3 days from and after the date the relevant payment is due, and (b) thereafter, at the interest rate then applicable to Advances that are Base Rate Loans (inclusive of the Base Rate Margin applicable thereto). "Designated Account" means that certain deposit account of Subsidiary Borrower bearing the account number and sort code set forth on Schedule D-1 and maintained with Subsidiary Borrower's Designated Account Bank, or such other deposit account of Subsidiary Borrower that has been designated as such, in writing, by Subsidiary Borrower to Agent. "Designated Account Bank" means the bank set forth on Schedule D-2. "Documentation Agent" means CITBC in its capacity as the documentation agent under the Irish Loan Documents, and its successors in such capacity. "Dollars" or "$" means United States dollars. "Domestic Loan Agreement" means that certain Loan and Security Agreement dated as of June 25, 2001 by and among Domestic Parent, Lenders, and Agents. "Domestic Loan Documents" means the "Loan Documents" (as defined in the Domestic Loan Agreement). -6- "Domestic Parent" means Palm, Inc., a Delaware corporation. "Domestic Revolver Usage" means, as of any date of determination, the "Revolver Usage" (as defined in the Domestic Loan Agreement). "Eligible Inventory" means Inventory consisting of "current model" (as determined by Agent in Agent's Permitted Discretion) first quality finished goods held for sale in the ordinary course of Subsidiary Borrower's business located at one of Subsidiary Borrower's business locations set forth on Schedule E-1 (or in-transit between any such locations), that complies with each of the representations and warranties respecting Eligible Inventory made by Subsidiary Borrower in the Irish Loan Documents, and that is not excluded as ineligible by virtue of the one or more of the criteria set forth below; provided, however, that such criteria may be fixed and revised from time to time by Agent in Agent's Permitted Discretion to address the results of any audit or appraisal performed by Agent from time to time after the Closing Date. In determining the amount to be so included, Inventory shall be valued at the lower of cost or market on a basis consistent with Subsidiary Borrower's historical accounting practices. An item of Inventory shall not be included in Eligible Inventory if: (a) Subsidiary Borrower does not have good, valid, and marketable title thereto, (b) it is not located at one of the locations in Ireland set forth on Schedule E-1 or in transit from one such location to another such location, (c) it is located on real property leased by Borrower or in a contract warehouse, in each case, unless it is subject to a Collateral Access Agreement executed by the lessor, warehouseman, or other third party, as the case may be, and unless it is segregated or otherwise separately identifiable from goods of others, if any, stored on the premises, (d) it is not subject to a valid and perfected first priority Agent's Lien, (e) it consists of goods returned or rejected by Borrower's customers, or (f) it consists of goods that, in the reasonable determination of Agent, are obsolete or slow moving, restrictive or custom items, work-in-process, raw materials, or goods that constitute spare parts, packaging and shipping materials, supplies used or consumed in Borrower's business, bill and hold goods, defective goods, "seconds," or Inventory acquired on consignment. "Eligible Transferee" means (a) a commercial bank organized under the laws of the United States, or any state thereof, and having total assets in excess of $250,000,000, -7- (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development or a political subdivision of any such country and which has total assets in excess of $250,000,000, provided that such bank is acting through a branch or agency located in the United States, (c) a finance company, insurance company, or other financial institution or fund that is engaged in making, purchasing, or otherwise investing in commercial loans in the ordinary course of its business and having (together with its Affiliates) total assets in excess of $250,000,000, (d) any Affiliate (other than individuals) of a Lender that was party hereto as of the Closing Date, (e) so long as no Event of Default has occurred and is continuing, any other Person approved by Agent and Subsidiary Borrower, and (f) during the continuation of an Event of Default, any other Person approved by Agent. Notwithstanding anything to the contrary in Sections (b) and (c) hereof, an Eligible Transferee shall not include any Person who (i) is a resident of a country that does not have an income tax treaty with Ireland providing zero withholding on interest payments and as a condition of assignment, and (ii) does not agree to complete any procedural formalities necessary for Subsidiary Borrower to qualify for zero withholding on interest payments, including, but not limited to, providing or updating relevant documentation pursuant to Section 16.11(f). "Environmental Actions" means any complaint, summons, citation, notice, directive, order, claim, litigation, investigation, judicial or administrative proceeding, judgment, letter, or other communication from any Governmental Authority, or any third party involving violations of Environmental Laws or releases of Hazardous Materials from (a) any assets, properties, or business of Subsidiary Borrower or any predecessor in interest, (b) from adjoining properties or businesses, or (c) from or onto any facilities which received Hazardous Materials generated by Subsidiary Borrower or any predecessor in interest. "Environmental Law" means any applicable federal, state, provincial, foreign or local statute, law, rule, regulation, ordinance, code, binding and enforceable guideline, binding and enforceable written policy, or rule of common law now or hereafter in effect and in each case as amended, or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, to the extent binding on Subsidiary Borrower, relating to the environment, employee health and safety, or Hazardous Materials, including, without limitation, the Public Health (Ireland) Act, 1878, the Air Pollution Act, 1987, the Local Government (Water Pollution) Acts, 1977 and 1990, the Fisheries Acts, 1959 to 1991, the Dangerous Substances Acts, 1972 and 1979, the Litter Act 1982, the Safety, Health and Welfare at Work Act, 1989, the Safety in Industry Act, 1980, the Factories Act, 1955, the Planning Acts, the Environmental Protection Agency Act, 1992, the European Communities Act, 1972 of Ireland, and all regulations, bye-laws, orders, decisions and codes made thereunder; any state and local or foreign counterparts or equivalents, in each case as amended from time to time. "Environmental Liabilities and Costs" means all liabilities, monetary obligations, Remedial Actions, losses, damages, punitive damages, consequential damages, -8- treble damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts, or consultants, and costs of investigation and feasibility studies), fines, penalties, sanctions, and interest incurred as a result of any claim or demand by any Governmental Authority or any third party, and which relate to any Environmental Action. "Environmental Lien" means any Lien in favor of any Governmental Authority for Environmental Liabilities and Costs. "Equipment" means equipment, machinery, machine tools, motors, furniture, furnishings, fixtures, vehicles (including motor vehicles), tools, parts, goods (other than consumer goods, farm products, or Inventory), wherever located, including all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing. "Event of Default" has the meaning set forth in Section 8. "Excess Availability" means the amount, as of the date any determination thereof is to be made, equal to Availability minus the aggregate amount, if any, of all trade payables of Subsidiary Borrower aged in excess of historical levels with respect thereto and all book overdrafts of Subsidiary Borrower in excess of historical practices with respect thereto, in each case as determined by Agent in its Permitted Discretion. "Exchange Rate" means and refers to the nominal rate of exchange (vis-a-vis Dollars) for a currency other than Dollars published in the Wall Street Journal (Western Edition) on the date of determination (which shall be a Business Day on which the Wall Street Journal (Western Edition) is published), expressed as the number of units of such other currency per one Dollar. "Euro" means the euro referred to in Council Regulation (EC) No. 1103/97 dated June 17, 1997, passed by the Council of the European Union, or, if different, the then lawful currency of the member states of the European Union that participate in the third stage of Economic and Monetary Union. "Flextronics" means Flextronics International Ltd. "Flextronics Reserve" means, as of any date of determination, a reserve equal to the amount of Subsidiary Borrower's accounts payable to Flextronics, any of its Affiliates, or any other Person supplying electronics manufacturing parts and services to Subsidiary Borrower as of such date. "Foothill" means Foothill Capital Corporation, a California corporation. "Foreign Exchange Reserve" means, as of any date of determination, a reserve for foreign currency exchange rate risk (in relation to Dollars) with respect to the Eligible -9- Inventory and in such amount as shall be determined by Agent in its Permitted Discretion from time to time. "Funding Date" means the date on which a Borrowing occurs. "Funding Losses" has the meaning set forth in Section 2.13(b)(ii). "GAAP" means generally accepted accounting principles as in effect from time to time in the United States, consistently applied. "Governing Documents" means, with respect to any Person, including the certificate of incorporation, memorandum and articles of association and other organisational documents of each Person, certificate or articles of incorporation, by-laws, or other organizational documents of such Person. "Governmental Authority" means any federal, state, local, or other governmental or administrative body, instrumentality, department, or agency or any court, tribunal, administrative hearing body, arbitration panel, commission, or other similar dispute-resolving panel or body. "Guarantors" means collectively, Domestic Parent and UK Borrower, and "Guarantor" means either of them. "Hazardous Materials" means (a) substances that are defined or listed in, or otherwise classified pursuant to, any applicable laws or regulations as "hazardous substances," "hazardous materials," "hazardous wastes," "toxic substances," or any other formulation intended to define, list, or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas, natural gas liquids, synthetic gas, drilling fluids, produced waters,, and other wastes associated with the exploration, development, or production of crude oil, natural gas, or geothermal resources, (c) any flammable substances or explosives or any radioactive materials, and (d) asbestos in any form or electrical equipment that contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of 50 parts per million. "Heller" has the meaning set forth in the preamble hereto. "Indebtedness" means, with respect to any Person, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations of such Person in respect of letters of credit, bankers acceptances, interest rate swaps, or other financial products, (c) all obligations of such Person under Capital Leases, (d) all obligations or liabilities of any other Person secured by a Lien on any asset of such Person, irrespective of whether such obligation or liability is assumed, (e) all obligations of such Person for the -10- deferred purchase price of assets (other than trade debt incurred in the ordinary course of such Person's business and repayable in accordance with customary trade practices), and (f) any obligation of such Person guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse to such Person) any obligation of any other Person. "Indemnified Liabilities" has the meaning set forth in Section 11.3. "Indemnified Person" has the meaning set forth in Section 11.3. "Insolvency Proceeding" means any proceeding commenced by or against any Person for court protection, winding-up or receivership of such Person under any provision of the Companies Acts or under any other state or federal bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief. "Insolvent" means a Person which or who is unable to pay its debts as defined in the Companies Acts. "Intellectual Property" means all of Subsidiary Borrower's patents, patent applications, trademarks, trademark applications, tradenames, tradedress, copyrights, copyright registrations, technology, know how and processes used in the conduct of the business of Subsidiary Borrower and its Subsidiaries. "Intercompany Advances" means loans or advances from Domestic Parent or one of its Subsidiaries to Domestic Parent or one of its Subsidiaries. "Interest Period" means, with respect to each LIBOR Rate Loan, a period commencing on the date of the making of such LIBOR Rate Loan and ending 1, 2, or 3 months thereafter; provided, however, that (a) if any Interest Period would end on a day that is not a Business Day, such Interest Period shall be extended (subject to clauses (c)-(e) below) to the next succeeding Business Day, (b) interest shall accrue at the applicable rate based upon the LIBOR Rate from and including the first day of each Interest Period to, but excluding, the day on which any Interest Period expires, (c) any Interest Period that would end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day, (d) with respect to an Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period), the Interest Period shall end on the last Business Day of the calendar month that is 1, 2, or 3 months after the date on which the Interest Period began, as applicable, and (e) Subsidiary Borrower may not elect an Interest Period which will end after the Maturity Date. -11- "Inventory" means all goods held for sale or lease or to be furnished under a contract of service, goods that are leased as lessor, goods that are furnished under a contract of service, and raw materials, work in process, or materials used or consumed in business. "Investment" means, with respect to any Person, any investment by such Person in any other Person (including Affiliates) in the form of loans, guarantees, advances, or capital contributions (excluding (a) commission, travel, and similar advances to officers and employees of such Person made in the ordinary course of business, and (b) bona fide Accounts arising from the sale of goods or rendition of services in the ordinary course of business consistent with past practice), purchases or other acquisitions for consideration of Indebtedness or Stock, and any other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. "IRC" means the Internal Revenue Code of 1986, as in effect from time to time. "Irish Cash Management Account" has the meaning set forth in Section 2.7(a). "Irish Cash Management Agreements" means those certain cash management service agreements, in form and substance satisfactory to Agent, each of which is among Subsidiary Borrower, Agent and one of the Irish Cash Management Banks. "Irish Cash Management Bank" has the meaning set forth in Section 2.7(a). "Irish Debenture" means, a guarantee and debenture incorporating fixed and floating charges, executed and delivered by Subsidiary Borrower in favor of Agent, in form and substance satisfactory to Agent. "Irish Guaranty" means a guaranty executed and delivered by Domestic Parent of the Indebtedness of the Subsidiary Borrower in favor of Agent, in form and substance satisfactory to Agent. "Irish Loan Documents" means this Agreement, the Letters of Credit, the Irish Debenture, the Irish Guaranty, the Irish Stock Pledge Agreement, the Irish Cash Management Agreements, any other Irish Security Documents, any note or notes executed by Subsidiary Borrower in connection with this Agreement and payable to a member of the Lender Group, and any other agreement entered into, now or in the future, by Subsidiary Borrower and the Lender Group in connection with this Agreement. "Irish Parent" means Palm Ireland Investment, a corporation organized under the laws of Ireland. "Irish Security Documents" means, collectively, such instruments, agreements, and documents as Agent may require in order to secure the Indebtedness of Subsidiary Borrower under this Agreement, including the Irish Debenture. -12- "Irish Stock Pledge Agreement" means a share charge, in form and substance satisfactory to Agent, executed and delivered by Irish Parent with respect to 100% of the shares of Subsidiary Borrower. "Issuing Lender" means Foothill or any other Lender that, at the request of Borrower and with the consent of Agent agrees, in such Lender's sole discretion, to become an Issuing Lender for the purpose of issuing L/Cs or L/C Undertakings pursuant to Section 2.12. "L/C" has the meaning set forth in Section 2.12(a). "L/C Disbursement" means a payment made by the Issuing Lender pursuant to a Letter of Credit. "L/C Undertaking" has the meaning set forth in Section 2.12(a). "Lender" and "Lenders" have the respective meanings set forth in the preamble to this Agreement, and shall include any other Person made a party to this Agreement in accordance with the provisions of Section 14.1. "Lender Group" means, individually and collectively, each of the Lenders and Agent. "Lender Group Expenses" means all (a) costs or expenses required to be paid by Subsidiary Borrower under any of the Irish Loan Documents that are paid or incurred by the Lender Group, (b) actual fees or charges paid or incurred by Agent in connection with the Lender Group's transactions with Subsidiary Borrower, including, fees or charges for photocopying, notarization, couriers and messengers, telecommunication, public record searches (including tax lien, litigation, and UCC searches, and including searches that are foreign equivalents thereof), filing, recording, publication, appraisal (including periodic Collateral appraisals or business valuations to the extent of the fees and charges (and up to the amount of any limitation) contained in this Agreement), real estate surveys, real estate title policies and endorsements, and environmental audits, (c) actual costs and expenses incurred by Agent in the disbursement of funds to Subsidiary Borrower (by wire transfer or otherwise), (d) actual charges paid or incurred by Agent resulting from the dishonor of cheques, (e) reasonable costs and expenses paid or incurred by the Lender Group to correct any default or enforce any provision of the Irish Loan Documents, or in gaining possession of, maintaining, handling, preserving, storing, shipping, selling, preparing for sale, or advertising to sell the Collateral, or any portion thereof, irrespective of whether a sale is consummated, (f) audit fees and expenses of Agent related to audit examinations of the Books to the extent of the fees and charges (and up to the amount of any limitation) contained in this Agreement, (g) reasonable costs and expenses of third party claims or any other suit paid or incurred by the Lender Group in enforcing or defending the Irish Loan Documents or in connection with the transactions contemplated by the Irish Loan Documents -13- or the Lender Group's relationship with Subsidiary Borrower or any guarantor of the Obligations, (h) Agent's reasonable fees and expenses (including attorneys fees) incurred in advising, structuring, drafting, reviewing, administering, or amending the Irish Loan Documents, and (i) Agent's and each Lender's reasonable fees and expenses (including attorneys fees) incurred in terminating, enforcing (including attorneys fees and expenses incurred in connection with a "workout," a "restructuring," or an Insolvency Proceeding concerning Subsidiary Borrower or in exercising rights or remedies under the Irish Loan Documents), or defending the Irish Loan Documents, irrespective of whether suit is brought. "Lender-Related Person" means, with respect to any Lender, such Lender, together with such Lender's Affiliates, and the officers, directors, employees, and agents of such Lender. "Letter of Credit" means an L/C or an L/C Undertaking, as the context requires. "Letter of Credit Usage" means, as of any date of determination, the aggregate undrawn amount of all outstanding Letters of Credit plus 100% of the amount of outstanding time drafts accepted by an Underlying Issuer as a result of drawings under Underlying Letters of Credit. "LIBOR Deadline" has the meaning set forth in Section 2.13(b)(i). "LIBOR Notice" means a written notice in the form of Exhibit L-1. "LIBOR Rate" means, for each Interest Period for each LIBOR Rate Loan, the rate per annum determined by Agent (rounded upwards, if necessary, to the next 1/16%) by dividing (a) the Base LIBOR Rate for such Interest Period, by (b) 100% minus the Reserve Percentage. The LIBOR Rate shall be adjusted on and as of the effective day of any change in the Reserve Percentage. "LIBOR Rate Loan" means each portion of an Advance that bears interest at a rate determined by reference to the LIBOR Rate. "LIBOR Rate Margin" means, as of any date of determination, for the 3 month period ended on the day prior to the applicable interest payment date, the percentage points determined by the following matrix: - -------------------------------------------------------------------------------- Average Amount of the Total Revolver Usage LIBOR Rate Margin - -------------------------------------------------------------------------------- Less than $50,000,000 2.25 - -------------------------------------------------------------------------------- $50,000,000 or greater, up to and including $125,000,000 2.75 - -------------------------------------------------------------------------------- -14- - -------------------------------------------------------------------------------- $125,000,000 - -------------------------------------------------------------------------------- greater than $125,000,000 3.00 - -------------------------------------------------------------------------------- "Lien" means any interest in an asset securing an obligation owed to, or a claim by, any Person other than the owner of the asset, whether such interest shall be based on the common law, statute, or contract, whether such interest shall be recorded or perfected, and whether such interest shall be contingent upon the occurrence of some future event or events or the existence of some future circumstance or circumstances, including the lien or security interest arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, security agreement, conditional sale or trust receipt, or from a lease, consignment, or bailment for security purposes and also including reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases, and other title exceptions and encumbrances affecting Real Property. "Loan Account" has the meaning set forth in Section 2.10. "Material Adverse Change" means (a) a material adverse change in the business, prospects, operations, results of operations, assets, liabilities or condition (financial or otherwise) of Subsidiary Borrower, (b) a material impairment of Subsidiary Borrower's ability to perform its obligations under the Irish Loan Documents to which it is a party or of the Lender Group's ability to enforce the Obligations or realize upon the Collateral, (c) a material impairment of the enforceability or priority of the Agent's Liens with respect to the Collateral as a result of an action or failure to act on the part of Subsidiary Borrower, (d) a Material Adverse Change (as defined in the Domestic Loan Agreement), or (e) a Material Adverse Change (as defined in the UK Loan Agreement). "Maturity Date" has the meaning set forth in Section 3.4. "Maximum Domestic Revolver Amount" means the "Maximum Revolver Amount" (as defined in the Domestic Loan Agreement). "Maximum Subsidiary Revolver Amount" means, as of any date of determination, the result of (a) $10,000,000, minus (b) the amount by which the sum of the Domestic Revolver Usage plus the UK Loan Usage exceeds $140,000,000. "Maximum UK Loan Amount" means, as of any date of determination, the result of (a) $20,000,000, minus (b) the amount by which the sum of the Domestic Revolver Usage plus the Subsidiary Borrower Revolver Usage exceeds $130,000,000. "Obligations" means all loans, Advances, debts, principal, interest (including any interest that, but for the insolvency provisions under the Companies Acts, would have -15- accrued), premiums, liabilities (including all amounts charged to Subsidiary Borrower's Loan Account pursuant hereto), contingent reimbursement obligations with respect to outstanding Letters of Credit, obligations, fees, charges, costs, Lender Group Expenses (including any fees or expenses that, but for the provisions of the Bankruptcy Code, would have accrued), lease payments, guaranties, covenants, and duties of any kind and description owing by Subsidiary Borrower to the Lender Group pursuant to or evidenced by the Irish Loan Documents and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including all interest not paid when due and all Lender Group Expenses that Subsidiary Borrower is required to pay or reimburse by the Irish Loan Documents, by law, or otherwise. Any reference in this Agreement or in the Irish Loan Documents to the Obligations shall include all amendments, changes, extensions, modifications, renewals replacements, substitutions, and supplements, thereto and thereof, as applicable, both prior and subsequent to any Insolvency Proceeding. "Originating Lender" has the meaning set forth in Section 14.1(e). "Overadvance" has the meaning set forth in Section 2.5. "Participant" has the meaning set forth in Section 14.1(e). "Permitted Discretion" means a determination made in good faith and in the exercise of reasonable (from the perspective of a secured asset-based lender) business judgment. "Permitted Dispositions" means (a) sales or other dispositions by Subsidiary Borrower of Equipment that is substantially worn, damaged, or obsolete in the ordinary course of business, (b) sales by Subsidiary Borrower of Inventory to buyers in the ordinary course of business, (c) the use or transfer of money or Cash Equivalents by Subsidiary Borrower in a manner that is not prohibited by the terms of this Agreement or the other Irish Loan Documents, and (d) the sale, licensing, or other disposition for fair market value by Subsidiary Borrower of patents, trademarks, copyrights, and other intellectual property rights; provided, however, that prior to or concurrent with any such sale, license, or other disposition, Subsidiary Borrower must retain or obtain sufficient rights to use (as determined by Agent in its Permitted Discretion) the subject intellectual property as to enable Subsidiary Borrower to continue to conduct its business in the ordinary course and such rights shall assignable to Agent or inure to the benefit of Agent (as determined by Agents in their Permitted Discretion) in order to enable Agent to dispose of the Collateral in the event of an Event of Default. "Permitted Intercompany Advances" means Intercompany Advances so long as (a) no Default or Event of Default exists at the time of the making of any Intercompany Advance or would exist after giving effect thereto, (b) after giving effect to the making of such Intercompany Advance, the Person that is acting as the lender with respect thereto is Solvent, -16- (c) the Intercompany Subordination Agreement (as defined in the Domestic Loan Agreement) is in full force and effect with respect to the proposed Intercompany Advance, (d) after giving effect to the making of such Intercompany Advance, the Person that is acting as the borrower with respect thereto is Solvent, (e) if Domestic Parent, Subsidiary Borrower or UK Borrower is the Person acting as the lender with respect thereto and a Subsidiary of Domestic Parent that is not the Subsidiary Borrower or UK Borrower is the Person acting as the borrower with respect thereto, such Intercompany Advance is made in the ordinary course of business and the amount of such Intercompany Advance does not exceed Subsidiary Borrower's or UK Borrower's, as applicable, current working capital requirements and it does not have more than one month's worth of cash or Cash Equivalents after giving effect thereto, (f) in cases not covered by clause (e) above, if Domestic Parent is the Person acting as the lender with respect thereto, it has availability under the Domestic Loan Agreement plus cash and Cash Equivalents that have been pledged to Agent (and are subject to a control agreement in favor of Agent) in an amount not less than $75,000,000 after giving effect thereto, (g) in cases not covered by clause (e) above, if UK Borrower is the Person acting as the lender with respect thereto, it has availability under the UK Loan Agreement plus cash and Cash Equivalents that have been pledged to Agent (and are subject to a control agreement in favor of Agent) of not less than $10,000,000 after giving effect thereto, and (h) in cases not covered by clause (e) above, if Subsidiary Borrower is the Person acting as the lender with respect thereto, it has Availability plus cash and Cash Equivalents that have been pledged to Agent (and are subject to a control agreement in favor of Agent) of not less than $5,000,000 after giving effect thereto. "Permitted Liens" means (a) Liens held by Agent for the benefit of Agent and the Lenders, (b) Liens for unpaid taxes that either (i) are not yet delinquent, or (ii) do not constitute an Event of Default hereunder and are the subject of Permitted Protests, (c) Liens set forth on Schedule P-3, (d) the interests of lessors under operating leases, (e) Liens arising by operation of law in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course of business of Subsidiary Borrower and not in connection with the borrowing of money, and which Liens either (i) are for sums not yet delinquent, or (ii) are the subject of Permitted Protests, (f) Liens arising from deposits made in connection with obtaining worker's compensation or other unemployment insurance, (g) Liens or deposits to secure performance of bids, tenders, or leases incurred in the ordinary course of business of Subsidiary Borrower and not in connection with the borrowing of money, (h) Liens granted as security for surety or appeal bonds in connection with obtaining such bonds in the ordinary course of business of Subsidiary Borrower, (i) Liens resulting from any judgment or award that is not an Event of Default hereunder, and (j) with respect to any Real Property, easements, rights of way, and zoning restrictions that do not materially interfere with or impair the use or operation thereof by Subsidiary Borrower. "Permitted Protest" means the right of Subsidiary Borrower to protest any Lien (other than any such Lien that secures the Obligations), taxes (other than payroll taxes or taxes that are the subject of a Revenue Commissioners tax lien), or rental payment, provided that (a) a reserve with respect to such obligation is established on the Books in such -17- amount as is required under GAAP, (b) any such protest is instituted promptly and prosecuted diligently by Subsidiary Borrower in good faith, and (c) Agent is satisfied that, while any such protest is pending, there will be no impairment of the enforceability or validity of any of the Agent's Liens. "Person" means natural persons, corporations, limited liability companies, limited partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and governments and agencies and political subdivisions thereof. "Planning Acts" means the Local Government (Planning and Development) Acts, 1963 to 1999, of Ireland, the Building Control Act, 1990, of Ireland, and any regulations issued pursuant thereto. "Preferred Stock" means, as applied to the capital Stock of any Person, the capital Stock of any class or classes (however designated) that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of capital Stock of any other class of such Person. "Prohibited Indebtedness" means, with respect to any Person, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations of such Person in respect of letters of credit, bankers acceptances, interest rate swaps, or other financial products, (c) all obligations or liabilities of any other Person secured by a Lien on any asset of such Person, irrespective of whether such obligation or liability is assumed, and (d) any obligation of such Person guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse to such Person) any obligation of any other Person. "Pro Rata Share" means: (a) with respect to a Lender's obligation to make Advances and receive payments of principal, interest, fees, costs, and expenses with respect thereto, the percentage obtained by dividing (i) such Lender's Commitment, by (ii) the aggregate Commitments of all Lenders, (b) with respect to a Lender's obligation to participate in Letters of Credit, to reimburse the Issuing Lender, and to receive payments of fees with respect thereto, the percentage obtained by dividing (i) such Lender's Commitment, by (ii) the aggregate Revolver of all Lenders, and (c) with respect to all other matters (including the indemnification obligations arising under Section 16.7), the percentage obtained by dividing (i) such Lender's Commitment, by (ii) the aggregate amount of Commitments of all Lenders; provided, -18- however, that, in each case, in the event all Commitments have been terminated, Pro Rata Share shall be determined according to the Commitments in effect immediately prior to such termination. "Qualified Cash" means, as of any date of determination, the amount of unrestricted cash and Cash Equivalents of Subsidiary Borrower that is on deposit with banks, or in securities accounts with securities intermediaries, or any combination thereof, and which such deposit account or securities account is maintained by a branch office located within the United States. "Real Property" means any estates or interests in real property now owned or hereafter acquired by Subsidiary Borrower and the improvements thereto. "Real Property Collateral" means the parcel or parcels of Real Property identified on Schedule R-1 and any Real Property hereafter acquired by Borrower. "Record" means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form. "Remedial Action" means all actions taken to (a) clean up, remove, remediate, contain, treat, monitor, assess, evaluate, or in any way address Hazardous Materials in the indoor or outdoor environment, (b) prevent or minimize a release or threatened release of Hazardous Materials so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment, (c) perform any pre-remedial studies, investigations, or post-remedial operation and maintenance activities, or (d) conduct any other actions authorized by 42 USC ss. 9601 or any equivalent foreign legislation. "Rent Reserve" means, as of any date of determination, a reserve equal to fees payable to IEC Global Logistics, Inc. or its Affiliates for all storage and other services provided by IEC Global Logistics, Inc. or its Affiliates to Subsidiary Borrower over the immediately preceding 60 days. "Report" has the meaning set forth in Section 16.17. "Required Lenders" means, at any time, any two or more Lenders whose Pro Rata Shares aggregate more than 50% of the Commitments, or if the Commitments have been terminated irrevocably, more than 50% of the Obligations then outstanding. "Reserve Percentage" means, on any day, for any Lender, the maximum percentage prescribed by the Board of Governors of the Federal Reserve System (or any successor Governmental Authority) for determining the reserve requirements (including any basic, supplemental, marginal, or emergency reserves) that are in effect on such date with respect to eurocurrency funding (currently referred to as "eurocurrency liabilities") of that -19- Lender, but so long as such Lender is not required or directed under applicable regulations to maintain such reserves, the Reserve Percentage shall be zero. "Risk Participation Liability" means, as to each Letter of Credit, all reimbursement obligations of Borrower to the Issuing Lender with respect to an L/C Undertaking, consisting of (a) the amount available to be drawn or which may become available to be drawn, (b) all amounts that have been paid by the Issuing Lender to the Underlying Issuer to the extent not reimbursed by Borrower, whether by the making of an Advance or otherwise, and (c) all accrued and unpaid interest, fees, and expenses payable with respect thereto. "SEC" means the United States Securities and Exchange Commission and any successor thereto. "Settlement" has the meaning set forth in Section 2.3(f)(i). "Settlement Date" has the meaning set forth in Section 2.3(f)(i). "Solvent" means, with respect to any Person on a particular date, that such Person is not Insolvent. "Specified State" means, England, Scotland, Wales, Ireland, Australia, France, Germany, Italy, New Zealand, Canada, Norway, Finland, Switzerland, Sweden, Belgium, Japan, Singapore, the Netherlands, United Kingdom and Ireland, or any other country approved by Agent in its sole discretion. "Stock" means all shares, options, warrants, interests, participations, or other equivalents (regardless of how designated) of or in a Person, whether voting or nonvoting, including common stock, preferred stock, or any other equity security. "Subsidiary" of a Person has the following meaning: (1) A company shall, subject to subsection (3), be deemed to be a subsidiary of another if, but only if (a) that other (i) is a member of it and controls the composition of its board of directors, or (ii) holds more than half in nominal value of its equity share capital, or (iii) holds more than half in nominal value of its shares carrying voting rights (other than voting rights which arise only in specified circumstances); or (b) the first-mentioned company is a subsidiary of any company which is that other's subsidiary. (2) For the purposes of subsection (1), the composition of a company's board of directors shall be deemed to be controlled by another company if, but only if, that other company by the exercise of some power exercisable by it without the consent or concurrence of any other person can appoint or remove the holders of all or a majority of the directorships; but for the purposes of this provision that other company shall be deemed to have power to appoint to a directorship in relation to which any of the following conditions is -20- satisfied (a) that a person cannot be appointed thereto without the exercise in his favour by that other company of such a power as aforesaid; or (b) that a person's appointment thereto follows necessarily from his appointment as director of that other company. (3) In determining whether one company is a subsidiary of another (a) any shares held or power exercisable by that other in a fiduciary capacity shall be treated as not held or exercisable by it; (b) subject to paragraphs (c) and (d), any shares held or power exercisable (i) by any person as a nominee for that other (except where that other is concerned only in a fiduciary capacity); or (ii) by, or by a nominee for, a subsidiary of that other, not being a subsidiary which is concerned only in a fiduciary capacity; shall be treated as held or exercisable by that other; (c) any shares held or power exercisable by any person by virtue of the provisions of any debentures of the first-mentioned company or of a trust deed for securing any issue of such debentures shall be disregarded; (d) any shares held or power exercisable by, or by a nominee for, that other or its subsidiary (not being held or exercisable as mentioned in paragraph (c)) shall be treated as not held or exercisable by that other if the ordinary business of that other or its subsidiary, as the case may be, includes the lending of money and the shares are held or power is exercisable as aforesaid by way of security only for the purposes of a transaction entered into in the ordinary course of that business. (4) A company shall be deemed to be another's holding company if, but only if, that other is its subsidiary. (5) In this definition "company" includes any body corporate and "equity share capital" means, in relation to a company, its issued share capital excluding any part thereof which, neither as respects dividends nor as respects capital, carries any right to participate beyond a specified amount in a distribution. "Subsidiary Borrower" has the meaning set forth in the preamble to this Agreement. "Subsidiary Borrower Collateral" means all of Subsidiary Borrower's now owned or hereafter acquired right, title, and interest in and to each of the following: (a) Accounts, (b) Books, (c) Equipment, (d) Intercompany Advances, (e) Inventory, (f) Real Property Collateral, and -21- (g) the proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance covering any or all of the foregoing, and all property resulting from the sale, exchange, collection, or other disposition of any of the foregoing, or any portion thereof or interest therein, and the proceeds thereof. "Subsidiary Borrower Revolver Usage" means, as of any date of determination, the sum of (a) the then extant amount of outstanding Advances, plus (b) the then extant amount of the Letter of Credit Usage. "Swing Lender" means Foothill or any other Lender that, at the request of Subsidiary Borrower and with the consent of Agent agrees, in such Lender's sole discretion, to become the Swing Lender hereunder. "Swing Loan" has the meaning set forth in Section 2.3(d)(i). "Syndication Agent" means Heller in its capacity as the syndication agent under the Irish Loan Documents, and its successors in such capacity. "Taxes" has the meaning set forth in Section 16.11. "Total Revolver Usage" means, as of any date of determination, the sum of (a) the Domestic Revolver Usage, plus (b) the Subsidiary Borrower Revolver Usage, plus (c) the UK Loan Usage. "Triggering Event" means either (a) the occurrence and continuation of an Event of Default, or (b) the first date on which the amount of Availability under the Domestic Loan Agreement, this Agreement and the UK Loan Agreement (calculated, prior to the Closing Date of any such agreement, as if the conditions precedent in Section 3.1 of such agreement have been satisfied) plus Qualified Cash that has been pledged to Agent under the Domestic Loan Agreement, this Agreement and the UK Loan Agreement and subject to a control agreement (in form and substance satisfactory to Agent) is equal to or less than $100,000,000, in the aggregate. "UK Borrower" means Palm Europe Limited, a corporation organized under the laws of England and Wales. "UK Loan Agreement" means a loan agreement between and among Agent, the Lenders, and UK Borrower providing for the making of advances by the Lenders to UK Borrower in a maximum amount outstanding at any one time not to exceed the Maximum UK Loan Amount. "UK Loan Documents" means the "UK Loan Documents" (as defined in the Domestic Loan Agreement). -22- "UK Loan Usage" means, as of any date of determination, the then extant amount of Indebtedness outstanding under the UK Loan Agreement. "Underlying Issuer" means a third Person which is the beneficiary of an L/C Undertaking and which has issued a letter of credit at the request of the Issuing Lender for the benefit of Subsidiary Borrower. "Voidable Transfer" has the meaning set forth in Section 17.7. "Wells Fargo" means Wells Fargo Bank, National Association, a national banking association. 1.2 Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. When used herein, the term "financial statements" shall include the notes and schedules thereto. Whenever the term "Subsidiary Borrower" is used in respect of a financial covenant or a related definition, it shall be understood to mean Subsidiary Borrower and its Subsidiaries on a consolidated basis unless the context clearly requires otherwise. 1.3 [Intentionally omitted]. 1.4 Construction. Unless the context of this Agreement or any other Irish Loan Document clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term "including" is not limiting, and the term "or" has, except where otherwise indicated, the inclusive meaning represented by the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement or any other Irish Loan Document refer to this Agreement or such other Irish Loan Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Irish Loan Document, as the case may be. Section, subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified. Any reference in this Agreement or in the other Irish Loan Documents to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein). Any reference herein to any Person shall be construed to include such Person's successors and assigns. Any requirement of a writing contained herein or in the other Irish Loan Documents shall be satisfied by the transmission of a Record and any Record transmitted shall constitute a representation and warranty as to the accuracy and completeness of the information contained therein. 1.5 Schedules and Exhibits. All of the schedules and exhibits attached to this Agreement shall be deemed incorporated herein by reference. -23- 2. LOAN AND TERMS OF PAYMENT. 2.1 Revolver Advances. (a) Subject to the terms and conditions of this Agreement, and during the term of this Agreement, each Lender agrees (severally, not jointly or jointly and severally) to make advances ("Advances") to Subsidiary Borrower in an amount at any one time outstanding not to exceed such Lender's Pro Rata Share of an amount equal to the lesser of (i) the Maximum Subsidiary Revolver Amount less the Letter of Credit Usage, or (ii) the Borrowing Base less the Letter of Credit Usage. For purposes of this Agreement, "Borrowing Base," as of any date of determination, shall mean the result of: (y) the lesser of (i) $10,000,000, and (ii) 60% of the Dollar value of Subsidiary Borrower's Eligible Inventory, minus (z) the aggregate amount of reserves, if any, established by Agent under Section 2.1(b). (b) Anything to the contrary in this Section 2.1 notwithstanding, Agent shall have the right to establish reserves in such amounts, and with respect to such matters, as Agent in its Permitted Discretion shall deem necessary or appropriate, against the Borrowing Base, including reserves with respect to (i) sums that Subsidiary Borrower is required to pay, including without limiting the generality of the foregoing, all payments which the Subsidiary Borrower, its receiver or liquidator would be required to pay, whether pursuant to sections 98 and 285 of the Companies Act 1963 (as the same may be amended and extended from time to time) or otherwise, (ii) amounts owing by Subsidiary Borrower to any Person to the extent secured by a Lien on, or trust over, any of the Collateral (including any existing Permitted Lien set forth on Schedule P-3 which Lien or trust would have a priority superior to the Agent's Liens (under applicable law) in and to such item of the Collateral, (iii) the Foreign Exchange Reserve, (iv) the Flextronics Reserve, and (v) the Rent Reserve. (c) The Lenders shall have no obligation to make additional Advances hereunder to the extent such additional Advances would cause the Subsidiary Borrower Revolver Usage to exceed the Maximum Subsidiary Revolver Amount. (d) Amounts borrowed pursuant to this Section may be repaid and, subject to the terms and conditions of this Agreement, reborrowed at any time during the term of this Agreement. 2.2 [Intentionally omitted]. -24- 2.3 Borrowing Procedures and Settlements. (a) Procedure for Borrowing. Each Borrowing shall be made by an irrevocable written request by an Authorized Person delivered to Agent (which notice must be received by Agent no later than 10:00 a.m. (California time) on the Business Day prior to the date that is the requested Funding Date in the case of a request for an Advance specifying (i) the amount of such Borrowing, and (ii) the requested Funding Date, which shall be a Business Day; provided, however, that in the case of a request for Swing Loan in an amount of $10,000,000 or less, such notice will be timely received if it is received by Agent no later than 10:00 a.m. (California time) on the Business Day that is the requested Funding Date) specifying (i) the amount of such Borrowing, and (ii) the requested Funding Date, which shall be a Business Day. At Agent's election, in lieu of delivering the above-described written request, any Authorized Person may give Agent telephonic notice of such request by the required time, with such telephonic notice to be confirmed in writing within 24 hours of the giving of such notice. (b) Agent's Election. Promptly after receipt of a request for a Borrowing pursuant to Section 2.3(a), Agent shall elect, in its discretion, (i) to have the terms of Section 2.3(c) apply to such requested Borrowing, or (ii) if the Borrowing is for an Advance, to request Swing Lender to make a Swing Loan pursuant to the terms of Section 2.3(d) in the amount of the requested Borrowing; provided, however, that if Swing Lender declines in its sole discretion to make a Swing Loan pursuant to Section 2.3(d), Agent shall elect to have the terms of Section 2.3(c) apply to such requested Borrowing. (c) Making of Advances. (i) In the event that Agent shall elect to have the terms of this Section 2.3(c) apply to a requested Borrowing as described in Section 2.3(b), then promptly after receipt of a request for a Borrowing pursuant to Section 2.3(a), Agent shall notify the Lenders, not later than 1:00 p.m. (California time) on the Business Day immediately preceding the Funding Date applicable thereto, by telecopy, telephone, or other similar form of transmission, of the requested Borrowing. Each Lender shall make the amount of such Lender's Pro Rata Share of the requested Borrowing available to Agent in Dollars and immediately available funds, to Agent's Account, not later than 10:00 a.m. (California time) on the Funding Date applicable thereto. After Agent's receipt of the proceeds of such Advances, upon satisfaction of the applicable conditions precedent set forth in Section 3 hereof, Agent shall make the proceeds thereof available to Subsidiary Borrower on the applicable Funding Date by transferring in Dollars and immediately available funds equal to such proceeds received by Agent to Subsidiary Borrower's Designated Account; provided, however, that, subject to the provisions of Section 2.3(i), Agent shall not request any Lender to make, and no Lender shall have the obligation to make, any Advance if Agent shall have actual knowledge that (1) one or more -25- of the applicable conditions precedent set forth in Section 3 will not be satisfied on the requested Funding Date for the applicable Borrowing unless such condition has been waived, or (2) the requested Borrowing would exceed the Availability on such Funding Date. (ii) Unless Agent receives notice from a Lender on or prior to the Closing Date or, with respect to any Borrowing after the Closing Date, at least 1 Business Day prior to the date of such Borrowing, that such Lender will not make available as and when required hereunder to Agent for the account of Subsidiary Borrower the amount of that Lender's Pro Rata Share of the Borrowing, Agent may assume that each Lender has made or will make such amount available to Agent in Dollars and immediately available funds on the Funding Date and Agent may (but shall not be so required), in reliance upon such assumption, make available to Subsidiary Borrower on such date a corresponding amount. If and to the extent any Lender shall not have made its full amount available to Agent in Dollars and immediately available funds and Agent in such circumstances has made available to Subsidiary Borrower such amount, that Lender shall on the Business Day following such Funding Date make such amount available to Agent, together with interest at the Defaulting Lender Rate for each day during such period. A notice submitted by Agent to any Lender with respect to amounts owing under this subsection shall be conclusive, absent manifest error. If such amount is so made available, such payment to Agent shall constitute such Lender's Advance on the date of Borrowing for all purposes of this Agreement. If such amount is not made available to Agent on the Business Day following the Funding Date, Agent will notify Subsidiary Borrower of such failure to fund and, upon demand by Agent, Subsidiary Borrower shall pay such amount to Agent for Agent's account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Advances composing such Borrowing. The failure of any Lender to make any Advance on any Funding Date shall not relieve any other Lender of any obligation hereunder to make an Advance on such Funding Date, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on any Funding Date. (iii) Agent shall not be obligated to transfer to a Defaulting Lender any payments made by Subsidiary Borrower to Agent for the Defaulting Lender's benefit, and, in the absence of such transfer to the Defaulting Lender, Agent shall transfer any such payments to each other non-Defaulting Lender member of the Lender Group ratably in accordance with their Commitments (but only to the extent that such Defaulting Lender's Advance was funded by the other members of the Lender Group) or, if so directed by Subsidiary Borrower and if no Default or Event of Default had occurred and is continuing -26- (and to the extent such Defaulting Lender's Advance was not funded by the Lender Group), retain same to be re-advanced to Subsidiary Borrower as if such Defaulting Lender had made Advances to Subsidiary Borrower. Subject to the foregoing, Agent may hold and, in its Permitted Discretion, re-lend to Subsidiary Borrower for the account of such Defaulting Lender the amount of all such payments received and retained by it for the account of such Defaulting Lender. Solely for the purposes of voting or consenting to matters with respect to the Irish Loan Documents, such Defaulting Lender shall be deemed not to be a "Lender" and such Lender's Commitment shall be deemed to be zero. This Section shall remain effective with respect to such Lender until (x) the Obligations under this Agreement shall have been declared or shall have become immediately due and payable, (y) the non-Defaulting Lenders, Agent, and Subsidiary Borrower shall have waived such Defaulting Lender's default in writing, or (z) the Defaulting Lender makes its Pro Rata Share of the applicable Advance and pays to Agent all amounts owing by Defaulting Lender in respect thereof. The operation of this Section shall not be construed to increase or otherwise affect the Commitment of any Lender, to relieve or excuse the performance by such Defaulting Lender or any other Lender of its duties and obligations hereunder, or to relieve or excuse the performance by Subsidiary Borrower of its duties and obligations hereunder to Agent or to the Lenders other than such Defaulting Lender. Any such failure to fund by any Defaulting Lender shall constitute a material breach by such Defaulting Lender of this Agreement and shall entitle Subsidiary Borrower at its option, upon written notice to Agent, to arrange for a substitute Lender to assume the Commitment of such Defaulting Lender, such substitute Lender to be acceptable to Agent. In connection with the arrangement of such a substitute Lender, the Defaulting Lender shall have no right to refuse to be replaced hereunder, and agrees to execute and deliver a completed form of Assignment and Acceptance Agreement in favor of the substitute Lender (and agrees that it shall be deemed to have executed and delivered such document if it fails to do so) subject only to being repaid its share of the outstanding Obligations (including an assumption of its Pro Rata Share of the Risk Participation Liability) without any premium or penalty of any kind whatsoever; provided further, however, that any such assumption of the Commitment of such Defaulting Lender shall not be deemed to constitute a waiver of any of the Lender Groups' or Subsidiary Borrower's rights or remedies against any such Defaulting Lender arising out of or in relation to such failure to fund. (d) Making of Swing Loans. (i) In the event Agent shall elect, with the consent of Swing Lender, as a Lender, to have the terms of this Section 2.3(d) apply to a -27- requested Borrowing as described in Section 2.3(b), Swing Lender as a Lender shall make such Advance in the amount of such Borrowing (any such Advance made solely by Swing Lender as a Lender pursuant to this Section 2.3(d) being referred to as a "Swing Loan" and such Advances being referred to collectively as "Swing Loans") available to Subsidiary Borrower on the Funding Date applicable thereto by transferring immediately available funds to Subsidiary Borrower's Designated Account. Each Swing Loan is an Advance hereunder and shall be subject to all the terms and conditions applicable to other Advances, except that no such Swing Loan shall be eligible for the LIBOR Option and all payments on any Swing Loan shall be payable to Swing Lender as a Lender solely for its own account (and for the account of the holder of any participation interest with respect to such Swing Loan). Subject to the provisions of Section 2.3(i), Agent shall not request Swing Lender as a Lender to make, and Swing Lender as a Lender shall not make, any Swing Loan if Agent has actual knowledge that (i) one or more of the applicable conditions precedent set forth in Section 3 will not be satisfied on the requested Funding Date for the applicable Borrowing unless such condition has been waived, or (ii) the requested Borrowing would exceed the Availability on such Funding Date. Swing Lender as a Lender shall not otherwise be required to determine whether the applicable conditions precedent set forth in Section 3 have been satisfied on the Funding Date applicable thereto prior to making, in its sole discretion, any Swing Loan. (ii) The Swing Loans shall be secured by the Agent's Liens, shall constitute Advances and Obligations hereunder, and shall bear interest at the rate applicable from time to time to Advances that are Base Rate Loans. (e) Agent Advances. (i) Agent hereby is authorized by Subsidiary Borrower and the Lenders, from time to time after the Closing Date, in Agent's sole discretion, (1) after the occurrence and during the continuance of a Default or an Event of Default, or (2) at any time that any of the other applicable conditions precedent set forth in Section 3 have not been satisfied, to make Advances to Subsidiary Borrower on behalf of the Lenders that Agent, in its Permitted Discretion deems necessary or desirable (A) to preserve or protect the Collateral, or any portion thereof, (B) to enhance the likelihood of repayment of the Obligations, or (C) to pay any other amount chargeable to Subsidiary Borrower pursuant to the terms of this Agreement, including Lender Group Expenses and the costs, fees, and expenses described in Section 10 (any of the Advances described in this Section 2.3(e) shall be referred to as "Agent Advances"). Each Agent Advance is an Advance hereunder and shall be subject to all the terms and conditions applicable to other Advances, except that no such Agent Advance -28- shall be eligible for the LIBOR Option and all payments thereon shall be payable to Agent solely for its own account (and for the account of the holder of any participation interest with respect to such Agent Advance). (ii) The Agent Advances shall be repayable on demand and secured by the Agent's Liens granted to Agent under the Irish Loan Documents, shall constitute Advances and Obligations hereunder, and shall bear interest at the rate applicable from time to time to Advances that are Base Rate Loans. (f) Settlement. It is agreed that each Lender's funded portion of the Advances is intended by the Lenders to equal, at all times, such Lender's Pro Rata Share of the outstanding Advances. Such agreement notwithstanding, Agent, Swing Lender, and the other Lenders agree (which agreement shall not be for the benefit of or enforceable by Subsidiary Borrower) that in order to facilitate the administration of this Agreement and the other UK Loan Documents, settlement among them as to the Advances, the Swing Loans, and the Agent Advances shall take place on a periodic basis in accordance with the following provisions: (i) Agent shall request settlement ("Settlement") with the Lenders on a weekly basis (or on a more frequent basis if so determined by Agent) or upon termination of the Loan Agreement (1) on behalf of Swing Lender, with respect to each outstanding Swing Loan, (2) for itself, with respect to each Agent Advance, and (3) with respect to Collections received, as to each by notifying the Lenders by telecopy, telephone, or other similar form of transmission, of such requested Settlement, no later than 2:00 p.m. (California time) on the Business Day immediately prior to the date of such requested Settlement (the date of such requested Settlement being the "Settlement Date"). Such notice of a Settlement Date shall include a summary statement of the amount of outstanding Advances, Swing Loans, and Agent Advances for the period since the prior Settlement Date. Subject to the terms and conditions contained herein (including Section 2.3(c)(iii)): (y) if a Lender's balance of the Advances, Swing Loans, and Agent Advances exceeds such Lender's Pro Rata Share of the Advances, Swing Loans, and Agent Advances as of a Settlement Date, then Agent shall, by no later than 12:00 p.m. (California time) on the Settlement Date, transfer in immediately available funds to the account of such Lender as such Lender may designate, an amount such that each -29- such Lender shall, upon receipt of such amount, have as of the Settlement Date, its Pro Rata Share of the Advances, Swing Loans, and Agent Advances, and (z) if a Lender's balance of the Advances, Swing Loans, and Agent Advances is less than such Lender's Pro Rata Share of the Advances, Swing Loans, and Agent Advances as of a Settlement Date, such Lender shall no later than 12:00 p.m. (California time) on the Settlement Date transfer in immediately available funds to the Agent's Account, an amount such that each such Lender shall, upon transfer of such amount, have as of the Settlement Date, its Pro Rata Share of the Advances, Swing Loans, and Agent Advances. Such amounts made available to Agent under clause (z) of the immediately preceding sentence shall be applied against the amounts of the applicable Swing Loan or Agent Advance and, together with the portion of such Swing Loan or Agent Advance representing Swing Lender's Pro Rata Share thereof, shall constitute Advances of such Lenders. If any such amount is not made available to Agent by any Lender on the Settlement Date applicable thereto to the extent required by the terms hereof, Agent shall be entitled to recover for its account such amount on demand from such Lender together with interest thereon at the Defaulting Lender Rate. (ii) In determining whether a Lender's balance of the Advances, Swing Loans, and Agent Advances is less than, equal to, or greater than such Lender's Pro Rata Share of the Advances, Swing Loans, and Agent Advances as of a Settlement Date, Agent shall, as part of the relevant Settlement, apply to such balance the portion of payments actually received in good funds by Agent with respect to principal, interest, fees payable by Subsidiary Borrower and allocable to the Lenders hereunder, and proceeds of Collateral. To the extent that a net amount is owed to any such Lender after such application, such net amount shall be distributed by Agent to that Lender as part of such next Settlement. (iii) Between Settlement Dates, Agent, to the extent no Agent Advances or Swing Loans are outstanding, may pay over to Swing Lender any payments received by Agent, that in accordance with the terms of this Agreement would be applied to the reduction of the Advances, for application to Swing Lender's Pro Rata Share of the Advances. If, as of any Settlement Date, Collections received since the then immediately preceding Settlement Date have been applied to Swing Lender's Pro Rata Share of the Advances other than to Swing Loans, as provided for in the previous sentence, Swing Lender shall pay to Agent for the accounts of the Lenders, and Agent shall pay to the Lenders, to be applied to the outstanding Advances of such Lenders, an amount such that each Lender shall, upon receipt of such amount, have, as of such Settlement Date, its Pro Rata Share of the Advances. During the period between Settlement Dates, Swing Lender with respect to Swing Loans, Agent with respect to Agent Advances, and each Lender (subject to the effect of letter agreements between Agent and individual Lenders) with respect to the Advances other than Swing Loans and Agent Advances, shall be entitled to interest at the applicable rate or rates payable under this Agreement on the daily amount of funds employed by Swing Lender, Agent, or the Lenders, as applicable. -30- (g) Notation. Agent shall record on its books the principal amount of the Advances owing to each Lender, including the Swing Loans owing to Swing Lender, and Agent Advances owing to Agent, and the interests therein of each Lender, from time to time. In addition, each Lender is authorized, at such Lender's option, to note the date and amount of each payment or prepayment of principal of such Lender's Advances in its books and records, including computer records, such books and records constituting conclusive evidence, absent manifest error, of the accuracy of the information contained therein. (h) Lenders' Failure to Perform. All Advances (other than Swing Loans and Agent Advances) shall be made by the Lenders contemporaneously and in accordance with their Pro Rata Shares. It is understood that (i) no Lender shall be responsible for any failure by any other Lender to perform its obligation to make any Advance (or other extension of credit) hereunder, nor shall any Commitment of any Lender be increased or decreased as a result of any failure by any other Lender to perform its obligations hereunder, and (ii) no failure by any Lender to perform its obligations hereunder shall excuse any other Lender from its obligations hereunder. (i) Optional Overadvances. Any contrary provision of this Agreement notwithstanding, the Lenders hereby authorize Agent or Swing Lender, as applicable, and Agent or Swing Lender, as applicable, may, but is not obligated to, knowingly and intentionally, continue to make Advances (including Swing Loans) to Subsidiary Borrower notwithstanding that an Overadvance exists or thereby would be created, so long as (i) after giving effect to such Advances (including a Swing Loan), the outstanding Subsidiary Borrower Revolver Usage does not exceed the Borrowing Base by more than $1,000,000, (ii) after giving effect to such Advances (including a Swing Loan), the outstanding Subsidiary Borrower Revolver Usage (except for and excluding amounts charged to the Loan Account for interest, fees, or Lender Group Expenses) does not exceed the Maximum Subsidiary Revolver Amount, and (iii) at the time of the making of any such Advance (including any Swing Loan), Agent does not believe, in good faith, that the Overadvance created by such Advance will be outstanding for more than 30 days; provided, however, that the authorization described in this Section 2.3(i) may be revoked by the Required Lenders at any time by written notice to Agent. The foregoing provisions are for the exclusive benefit of Agent, Swing Lender, and the Lenders and are not intended to benefit Subsidiary Borrower in any way. The Advances and Swing Loans, as applicable, that are made pursuant to this Section 2.3(i) shall be subject to the same terms and conditions as any other Advance or Swing Loan, as applicable, except that they shall not be eligible for the LIBOR Option and the rate of interest applicable thereto shall be the rate applicable to Advances that are Base Rate Loans under Section 2.6(c) hereof without regard to the presence or absence of a Default or Event of Default. (i) In the event Agent obtains actual knowledge that the Subsidiary Borrower Revolver Usage exceeds the amounts permitted by the preceding paragraph, regardless of the amount of, or reason for, such excess, Agent shall -31- notify Lenders as soon as practicable (and prior to making any (or any additional) intentional Overadvances (except for and excluding amounts charged to the Loan Account for interest, fees, or Lender Group Expenses) unless Agent determines that prior notice would result in imminent harm to the Collateral or its value), and the Lenders with Revolver Commitments thereupon shall, together with Agent, jointly determine the terms of arrangements that shall be implemented with Subsidiary Borrower intended to reduce, within a reasonable time, the outstanding principal amount of the Advances to Subsidiary Borrower to an amount permitted by the preceding paragraph. In the event Agent or any Lender disagrees over the terms of reduction or repayment of any Overadvance, the terms of reduction or repayment thereof shall be implemented according to the determination of the Required Lenders. (ii) Each Lender with a Revolver Commitment shall be obligated to settle with Agent as provided in Section 2.3(f) for the amount of such Lender's Pro Rata Share of any unintentional Overadvances by Agent reported to such Lender, any intentional Overadvances made as permitted under this Section 2.3(i), and any Overadvances resulting from the charging to the Loan Account of interest, fees, or Lender Group Expenses. 2.4 Payments. (a) Payments by Subsidiary Borrower. (i) Except as otherwise expressly provided herein, all payments by Subsidiary Borrower shall be made to Agent's Account for the account of the Lender Group and shall be made in Dollars and immediately available funds, no later than 11:00 a.m. (California time) on the date specified herein. Any payment received by Agent later than 11:00 a.m. (California time) shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue until such following Business Day. (ii) Unless Agent receives notice from Subsidiary Borrower prior to the date on which any payment is due to the Lenders that Subsidiary Borrower will not make such payment in full as and when required, Agent may assume that Subsidiary Borrower has made (or will make) such payment in full to Agent on such date in Dollars and immediately available funds and Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent Subsidiary Borrower does not make such payment in full to Agent on the date when due, each Lender severally shall repay to Agent on demand such amount distributed to such Lender, together -32- with interest thereon at the Defaulting Lender Rate for each day from the date such amount is distributed to such Lender until the date repaid. (b) Apportionment and Application of Payments. (i) Except as otherwise provided with respect to Defaulting Lenders and except as otherwise provided in the Irish Loan Documents (including letter agreements between Agent and individual Lenders), aggregate principal and interest payments shall be apportioned ratably among the Lenders (according to the unpaid principal balance of the Obligations to which such payments relate held by each Lender) and payments of fees and expenses (other than fees or expenses that are for Agent's separate account, after giving effect to any letter agreements between Agent and individual Lenders) shall be apportioned ratably among the Lenders having a Pro Rata Share of the type of Commitment or Obligation to which a particular fee relates. All payments shall be remitted to Agent and all such payments (other than payments received while no Default or Event of Default has occurred and is continuing and which relate to the payment of principal or interest of specific Obligations or which relate to the payment of specific fees), and all proceeds of Accounts or other Collateral received by Agent, shall be applied as follows: (A) first, to pay any Lender Group Expenses then due to Agent under the Irish Loan Documents, until paid in full, (B) second, to pay any Lender Group Expenses then due to the Lenders under the Irish Loan Documents, on a ratable basis, until paid in full, (C) third, to pay any fees then due to Agent (for its separate accounts, after giving effect to any letter agreements between Agent and individual Lenders) under the Irish Loan Documents until paid in full, (D) fourth, to pay any fees then due to any or all of the Lenders (after giving effect to any letter agreements between Agent and individual Lenders) under the Irish Loan Documents, on a ratable basis, until paid in full, (E) fifth, to pay interest due in respect of all Agent Advances, until paid in full, (F) sixth, ratably to pay interest due in respect of the Advances (other than Agent Advances) and the Swing Loans until paid in full, -33- (G) seventh, to pay the principal of all Agent Advances until paid in full, (H) eighth, to pay the principal of all Swing Loans until paid in full, (I) ninth, to pay the principal of all Advances until paid in full, (J) tenth, if an Event of Default has occurred and is continuing, to Agent, to be held by Agent, for the ratable benefit of Issuing Lender and Lenders, as cash collateral in an amount up to 105% of the then extant Letter of Credit Usage until paid in full, (K) eleventh, to pay any other Obligations (including the Obligations of Subsidiary Borrower then owing under the guarantee contained in the Irish Debenture) until paid in full, and (L) twelfth, to Subsidiary Borrower (to be wired to the Designated Account) or such other Person entitled thereto under applicable law. (ii) Agent promptly shall distribute to each Lender, pursuant to the applicable wire instructions received from each Lender in writing, such funds as it may be entitled to receive, subject to a Settlement delay as provided in Section 2.3(h). (iii) In each instance, so long as no Default or Event of Default has occurred and is continuing, Section 2.4(b) shall not be deemed to apply to any payment by Subsidiary Borrower specified by Subsidiary Borrower to be for the payment of specific Obligations then due and payable (or prepayable) under any provision of this Agreement. (iv) For purposes of the foregoing, "paid in full" means payment of all amounts owing under the Irish Loan Documents according to the terms thereof, including loan fees, service fees, professional fees, interest (and specifically including interest accrued after the commencement of any Insolvency Proceeding), default interest, interest on interest, and expense reimbursements, whether or not the same would be or is allowed or disallowed in whole or in part in any Insolvency Proceeding. (v) In the event of a direct conflict between the priority provisions of this Section 2.4 and other provisions contained in any other Irish Loan Document, it is the intention of the parties hereto that such priority provisions in such documents shall be read together and construed, to the fullest extent -34- possible, to be in concert with each other. In the event of any actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms and provisions of this Section 2.4 shall control and govern. 2.5 Overadvances. Subject to Section 2.3(i), if, at any time or for any reason, the amount of Obligations owed by Subsidiary Borrower to the Lender Group pursuant to Sections 2.1 and 2.12 is greater than either the Dollar or percentage limitations set forth in Sections 2.1 or 2.12, (an "Overadvance"), Subsidiary Borrower immediately shall pay to Agent, in Dollars, the amount of such excess, which amount shall be used by Agent to reduce the Obligations in accordance with the priorities set forth in Section 2.4(b). In addition, Subsidiary Borrower hereby promises to pay the Obligations (including principal, interest, fees, costs, and expenses) in Dollars in full to the Lender Group as and when due and payable under the terms of this Agreement and the other Irish Loan Documents. 2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations. (a) Interest Rates. Except as provided in clause (c) below, all Obligations (except for undrawn Letters of Credit) that have been charged to the Loan Account pursuant to the terms hereof shall bear interest on the Daily Balance thereof as follows (i) if the relevant Obligation is an Advance that is a LIBOR Rate Loan, at a per annum rate equal to the LIBOR Rate plus the LIBOR Rate Margin, and (ii) otherwise, at a per annum rate equal to the Base Rate plus the Base Rate Margin. The foregoing notwithstanding, at no time shall any portion of the Obligations bear interest on the Daily Balance thereof at a per annum rate less than 6% per annum. To the extent that interest accrued hereunder at the rate set forth herein would be less than the foregoing minimum daily rate, the interest rate chargeable hereunder for such day automatically shall be deemed increased to the minimum rate. (b) Letter of Credit Fee. Borrower shall pay Agent (for the ratable benefit of the Lenders with a Revolver Commitment, subject to any letter agreement between Agent and individual Lenders), a Letter of Credit fee (in addition to the charges, commissions, fees, and costs set forth in Section 2.12(e)) which shall accrue at a rate equal to 1.50% per annum times the Daily Balance of the undrawn amount of all outstanding Letters of Credit. (c) Default Rate. Upon the occurrence and during the continuation of an Event of Default (and at the election of Agent or the Required Lenders), (i) all Obligations (except for undrawn Letters of Credit) that have been charged to the Loan Account pursuant to the terms hereof shall bear interest on the Daily Balance thereof at a per annum rate equal to 3 percentage points above the per annum rate otherwise applicable hereunder, and -35- (ii) the Letter of Credit Fee provided for above shall be increased to 3 percentage points above the per annum rate otherwise applicable hereunder. (d) Payment. Interest and all fees payable hereunder shall be earned monthly and (other than the Letter of Credit Fee) due and payable, in arrears, on the first day of each month at any time that Obligations or Commitments are outstanding. The Letter of Credit Fees payable hereunder shall be earned monthly and due and payable, in arrears, on the first day of each third month (commencing with October 1, 2001) at any time that Obligations or Commitments are outstanding. Subsidiary Borrower hereby authorizes Agent, from time to time without prior notice to Subsidiary Borrower, to charge such interest and fees, all Lender Group Expenses (as and when incurred), the charges, commissions, fees, and costs provided for in Section 2.12(e) (as and when accrued or incurred), the fees and costs provided for in Section 2.11 (as and when accrued or incurred), and all other payments as and when due and payable under any Loan Document to Subsidiary Borrower's Loan Account, which amounts thereafter constitute Advances hereunder and shall accrue interest at the rate then applicable to Advances hereunder. Any interest not paid when due shall be compounded by being charged to Subsidiary Borrower's Loan Account and shall thereafter constitute Advances hereunder and shall accrue interest at the rate then applicable to Advances that are Base Rate Loans hereunder. (e) Computation. All interest and fees chargeable under the Irish Loan Documents shall be computed on the basis of a 360 day year for the actual number of days elapsed. In the event the Base Rate is changed from time to time hereafter, the rates of interest hereunder based upon the Base Rate automatically and immediately shall be increased or decreased by an amount equal to such change in the Base Rate. (f) Intent to Limit Charges to Maximum Lawful Rate. In no event shall the interest rate or rates payable under this Agreement, plus any other amounts paid in connection herewith, exceed the highest rate permissible under any law that a court of competent jurisdiction shall, in a final determination, deem applicable. Subsidiary Borrower and the Lender Group, in executing and delivering this Agreement, intend legally to agree upon the rate or rates of interest and manner of payment stated within it; provided, however, that, anything contained herein to the contrary notwithstanding, if said rate or rates of interest or manner of payment exceeds the maximum allowable under applicable law, then, ipso facto, as of the date of this Agreement, Subsidiary Borrower is and shall be liable only for the payment of such maximum as allowed by law, and payment received from Subsidiary Borrower in excess of such legal maximum, whenever received, shall be applied to reduce the principal balance of the Obligations to the extent of such excess. 2.7 Cash Management. (a) Within 60 days of the date of this Agreement, Subsidiary Borrower shall (i) establish and maintain cash management services of a type and on terms satisfactory -36- to Agent at one or more of the banks set forth on Schedule 2.7(a) (each, an "Irish Cash Management Bank"), and (ii) deposit or cause to be deposited promptly, and in any event no later than the first Business Day after the date of receipt thereof, all Collections into a bank account in Agent's name (a "Irish Cash Management Account") at one of the Irish Cash Management Banks. (b) Within 60 days of the date of this Agreement, each Irish Cash Management Bank shall establish and maintain UK Cash Management Agreements with Agent and Subsidiary Borrower, in form and substance acceptable to Agent. Each such Irish Cash Management Agreement shall provide, among other things, that (i) all items of payment deposited in such Irish Cash Management Account and proceeds thereof are held by such Irish Cash Management Bank as agent or bailee-in-possession for Agent, (ii) the Irish Cash Management Bank has no rights of setoff or recoupment or any other claim against the applicable Irish Cash Management Account other than for payment of its service fees and other charges directly related to the administration of such Irish Cash Management Account and for returned cheques or other items of payment, and (iii) from and after the date that it receives written notification from Agent, it immediately will forward by daily sweep all amounts in the applicable Irish Cash Management Account to the Agent's Account. Anything contained herein into the contrary notwithstanding, Agent agrees that it shall not provide the above-described notice to the Irish Cash Management Bank unless and until a Triggering Event has occurred. Once a Triggering Event has occurred, Agent shall be free to exercise its right to issue such notice and the subsequent elimination of the subject Triggering Event shall not eliminate the effectiveness of such notice. (c) So long as no Default or Event of Default has occurred and is continuing, Subsidiary Borrower may amend Schedule 2.7(a) to add or replace a Irish Cash Management Bank or Irish Cash Management Account; provided, however, that (i) such prospective Irish Cash Management Bank shall be satisfactory to Agent and Agent shall have consented in writing in advance to the opening of such Irish Cash Management Account with the prospective Irish Cash Management Bank, and (ii) prior to the time of the opening of such Irish Cash Management Account, Subsidiary Borrower and such prospective Irish Cash Management Bank shall have executed and delivered to Agent a Irish Cash Management Agreement. Subsidiary Borrower shall close any of its Irish Cash Management Accounts (and establish replacement cash management accounts in accordance with the foregoing sentence) promptly and in any event within 30 days of notice from Agent that the creditworthiness of any Irish Cash Management Bank is no longer acceptable in Agent's reasonable judgment, or as promptly as practicable and in any event within 60 days of notice from Agent that the operating performance, funds transfer, or availability procedures or performance of the Irish Cash Management Bank with respect to Irish Cash Management Accounts or Agent's liability under any Irish Cash Management Agreement with such Irish Cash Management Bank is no longer acceptable in Agent's reasonable judgment. -37- (d) The Irish Cash Management Accounts shall be cash collateral accounts, with all cash, cheques and similar items of payment in such accounts securing payment of the Obligations, and in which Subsidiary Borrower is hereby deemed to have granted a Lien to Agent. 2.8 Crediting Payments. The receipt of any payment item by Agent (whether from transfers to Agent by the Irish Cash Management Banks pursuant to the Irish Cash Management Agreements or otherwise) shall not be considered a payment on account unless such payment item is a wire transfer of immediately available federal funds made to the Agent's Account or unless and until such payment item is honored when presented for payment. Should any payment item not be honored when presented for payment, then Subsidiary Borrower shall be deemed not to have made such payment and interest shall be calculated accordingly. Anything to the contrary contained herein notwithstanding, any payment item shall be deemed received by Agent only if it is received into the Agent's Account on a Business Day on or before 11:00 a.m. (California time). If any payment item is received into the Agent's Account on a non-Business Day or after 11:00 a.m. (California time) on a Business Day, it shall be deemed to have been received by Agent as of the opening of business on the immediately following Business Day. 2.9 Designated Account. Agent is authorized to make the Advances, and the Issuing Lender is authorized to issue the Letters of Credit, under this Agreement based upon telephonic or other instructions received from anyone purporting to be an Authorized Person, or without instructions if pursuant to Section 2.6(d). Subsidiary Borrower agrees to establish and maintain the Designated Account with the Designated Account Bank for the purpose of receiving the proceeds of the Advances requested by Subsidiary Borrower and made by Agent or the Lenders hereunder. Unless otherwise agreed by Agent and Subsidiary Borrower, any Advance, Agent Advance, or Swing Loan requested by Subsidiary Borrower and made by Agent or the Lenders hereunder shall be made to the Designated Account. 2.10 Maintenance of Loan Account; Statements of Obligations. Agent shall maintain an account on its books in the name of Subsidiary Borrower (the "Loan Account") on which Subsidiary Borrower will be charged with all Advances (including Agent Advances and Swing Loans) made by Agent, Swing Lender, or the Lenders to Subsidiary Borrower or for Subsidiary Borrower's account, the Letters of Credit issued by Issuing Lender for Subsidiary Borrower's account, and with all other payment Obligations hereunder or under the other Irish Loan Documents, including, accrued interest, fees and expenses, and Lender Group Expenses. In accordance with Section 2.8, the Loan Account will be credited with all payments received by Agent from Subsidiary Borrower or for Subsidiary Borrower's account, including all amounts received in the Agent's Account from any Irish Cash Management Bank. Agent shall render statements regarding the Loan Account to Subsidiary Borrower, including principal, interest, fees, and including an itemization of all charges and expenses constituting Lender Group Expenses owing, and such statements shall be conclusively presumed to be correct and accurate and constitute an account stated between -38- Subsidiary Borrower and the Lender Group unless, within 30 days after receipt thereof by Subsidiary Borrower, Subsidiary Borrower shall deliver to Agent written objection thereto describing the error or errors contained in any such statements. 2.11 Fees. Subsidiary Borrower shall pay to Agent the following fees and charges, which fees and charges shall be non-refundable when paid (irrespective of whether this Agreement is terminated thereafter) and, in the case of clause (a) below shall be apportioned ratably amongst the Lenders based upon their respective Pro Rata Shares, and in the case of clause (b) below shall be apportioned among the Lenders in accordance with the terms of letter agreements between Agent and individual Lenders: (a) Audit, Appraisal, and Valuation Charges. For the separate account of Agent, audit, appraisal, and valuation fees and charges as follows (i) a fee of $750 per day, per auditor, plus out-of-pocket expenses for each financial audit of Subsidiary Borrower performed by personnel employed by Agent; provided, however, that, so long as no Event of Default shall have occurred and be continuing, Subsidiary Borrower shall not be obligated to pay such fees and expenses in respect of more than 4 such audits in any calendar year, (ii) a fee of $1,500 per day per appraiser, plus out-of-pocket expenses, for each appraisal of the Collateral performed by personnel employed by Agent, and (iii) the actual charges paid or incurred by Agent if it elects to employ the services of one or more third Persons to perform financial audits of Subsidiary Borrower, to appraise the Collateral, or any portion thereof, or to assess Subsidiary Borrower's business valuation; provided, however, that, so long as no Event of Default shall have occurred and be continuing, Subsidiary Borrower shall not be obligated to pay such fees and expenses in respect of more than 1 such appraisal or valuation in any calendar year. 2.12 Letters of Credit (a) Subject to the terms and conditions of this Agreement, the Issuing Lender agrees to issue letters of credit for the account of Subsidiary Borrower (each, an "L/C") or to purchase participations or execute indemnities or reimbursement obligations (each such undertaking, an "L/C Undertaking") with respect to letters of credit issued by an Underlying Issuer (as of the Closing Date, the prospective Underlying Issuer is to be Wells Fargo) for the account of Subsidiary Borrower. To request the issuance of an L/C or an L/C Undertaking (or the amendment, renewal, or extension of an outstanding L/C or L/C Undertaking), Subsidiary Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Lender) to the Issuing Lender and Agent (reasonably in advance of the requested date of issuance, amendment, renewal, or extension) a notice requesting the issuance of an L/C or L/C Undertaking, or identifying the L/C or L/C Undertaking to be amended, renewed, or extended, the date of issuance, amendment, renewal, or extension, the date on which such L/C or L/C Undertaking is to expire, the amount of such L/C or L/C Undertaking, the name and address of the beneficiary thereof (or the beneficiary of the Underlying Letter of Credit, as applicable), and such other information as shall be necessary to prepare, amend, renew, or -39- extend such L/C or L/C Undertaking. If requested by the Issuing Lender, Subsidiary Borrower also shall be an applicant under the application with respect to any Underlying Letter of Credit that is to be the subject of an L/C Undertaking. The Issuing Lender shall have no obligation to issue, or to participate in, a Letter of Credit if the following would result after giving effect to the requested Letter of Credit: (i) the Letter of Credit Usage would exceed the Borrowing Base less the amount of outstanding Advances, (ii) the Letter of Credit Usage under this Agreement, the Domestic Loan Agreement and the UK Loan Agreement would exceed $10,000,000 in the aggregate, or (iii) the Letter of Credit Usage would exceed the Maximum Subsidiary Revolver Amount less the then extant amount of outstanding Advances. Each L/C and L/C Undertaking must either be given by a party who is either: (a) an Irish licensed bank pursuant to the 1971 Central Bank Act; (b) a credit institution established and licensed in a Member State of the European Union which has "passported" in its license to carry on banking business in Ireland; or (c) another party who is not resident in Ireland who gives the L/C or L/C Undertaking to satisfy a requirement of another entity qualifying under (a) or (b) above and the L/C or L/C Undertaking must be made solely to secure financial facilities to be made available by that other party. In addition, each Letter of Credit (and corresponding Underlying Letter of Credit) shall have an expiry date no later than 30 days prior to the Maturity Date and all such Letters of Credit (and corresponding Underlying Letter of Credit) shall be in form and substance acceptable to the Issuing Lender (in the exercise of its Permitted Discretion), including the requirement that the amounts payable thereunder must be payable in Dollars, Euros or English Pounds. If the amounts payable thereunder are in Euros, or English pounds, Agent shall have the right in its Permitted Discretion to establish Foreign Exchange Reserves against the Borrowing Base. If Issuing Lender is obligated to advance funds under a Letter of Credit, Subsidiary Borrower immediately shall reimburse such L/C Disbursement to Issuing Lender by paying to Agent an amount equal to such L/C Disbursement not later than 11:00 a.m., California time, on the date that such L/C Disbursement is made, if Subsidiary Borrower shall have received written or telephonic notice of such L/C Disbursement prior to 10:00 a.m., California time, on such date, or, if such notice has not been received by Subsidiary Borrower prior to such time on such date, then not later than 11:00 a.m., California time, on the Business Day that Subsidiary Borrower receives such notice, if such notice is received prior to 10:00 a.m., California time, on the date of receipt, and, in the absence of such reimbursement, the L/C Disbursement immediately and automatically shall be deemed to be an Advance hereunder and, thereafter, shall bear interest at the rate then applicable to Advances that are Base Rate Loans under Section 2.6. To the extent an L/C Disbursement is deemed to be an Advance hereunder, Subsidiary Borrower's obligation to reimburse such L/C Disbursement shall be -40- discharged and replaced by the resulting Advance. Promptly following receipt by Agent of any payment from Subsidiary Borrower pursuant to this paragraph, Agent shall distribute such payment to the Issuing Lender or, to the extent that Lenders have made payments pursuant to Section 2.12(c) to reimburse the Issuing Lender, then to such Lenders and the Issuing Lender as their interest may appear. (b) Promptly following receipt of a notice of L/C Disbursement pursuant to Section 2.12(a), each Lender with a Revolver Commitment agrees to fund its Pro Rata Share of any Advance deemed made pursuant to the foregoing subsection on the same terms and conditions as if Subsidiary Borrower had requested such Advance and Agent shall promptly pay to Issuing Lender the amounts so received by it from the Lenders. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Lender or the Lenders with Revolver Commitment, the Issuing Lender shall be deemed to have granted to each Lender with a Revolver Commitment, and each Lender with a Revolver Commitment shall be deemed to have purchased, a participation in each Letter of Credit, in an amount equal to its Pro Rata Share of the Risk Participation Liability of such Letter of Credit, and each such Lender agrees to pay to Agent, for the account of the Issuing Lender, such Lender's Pro Rata Share of any payments made by the Issuing Lender under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender with a Revolver Commitment hereby absolutely and unconditionally agrees to pay to Agent, for the account of the Issuing Lender, such Lender's Pro Rata Share of each L/C Disbursement made by the Issuing Lender and not reimbursed by Subsidiary Borrower on the date due as provided in clause (a) of this Section, or of any reimbursement payment required to be refunded to Subsidiary Borrower for any reason. Each Lender with a Revolver Commitment acknowledges and agrees that its obligation to deliver to Agent, for the account of the Issuing Lender, an amount equal to its respective Pro Rata Share pursuant to this Section 2.12(b) shall be absolute and unconditional and such remittance shall be made notwithstanding the occurrence or continuation of an Event of Default or Default or the failure to satisfy any condition set forth in Section 3 hereof. If any such Lender fails to make available to Agent the amount of such Lender's Pro Rata Share of any payments made by the Issuing Lender in respect of such Letter of Credit as provided in this Section, Agent (for the account of the Issuing Lender) shall be entitled to recover such amount on demand from such Lender together with interest thereon at the Defaulting Lender Rate until paid in full. (c) Subsidiary Borrower hereby agrees to indemnify, save, defend, and hold the Lender Group harmless from any loss, cost, expense, or liability, and reasonable attorneys fees incurred by the Lender Group arising out of or in connection with any Letter of Credit; provided, however, that Subsidiary Borrower shall not be obligated hereunder to indemnify for any loss, cost, expense, or liability that is caused by the gross negligence or wilful misconduct of the Issuing Lender or any other member of the Lender Group. Subsidiary Borrower agrees to be bound by the Underlying Issuer's regulations and interpretations of any Underlying Letter of Credit or by Issuing Lender's interpretations of -41- any L/C issued by Issuing Lender to or for Subsidiary Borrower's account, even though this interpretation may be different from Subsidiary Borrower's own, and Subsidiary Borrower understands and agrees that the Lender Group shall not be liable for any error, negligence, or mistake, whether of omission or commission, in following Subsidiary Borrower's instructions or those contained in the Letter of Credit or any modifications, amendments, or supplements thereto. Subsidiary Borrower understands that the L/C Undertakings may require Issuing Lender to indemnify the Underlying Issuer for certain costs or liabilities arising out of claims by Subsidiary Borrower against such Underlying Issuer. Subsidiary Borrower hereby agrees to indemnify, save, defend, and hold the Lender Group harmless with respect to any loss, cost, expense (including reasonable attorneys fees), or liability incurred by the Lender Group under any L/C Undertaking as a result of the Lender Group's indemnification of any Underlying Issuer; provided, however, that Subsidiary Borrower shall not be obligated hereunder to indemnify for any loss, cost, expense, or liability that is caused by the gross negligence or wilful misconduct of the Issuing Lender or any other member of the Lender Group. (d) Subsidiary Borrower hereby authorizes and directs any Underlying Issuer to deliver to the Issuing Lender all instruments, documents, and other writings and property received by such Underlying Issuer pursuant to such Underlying Letter of Credit and to accept and rely upon the Issuing Lender's instructions with respect to all matters arising in connection with such Underlying Letter of Credit and the related application. (e) Any and all charges, commissions, fees, and costs incurred by the Issuing Lender relating to Underlying Letters of Credit shall be Lender Group Expenses for purposes of this Agreement and immediately shall be reimbursable by Subsidiary Borrower to Agent for the account of the Issuing Lender; it being acknowledged and agreed by Subsidiary Borrower that, as of the date of this Agreement, the issuance charge imposed by the prospective Underlying Issuer is .825% per annum times the face amount of each Underlying Letter of Credit, that such issuance charge may be changed from time to time, and that the Underlying Issuer also imposes a schedule of charges for amendments, extensions, drawings, and renewals. (f) If by reason of (i) any change in any applicable law, treaty, rule, or regulation or any change in the interpretation or application thereof by any Governmental Authority, or (ii) compliance by the Underlying Issuer or the Lender Group with any direction, request, or requirement (irrespective of whether having the force of law) of any Governmental Authority or monetary authority including, Regulation D of the Federal Reserve Board as from time to time in effect (and any successor thereto): (i) any reserve, deposit, or similar requirement is or shall be imposed or modified in respect of any Letter of Credit issued hereunder, or -42- (ii) there shall be imposed on the Underlying Issuer or the Lender Group any other condition regarding any Underlying Letter of Credit or any Letter of Credit issued pursuant hereto, and the result of the foregoing is to increase, directly or indirectly, the cost to the Lender Group of issuing, making, guaranteeing, or maintaining any Letter of Credit or to reduce the amount receivable in respect thereof by the Lender Group, then, and in any such case, Agent may, at any time within a reasonable period after the additional cost is incurred or the amount received is reduced, notify Subsidiary Borrower, and Subsidiary Borrower shall pay on demand such amounts as Agent may specify to be necessary to compensate the Lender Group for such additional cost or reduced receipt, together with interest on such amount from the date of such demand until payment in full thereof at the rate then applicable to Base Rate Loans hereunder. The determination by Agent of any amount due pursuant to this Section, as set forth in a certificate setting forth the calculation thereof in reasonable detail, shall, in the absence of manifest or demonstrable error, be final and conclusive and binding on all of the parties hereto. 2.13 LIBOR Option. (a) Interest and Interest Payment Dates. In lieu of having interest charged at the rate based upon the Base Rate, Subsidiary Borrower shall have the option (the "LIBOR Option") to have interest on all or a portion of the Advances be charged at a rate of interest based upon the LIBOR Rate. Interest on LIBOR Rate Loans shall be payable on the earliest of (i) the last day of the Interest Period applicable thereto, (ii) the occurrence of an Event of Default in consequence of which the Required Lenders or Agent on behalf thereof elect to accelerate the maturity of the Obligations, (iii) termination of this Agreement pursuant to the terms hereof, or (iv) the first day of each month that such LIBOR Rate Loan is outstanding. On the last day of each applicable Interest Period, unless Subsidiary Borrower properly has exercised the LIBOR Option with respect thereto, the interest rate applicable to such LIBOR Rate Loan automatically shall convert to the rate of interest then applicable to Base Rate Loans of the same type hereunder. At any time that an Event of Default has occurred and is continuing, Subsidiary Borrower no longer shall have the option to request that Advances bear interest at the LIBOR Rate and Agent shall have the right to convert the interest rate on all outstanding LIBOR Rate Loans to the rate then applicable to Base Rate Loans hereunder. (b) LIBOR Election. (i) Subsidiary Borrower may, at any time and from time to time, so long as no Event of Default has occurred and is continuing, elect to exercise the LIBOR Option by notifying Agent prior to 11:00 a.m. (California time) on the date that is at least 3 Business Days prior to the commencement of the proposed Interest Period (the "LIBOR Deadline"). Notice of Subsidiary Borrower's election of the LIBOR Option for a permitted portion of the -43- Advances and an Interest Period pursuant to this Section shall be made by delivery to Agent of a LIBOR Notice received by Agent before the LIBOR Deadline, or by telephonic notice received by Agent before the LIBOR Deadline (to be confirmed by delivery to Agent of a LIBOR Notice received by Agent prior to 5:00 p.m. (California time) on the same day. Promptly upon its receipt of each such LIBOR Notice, Agent shall provide a copy thereof to each of the Lenders having a Commitment. (ii) Each LIBOR Notice shall be irrevocable and binding on Subsidiary Borrower. In connection with each LIBOR Rate Loan, Subsidiary Borrower shall indemnify, defend, and hold Agent and the Lenders harmless against any loss, cost, or expense incurred by Agent or any Lender as a result of (a) the payment of any principal of any LIBOR Rate Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any LIBOR Rate Loan other than on the last day of the Interest Period applicable thereto, or (c) the failure to borrow, convert, continue or prepay any LIBOR Rate Loan on the date specified in any LIBOR Notice delivered pursuant hereto (such losses, costs, and expenses, collectively, "Funding Losses"). Funding Losses shall, with respect to Agent or any Lender, be deemed to equal the amount determined by Agent or such Lender to be the excess, if any, of (i) the amount of interest that would have accrued on the principal amount of such LIBOR Rate Loan had such event not occurred, at the LIBOR Rate that would have been applicable thereto, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert, or continue, for the period that would have been the Interest Period therefor), minus (ii) the amount of interest that would accrue on such principal amount for such period at the interest rate which Agent or such Lender would be offered were it to be offered, at the commencement of such period, Dollar deposits of a comparable amount and period in the London interbank market. A certificate of Agent or a Lender delivered to Subsidiary Borrower setting forth any amount or amounts that Agent or such Lender is entitled to receive pursuant to this Section shall be conclusive absent manifest error. (iii) Subsidiary Borrower shall have not more than 5 LIBOR Rate Loans in effect at any given time. Subsidiary Borrower only may exercise the LIBOR Option for LIBOR Rate Loans of at least $1,000,000 and integral multiples of $500,000 in excess thereof. (c) Prepayments. Subsidiary Borrower may prepay LIBOR Rate Loans at any time; provided, however, that in the event that LIBOR Rate Loans are prepaid on any date that is not the last day of the Interest Period applicable thereto, including as a result of any automatic prepayment through the required application by Agent of proceeds of -44- Collections in accordance with Section 2.4(b) or for any other reason, including early termination of the term of this Agreement or acceleration of the Obligations pursuant to the terms hereof, Subsidiary Borrower shall indemnify, defend, and hold Agent and the Lenders and their Participants harmless against any and all Funding Losses in accordance with clause (b)(ii) above. (d) Special Provisions Applicable to LIBOR Rate. (i) The LIBOR Rate may be adjusted by Agent with respect to any Lender on a prospective basis to take into account any additional or increased costs to such Lender of maintaining or obtaining any eurodollar deposits or increased costs due to changes in applicable law occurring subsequent to the commencement of the then applicable Interest Period, including changes in tax laws (except changes of general applicability in corporate income tax laws) and changes in the reserve requirements imposed by the Board of Governors of the Federal Reserve System (or any successor), excluding the Reserve Percentage, which additional or increased costs would increase the cost of funding loans bearing interest at the LIBOR Rate. In any such event, the affected Lender shall give Subsidiary Borrower and Agent notice of such a determination and adjustment and Agent promptly shall transmit the notice to each other Lender and, upon its receipt of the notice from the affected Lender, Subsidiary Borrower may, by notice to such affected Lender (y) require such Lender to furnish to Subsidiary Borrower a statement setting forth the basis for adjusting such LIBOR Rate and the method for determining the amount of such adjustment, or (z) repay the LIBOR Rate Loans with respect to which such adjustment is made (together with any amounts due under clause (b)(ii) above). (ii) In the event that any change in market conditions or any law, regulation, treaty, or directive, or any change therein or in the interpretation of application thereof, shall at any time after the date hereof, in the reasonable opinion of any Lender, make it unlawful or impractical for such Lender to fund or maintain LIBOR Advances or to continue such funding or maintaining, or to determine or charge interest rates at the LIBOR Rate, such Lender shall give notice of such changed circumstances to Agent and Subsidiary Borrower and Agent promptly shall transmit the notice to each other Lender and (y) in the case of any LIBOR Rate Loans of such Lender that are outstanding, the date specified in such Lender's notice shall be deemed to be the last day of the Interest Period of such LIBOR Rate Loans, and interest upon the LIBOR Rate Loans of such Lender thereafter shall accrue interest at the rate then applicable to Base Rate Loans, and (z) Subsidiary Borrower shall not be entitled to elect the LIBOR Option until such Lender determines that it would no longer be unlawful or impractical to do so. -45- (e) No Requirement of Matched Funding. Anything to the contrary contained herein notwithstanding, neither Agent, nor any Lender, nor any of their Participants, is required actually to acquire eurodollar deposits to fund or otherwise match fund any Obligation as to which interest accrues at the LIBOR Rate. The provisions of this Section shall apply as if each Lender or its Participants had match funded any Obligation as to which interest is accruing at the LIBOR Rate by acquiring eurodollar deposits for each Interest Period in the amount of the LIBOR Rate Loans. 2.14 Capital Requirements. If, after the date hereof, any Lender determines that (i) the adoption of or change in any law, rule, regulation or guideline regarding capital requirements for banks or bank holding companies, or any change in the interpretation or application thereof by any Governmental Authority charged with the administration thereof, or (ii) compliance by such Lender or its parent bank holding company with any guideline, request, or directive of any such entity regarding capital adequacy (whether or not having the force of law), the effect of reducing the return on such Lender's or such holding company's capital as a consequence of such Lender's Commitments hereunder to a level below that which such Lender or such holding company could have achieved but for such adoption, change, or compliance (taking into consideration such Lender's or such holding company's then existing policies with respect to capital adequacy and assuming the full utilization of such entity's capital) by any amount deemed by such Lender to be material, then such Lender may notify Subsidiary Borrower and Agent thereof. Following receipt of such notice, Subsidiary Borrower agrees to pay such Lender on demand the amount of such reduction of return of capital as and when such reduction is determined, payable within 90 days after presentation by such Lender of a statement in the amount and setting forth in reasonable detail such Lender's calculation thereof and the assumptions upon which such calculation was based (which statement shall be deemed true and correct absent manifest error). In determining such amount, such Lender may use any reasonable averaging and attribution methods. 3. CONDITIONS; TERM OF AGREEMENT. 3.1 Conditions Precedent to the Initial Extension of Credit. The obligation of the Lender Group (or any member thereof) to make the initial Advance (or otherwise to extend any credit provided for hereunder), is subject to the fulfilment, to the satisfaction of Agent or Agents, as applicable below, of each of the conditions precedent set forth below: (a) each of the conditions precedent set forth in this Section 3.1 shall have been satisfied on or before the date that is 60 days after the date of the execution and delivery of this Agreement by each of the original signatories hereto (the "Conditions Precedent Deadline"); (b) Agent shall have received search results from the Companies Registration Office in Ireland indicating that no charges have been registered against Subsidiary Borrower; -46- (c) Agent shall have received each of the following documents, in form and substance satisfactory to Agent (which, in the case of items (i), (ii), (iii), and (iv), shall have obtained the approval of the other Agents), duly executed, and each such document shall be in full force and effect: (i) Irish Debenture and other deeds and documents of title required to be deposited thereunder, (ii) Irish Guaranty, (iii) Irish Stock Pledge Agreement, together with all certificates representing the shares of Subsidiary Borrower pledged thereunder, as well as stock powers with respect thereto endorsed in blank, and (iv) Irish Cash Management Agreements. (d) Agent shall have received a certificate from the Secretary of Subsidiary Borrower attesting to the resolutions of Subsidiary Borrower's Board of Directors authorizing its execution, delivery, and performance of this Agreement and the other Irish Loan Documents to which Subsidiary Borrower is a party and authorizing specific officers of Subsidiary Borrower to execute the same; (e) Agent shall have received copies of Subsidiary Borrower's Governing Documents, as amended, modified, or supplemented to the Closing Date, certified by the Secretary of Subsidiary Borrower; (f) Agent shall have received a certificate of status with respect to Subsidiary Borrower, dated within 10 days of the Closing Date, such certificate to be issued by the appropriate officer of the jurisdiction of organization of Subsidiary Borrower, which certificate shall indicate that Subsidiary Borrower is in good standing in such jurisdiction; (g) Agent shall have received a certificate from the Secretary of each Guarantor attesting to the resolutions of such Guarantor's Board of Directors authorizing its execution, delivery, and performance of the Irish Loan Documents to which it is a party and authorizing specific officers of such Guarantor to execute the same; (h) Agent shall have received a certificate from the Secretary of Domestic Parent certifying that there have been no amendments, restatements, supplements, or modifications to the Governing Documents of Domestic Parent or Subsidiary Borrower since the "Closing Date" (as defined in the Domestic Loan Agreement); (i) Agent shall have received a certificate from the Secretary of Irish parent attesting to the resolutions of Irish Parent's Board of Directors authorizing its execution, delivery, and performance of the Irish Loan Documents to which Irish Parent is a party and authorizing specific officers of Irish Parent to execute same; -47- (j) Agent shall have received copies of Irish Parent's Governing Documents, as amended, modified, or supplemented to the Closing Date, certified by the Secretary of Irish Parent; (k) Agent shall have received a certificate of insurance, together with the endorsements thereto, as are required by Section 6.8, the form and substance of which shall be satisfactory to Agent which shall have consulted with the other Agents prior to making such determination; (l) Agent shall have received an opinion of Subsidiary Borrower's counsel, and, in Agent's sole discretion, Agent's foreign counsel, in form and substance satisfactory to Agent which shall have consulted with the other Agents prior to making such determination; (m) Agent shall have received a certificate from an officer of Subsidiary Borrower certifying that (i) the execution of the Irish Debenture is not contrary to section 60 of the Companies Act, 1963 (as amended), (ii) the execution of the Irish Debenture is not contrary to section 31 or section 35 of the Companies Act, 1990 (as amended) and Subsidiary Borrower and UK Borrower are part of a "group" for the purposes of section 35 of the Companies Act, 1990 (as amended), and (iii) Subsidiary Borrower is, at the Closing Date and the date of the creation of the Irish Debenture, solvent and able to pay its debts as they fall due; (n) Agent shall have received a Notice and Consent from an officer of Domestic Parent in the form attached hereto as Exhibit 3.1(n); (o) Agent shall have received evidence in form and substance satisfactory to Agents (including a certificate of the chief financial officer of Subsidiary Borrower) that all tax returns required to be filed by Subsidiary Borrower have been timely filed and all taxes upon Subsidiary Borrower or its properties, assets, income, and franchises (including Real Property taxes and payroll taxes) have been paid prior to delinquency, except such taxes that are the subject of a Permitted Protest or are set forth on Schedule 6.7; (p) Domestic Parent, Subsidiary Borrower and UK Borrower shall, in the aggregate, have Excess Availability and Qualified Cash in an amount of not less than $100,000,000 after giving effect to the initial extensions of credit under the Domestic Loan Agreement, this Agreement and the UK Loan Agreement; (q) Agents shall have completed their collateral due diligence, including a collateral audit and review of Subsidiary Borrower's books and records and verification of Subsidiary Borrower's representations and warranties concerning Collateral to the Lender Group, the results of which shall be satisfactory to the Agents; -48- (r) Agent shall have completed its business and legal due diligence, the results of which shall be satisfactory to Agent; (s) Agent shall have received completed reference checks with respect to Subsidiary Borrower's senior management, the results of which are satisfactory to Agent in its sole discretion; (t) Subsidiary Borrower shall pay all Lender Group Expenses incurred in connection with the transactions evidenced by this Agreement; (u) Agent shall have received copies of each of Subsidiary Borrower's material leases, financing agreements, supplier agreements, transition services agreements, and Intellectual Property licenses, together with a certificate of the Secretary of Subsidiary Borrower certifying each such document as being a true, correct, and complete copy thereof; (v) Subsidiary Borrower shall have received all licenses, approvals or evidence of other actions required by any Governmental Authority in connection with the execution and delivery by Subsidiary Borrower of this Agreement or any other Irish Loan Document or with the consummation of the transactions contemplated hereby and thereby; and (w) all other documents and legal matters in connection with the transactions contemplated by this Agreement shall have been delivered, executed, or recorded and shall be in form and substance satisfactory to Agent. 3.2 [Intentionally omitted] 3.3 Conditions Precedent to all Extensions of Credit. The obligation of the Lender Group (or any member thereof) to make all Advances (or to extend any other credit hereunder) shall be subject to the following conditions precedent: (a) the representations and warranties contained in this Agreement and the other Irish Loan Documents shall be true and correct in all material respects on and as of the date of such extension of credit, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date), (b) no Default or Event of Default shall have occurred and be continuing on the date of such extension of credit, nor shall either result from the making thereof, (c) no injunction, writ, restraining order, or other order of any nature prohibiting, directly or indirectly, the extending of such credit shall have been issued and remain in force by any Governmental Authority against Subsidiary Borrower, Agent, any Lender, or any of their Affiliates, and -49- (d) no Material Adverse Change shall have occurred. 3.4 Term. This Agreement shall become effective upon the execution and delivery hereof by Subsidiary Borrower, Agent, and the Lenders and shall continue in full force and effect for a term ending on the earlier of (the "Maturity Date") (a) June 25, 2003, (b) the Conditions Precedent Deadline (as defined in Section 3.1(a)) if Subsidiary Borrower has failed to satisfy each of the conditions precedent in Section 3.1 on or before the Conditions Precedent Deadline, or (c) the date of termination of the Domestic Loan Agreemetn (including termination by Domestic Parent pursuant to Section 3.6 of the Domestic Loan Agreement). The foregoing notwithstanding, the Lender Group, upon the election of the Required Lenders, shall have the right to terminate its obligations under this Agreement immediately and without notice upon the occurrence and during the continuation of an Event of Default. 3.5 Effect of Termination. On the date of termination of this Agreement, all Obligations (including contingent reimbursement obligations of Subsidiary Borrower with respect to outstanding Letters of Credit) immediately shall become due and payable without notice or demand. No termination of this Agreement, however, shall relieve or discharge Subsidiary Borrower of its duties, Obligations, or covenants hereunder and the Agent's Liens in the Collateral shall remain in effect until all Obligations have been fully and finally discharged and the Lender Group's obligations to provide additional credit hereunder have been terminated. When this Agreement has been terminated and all of the Obligations (other than contingent indemnification obligations) have been fully and finally discharged and the Lender Group's obligations to provide additional credit under the Irish Loan Documents have been terminated irrevocably, Agent will, at Subsidiary Borrower's sole expense, execute and deliver any UCC termination statements, lien releases, mortgage releases, re-assignments of trademarks, discharges of security interests, and other similar discharge or release documents (and, if applicable, in recordable form) as are reasonably necessary to release, as of record, the Agent's Liens and all notices of security interests and liens previously filed by Agent with respect to the Obligations. 3.6 Early Termination by Subsidiary Borrower. Subsidiary Borrower has the option, at any time upon 90 days prior written notice to Agent, to terminate this Agreement by paying to Agent, for the benefit of the Lender Group, in cash, the Obligations (including either (i) providing cash collateral to be held by Agent for the benefit of those Lenders with a Revolver Commitment in an amount equal to 105% of the then extant Letter of Credit Usage, or (ii) causing the original Letters of Credit to be returned to the Issuing Lender) in full (to be allocated based upon letter agreements between Agent and individual Lenders). If Subsidiary Borrower has sent a notice of termination pursuant to the provisions of this Section, then the Commitments shall terminate and Subsidiary Borrower shall be obligated to repay the Obligations (including either (i) providing cash collateral to be held by Agent for the benefit of those Lenders with a Revolver Commitment in an amount equal to 105% of the then extant Letter of Credit Usage, or (ii) causing the original Letters of Credit to be returned -50- to the Issuing Lender) in full on the date set forth as the date of termination of this Agreement in such notice. The foregoing to the contrary notwithstanding, Subsidiary Borrower shall not have the right to terminate this Agreement unless the UK Loan Agreement concurrently is terminated and all of the Indebtedness thereunder repaid in full. 4. PERFECTION OF SECURITY INTEREST; INSPECTION RIGHTS. 4.1 [Intentionally omitted] 4.2 [Intentionally omitted] 4.3 [Intentionally omitted] 4.4 Delivery of Additional Documentation Required. At any time upon the request of Agent, Subsidiary Borrower shall execute and deliver to Agent, any and all financing statements, original financing statements in lieu of continuation statements, fixture filings, security agreements, pledges, assignments, endorsements of certificates of title, and all other documents (the "Additional Documents") that Agent may request in its Permitted Discretion, in form and substance satisfactory to Agent, to perfect and continue perfected or better perfect the Agent's Liens in the Collateral (whether now owned or hereafter arising or acquired), to create and perfect Liens in favor of Agent in any Real Property acquired after the date of this Agreement, and in order to fully consummate all of the transactions contemplated hereby and under the other Irish Loan Documents. To the maximum extent permitted by applicable law, Subsidiary Borrower authorizes Agent to execute any such Additional Documents in Subsidiary Borrower's name and authorizes Agent to file such executed Additional Documents in any appropriate filing office. 4.5 Power of Attorney. Subsidiary Borrower hereby irrevocably makes, constitutes, and appoints Agent (and any of Agent's officers, employees, or agents designated by Agent) as Subsidiary Borrower's true and lawful attorney, with power to (a) if Subsidiary Borrower refuses to, or fails timely to execute and deliver any of the documents described in Section 4.4, sign the name of Subsidiary Borrower on any of the documents described in Section 4.4, (b) at any time that an Event of Default has occurred and is continuing, sign Subsidiary Borrower's name on any invoice or bill of lading relating to the Collateral, (c) send requests for verification of Accounts; provided, however, that, so long as no Event of Default has occurred and is continuing, Agent agrees to coordinate such verification activities with Subsidiary Borrower, (d) endorse Subsidiary Borrower's name on any Collection item that may come into the Lender Group's possession, and (e) at any time that an Event of Default has occurred and is continuing, make, settle, and adjust all claims under Subsidiary Borrower's policies of insurance and make all determinations and decisions with respect to such policies of insurance . The appointment of Agent as Subsidiary Borrower's attorney, and each and every one of its rights and powers, being coupled with an interest, is irrevocable until all of -51- the Obligations have been fully and finally repaid and performed and the Lender Group's obligations to extend credit hereunder are terminated. 4.6 Right to Inspect. Agents (through any of their respective officers, employees, or agents) shall have the right, from time to time hereafter to inspect the Books and to check, test, and appraise the Collateral in order to verify Subsidiary Borrower's financial condition or the amount, quality, value, condition of, or any other matter relating to, the Collateral; provided however, that so long as no Event of Default has occurred which is continuing, any such inspection, check, test or appraisal shall be conducted during normal business hours in a manner so as not to interfere unreasonably with Subsidiary Borrower's business operations. 4.7 [Intentionally omitted]. 5. REPRESENTATIONS AND WARRANTIES. In order to induce the Lender Group to enter into this Agreement, Subsidiary Borrower makes the following representations and warranties to the Lender Group which shall be true, correct, and complete, in all material respects, as of the date hereof, and shall be true, correct, and complete, in all material respects, as of the Closing Date, and at and as of the date of the making of each Advance (or other extension of credit) made thereafter, as though made on and as of the date of such Advance (or other extension of credit) (except to the extent that such representations and warranties relate solely to an earlier date) and such representations and warranties shall survive the execution and delivery of this Agreement: 5.1 No Encumbrances. Subsidiary Borrower has title to the Subsidiary Borrower Collateral and the Real Property, free and clear of Liens except for Permitted Liens. 5.2 [Intentionally omitted]. 5.3 Eligible Inventory. All Eligible Inventory is of good and merchantable quality, free from defects. As to each item of Eligible Inventory, such Inventory is not excluded as ineligible by virtue of one or more of the excluding criteria set forth in the definition of Eligible Inventory. 5.4 Equipment. All of the Equipment of Subsidiary Borrower is used or held for use in its business and is fit for such purposes. 5.5 Location of Inventory and Equipment. Subsidiary Borrower's Inventory and Equipment are not stored with a bailee, warehouseman, or similar party and are located only at the locations identified on Schedule 5.5. 5.6 Inventory Records. Subsidiary Borrower keeps correct and accurate records itemizing and describing the type, quality, and quantity of its Inventory and the book value thereof. -52- 5.7 Location of Chief Executive Office. The principal place of business and registered office of Subsidiary Borrower is located at the address indicated in Schedule 5.7. 5.8 Due Organization and Qualification; Subsidiaries. (a) Subsidiary Borrower is validly incorporated and existing and in good standing under the laws of Ireland and qualified to do business in any state where the failure to be so qualified reasonably could be expected to have a Material Adverse Change. (b) Set forth on Schedule 5.8(b), is a complete and accurate description of the authorized share capital of Subsidiary Borrower, by class, and, as of the Closing Date, a description of the number of shares of each such class that are issued and outstanding. Other than as described on Schedule 5.8(b), there are no subscriptions, options, warrants, or calls relating to any shares of Subsidiary Borrower and such shares are fully paid up, including any right of conversion or exchange under any outstanding security or other instrument. Subsidiary Borrower is not subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any of its shares or any security convertible into or exchangeable for any of its shares. (c) Set forth on Schedule 5.8(c), is a complete and accurate list of Subsidiary Borrower's direct and indirect Subsidiaries, showing: (i) the jurisdiction of their organization, (ii) the number of shares of each class of common and preferred Stock authorized for each of such Subsidiaries, and (iii) the number and the percentage of the outstanding shares of each such class owned directly or indirectly by Subsidiary Borrower. All of the outstanding capital Stock of each such Subsidiary has been validly issued and is fully paid and non-assessable. (d) Except as set forth on Schedule 5.8(c), there are no subscriptions, options, warrants, or calls relating to any shares of Subsidiary Borrower's Subsidiaries' capital Stock, including any right of conversion or exchange under any outstanding security or other instrument. Neither Subsidiary Borrower nor any of its Subsidiaries is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of Subsidiary Borrower's Subsidiaries' capital Stock or any security convertible into or exchangeable for any such capital Stock. 5.9 Due Authorization; No Conflict. (a) The execution, delivery, and performance by Subsidiary Borrower of this Agreement and the Irish Loan Documents to which it is a party have been duly authorized by all necessary action on the part of Subsidiary Borrower. (b) The execution, delivery, and performance by Subsidiary Borrower of this Agreement and the Irish Loan Documents to which it is a party do not and will not (i) violate any provision of any law including federal, state, or local law or regulation -53- applicable to Subsidiary Borrower, the Governing Documents of Subsidiary Borrower, or any order, judgment, or decree of any court or other Governmental Authority binding on Subsidiary Borrower, (ii) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material contractual obligation of Subsidiary Borrower, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any properties or assets of Subsidiary Borrower, other than Permitted Liens, or (iv) require any approval of Subsidiary Borrower's interest holders or any approval or consent of any Person under any material contractual obligation of Subsidiary Borrower. (c) Other than the filing of financing statements, fixture filings and certain of the Irish Loan Documents with the SEC and filings with the Companies Registration Office, Dublin, the execution, delivery, and performance by Subsidiary Borrower of this Agreement and the Irish Loan Documents to which Subsidiary Borrower is a party do not and will not require any registration with, consent, or approval of, or notice to, or other action with or by, any Governmental Authority or other Person. (d) This Agreement and the other Irish Loan Documents to which Subsidiary Borrower is a party, and all other documents contemplated hereby and thereby, when executed and delivered by Subsidiary Borrower will be the legally valid and binding obligations of Subsidiary Borrower, enforceable against Subsidiary Borrower in accordance with their respective terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors' rights generally. (e) The Agent's Liens are validly created and no action is required to perfect the security except, where appropriate, for registration and notice and the security will be a first charge ranking ahead of any other Lien. (f) As to each Guarantor, the execution, delivery, and performance by such Guarantor of the Irish Loan Documents to which it is a party have been duly authorized by all necessary action on the part of such Guarantor. (g) As to each Guarantor, the execution, delivery, and performance by such Guarantor of the Irish Loan Documents to which it is a party do not and will not (i) violate any provision of law or regulation applicable to such Guarantor, the Governing Documents of such Guarantor, or any order judgment, or decree of any court or other Governmental Authority binding on such Guarantor, (ii) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material contractual obligation of such Guarantor, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any properties or assets of such Guarantor, other than Permitted Liens, or (iv) require any approval of such Guarantor's interestholders or any approval or consent of any Person under any material contractual obligation of such Guarantor. -54- (h) As to each Guarantor, the execution, delivery, and performance by such Guarantor of the Irish Loan Documents to which such Guarantor is a party do not and will not require any registration with, consent, or approval of, or notice to, or other action with or by, any Governmental Agency or other Person. (i) As to each Guarantor, the Irish Loan Documents to which such Guarantor is a party, and all other documents contemplated hereby and thereby, when executed and delivered by such Guarantor will be legally valid and binding obligations of such Guarantor enforceable against such guarantor in accordance with their respective terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or omitting creditors' rights generally. 5.10 Litigation. Other than those matters disclosed on Schedule 5.10, there are no actions, suits, or proceedings pending or, to the knowledge of senior officers of Subsidiary Borrower, threatened in writing against Subsidiary Borrower, except for (a) matters that are fully covered by insurance (subject to customary deductibles), and (b) matters arising after the Closing Date that, if decided adversely to Subsidiary Borrower, reasonably could not be expected to result in a Material Adverse Change. 5.11 No Material Adverse Change. All financial statements relating to Subsidiary Borrower and its Subsidiaries that have been delivered by Subsidiary Borrower to the Lender Group have been prepared in accordance with GAAP (except, in the case of unaudited financial statements, for the lack of footnotes and being subject to year-end audit adjustments) and present fairly in all material respects, Subsidiary Borrower's financial condition as of the date thereof and results of operations for the period then ended. There has not been a Material Adverse Change with respect to Subsidiary Borrower and its Subsidiaries since the date of the latest financial statements submitted to the Lender Group on or before the Closing Date. 5.12 Fraudulent Transfer. (a) Subsidiary Borrower is Solvent. (b) No transfer of property is being made by Subsidiary Borrower and no obligation is being incurred by Subsidiary Borrower in connection with the transactions contemplated by this Agreement or the other Irish Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of Subsidiary Borrower . 5.13 [Intentionally omitted] 5.14 [Intentionally omitted] 5.15 Brokerage Fees. Subsidiary Borrower has not utilized the services of any broker or finder in connection with Subsidiary Borrower's obtaining financing from the -55- Lender Group under this Agreement and no brokerage commission or finders fee is payable by Subsidiary Borrower in connection herewith. 5.16 Intellectual Property. Subsidiary Borrower does not own, or hold licenses in any licenses, trademarks, trade names, copyrights, patents, patent rights, or licenses and no patents, patent rights, or licenses are necessary to the conduct of Subsidiary Borrower's business as currently conducted. 5.17 Leases. Subsidiary Borrower has possession under all leases material to the business of Subsidiary Borrower and to which it is a party or under which it is operating. All of such leases are valid and subsisting and no material default by Subsidiary Borrower exists under any of them. 5.18 DDAs. Set forth on Schedule 5.18 are all of Subsidiary Borrower's DDAs, including, with respect to each depository (i) the name and address of such depository, and (ii) the account numbers of the accounts maintained with such depository. 5.19 Complete Disclosure. All factual information (taken as a whole) furnished by or on behalf of Subsidiary Borrower in writing to Agent or any Lender (including all information contained in the Schedules hereto or in the other Irish Loan Documents) for purposes of or in connection with this Agreement, the other Irish Loan Documents, or any transaction contemplated herein or therein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of Subsidiary Borrower in writing to Agent or any Lender will be, true and accurate, in all material respects, on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading in any material respect at such time in light of the circumstances under which such information was provided. On the Closing Date, the Closing Date Projections represent, and as of the date on which any other Projections are delivered to Agent, such additional Projections represent Subsidiary Borrower's good faith best estimate of its future performance for the periods covered thereby. Anything in any Loan Document to the contrary notwithstanding, Subsidiary Borrower makes no representation or warranty as to any projection or forecast of results or other forward looking statement set forth in any document or statement delivered to made to Agent or the Lenders other than, in the case of any such projection, forecast or forward looking statement, that Subsidiary Borrower had a good faith belief at the time of such delivery that such projection, forecast or forward looking statement was reasonably supported based on the assumptions described in connection therewith at the time of such delivery. 5.20 Indebtedness. Set forth on Schedule 5.20 is a true and complete list of all Indebtedness of Subsidiary Borrower outstanding immediately prior to the Closing Date that is to remain outstanding after the Closing Date and such Schedule accurately reflects the aggregate principal amount of such Indebtedness and the principal terms thereof. -56- 5.21 [Intentionally omitted] 5.22 Review and Approval of Domestic Loan Agreement. Subsidiary Borrower has reviewed the Domestic Loan Agreement and all Exhibits and Schedules referred to therein and has approved all terms and conditions relating to or affecting Subsidiary Borrower contained therein. Subsidiary Borrower acknowledges and agrees that the credit facility evidenced hereby shall terminate automatically and be of no further force and effect in the event that the Domestic Loan Agreement shall terminate for any reason. 6. AFFIRMATIVE COVENANTS. Subsidiary Borrower covenants and agrees that, so long as any credit hereunder shall be available and until full and final payment of the Obligations, Subsidiary Borrower shall do and shall cause each of its Subsidiaries to do all of the following: 6.1 Accounting System. Maintain a system of accounting that enables Subsidiary Borrower to produce financial statements in accordance with GAAP and maintain records pertaining to the Collateral that contain information as from time to time reasonably may be requested by Agent. Subsidiary Borrower also shall keep an Inventory reporting system that shows all additions, sales, claims, returns, and allowances with respect to the Inventory. 6.2 Collateral Reporting. Provide Agent (and if so requested by Agent, with copies for each Lender) with the following documents at the following times in form satisfactory to Agent: ================================================================================ Weekly (from and (a) Inventory reports specifying Subsidiary after the occurrence Borrower's cost and the wholesale market value of of a Triggering its Inventory, by category, with additional detail Event) or, showing additions to and deletions from the otherwise, monthly Inventory. (not later than the 15th day after the end of each fiscal month) - -------------------------------------------------------------------------------- Monthly (not later (b) A detailed calculation of the Subsidiary than the 15th day Borrowing Base. after the end of each fiscal month) - -------------------------------------------------------------------------------- Quarterly (c) a report regarding Subsidiary Borrower's accrued, but unpaid, ad valorem taxes. ================================================================================ -57- ================================================================================ Upon request by (d) such other reports as to the Collateral, or Agent the financial condition of Subsidiary Borrower or its Subsidiaries, as Agent may request and the Subsidiary Borrower may lawfully supply. ================================================================================ In addition, Subsidiary Borrower agrees to cooperate fully with Agent to facilitate and implement a system of electronic collateral reporting in order to provide electronic reporting of each of the items set forth above. 6.3 Financial Statements, Reports, Certificates. Deliver to Agent, with copies to each Lender: (a) . (i) prior to the occurrence of a Triggering Event, unless the average of the sum of the Subsidiary Borrower Revolver Usage, Irish Loan Usage and Domestic Loan Usage (taken as a whole) over the immediately preceding 30 day period does not exceed $75,000,000, as soon as possible, but in any event, within 45 days after the end of each fiscal quarter, and (ii) if clause (i) is not applicable, as soon as available, but in any event within 30 days (45 days in the case of a fiscal month that is the end of one of the first 3 fiscal quarters in a fiscal year) after the end of each fiscal month during each of Domestic Parent's fiscal years, a company prepared consolidated balance sheet, income statement, and statement of cash flow covering Domestic Parent's and its Subsidiaries' operations during such period, (b) if and when filed by Subsidiary Borrower, copies of Subsidiary Borrower's income tax returns, and any amendments thereto, filed with the Inland Revenue Service, (c) if and when filed by Subsidiary Borrower and as requested by Agent, satisfactory evidence of payment of applicable excise taxes in each jurisdictions in which (i) Subsidiary Borrower conducts business or is required to pay any such excise tax, (ii) where Subsidiary Borrower's failure to pay any such applicable excise tax would result in a Lien on the properties or assets of Subsidiary Borrower, or (iii) where Subsidiary Borrower's failure to pay any such applicable excise tax reasonably could be expected to result in a Material Adverse Change, (d) as soon as a senior officer of Subsidiary Borrower has knowledge of any event or condition that constitutes a Default or an Event of Default, notice thereof and a statement of the curative action that Subsidiary Borrower proposes to take with respect thereto, and (e) upon the request of Agent, any other report reasonably requested relating to the financial condition of Subsidiary Borrower. Subsidiary Borrower agrees that its independent certified public accountants are authorized to communicate with Agent and to release to Agent whatever financial information concerning Subsidiary Borrower Agent -58- reasonably may request. Subsidiary Borrower waives the right to assert a confidential relationship, if any, it may have with any accounting firm or service bureau in connection with any information requested by Agent pursuant to or in accordance with this Agreement, and agrees that Agent may contact directly any such accounting firm or service bureau in order to obtain such information. 6.4 [Intentionally omitted] . 6.5 [Intentionally omitted]. 6.6 Maintenance of Properties. Maintain and preserve all of its properties which are necessary or useful in the proper conduct to its business in good working order and condition, ordinary wear and tear excepted, and comply at all times with the provisions of all leases to which it is a party as lessee so as to prevent any loss or forfeiture thereof or thereunder. 6.7 Taxes. Except as set forth on Schedule 6.7, cause all assessments and taxes, whether real, personal, or otherwise, due or payable by, or imposed, levied, or assessed against Subsidiary Borrower or any of its assets to be paid in full, before delinquency or before the expiration of any extension period, except to the extent that the validity of such assessment or tax shall be the subject of a Permitted Protest. Subsidiary Borrower will make timely payment or deposit of all tax payments and withholding taxes required of it or them by applicable laws, including those laws concerning Pay As You Earn taxes, Pay Related Social Insurance contributions and Value Added Tax and Irish and foreign income and corporate taxes, and will, upon request, furnish Agent with proof satisfactory to Agent indicating that Subsidiary Borrower has made such payments or deposits. Upon Agent's request, Subsidiary Borrower shall deliver satisfactory evidence of payment of applicable excise taxes in each jurisdictions in which Subsidiary Borrower is required to pay any such excise tax. 6.8 Insurance. (a) At Domestic Parent's expense, maintain insurance respecting Subsidiary Borrower's assets wherever located, covering loss or damage by fire, theft, explosion, and all other hazards and risks as ordinarily are insured against by other Persons engaged in the same or similar businesses. Subsidiary Borrower also shall maintain business interruption, public liability, and product liability insurance, as well as insurance against larceny, embezzlement, and criminal misappropriation. All such policies of insurance shall be in amounts maintained by companies of similar standing and shall be with such insurance companies as are satisfactory to Agent in its Permitted Discretion. Subsidiary Borrower shall deliver copies of all such policies to Agent with a satisfactory lender's loss payable endorsement naming Agent as sole loss payee or additional insured, as appropriate. This Section 6.8 shall not require Subsidiary Borrower to deliver policies of insurance to Agent in addition to those policies of insurance delivered by Domestic Parent to Agent pursuant to -59- Section 6.8 of the Domestic Loan Agreement. Notwithstanding the foregoing, if such policies delivered by Domestic Parent are amended or modified so that they no longer pertain to Subsidiary Borrower, Subsidiary Borrower must, at its expense, maintain the insurance described in this Section 6.8(a) and deliver such policies to Agent with a satisfactory lender's loss payable endorsement naming Agent as sole loss payee or additional insured, as appropriate. (b) Subsidiary Borrower shall give Agent prompt notice of any loss covered by such insurance. Following the Closing Date, Agent shall have the exclusive right to adjust any losses payable under any such insurance policies in excess of $250,000, without any liability to Subsidiary Borrower whatsoever in respect of such adjustments. Any monies received as payment for any loss under any insurance policy mentioned above (other than liability insurance policies) or as payment of any award or compensation for condemnation or taking by eminent domain, shall be paid over to Agent to be applied at the option of Required Lenders either to the prepayment of the Obligations or shall be disbursed to Subsidiary Borrower under staged payment terms reasonably satisfactory to the Required Lenders for application to the cost of repairs, replacements, or restorations; provided, however, that if Agent receives such monies in immediately available funds on a date that no Advance is outstanding, Agent shall disburse such monies to Subsidiary Borrower on the Business Day immediately following the date upon which Agent received such monies. Any such repairs, replacements, or restorations shall be effected with reasonable promptness and shall be of a value at least equal to the value of the items of property destroyed prior to such damage or destruction. Subsidiary Borrower will not take out separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this Section 6.8, unless Agent is included thereon as named insured with the loss payable to Agent under a lender's loss payable endorsement or its equivalent. Subsidiary Borrower immediately shall notify Agent whenever such separate insurance is taken out, specifying the insurer thereunder and full particulars as to the policies evidencing the same, and copies of such policies promptly shall be provided to Agent. 6.9 Location of Inventory and Equipment. Keep Subsidiary Borrower's Inventory and Equipment only at the locations identified on Schedule 5.5; provided, however, that Subsidiary Borrower may amend Schedule 5.5 so long as such amendment occurs by written notice to Agent not less than 15 days prior to the date on which Inventory or Equipment is moved to such new location, so long as such new location is within Ireland and so long as, at the time of such written notification, Subsidiary Borrower provides any filings necessary to perfect and continue perfected the Agent's Liens on such assets and also provides to Agent a Collateral Access Agreement. 6.10 Compliance with Laws. Comply with the requirements of all applicable laws, rules, regulations, and orders of any Governmental Authority, other than laws, rules, regulations, and orders the non-compliance with which, individually or in the aggregate, -60- would not result in and reasonably could not be expected to result in a Material Adverse Change. 6.11 Leases. Pay when due all rents and other amounts payable under any leases to which they are parties or by which their properties and assets are bound, unless such payments are the subject of a Permitted Protest. 6.12 Brokerage Commissions. Pay any and all brokerage commission or finders fees incurred in connection with or as a result of Subsidiary Borrower's obtaining financing from the Lender Group under this Agreement. Subsidiary Borrower agrees and acknowledges that payment of all such brokerage commissions or finders fees shall be the sole responsibility of Subsidiary Borrower, and Subsidiary Borrower agrees to indemnify, defend, and hold Agent and the Lender Group harmless from and against any claim of any broker or finder arising out of Subsidiary Borrower's obtaining financing from the Lender Group under this Agreement. 6.13 Existence. At all times preserve and keep in full force and effect Subsidiary Borrower's valid existence and good standing and any rights and franchises material to its business. 6.14 Environmental. (a) Keep any property either owned or operated by them free of any Environmental Liens or post bonds or other financial assurances sufficient to satisfy the obligations or liability evidenced by such Environmental Liens, (b) comply, in all material respects, with Environmental Laws and provide to Agent documentation of such compliance which Agent reasonably requests, (c) promptly notify Agent of any release of a Hazardous Material in any reportable quantity from or onto property owned or operated by Subsidiary Borrower and take any Remedial Actions required to abate said release of a Hazardous Material in any reportable quantity from or onto property owned or operated by Subsidiary Borrower and take any Remedial Actions required to abate said release or otherwise to come into compliance with applicable Environmental Law, and (d) promptly provide Agent with written notice within 10 days of the receipt of the following: (i) notice that an Environmental Lien has been filed against any of the real or personal property of Subsidiary Borrower, (ii) commencement of any Environmental Action or notice that an Environmental Action will be filed against Subsidiary Borrower, and (iii) notice of a violation, citation, or other administrative order which reasonably could be expected to result in a Material Adverse Change. 6.15 Disclosure Updates. Promptly and in no event later than 5 Business Days after a senior officer of Subsidiary Borrower obtains knowledge thereof, (a) notify Agent if any written information, exhibit, or report furnished to the Lender Group contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements contained therein not misleading in light of the circumstances in which made, and (b) correct any defect or error that may be discovered therein or in any Loan Document or in the execution, acknowledgement, filing, or recordation thereof. -61- 6.16 Compliance with Covenants of Domestic Loan Agreement. Promptly take all such actions as are necessary to assure that, as a Material Subsidiary (as defined in the Domestic Loan Agreement) of Domestic Parent, it is in compliance with all requirements applicable to Material Subsidiaries and other Subsidiaries of Domestic Parent pursuant to the Domestic Loan Agreement. 7. NEGATIVE COVENANTS. Subsidiary Borrower covenants and agrees that, so long as any credit hereunder shall be available and until full and final payment of the Obligations, Subsidiary Borrower will not and will not permit any of its Subsidiaries to do any of the following: 7.1 Indebtedness. Create, incur, assume, permit, guarantee, or otherwise become or remain, directly or indirectly, liable with respect to any Indebtedness, except: (a) Indebtedness evidenced by this Agreement and the other Irish Loan Documents together with Indebtedness owed to Underlying Issuers with respect to Underlying Letters of Credit, (b) Indebtedness set forth on Schedule 5.20, (c) refinancings, renewals, or extensions of Indebtedness permitted under clauses (b) and (c) of this Section 7.1 (and continuance or renewal of any Permitted Liens associated therewith) so long as: (i) the terms and conditions of such refinancings, renewals, or extensions do not, in Agent's reasonable judgment, materially impair the prospects of repayment of the Obligations by Subsidiary Borrower or materially impair Subsidiary Borrower's creditworthiness, (ii) such refinancings, renewals, or extensions do not result in an increase in the principal amount of, or interest rate with respect to, the Indebtedness so refinanced, renewed, or extended, (iii) such refinancings, renewals, or extensions do not result in a shortening of the average weighted maturity of the Indebtedness so refinanced, renewed, or extended, nor are they on terms or conditions that, taken as a whole, are materially more burdensome or restrictive to Subsidiary Borrower, and (iv) if the Indebtedness that is refinanced, renewed, or extended was subordinated in right of payment to the Obligations, then the terms and conditions of the refinancing, renewal, or extension Indebtedness must include subordination terms and conditions that are at least as favorable to the Lender Group as those that were applicable to the refinanced, renewed, or extended Indebtedness, and (d) Indebtedness arising as a result of Permitted Intercompany Advances. 7.2 Liens. Create, incur, assume, or permit to exist, directly or indirectly, any Lien on or with respect to any of its assets, of any kind, whether now owned or hereafter acquired, or any income or profits therefrom, except for Permitted Liens (including Liens that are -62- replacements of Permitted Liens to the extent that the original Indebtedness is refinanced, renewed, or extended under Section 7.1(d) and so long as the replacement Liens only encumber those assets that secured the refinanced, renewed, or extended Indebtedness). 7.3 Restrictions on Fundamental Changes. (a) Enter into any merger, consolidation, reorganization, or recapitalization, or reclassify its Stock; (b) Liquidate, wind up, or dissolve itself (or suffer any liquidation or dissolution). (c) Except for Permitted Dispositions, convey, sell, lease, license, assign, transfer, or otherwise dispose of, in one transaction or a series of transactions, all or any substantial part of its assets. 7.4 Disposal of Assets. Other than Permitted Dispositions, convey, sell, lease, license, assign, transfer, or otherwise dispose of any of Subsidiary Borrower's assets. 7.5 Change Name. Change Subsidiary Borrower's name, corporate structure, or identity, or add any new fictitious name; provided, however, that Subsidiary Borrower may change its name upon at least 30 days prior written notice to Agent of such change and so long as, at the time of such written notification, Subsidiary Borrower provides any financing statements or fixture filings necessary to perfect and continue perfected the Agent's Liens as to the Collateral. 7.6 Guarantee. Except for (a) the guarantee contained in the Irish Debenture and (b) those guarantees set forth on Schedule 7.6, guarantee or otherwise become in any way liable with respect to the obligations of any third Person except by endorsement of instruments or items of payment for deposit to the account of Subsidiary Borrower or which are transmitted or turned over to Agent. 7.7 Nature of Business. Make any change in the principal nature of its business. 7.8 Prepayments and Amendments. (a) Except in connection with a refinancing permitted by Section 7.1(d), prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness of Subsidiary Borrower, other than the Obligations in accordance with this Agreement, and (b) Except in connection with a refinancing permitted by Section 7.1(d), directly or indirectly, amend, modify, alter, increase, or change any of the terms or conditions of any agreement, instrument, document, indenture, or other writing evidencing or concerning Indebtedness permitted under Sections 7.1(b), (c), or (e). -63- 7.9 Change of Control. Cause, permit, or suffer, directly or indirectly, any Change of Control. 7.10 Consignments. Consign any of its Inventory or sell any of its Inventory on bill and hold, sale or return, sale on approval, or other conditional terms of sale. 7.11 Distributions. Make any distribution or declare or pay any dividends (in cash or other property) on, or purchase, acquire, redeem, or retire any of Subsidiary Borrower's Stock, of any class, whether now or hereafter outstanding. 7.12 Accounting Methods. Modify or change its method of accounting (other than as may be required to conform to GAAP or which would result in an improvement in Subsidiary Borrower's reporting abilities and practices) or enter into, modify, or terminate any agreement currently existing, or at any time hereafter entered into with any third party accounting firm or service bureau for the preparation or storage of its accounting records without said accounting firm or service bureau agreeing to provide Agent information regarding the Collateral or Subsidiary Borrower's financial condition. 7.13 Investments. Directly or indirectly, make or acquire any Investment or incur any liabilities (including contingent obligations) for or in connection with any Investment. 7.14 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any transaction with any Affiliate of Subsidiary Borrower except for transactions that are in the ordinary course of Subsidiary Borrower's business, upon fair and reasonable terms, that are fully disclosed to Agent, and that are no less favorable to Subsidiary Borrower than would be obtained in an arm's length transaction with a non-Affiliate. 7.15 Suspension. Go out of all or a substantial portion of its core business. 7.16 [Intentionally omitted] 7.17 Use of Proceeds. Use the proceeds of the Advances for any purpose other than (a) to pay transactional fees, costs, and expenses incurred in connection with this Agreement, the other Irish Loan Documents, and the transactions contemplated hereby and thereby, and (b) consistent with the terms and conditions hereof, for its lawful and permitted purposes. 7.18 Change in Location of Chief Executive Office; Inventory and Equipment with Bailees. Relocate its chief executive office to a new location without providing 30 days prior written notification thereof to Agent and so long as, at the time of such written notification, Subsidiary Borrower provides any financing statements or fixture filings necessary to perfect and continue perfected the Agent's Liens and also provides to Agent a Collateral Access Agreement with respect to such new location. Borrower's and its Material -64- Subsidiaries' Inventory and Equipment shall not at any time now or hereafter be stored with a bailee, warehouseman, or similar party without Agent's prior written consent. 7.19 [Intentionally omitted]. 7.20 [Intentionally omitted]. 7.21 Preferred Stock. Issue or sell any Preferred Stock. 7.22 Compliance with Covenants of Domestic Loan Agreement. Take any action which would cause Domestic Parent to be in violation of any material term or provision of the Domestic Loan Agreement or any other Domestic Loan Document to which Domestic Parent is party. 8. EVENTS OF DEFAULT. Any one or more of the following events shall constitute an event of default (each, an "Event of Default") under this Agreement: 8.1 If Subsidiary Borrower fails to pay when due and payable, or when declared due and payable, all or any portion of the Obligations (whether of principal, interest (including any interest which, but for the provisions of the Bankruptcy Code, would have accrued on such amounts), fees and charges due the Lender Group, reimbursement of Lender Group Expenses, or other amounts constituting Obligations); 8.2 If Subsidiary Borrower fails to (a) perform, keep, or observe any covenant or other provision contained in Sections 6.2, 6.3, 6.7, 6.9, 6.10, and 6.11 hereof and such failure or neglect continues for a period of 5 days after the date on which such failure or neglect first occurs, or (b) perform, keep, or observe any covenant or other provision contained in any Section of this Agreement (other than a Section that is expressly dealt with elsewhere in this Section 8) or the other Irish Loan Documents (other than a Section of such other Irish Loan Documents dealt with elsewhere in this Section 8) and such failure or neglect is not cured within 15 days after the date on which such failure or neglect first occurs, or (c) perform, keep, or observe any covenant or other provision contained in Section 6 (other than a subsection of Section 6 that is dealt with elsewhere in this Section 8), or Section 7 of this Agreement or any comparable provision contained in any of the other Irish Loan Documents; 8.3 If any material portion of Subsidiary Borrower's assets is attached, seized, subjected to a writ or distress warrant, levied upon, or comes into the possession of any third Person; 8.4 If an Insolvency Proceeding is commenced by Subsidiary Borrower or any of its Subsidiaries; -65- 8.5 If an Insolvency Proceeding is commenced against Subsidiary Borrower, or any of its Subsidiaries, and any of the following events occur: (a) Subsidiary Borrower or the Subsidiary consents to the institution of such Insolvency Proceeding against it, (b) the petition commencing the Insolvency Proceeding is not timely controverted, (c) the petition commencing the Insolvency Proceeding is not dismissed within 45 calendar days of the date of the filing thereof; provided, however, that, during the pendency of such period, Agent (including any successor agent) and each other member of the Lender Group shall be relieved of their obligations to extend credit hereunder, (d) an interim trustee is appointed to take possession of all or any substantial portion of the properties or assets of, or to operate all or any substantial portion of the business of, Subsidiary Borrower or any of its Subsidiaries, or (e) an order for relief shall have been entered therein; 8.6 If Subsidiary Borrower is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of its business affairs; 8.7 If a notice of Lien, levy, or assessment is filed of record with respect to any of Subsidiary Borrower's assets by the United States, or any department, agency, or instrumentality thereof, or by any state, county, municipal, or governmental agency, or if any taxes or debts owing at any time hereafter to any one or more of such entities becomes a Lien, whether choate or otherwise, upon any of Subsidiary Borrower's assets and the same is not paid before such payment is delinquent; 8.8 If a judgment or other claim becomes a Lien or encumbrance upon any material portion of Subsidiary Borrower's assets; 8.9 If there is a default in any material financing agreement or lease to which Subsidiary Borrower is a party and such default (a) occurs at the final maturity of the obligations thereunder, or (b) results in a right by the other party thereto, irrespective of whether exercised, to accelerate the maturity of Subsidiary Borrower's obligations thereunder or to terminate such agreement or lease; 8.10 If Subsidiary Borrower makes any payment on account of Indebtedness that has been contractually subordinated in right of payment to the payment of the Obligations, except to the extent such payment is permitted by the terms of the subordination provisions applicable to such Indebtedness; 8.11 If any material misstatement or misrepresentation exists now or hereafter in any warranty, representation, statement, or Record made to the Lender Group by Subsidiary Borrower, or any officer, employee, agent, or director of Subsidiary Borrower; 8.12 If any Irish Loan Document that purports to create a Lien shall, for any reason, fail or cease to create a valid and perfected charge, Lien or security interest in the Collateral covered hereby and thereby; -66- 8.13 Any provision of any Loan Document shall at any time for any reason be declared to be null and void, or the validity or enforceability thereof shall be contested by Subsidiary Borrower, or a proceeding shall be commenced by Subsidiary Borrower, or by any Governmental Authority having jurisdiction over Subsidiary Borrower, seeking to establish the invalidity or unenforceability thereof, or Subsidiary Borrower shall deny that Subsidiary Borrower has any liability or obligation purported to be created under any Irish Loan Document; 8.14 If there is a default in any Domestic Loan Document and such default (a) occurs at the final maturity of the obligations thereunder, or (b) results in a right by Agent or any Lender, irrespective of whether exercised, to accelerate the maturity of the Domestic Parent's obligations thereunder, to terminate such agreement, or to refuse to renew such agreement pursuant to an automatic renewal right therein; or 8.15 If there is a default in any UK Loan Document and such default (a) occurs at the final maturity of the obligations thereunder, or (b) results in a right by Agent or any Lender, irrespective of whether exercised, to accelerate the maturity of the UK Borrower's obligations thereunder, to terminate such agreement, or to refuse to renew such agreement pursuant to an automatic renewal right therein. 9. THE LENDER GROUP'S RIGHTS AND REMEDIES. 9.1 Rights and Remedies. Upon the occurrence, and during the continuation, of an Event of Default, the Required Lenders (at their election but without notice of their election and without demand) may authorize and instruct Agent to do any one or more of the following on behalf of the Lender Group (and Agent, acting upon the instructions of the Required Lenders, shall do the same on behalf of the Lender Group), all of which are authorized by Subsidiary Borrower: (a) Declare all Obligations, whether evidenced by this Agreement, by any of the other Irish Loan Documents, or otherwise, immediately due and payable; provided, however, that if an Event of Default occurs under Section 8.4 or Section 8.5, all such Obligations will automatically become immediately due and payable; (b) Cease advancing money or extending credit to or for the benefit of Subsidiary Borrower under this Agreement, under any of the Irish Loan Documents, or under any other agreement between Subsidiary Borrower and the Lender Group; (c) Terminate this Agreement and any of the other Irish Loan Documents as to any future liability or obligation of the Lender Group, but without affecting any of the Agent's Liens in the Collateral and without affecting the Obligations; (d) The Lender Group shall have all other rights and remedies available at law or in equity or pursuant to any other Irish Loan Document; and -67- (e) Any deficiency that exists after disposition of the Subsidiary Borrower Collateral as provided above will be paid immediately by Subsidiary Borrower. Any excess will be returned, without interest and subject to the rights of third Persons, by Agent to Subsidiary Borrower. 9.2 Remedies Cumulative. The rights and remedies of the Lender Group under this Agreement, the other Irish Loan Documents, and all other agreements shall be cumulative. The Lender Group shall have all other rights and remedies not inconsistent herewith as provided by law or in equity. No exercise by the Lender Group of one right or remedy shall be deemed an election, and no waiver by the Lender Group of any Event of Default shall be deemed a continuing waiver. No delay by the Lender Group shall constitute a waiver, election, or acquiescence by it. 10. TAXES AND EXPENSES. If Subsidiary Borrower fails to pay any monies (whether taxes, assessments, insurance premiums, or, in the case of leased properties or assets, rents or other amounts payable under such leases) due to third Persons, or fails to make any deposits or furnish any required proof of payment or deposit, all as required under the terms of this Agreement, then, Agent, in its sole discretion and without prior notice to Subsidiary Borrower, may do any or all of the following: (a) make payment of the same or any part thereof, (b) set up such reserves in Subsidiary Borrower's Loan Account as Agent deems necessary to protect the Lender Group from the exposure created by such failure, or (c) in the case of the failure to comply with Section 6.8 hereof, obtain and maintain insurance policies of the type described in Section 6.8 and take any action with respect to such policies as Agent deems prudent. Any such amounts paid by Agent shall constitute Lender Group Expenses and any such payments shall not constitute an agreement by the Lender Group to make similar payments in the future or a waiver by the Lender Group of any Event of Default under this Agreement. Agent need not inquire as to, or contest the validity of, any such expense, tax, or Lien and the receipt of the usual official notice for the payment thereof shall be conclusive evidence that the same was validly due and owing. 11. WAIVERS; INDEMNIFICATION. 11.1 Demand; Protest; etc. Subsidiary Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and non-payment, non-payment at maturity, release, compromise, settlement, extension, or renewal of documents, instruments, chattel paper, and guarantees at any time held by the Lender Group on which Subsidiary Borrower may in any way be liable. 11.2 [Intentionally omitted]. 11.3 Indemnification. Subsidiary Borrower shall pay, indemnify, defend, and hold the Agent-Related Persons, the Lender-Related Persons with respect to each Lender, each -68- Participant, and each of their respective officers, directors, employees, agents, and attorneys-in-fact (each, an "Indemnified Person") harmless (to the fullest extent permitted by law) from and against any and all claims, demands, suits, actions, investigations, proceedings, and damages, and all reasonable attorneys fees and disbursements and other costs and expenses actually incurred in connection therewith (as and when they are incurred and irrespective of whether suit is brought), at any time asserted against, imposed upon, or incurred by any of them (a) in connection with or as a result of or related to the execution, delivery, enforcement, performance, or administration of this Agreement, any of the other Irish Loan Documents, or the transactions contemplated hereby or thereby, and (b) with respect to any investigation, litigation, or proceeding related to this Agreement, any other Irish Loan Document, or the use of the proceeds of the credit provided hereunder (irrespective of whether any Indemnified Person is a party thereto), or any act, omission, event, or circumstance in any manner related thereto (all the foregoing, collectively, the "Indemnified Liabilities"). The foregoing to the contrary notwithstanding, Subsidiary Borrower shall have no obligation to any Indemnified Person under this Section 11.3 with respect to any Indemnified Liability that a court of competent jurisdiction finally determines to have resulted from the gross negligence or wilful misconduct of such Indemnified Person. This provision shall survive the termination of this Agreement and the repayment of the Obligations. If any Indemnified Person makes any payment to any other Indemnified Person with respect to an Indemnified Liability as to which Subsidiary Borrower was required to indemnify the Indemnified Person receiving such payment, the Indemnified Person making such payment is entitled to be indemnified and reimbursed by Subsidiary Borrower with respect thereto. WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON. 12. NOTICES. Unless otherwise provided in this Agreement, all notices or demands by Subsidiary Borrower or Agent to the other relating to this Agreement or any other Loan Document shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by registered or certified mail (postage prepaid, return receipt requested), overnight courier, electronic mail (at such email addresses as Subsidiary Borrower or Agent, as applicable, may designate to each other in accordance herewith), or telefacsimile to Subsidiary Borrower or Agent, as the case may be, at its address set forth below: If to Subsidiary Borrower: PALM GLOBAL OPERATIONS LTD. c/o Palm, Inc. 5470 Great America Parkway, MS 12106 Santa Clara CA 95052 -69- Attn: Chief Financial Officer Fax No. 408.878.2790 with copies to: GRAY CARY WARE & FREIDENRICH, LLP 3340 Hillview Avenue Palo Alto, CA 94304-1203 Attn: Duc V. Trang, Esq. Fax No. 650.833.2301 If to Agent: FOOTHILL CAPITAL CORPORATION 2450 Colorado Avenue Suite 3000 Santa Monica, California 90404 Attn: Business Finance Division Manager Fax No.: 310.453.7443 with copies to: BROBECK, PHLEGER & HARRISON LLP 550 South Hope Street, Suite 2100 Los Angeles, California 90071 Attn: John Francis Hilson, Esq. Fax No. 213.745.3700 Agent and Subsidiary Borrower may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other party. All notices or demands sent in accordance with this Section 12 shall be deemed received on the earlier of the date of actual receipt or 3 Business Days after the deposit thereof in the mail. Subsidiary Borrower acknowledges and agrees that notices sent by the Lender Group in connection with the exercise of enforcement rights against Collateral shall be deemed sent when deposited in the mail or personally delivered, or, where permitted by law, transmitted by telefacsimile or any other method set forth above. 13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. (a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER UK LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. -70- (b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER UK LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA, OR, AT THE OPTION OF THE AGENT SOLELY, THE COURTS OF IRELAND; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. SUBSIDIARY BORROWER AND THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b). (c) SUBSIDIARY BORROWER AND THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE UK LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. SUBSIDIARY BORROWER AND THE LENDER GROUP REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. 14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS. 14.1 Assignments and Participations. (a) Any Lender may, with the written consent of Agent and, so long as no Event of Default has occurred and is continuing, with the written consent of Subsidiary Borrower (provided that no written consent of Agent or Subsidiary Borrower shall be required in connection with any assignment and delegation by a Lender to an Eligible Transferee), assign and delegate to one or more assignees (each an "Assignee") all, or any ratable part of all, of the Obligations, the Commitments and the other rights and obligations of such Lender hereunder and under the other Irish Loan Documents, in a minimum amount of $1,500,000; provided, however, that Subsidiary Borrower and Agent may continue to deal solely and directly with such Lender in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, together with payment instructions, -71- addresses, and related information with respect to the Assignee, have been given to Subsidiary Borrower and Agent by such Lender and the Assignee, (ii) such Lender and its Assignee have delivered to Subsidiary Borrower and Agent an Assignment and Acceptance in form and substance satisfactory to Agent, and (iii) unless the assignment occurs prior to the date that is 90 days after the Closing Date, the assignor Lender or Assignee has paid to Agent for Agent's separate account a processing fee in the amount of $5,000. Anything contained herein to the contrary notwithstanding, the consent of Agent and Subsidiary Borrower shall not be required (and payment of any fees shall not be required) if such assignment is in connection with any merger, consolidation, sale, transfer, or other disposition of all or any substantial portion of the business or loan portfolio of such Lender and no Lender shall assign or participate all or any portion of its Commitment or portion of the Obligations to a Person which it knows is a direct competitor of Subsidiary Borrower. (b) From and after the date that Agent notifies the assignor Lender (with a copy to Subsidiary Borrower) that it has received an executed Assignment and Acceptance and payment of the above-referenced processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Lender under the Irish Loan Documents, and (ii) the assignor Lender shall, to the extent that rights and obligations hereunder and under the other Irish Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (except with respect to Section 11.3 hereof) and be released from its obligations under this Agreement (and in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement and the other Irish Loan Documents, such Lender shall cease to be a party hereto and thereto), and such assignment shall affect a novation between Subsidiary Borrower and the Assignee. (c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the Assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (1) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Irish Loan Document furnished pursuant hereto, (2) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of Subsidiary Borrower or the performance or observance by Subsidiary Borrower of any of its obligations under this Agreement or any other Irish Loan Document furnished pursuant hereto, (3) such Assignee confirms that it has received a copy of this Agreement, together with such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance, (4) such Assignee will, independently and without reliance upon Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own -72- credit decisions in taking or not taking action under this Agreement, (5) such Assignee appoints and authorizes Agent to take such actions and to exercise such powers under this Agreement as are delegated to Agent, by the terms hereof, together with such powers as are reasonably incidental thereto, and (6) such Assignee agrees that it will perform all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (d) Immediately upon each Assignee's making its processing fee payment under the Assignment and Acceptance and receipt and acknowledgment by Agent of such fully executed Assignment and Acceptance, this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Commitments arising therefrom. The Commitment allocated to each Assignee shall reduce such Commitments of the assigning Lender pro tanto. (e) Any Lender may at any time, with the written consent of Agent, sell to one or more commercial banks, financial institutions, or other Persons not Affiliates of such Lender (a "Participant") participating interests in its Obligations, the Commitment, and the other rights and interests of that Lender (the "Originating Lender") hereunder and under the other Irish Loan Documents (provided that no written consent of Agent shall be required in connection with any sale of any such participating interests by a Lender to an Eligible Transferee); provided, however, that (i) the Originating Lender shall remain a "Lender" for all purposes of this Agreement and the other Irish Loan Documents and the Participant receiving the participating interest in the Obligations, the Commitments, and the other rights and interests of the Originating Lender hereunder shall not constitute a "Lender" hereunder or under the other Irish Loan Documents and the Originating Lender's obligations under this Agreement shall remain unchanged, (ii) the Originating Lender shall remain solely responsible for the performance of such obligations, (iii) Subsidiary Borrower, Agent, and the Lenders shall continue to deal solely and directly with the Originating Lender in connection with the Originating Lender's rights and obligations under this Agreement and the other Irish Loan Documents, (iv) no Lender shall transfer or grant any participating interest under which the Participant has the right to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Irish Loan Document, except to the extent such amendment to, or consent or waiver with respect to this Agreement or of any other Irish Loan Document would (A) extend the final maturity date of the Obligations hereunder in which such Participant is participating, (B) reduce the interest rate applicable to the Obligations hereunder in which such Participant is participating, (C) release all or a material portion of the Collateral or guaranties (except to the extent expressly provided herein or in any of the Irish Loan Documents) supporting the Obligations hereunder in which such Participant is participating, (D) postpone the payment of, or reduce the amount of, the interest or fees payable to such Participant through such Lender, or (E) change the amount or due dates of scheduled principal repayments or prepayments or premiums, and (v) all amounts payable by Subsidiary Borrower hereunder shall be determined as if such Lender -73- had not sold such participation, except that, if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement. The rights of any Participant only shall be derivative through the Originating Lender with whom such Participant participates and no Participant shall have any rights under this Agreement or the other Irish Loan Documents or any direct rights as to the other Lenders, Agent, Subsidiary Borrower, the Collections, the Collateral, or otherwise in respect of the Obligations. No Participant shall have the right to participate directly in the making of decisions by the Lenders among themselves. (f) In connection with any such assignment or participation or proposed assignment or participation, a Lender may disclose all documents and information which it now or hereafter may have relating to Subsidiary Borrower or Subsidiary Borrower's business. 14.2 Successors. This Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties; provided, however, that Subsidiary Borrower may not assign this Agreement or any rights or duties hereunder without the Lenders' prior written consent and any prohibited assignment shall be absolutely void ab initio. No consent to assignment by the Lenders shall release Subsidiary Borrower from its Obligations. A Lender may assign this Agreement and the other UK Loan Documents and its rights and duties hereunder and thereunder pursuant to Section 14.1 hereof and, except as expressly required pursuant to Section 14.1 hereof, no consent or approval by Subsidiary Borrower is required in connection with any such assignment. 15. AMENDMENTS; WAIVERS. 15.1 Amendments and Waivers. No amendment or waiver of any provision of this Agreement or any other Irish Loan Document, and no consent with respect to any departure by Subsidiary Borrower therefrom, shall be effective unless the same shall be in writing and signed by the Required Lenders (or by Agent at the written request of the Required Lenders) and Subsidiary Borrower and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such waiver, amendment, or consent shall, unless in writing and signed by all of the Lenders affected thereby and Subsidiary Borrower, do any of the following: (a) increase or extend any Commitment of any Lender, (b) postpone or delay any date fixed by this Agreement or any other Irish Loan Document for any payment of principal, interest, fees, or other amounts due hereunder or under any other Irish Loan Document, -74- (c) reduce the principal of, or the rate of interest on, any loan or other extension of credit hereunder, or reduce any fees or other amounts payable hereunder or under any other Irish Loan Document, (d) change the percentage of the Commitments that is required to take any action hereunder, (e) amend this Section or any provision of the Agreement providing for consent or other action by all Lenders, (f) release Collateral other than as permitted by Section 16.12, (g) change the definition of "Required Lenders" or "Defaulting Lender Rate", (h) contractually subordinate any of the Agent's Liens, (i) release Subsidiary Borrower from any obligation for the payment of money, (j) change the definition of Borrowing Base or the definitions of Eligible Inventory or Maximum Subsidiary Revolver Amount, or change Section 2.1(b), or (k) amend any of the provisions of Section 16 or Section 3.1. and, provided further, however, that no amendment, waiver or consent shall, unless in writing and signed by Agent, or Swing Lender, as applicable, affect the rights or duties of Agent or Swing Lender, as applicable, under this Agreement or any other Irish Loan Document. The foregoing notwithstanding, any amendment, modification, waiver, consent, termination, or release of, or with respect to, any provision of this Agreement or any other Irish Loan Document that relates only to the relationship of the Lender Group among themselves, and that does not affect the rights or obligations of Subsidiary Borrower, shall not require consent by or the agreement of Subsidiary Borrower. 15.2 Replacement of Holdout Lender. (a) If any action to be taken by the Lender Group or Agent hereunder requires the unanimous consent, authorization, or agreement of all Lenders, and a Lender ("Holdout Lender") fails to give its consent, authorization, or agreement, then Agent, upon at least 5 Business Days prior irrevocable notice to the Holdout Lender, may permanently replace the Holdout Lender with one or more substitute Lenders (each, a "Replacement Lender"), and the Holdout Lender shall have no right to refuse to be replaced hereunder. Such notice to replace the Holdout Lender shall specify an effective date for such replacement, which date shall not be later than 15 Business Days after the date such notice is given. -75- (b) Prior to the effective date of such replacement, the Holdout Lender and each Replacement Lender shall execute and deliver an Assignment and Acceptance Agreement, subject only to the Holdout Lender being repaid its share of the outstanding Obligations (including an assumption of its Pro Rata Share of the Risk Participation Liability) without any premium or penalty of any kind whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver any such Assignment and Acceptance Agreement prior to the effective date of such replacement, the Holdout Lender shall be deemed to have executed and delivered such Assignment and Acceptance Agreement. The replacement of any Holdout Lender shall be made in accordance with the terms of Section 14.1. Until such time as the Replacement Lenders shall have acquired all of the Obligations, the Commitments, and the other rights and obligations of the Holdout Lender hereunder and under the other Irish Loan Documents, the Holdout Lender shall remain obligated to make the Holdout Lender's Pro Rata Share of Advances, and to purchase a participation in each Letter of Credit, in an amount equal to its Pro Rata Share of the Risk Participation Liability of such Letter of Credit. 15.3 No Waivers; Cumulative Remedies. No failure by Agent or any Lender to exercise any right, remedy, or option under this Agreement or any other Irish Loan Document, or delay by Agent or any Lender in exercising the same, will operate as a waiver thereof. No waiver by Agent or any Lender will be effective unless it is in writing, and then only to the extent specifically stated. No waiver by Agent or any Lender on any occasion shall affect or diminish Agent's and each Lender's rights thereafter to require strict performance by Subsidiary Borrower of any provision of this Agreement. Agent's and each Lender's rights under this Agreement and the other Irish Loan Documents will be cumulative and not exclusive of any other right or remedy the Agent or any Lender may have. 16. AGENT; THE LENDER GROUP. 16.1 Appointment and Authorization of Agent. Each Lender hereby designates and appoints Foothill as its representative under this Agreement and the other Irish Loan Documents and each Lender hereby irrevocably authorizes Agent to take such action on its behalf under the provisions of this Agreement and each other Irish Loan Document and to exercise such powers and perform such duties as are expressly delegated to Agent by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Agent agrees to act as such on the express conditions contained in this Section 16. The provisions of this Section 16 are solely for the benefit of Agent, and the Lenders, and Subsidiary Borrower shall have no rights as a third party beneficiary of any of the provisions contained herein. Any provision to the contrary contained elsewhere in this Agreement or in any other UK Loan Document notwithstanding, Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Irish Loan Document or otherwise exist against Agent; -76- it being expressly understood and agreed that the use of the word "Agent" is for convenience only, that Foothill is merely the representative of the Lenders, and only has the contractual duties set forth herein. Except as expressly otherwise provided in this Agreement, Agent shall have and may use its sole discretion with respect to exercising or refraining from exercising any discretionary rights or taking or refraining from taking any actions that Agent expressly is entitled to take or assert under or pursuant to this Agreement and the other Irish Loan Documents. Without limiting the generality of the foregoing, or of any other provision of the Irish Loan Documents that provides rights or powers to Agent, Lenders agree that Agent shall have the right to exercise the following powers as long as this Agreement remains in effect: (a) maintain, in accordance with its customary business practices, ledgers and records reflecting the status of the Obligations, the Collateral, the Collections, and related matters, (b) execute or file any and all financing or similar statements or notices, amendments, renewals, supplements, documents, instruments, proofs of claim, notices and other written agreements with respect to the Irish Loan Documents, (c) make Advances, for itself or on behalf of Lenders as provided in the Irish Loan Documents, (d) exclusively receive, apply, and distribute the Collections as provided in the Irish Loan Documents, (e) open and maintain such bank accounts and cash management arrangements as Agent deems necessary and appropriate in accordance with the Irish Loan Documents for the foregoing purposes with respect to the Collateral and the Collections, (f) perform, exercise, and enforce any and all other rights and remedies of the Lender Group with respect to Subsidiary Borrower, the Obligations, the Collateral, the Collections, or otherwise related to any of same as provided in the Irish Loan Documents, and (g) incur and pay such Lender Group Expenses as Agent may deem necessary or appropriate for the performance and fulfilment of its functions and powers pursuant to the Irish Loan Documents. Documentation Agent, in its capacity as Documentation Agent, shall have no duties under the Irish Loan Documents. Syndication Agent, in its capacity as Syndication Agent, shall have no duties under the Irish Loan Documents. 16.2 Delegation of Duties. Agent may execute any of its duties under this Agreement or any other Irish Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects as long as such selection was made without gross negligence or wilful misconduct. 16.3 Liability of Agent. None of the Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Irish Loan Document or the transactions contemplated hereby (except for its own gross negligence or wilful misconduct), or (ii) be responsible in any manner to any of the Lenders for any recital, statement, representation or warranty made by Subsidiary Borrower or Affiliate of Subsidiary Borrower, or any officer or director thereof, contained in this Agreement or in any other Irish Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by Agent -77- under or in connection with, this Agreement or any other Irish Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Irish Loan Document, or for any failure of Subsidiary Borrower or any other party to any Irish Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Irish Loan Document, or to inspect the Books or properties of Subsidiary Borrower or the books or records or properties of any of Subsidiary Borrower's Subsidiaries or Affiliates. 16.4 Reliance by Agent. Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent, or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to Borrower or counsel to any Lender), independent accountants and other experts selected by Agent. Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Irish Loan Document unless Agent shall first receive such advice or concurrence of the Lenders as it deems appropriate until such instructions are received, Agent shall act, or refrain from acting, as it deems advisable. If Agent so requests, it shall first be indemnified to its reasonable satisfaction by Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Irish Loan Document in accordance with a request or consent of the Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders. 16.5 Notice of Default or Event of Default. Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest, fees, and expenses required to be paid to Agent for the account of the Lenders, except with respect to Events of Default of which Agent has actual knowledge, unless Agent shall have received written notice from a Lender or Subsidiary Borrower referring to this Agreement, describing such Default or Event of Default, and stating that such notice is a "notice of default." Agent promptly will notify the Lenders of its receipt of any such notice or of any Event of Default of which Agent has actual knowledge. If any Lender obtains actual knowledge of any Event of Default, such Lender promptly shall notify the other Lenders and Agent of such Event of Default. Each Lender shall be solely responsible for giving any notices to its Participants, if any. Subject to Section 16.4, Agent shall take such action with respect to such Default or Event of Default as may be requested by the Required Lenders in accordance with Section 9; provided, however, that unless and until Agent has received any such request, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable. -78- 16.6 Credit Decision. Each Lender acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by Agent hereinafter taken, including any review of the affairs of Subsidiary Borrower and its Subsidiaries or Affiliates, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender. Each Lender represents to Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of Subsidiary Borrower and any other Person (other than the Lender Group) party to a Irish Loan Document, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to Subsidiary Borrower. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Irish Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of Subsidiary Borrower and any other Person (other than the Lender Group) party to a Irish Loan Document. Except for notices, reports, and other documents expressly herein required to be furnished to the Lenders by Agent, Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of Subsidiary Borrower and any other Person party to an Irish Loan Document that may come into the possession of any of the Agent-Related Persons. 16.7 Costs and Expenses; Indemnification. Agent may incur and pay Lender Group Expenses to the extent Agent reasonably deems necessary or appropriate for the performance and fulfilment of its functions, powers, and obligations pursuant to the Irish Loan Documents, including court costs, reasonable attorneys fees and expenses, costs of collection by outside collection agencies and auctioneer fees and costs of security guards or insurance premiums paid to maintain the Collateral, whether or not Subsidiary Borrower is obligated to reimburse Agent or Lenders for such expenses pursuant to the Loan Agreement or otherwise. Agent is authorized and directed to deduct and retain sufficient amounts from Collections received by Agent to reimburse Agent for such out-of-pocket costs and expenses prior to the distribution of any amounts to Lenders. In the event Agent is not reimbursed for such costs and expenses from Collections received by Agent, each Lender hereby agrees that it is and shall be obligated to pay to or reimburse Agent for the amount of such Lender's Pro Rata Share thereof. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of Subsidiary Borrower and without limiting the obligation of Subsidiary Borrower to do so), according to their Pro Rata Shares, from and against any and all Indemnified Liabilities; provided, however, that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities resulting solely -79- from such Person's gross negligence or wilful misconduct nor shall any Lender be liable for the obligations of any Defaulting Lender in failing to make an Advance or other extension of credit hereunder. Without limitation of the foregoing, each Lender shall reimburse Agent upon demand for such Lender's ratable share of any costs or out-of-pocket expenses (including attorneys fees and expenses) incurred by Agent in connection with the preparation, execution, delivery, administration, modification, amendment, or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Irish Loan Document, or any document contemplated by or referred to herein, to the extent that Agent is not reimbursed for such expenses by or on behalf of Subsidiary Borrower. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of Agent. 16.8 Agent in Individual Capacity. Foothill and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in, and generally engage in any kind of banking, trust, financial advisory, underwriting, or other business with Subsidiary Borrower and its Subsidiaries and Affiliates and any other Person (other than the Lender Group) party to any Irish Loan Documents as though Foothill were not Agent hereunder, and, in each case, without notice to or consent of the other members of the Lender Group. The other members of the Lender Group acknowledge that, pursuant to such activities, Foothill or its Affiliates may receive information regarding Subsidiary Borrower or its Affiliates and any other Person (other than the Lender Group) party to any Irish Loan Documents that is subject to confidentiality obligations in favor of Subsidiary Borrower or such other Person and that prohibit the disclosure of such information to the Lenders, and the Lenders acknowledge that, in such circumstances (and in the absence of a waiver of such confidentiality obligations, which waiver Agent will use its reasonable best efforts to obtain), Agent shall not be under any obligation to provide such information to them. The terms "Lender" and "Lenders" include Foothill in its individual capacity. 16.9 Successor Agent. Agent may resign as Agent upon 45 days notice to the Lenders. If Agent resigns under this Agreement, the Required Lenders shall appoint a successor Agent for the Lenders. If no successor Agent is appointed prior to the effective date of the resignation of Agent, Agent may appoint, after consulting with the Lenders, a successor Agent. If Agent has materially breached or failed to perform any material provision of this Agreement or of applicable law, the Required Lenders may agree in writing to remove and replace Agent with a successor Agent from among the Lenders. In any such event, upon the acceptance of its appointment as successor Agent hereunder, such successor Agent shall succeed to all the rights, powers, and duties of the retiring Agent and the term "Agent" shall mean such successor Agent and the retiring Agent's appointment, powers, and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 16 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor Agent has accepted appointment as Agent by the date which is 45 days following a retiring Agent's -80- notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of Agent hereunder until such time, if any, as the Lenders appoint a successor Agent as provided for above. 16.10 Lender in Individual Capacity. Any Lender and its respective Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with Subsidiary Borrower and its Subsidiaries and Affiliates and any other Person (other than the Lender Group) party to any Irish Loan Documents as though such Lender were not a Lender hereunder without notice to or consent of the other members of the Lender Group. The other members of the Lender Group acknowledge that, pursuant to such activities, such Lender and its respective Affiliates may receive information regarding Subsidiary Borrower or its Affiliates and any other Person (other than the Lender Group) party to any Irish Loan Documents that is subject to confidentiality obligations in favor of Subsidiary Borrower or such other Person and that prohibit the disclosure of such information to the Lenders, and the Lenders acknowledge that, in such circumstances (and in the absence of a waiver of such confidentiality obligations, which waiver such Lender will use its reasonable best efforts to obtain), such Lender not shall be under any obligation to provide such information to them. With respect to the Swing Loans and Agent Advances, Swing Lender shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the sub-agent of Agent. 16.11 Withholding Taxes. (a) If any Lender is a "foreign corporation, partnership or trust" within the meaning of the IRC and such Lender claims exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or 1442 of the IRC, such Lender agrees with and in favor of Agent and Subsidiary Borrower, to deliver to Agent and Subsidiary Borrower: (i) if such Lender claims an exemption from withholding tax pursuant to its portfolio interest exception, (a) a statement of the Lender, signed under penalty of perjury, that it is not a (I) a "bank" as described in Section 881(c)(3)(A) of the IRC, (II) a 10% shareholder (within the meaning of Section 881(c)(3)(B) of the IRC), or (III) a controlled foreign corporation described in Section 881(c)(3)(C) of the IRC, and (B) a properly completed IRS Form W-8BEN, before the first payment of any interest under this Agreement and at any other time reasonably requested by Agent or Subsidiary Borrower; (ii) if such Lender claims an exemption from, or a reduction of, withholding tax under a United States tax treaty, properly completed IRS Form W-8BEN before the first payment of any interest under this Agreement and at any other time reasonably requested by Agent or Subsidiary Borrower; -81- (iii) if such Lender claims that interest paid under this Agreement is exempt from United States withholding tax because it is effectively connected with a United States trade or business of such Lender, two properly completed and executed copies of IRS Form W-8ECI before the first payment of any interest is due under this Agreement and at any other time reasonably requested by Agent or Subsidiary Borrower; (iv) such other form or forms as may be required under the IRC or other laws of the United States as a condition to exemption from, or reduction of, United States withholding tax. Such Lender agrees promptly to notify Agent and Subsidiary Borrower of any change in circumstances which would modify or render invalid any claimed exemption or reduction. (b) If any Lender claims exemption from, or reduction of, withholding tax under a United States tax treaty by providing IRS Form W-8BEN and such Lender sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of Subsidiary Borrower to such Lender, such Lender agrees to notify Agent of the percentage amount in which it is no longer the beneficial owner of Obligations of Subsidiary Borrower to such Lender. To the extent of such percentage amount, Agent will treat such Lender's IRS Form W-8BEN as no longer valid. (c) If any Lender is entitled to a reduction in the applicable withholding tax, Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable withholding tax after taking into account such reduction. If the forms or other documentation required by subsection (a) of this Section are not delivered to Agent, then Agent may withhold from any interest payment to such Lender not providing such forms or other documentation an amount equivalent to the applicable withholding tax. (d) If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Lender shall indemnify and hold Agent harmless for all amounts paid, directly or indirectly, by Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to Agent under this Section, together with all costs and expenses (including attorneys fees and expenses). The obligation of the Lenders under this subsection shall survive the payment of all Obligations and the resignation or replacement of Agent. If the IRS or any other Governmental Authority of the United States or any political subdivision or taxing authority thereof or therein asserts a claim that Subsidiary Borrower did not properly withhold tax from amounts paid to Agent or Lender, Agent shall indemnify and hold Subsidiary Borrower harmless for all amounts paid, directly or indirectly, by Subsidiary Borrower as tax or -82- otherwise, including penalties, interest and related costs and expenses in connection with such claim. If any of the Lenders fail to properly report and file taxes imposed with respect to any payments made hereunder and as a result of such failure the IRS or any other Governmental Authority of the United States or any political subdivision or taxing authority thereof or therein asserts a claim that Subsidiary Borrower did not properly withhold tax from amounts paid to Agent or any Lender hereunder, Agent shall indemnify and hold Subsidiary Borrower harmless for all amounts paid, directly or indirectly, by Subsidiary Borrower as tax or otherwise, including penalties, interest and related costs and expenses in connection with such claim. The obligation of Agent to Subsidiary Borrower under this subsection shall survive the payment of all Obligations and the resignation or replacement of Agent. (e) All payments made by Subsidiary Borrower hereunder or under any note will be made without setoff, counterclaim, or other defense, except as required by applicable law. All such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction (other than the United States) or by any political subdivision or taxing authority thereof or therein (other than of the United States) with respect to such payments (but excluding, any tax imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein (i) measured by or based on the net income or net profits of a Lender, or (ii) to the extent that such tax results from a change in the circumstances of the Lender, including a change in the residence, place of organization, or principal place of business of the Lender, or a change in the branch or lending office of the Lender participating in the transactions set forth herein) and all interest, penalties or similar liabilities with respect thereto (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges, including, for the avoidance of doubt, Irish deduction or withholding tax, being referred to collectively as "Taxes"). If any Taxes are so levied or imposed or required to be deducted or withheld, Subsidiary Borrower agrees to pay the full amount of such Taxes, and such additional amounts (the "Gross Up Amount") as may be necessary so that every payment of all amounts due under this Agreement or under any note, including any amount paid pursuant to this Section 16.11(e) after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein; provided, however, that Subsidiary Borrower shall not be required to increase any such amounts payable to Agent or any Lender (i) that is not organized under the laws of the United States, if such Person fails to comply with the other requirements of this Section 16.11, or (ii) if the increase in such amount payable results from Agent's or such Lender's own wilful misconduct or gross negligence. Subsidiary Borrower will furnish to Agent as promptly as possible after the date the payment of any Taxes is due pursuant to applicable law certified copies of tax receipts evidencing such payment by Subsidiary Borrower. (f) Without prejudice to the generality of the provisions in Section 16.11(e) above, the Lenders, the Agent and Subsidiary Borrower shall cooperate in -83- completing any procedural formalities necessary to make an application for Subsidiary Borrower to obtain authorisation to make its payment hereunder or under any note without deduction or withholding for or on account of applicable Taxes due on account of the making of a payment hereunder. In the period prior to the obtaining of such authorisation (such period not to exceed 6 months from the date of entering into this Agreement), any interest which accrues to the Lenders pursuant to the terms of this Agreement shall not be paid until such time as such authorisation is obtained, but shall then be paid in full. In circumstances where 6 months has elapsed since the date of entering into this Agreement and no such authorisation (for whatever reason other than failure by a Lender or the Agent to cooperate in completing any procedural formalities necessary for making an application under this Section 16.11(f)) has been obtained, the Subsidiary Borrower shall pay in full any interest which has accrued to the Lenders pursuant to the terms of this Agreement together with the Gross Up Amount and the provisions of Section 16.11(e) shall apply. Any documentation to be provided (i) under this Section 16.11(f) in order to obtain the relevant authorisation hereunder or (ii) pursuant to the requirements set forth in the definition of Eligible Transferee in Section 1.1 shall be provided or updated within 60 days of a written request by Subsidiary Borrower. If any Lender fails to provide or update the relevant documentation within such time period, the Gross Up Amount under Section 16.11(e) shall not be payable to the extent such Gross Up Amount obligation arises from the failure by a Lender to provide or update such documentation. (g) If Agent shall have determined and shall so advise the Subsidiary Borrower that the introduction of, or a change in, any applicable law or regulation or in the interpretation thereof by any governmental or other regulatory authority charged with the administration thereof or by any court of competent jurisdiction, or compliance by the Lender Group (as the case may be) with any request or directive from any central bank or other authority (whether having the force of law or not), make it or makes it apparent that it is unlawful for the Lender Group to give effect to some or all of its obligations as contemplated by this Agreement, then Agent shall forthwith give notice thereof to the Subsidiary Borrower specifying the obligations whose performance is unlawful or is thereby prevented and all amounts outstanding, including accrued interest, under this Agreement that must be re-paid to avoid such unlawfulness shall become immediately due and payable and shall be paid on demand to Agent on behalf of the Lender Group. (h) If by reason of (1) the introduction of or any change in or in the interpretation of any law or regulation and/or (2) compliance by the Lender Group with any present or future request or directive from any central bank or other fiscal, monetary or other authority (whether having the force of law or not) including in particular (but without prejudice to the generality of the foregoing) any reserve asset, special deposit or similar requirements, (i) the Lender Group incurs a new cost as a result of its having entered into and/or performing its obligations under this Agreement and/or -84- assuming or maintaining a commitment under this Agreement and/or its making available the Advances; (ii) the Lender Group is unable to obtain the rate of return on its overall capital which it would have been able to achieve but for its entering into and/or performing its obligations and/or assuming or maintaining a commitment under this Agreement; (iii) there is any increase in the cost to the Lender Group of funding or maintaining all or any of the Advances; or (iv) the Lender Group becomes liable to make any payment on account of tax, levy, duty, charge, fee, deduction or otherwise (not being a tax imposed on its overall net income by the jurisdiction of its incorporation) on or calculated by reference to the Advances and/or any sum received or receivable by it hereunder, then the Subsidiary Borrower shall from time to time on demand by Agent, pay to the Agent on behalf of the Lender Group amounts sufficient to indemnify the Lender Group against, as the case may be, (1) such new cost, (2) such reduction in the rate of return (or such proportion of such reduction as is, in Agent's opinion attributable to the Lender Group's obligations hereunder), (3) such increased cost (or such proportion of such increased cost as is in Agent's opinion attributable to the Lender Group's funding or maintaining advances hereunder) or (4) such liability. Agent shall provide the Subsidiary Borrower with written evidence of the determination of such costs and/or liabilities, which determination shall be conclusive and binding save for manifest error. 16.12 Collateral Matters. (a) The Lenders hereby irrevocably authorize Agent, at its option and in its sole discretion, to release any Lien on any Collateral (i) upon the termination of the Commitments and payment and satisfaction in full by Subsidiary Borrower of all Obligations, (ii) constituting property being sold or disposed of if a release is required or desirable in connection therewith and if Subsidiary Borrower certifies to Agent that the sale or disposition is permitted under Section 7.4 of this Agreement or the other Irish Loan Documents (and Agent may rely conclusively on any such certificate, without further inquiry), (iii) constituting property in which Subsidiary Borrower owned no interest at the time the security interest was granted or at any time thereafter, or (iv) constituting property leased to Subsidiary Borrower under a lease that has expired or is terminated in a transaction permitted under this Agreement. Except as provided above, Agent will not execute and deliver a release of any Lien on any Collateral without the prior written authorization of (y) if the release is of all or substantially all of the Collateral, all of the Lenders, or (z) otherwise, the Required Lenders. Upon request by Agent or Subsidiary Borrower at any time, the Lenders will confirm in writing Agent's authority to release any such Liens on particular -85- types or items of Collateral pursuant to this Section 16.12; provided, however, that (1) Agent shall not be required to execute any document necessary to evidence such release on terms that, in Agent's opinion, would expose Agent to liability or create any obligation or entail any consequence other than the release of such Lien without recourse, representation, or warranty, and (2) such release shall not in any manner discharge, affect, or impair the Obligations or any Liens (other than those expressly being released) upon (or obligations of Subsidiary Borrower in respect of) all interests retained by Subsidiary Borrower, including, the proceeds of any sale, all of which shall continue to constitute part of the Collateral. (b) Agent shall have no obligation whatsoever to any of the Lenders to assure that the Collateral exists or is owned by Subsidiary Borrower or is cared for, protected, or insured or has been encumbered, or that the Agent's Liens have been properly or sufficiently or lawfully created, perfected, protected, or enforced or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent pursuant to any of the Irish Loan Documents, it being understood and agreed that in respect of the Collateral, or any act, omission, or event related thereto, subject to the terms and conditions contained herein, Agent may act in any manner it may deem appropriate, in its sole discretion given Agent's own interest in the Collateral in its capacity as one of the Lenders and that Agent shall have no other duty or liability whatsoever to any Lender as to any of the foregoing, except as otherwise provided herein. 16.13 Restrictions on Actions by Lenders; Sharing of Payments. (a) Each of the Lenders agrees that it shall not, without the express consent of Agent, and that it shall, to the extent it is lawfully entitled to do so, upon the request of Agent, set off against the Obligations, any amounts owing by such Lender to Subsidiary Borrower or any deposit accounts of Subsidiary Borrower now or hereafter maintained with such Lender. Each of the Lenders further agrees that it shall not, unless specifically requested to do so by Agent, take or cause to be taken any action, including, the commencement of any legal or equitable proceedings, to foreclose any Lien on, or otherwise enforce any security interest in, any of the Collateral the purpose of which is, or could be, to give such Lender any preference or priority against the other Lenders with respect to the Collateral. (b) If, at any time or times any Lender shall receive (i) by payment, foreclosure, setoff, or otherwise, any proceeds of Collateral or any payments with respect to the Obligations arising under, or relating to, this Agreement or the other Irish Loan Documents, except for any such proceeds or payments received by such Lender from Agent pursuant to the terms of this Agreement, or (ii) payments from Agent in excess of such Lender's ratable portion of all such distributions by Agent, such Lender promptly shall (1) turn the same over to Agent, in kind, and with such endorsements as may be required to negotiate the same to Agent, or in immediately available funds, as applicable, for the account of all of the Lenders and for application to the Obligations in accordance with the applicable -86- provisions of this Agreement, or (2) purchase, without recourse or warranty, an undivided interest and participation in the Obligations owed to the other Lenders so that such excess payment received shall be applied ratably as among the Lenders in accordance with their Pro Rata Shares; provided, however, that if all or part of such excess payment received by the purchasing party is thereafter recovered from it, those purchases of participations shall be rescinded in whole or in part, as applicable, and the applicable portion of the purchase price paid therefor shall be returned to such purchasing party, but without interest except to the extent that such purchasing party is required to pay interest in connection with the recovery of the excess payment. 16.14 [Intentionally omitted]. 16.15 Payments by Agent to the Lenders. All payments to be made by Agent to the Lenders shall be made by bank wire transfer or internal transfer of immediately available funds pursuant to such wire transfer instructions as each party may designate for itself by written notice to Agent. Concurrently with each such payment, Agent shall identify whether such payment (or any portion thereof) represents principal, premium, or interest of the Obligations. 16.16 Concerning the Collateral and Related UK Loan Documents. Each member of the Lender Group authorizes and directs Agent to enter into this Agreement and the other Irish Loan Documents relating to the Collateral, for the benefit of the Lender Group. Each member of the Lender Group agrees that any action taken by Agent in accordance with the terms of this Agreement or the other Irish Loan Documents relating to the Collateral and the exercise by Agent of its powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all of the Lenders. 16.17 Field Audits and Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports and Information. By becoming a party to this Agreement, each Lender: (a) is deemed to have requested that Agent furnish such Lender, promptly after it becomes available, a copy of each field audit or examination report (each a "Report" and collectively, "Reports") prepared by Agent, and Agent shall so furnish each Lender with such Reports, (b) expressly agrees and acknowledges that Agent does not (i) make any representation or warranty as to the accuracy of any Report, and (ii) shall not be liable for any information contained in any Report, (c) expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that Agent or other party performing any audit or examination will inspect only specific information regarding Subsidiary Borrower and will -87- rely significantly upon the Books, as well as on representations of Subsidiary Borrower's personnel, (d) agrees to keep all Reports and other material, non-public information regarding Subsidiary Borrower and its Subsidiaries and their operations, assets, and existing and contemplated business plans in a confidential manner; it being understood and agreed by Subsidiary Borrower that in any event such Lender may make disclosures (a) to counsel for and other advisors, accountants, and auditors to such Lender, (b) reasonably required by any bona fide potential or actual Assignee or Participant in connection with any contemplated or actual assignment or transfer by such Lender of an interest herein or any participation interest in such Lender's rights hereunder, (c) of information that has become public by disclosures made by Persons other than such Lender, its Affiliates, assignees, transferees, or Participants, or (d) as required or requested by any court, governmental or administrative agency, pursuant to any subpoena or other legal process, or by any law, statute, regulation, or court order; provided, however, that, unless prohibited by applicable law, statute, regulation, or court order, such Lender shall notify Subsidiary Borrower of any request by any court, governmental or administrative agency, or pursuant to any subpoena or other legal process for disclosure of any such non-public material information concurrent with, or where practicable, prior to the disclosure thereof, and (e) without limiting the generality of any other indemnification provision contained in this Agreement, agrees: (i) to hold Agent and any other Lender preparing a Report harmless from any action the indemnifying Lender may take or conclusion the indemnifying Lender may reach or draw from any Report in connection with any loans or other credit accommodations that the indemnifying Lender has made or may make to Subsidiary Borrower, or the indemnifying Lender's participation in, or the indemnifying Lender's purchase of, a loan or loans of Subsidiary Borrower, and (ii) to pay and protect, and indemnify, defend and hold Agent, and any such other Lender preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs, expenses, and other amounts (including, attorneys fees and costs) incurred by Agent and any such other Lender preparing a Report as the direct or indirect result of any third parties who might obtain all or part of any Report through the indemnifying Lender. In addition to the foregoing: (x) any Lender may from time to time request of Agent in writing that Agent provide to such Lender a copy of any report or document provided by Subsidiary Borrower to Agent that has not been contemporaneously provided by Subsidiary Borrower to such Lender, and, upon receipt of such request, Agent promptly shall provide a copy of same to such Lender, (y) to the extent that Agent is entitled, under any provision of the UK Loan Documents, to request additional reports or information from Subsidiary Borrower, any Lender may, from time to time, reasonably request Agent to exercise such right as specified in such Lender's notice to Agent, whereupon Agent promptly shall request of Subsidiary Borrower the additional reports or information reasonably specified by such Lender, and, upon receipt thereof from Subsidiary Borrower, Agent promptly shall provide a -88- copy of same to such Lender, and (z) any time that Agent renders to Subsidiary Borrower a statement regarding the Loan Account, Agent shall send a copy of such statement to each Lender. 16.18 Several Obligations; No Liability. Notwithstanding that certain of the Irish Loan Documents now or hereafter may have been or will be executed only by or in favor of Agent in its capacity as such, and not by or in favor of the Lenders, any and all obligations on the part of Agent (if any) to make any credit available hereunder shall constitute the several (and not joint) obligations of the respective Lenders on a ratable basis, according to their respective Commitments, to make an amount of such credit not to exceed, in principal amount, at any one time outstanding, the amount of their respective Commitments. Nothing contained herein shall confer upon any Lender any interest in, or subject any Lender to any liability for, or in respect of, the business, assets, profits, losses, or liabilities of any other Lender. Each Lender shall be solely responsible for notifying its Participants of any matters relating to the Irish Loan Documents to the extent any such notice may be required, and no Lender shall have any obligation, duty, or liability to any Participant of any other Lender. Except as provided in Section 16.7, no member of the Lender Group shall have any liability for the acts or any other member of the Lender Group. No Lender shall be responsible to Subsidiary Borrower or any other Person for any failure by any other Lender to fulfill its obligations to make credit available hereunder, nor to advance for it or on its behalf in connection with its Commitment, nor to take any other action on its behalf hereunder or in connection with the financing contemplated herein. 16.19 Legal Representation of Agent. In connection with the negotiation, drafting, and execution of this Agreement and the other Irish Loan Documents, or in connection with future legal representation relating to loan administration, amendments, modifications, waivers, or enforcement of remedies, Brobeck, Phleger & Harrison LLP ("Brobeck") only has represented and only shall represent Foothill in its capacity as Agent and as a Lender. Each other Lender hereby acknowledges that Brobeck does not represent it in connection with any such matters. 17. GENERAL PROVISIONS. 17.1 Effectiveness. This Agreement shall be binding and deemed effective when executed by Subsidiary Borrower, Agent, and each Lender whose signature is provided for on the signature pages hereof. 17.2 Section Headings. Headings and numbers have been set forth herein for convenience only. Unless the contrary is compelled by the context, everything contained in each Section applies equally to this entire Agreement. 17.3 Interpretation. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed against the Lender Group or Subsidiary Borrower, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by -89- all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to accomplish fairly the purposes and intentions of all parties hereto. 17.4 Severability of Provisions. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision. 17.5 Amendments in Writing. This Agreement only can be amended by a writing signed by Agent (on behalf of the requisite Lenders) and Subsidiary Borrower. 17.6 Counterparts; Telefacsimile Execution. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement. Delivery of an executed counterpart of this Agreement by telefacsimile shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by telefacsimile also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement. The foregoing shall apply to each other Irish Loan Document mutatis mutandis. 17.7 Revival and Reinstatement of Obligations. If the incurrence or payment of the Obligations by Subsidiary Borrower or the transfer to the Lender Group of any property should for any reason subsequently be declared to be void or voidable under any law, including any state or federal law relating to creditors' rights, including provisions of the Bankruptcy Code relating to fraudulent conveyances, preferences, or other voidable or recoverable payments of money or transfers of property (collectively, a "Voidable Transfer"), and if the Lender Group is required to repay or restore, in whole or in part, any such Voidable Transfer, or elects to do so upon the reasonable advice of its counsel, then, as to any such Voidable Transfer, or the amount thereof that the Lender Group is required or elects to repay or restore, and as to all reasonable costs, expenses, and attorneys fees of the Lender Group related thereto, the liability of Subsidiary Borrower automatically shall be revived, reinstated, and restored and shall exist as though such Voidable Transfer had never been made. 17.8 Integration. This Agreement, together with the other Irish Loan Documents, reflects the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement, oral or written, before the date hereof. 17.9 Confidentiality. Except as otherwise provided in this Agreement, Agent and each of the Lenders shall not disclose any Confidential Information to any Person without the consent of Subsidiary Borrower, other than (a) to Agent's or a Lender's Affiliates and their officers, directors, employees, agents and advisors and to actual or prospective assignees and -90- participants, and then only on a confidential basis; (b) as required by any law, rule, or regulation or judicial process; and (c) as requested or required by any state, federal, or foreign authority or examiner regulating Agent or such Lender. If Agent or a Lender is required by any law, rule, or regulation or judicial process to disclose any Confidential Information, to the extent permitted by applicable law, it shall promptly give notice to Subsidiary Borrower so that Subsidiary Borrower may seek a protective order or other appropriate remedy. If Subsidiary Borrower does not obtain such a protective order or other remedy, to the extent permitted by applicable law, Agent or the Lender, as applicable, will endeavor to furnish only that portion of the Confidential Information that it reasonably believes to be legally required. [Signature page to follow.] -91- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the date first above written. PALM GLOBAL OPERATIONS LTD., a corporation organized under the laws of Ireland By: /s/ Judy Bruner --------------------------------------------------- Title: Director FOOTHILL CAPITAL CORPORATION, a California corporation, as Agent and as a Lender By: /s/ John Nocita --------------------------------------------------- Title: Vice President HELLER FINANCIAL, INC., a Delaware corporation, as Syndication Agent and as a Lender By: /s/ Heller Financial, Inc. --------------------------------------------------- Title: Vice President THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation, as Documentation Agent and as a Lender By: /s/ The CIT Group/Business Credit, Inc. --------------------------------------------------- Title: Vice President -92- EXHIBIT A-1 ----------- FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT This ASSIGNMENT AND ACCEPTANCE AGREEMENT ("Assignment Agreement") is entered into as of _____________ between __________________ ("Assignor") and _________________ ("Assignee"). Reference is made to the Agreement described in Item 2 of Annex I annexed hereto (the "Loan Agreement"). Capitalized terms used - ------ ------- herein and not otherwise defined shall have the meanings ascribed to them in the Loan Agreement. 1. In accordance with the terms and conditions of Section 14 of the Loan Agreement, the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, that interest in and to the Assignor's rights and obligations under the Irish Loan Documents as of the date hereof with respect to the Obligations owing to the Assignor, and Assignor's portion of the Total Commitments, Commitments to make Advances, and the sub-portion of Commitments to participate in Letters of Credit, all as specified in Item 4.b and Item 4.c of Annex I. After giving effect to such sale -------- -------- ------- and assignment, the Assignee's amount and portion of the Total Commitments, Commitments to make Advances, and the sub-portion of Commitments to participate in Letters of Credit will be as set forth in Item 4.d and Item 4.e of Annex I. -------- -------- ------- 2. The Assignor (a) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (b) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Irish Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Irish Loan Documents or any other instrument or document furnished pursuant thereto; and (c) makes no representation or warranty and assumes no responsibility with respect to the financial condition of Subsidiary Borrower or any of its Subsidiaries or the performance or observance by Subsidiary Borrower or any of its Subsidiaries of any of its obligations under the Irish Loan Documents or any other instrument or document furnished pursuant thereto. 3. The Assignee (a) confirms that it has received copies of the Loan Agreement and the other Irish Loan Documents, together with copies of the financial statements referred to therein and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment Agreement; (b) agrees that it will, independently and without reliance, as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Irish Loan Documents; (c) confirms that it is eligible as an assignee under the terms of the Loan Agreement; (d) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Irish Loan Documents as are delegated to Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (e) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Irish Loan Documents are required to be performed by it as a Lender [and (f) attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee's status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Loan Agreement or such other documents as are necessary to indicate that all such payments are subject to such rates at a rate reduced by an applicable tax treaty.] 4. Following the execution of this Assignment Agreement by the Assignor and Assignee, it will be delivered by the Assignor to the Agent for recording by the Agent. The effective date of this Assignment Agreement (the "Settlement Date") shall be the later of (a) the date of the execution hereof by the Assignor and the Assignee, the payment by Assignor or Assignee to Agent for Agent's sole and separate account a processing fee in the amount of $5,000, and the receipt of any required consent of the Agent, and (b) the date specified in Item 5 of ------ Annex I. Agent shall use its best efforts to provide Subsidiary Borrower written - ------- notice of the sale and assignment contemplated by this Assignment Agreement within five (5) days of the Settlement Date. 5. Upon recording by the Agent, as of the Settlement Date, (a) the Assignee shall be a party to the Loan Agreement and, to the extent of the interest assigned pursuant to this Assignment Agreement, have the rights and obligations of a Lender thereunder and under the other Irish Loan Documents, and (b) the Assignor shall, to the extent of the interest assigned pursuant to this Assignment Agreement, relinquish its rights and be released from its obligations under the Loan Agreement and the other Irish Loan Documents. 6. Upon recording by the Agent, from and after the Settlement Date, the Agent shall make all payments under the Loan Agreement and the other Irish Loan Documents in respect of the interest assigned hereby (including, without limitation, all payments or principal, interest and commitment fees (if applicable) with respect thereto) to the Assignee. Upon the Settlement Date, the Assignee shall pay to the Assignor the Assigned Share (as set forth in Item 4.b -------- of Annex I) of the principal amount of any outstanding loans under the Loan ------- Agreement and the other Irish Loan Documents. The Assignor and Assignee shall make all appropriate adjustments in payments under the Loan Agreement and the other Irish Loan Documents for periods prior to the Settlement Date directly between themselves on the Settlement Date. 7. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA. [Remainder of page left intentionally blank.] 2 IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement and Annex I hereto to be executed by their respective officers thereunto duly authorized, as of the first date above written. [NAME OF ASSIGNOR] as Assignor By: ---------------------------------------------- Title: ------------------------------------------- [NAME OF ASSIGNEE] as Assignee By: ---------------------------------------------- Title: ------------------------------------------- ACCEPTED THIS ____ DAY OF _____________ FOOTHILL CAPITAL CORPORATION, AS AGENT By:___________________________ Title:________________________ 3 ANNEX FOR ASSIGNMENT AND ACCEPTANCE ANNEX I 1. Subsidiary Borrower: Palm Global Operations Ltd. 2. Name and Date of Loan Agreement: Loan Agreement, dated as of November 30, 2001, among the Subsidiary Borrower, the lenders signatory thereto as the Lenders, Foothill Capital Corporation, a California corporation, as the Arranger and Administrative Agent for the Lenders, Heller Financial, Inc., as the Syndication Agent, and The CIT Group/Business Credit, Inc., as the Documentation Agent. 3. Date of Assignment Agreement: _______________ 4. Amounts: a. Assignor's Total Commitment $ ___________ i. Assignor's Commitment to make Advances $ ___________ ii. Sub-portion of Assignor's Commitment to participate $ ___________ in Letters of Credit b. Assigned Share of Total Commitment ___________% i. Assigned Share of Assignor's Commitment to make Advances ___________% ii. Assigned Share of sub-portion of Assignor's Commitment to participate in Letters of Credit ___________% c. Assigned Amount of Total Commitment $ ___________ i. Assigned Amount of Assignor's Commitment to make Advances $ ___________ ii. Assigned Amount of sub-portion of Assignor's Commitment to participate in Letters of Credit $ ___________ d. Assignee's Total Commitment $ ___________ i. Assignee's Commitment to make Advances $ ___________ ii. Sub-portion of Assignee's Commitment to participate in Letters of Credit $ ___________ e. Assignee's Share of Total Commitments ___________% i. Assignee's Share of Commitment to make Advances ___________% ii. Assignee's Share of Commitment to participate in Letters of Credit ___________% 4 5. Settlement Date: _______________________________ 6. Notice and Payment Instructions, etc. Assignee: Assignor: ____________________________ ______________________________ ____________________________ ______________________________ ____________________________ ______________________________ 7. Agreed and Accepted: [ASSIGNOR] [ASSIGNEE] By:_________________________ By:___________________________ Title:______________________ Title:________________________ Accepted: FOOTHILL CAPITAL CORPORATION, AS AGENT By:_____________________________ Title:__________________________ 5 EXHIBIT B-1 (Form of Borrowing Base Certificate) Foothill Capital Corporation 2450 Colorado Avenue, Suite 3000 West Santa Monica, California 90404 The undersigned, the chief financial officer of Palm Global Operations Ltd., a company organized under the laws of Ireland ("Subsidiary Borrower"), pursuant to Section 6.2 of that certain Loan Agreement, dated as of November 30, ----------- 2001 (the "Loan Agreement"), entered into by Subsidiary Borrower, the lenders signatory thereto as the Lenders, Foothill Capital Corporation, a California corporation, as arranger and administrative agent for the Lenders ("Agent"), Heller Financial, Inc., a Delaware corporation, as the Syndication Agent, and The CIT Group/Business Credit, Inc., a New York corporation, as the Documentation Agent, hereby certifies to Agent that the following items, calculated in accordance with the terms and definitions set forth in the Loan Agreement for such items are true and correct, and that Subsidiary Borrower is in compliance with and, after giving effect to any currently requested Loans, will be in compliance with the terms, conditions, and provisions of the Loan Agreement. All initially capitalized terms used in this Borrowing Base Certificate have the meanings set forth in the Loan Agreement unless specifically defined herein. Effective Date of Calculation:_________________________ A. Borrowing Base Calculation 1. Inventory: a. An amount equal to: $10,000,000 ---------- b. 60% of the amount of Subsidiary Borrower's Eligible Inventory (as detailed on Schedule A.1 ------------ attached hereto and incorporated herein by this reference): $__________ c. The lesser of Item 1(a) and Item 1(b): $__________ 2. Reserves established by Agent under Section 2.1(b) of the Loan Agreement: $__________ 3. Borrowing Base: Item 1 minus Item 2= $__________ ----- B. AVAILABILITY CALCULATION 1. Maximum Permitted Advances: a. Maximum Subsidiary Revolver Amount: (i) An amount equal to: $10,000,000 (ii) Domestic Revolver Usage: $__________ (iii) UK Loan Usage: $__________ (iv) Item 1(a)(ii) plus Item 1(a)(iii): $__________ (v) Item 1(a)(iv) minus $140,000,000 ----- (if a negative number insert 0): $__________ -2- (vi) Item 1(a)(i) minus Item 1(a)(v): $__________ ----- b. Letter of Credit Usage: $__________ Item 1(a)(vi) minus Item 1(b)= $__________ ----- 2. Advances Permitted Under Borrowing Base: a. Borrowing Base (from Section A, Item 3): $__________ --------- ------ b. Letter of Credit Usage: $__________ Item 2(a) minus Item 2(b)= $__________ ----- 3. Availability: a. Permitted Advances: (The lesser of Item 1 and Item 2) $__________ b. Aggregate amount of outstanding Advances: $__________ Item 3(a) minus Item 3(b)= $__________ ----- [Signature page follows.] -3- The undersigned hereby certifies that all of the foregoing is true and correct as of the effective date of the calculations set forth above and that such calculations have been made in accordance with the requirements of the Loan Agreement. PALM GLOBAL OPERATIONS LTD., a company organized under the laws of Ireland, as Subsidiary Borrower By: ------------------------------------------ Title: --------------------------------------- Schedule A.1 ------------ (Eligible Inventory) EXHIBIT L-1 ----------- FORM OF LIBOR NOTICE Foothill Capital Corporation 2450 Colorado Avenue, Suite 3000 West Santa Monica, California 90404 Attention: Business Finance Division Manager --------------------------------- Ladies and Gentlemen: Reference hereby is made to that certain Loan Agreement, dated as of November 30, 2001 (the "Loan Agreement"), among Palm Global Operations Ltd., a -------------- company organized under the laws of the Republic of Ireland ("Subsidiary ---------- Borrower"), the lenders signatory thereto as the Lenders, Foothill Capital - -------- Corporation, a California corporation, as the arranger and administrative agent for the Lenders (the "Agent"), Heller Financial, Inc., a Delaware corporation, ----- as the Syndication Agent, and The CIT Group/Business Credit, Inc., a New York corporation, as the Documentation Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Loan Agreement. This LIBOR Notice represents Subsidiary Borrower's request to elect the LIBOR Option with respect to outstanding Advances in the amount of $____________ (the "LIBOR Rate Advance")[, and is a written confirmation of the telephonic ------------------ notice of such election given to Agent]. Such LIBOR Rate Advance will have an Interest Period of [1, 2, or 3] month(s) commencing on ________________. This LIBOR Notice further confirms Subsidiary Borrower's acceptance, for purposes of determining the rate of interest based on the LIBOR Rate under the Loan Agreement, of the LIBOR Rate as determined pursuant to the Loan Agreement. Subsidiary Borrower represents and warrants that (i) as of the date hereof, each representation or warranty contained in or pursuant to any Irish Loan Document, any agreement, instrument, certificate, document or other writing furnished at any time under or in connection with any Irish Loan Document, and as of the effective date of any advance, continuation or conversion requested above is true and correct in all material respects (except to the extent any representation or warranty expressly related to an earlier date), (ii) each of the covenants and agreements contained in any Irish Loan Document have been performed (to the extent required to be performed on or before the date hereof or each such effective date), and (iii) no Default or Event of Default has occurred and is continuing on the date hereof, nor will any thereof occur after giving effect to the request above. Dated: ------------------------------------------ PALM GLOBAL OPERATIONS LTD., a company organized under the laws of the Republic of Ireland, as Subsidiary Borrower By ---------------------------------------------- Name: --------------------------------------------- Title: ------------------------------------------ Acknowledged by: FOOTHILL CAPITAL CORPORATION, a California corporation, as Agent By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 2 Exhibit 3.1(n) Form of Notice and Consent [Insert Date] Foothill Capital Corporation 2450 Colorado Avenue Suite 3000 Santa Monica, CA 90404 Re: Loan Agreement, dated as of November 30, 2001, by and among Palm Global Operations Ltd., the lenders that are signatories thereto, Foothill Capital Corporation, as the arranger and administrative agent, Heller Financial, Inc., as the syndication agent, and The CIT Group/Business Credit, Inc., as the documentation agent (the "Loan Agreement") Ladies and Gentlemen: Pursuant to Section 3.1(n) of the Loan Agreement, Palm, Inc. hereby notifies Foothill Capital Corporation and consents as follows: Sincerely, Palm, Inc. By_____________________ Title____________________ SCHEDULE C-1 ------------ COMMITMENTS ================================================================================ LENDER TOTAL COMMITMENT ================================================================================ FOOTHILL CAPITAL CORPORATION $3,333,333.33 ================================================================================ HELLER FINANCIAL, INC. $3,333,333.33 ================================================================================ THE CIT GROUP/BUSINESS CREDIT, INC. $3,333,333.33 ================================================================================ ALL LENDERS $10,000,000.00 ================================================================================ SCHEDULES AND EXCEPTIONS FOR PALM GLOBAL OPERATIONS LTD./ FOOTHILL CAPITAL CORPORATION Schedule D-1 Designated Account Account # [*] at the Designated Account Bank Schedule D-2 Designated Account Bank [*] Schedule E-1 Eligible Inventory Locations INVENTORY LOCATIONS - ------------------- [*] Schedule P-3 Permitted Liens The Eligible Inventory locations listed on Schedule E-1 are owned by third parties and, therefore, Inventory at such locations may be subject to warehousemen liens. Equipment Leases - NONE - ----------------------- Schedule R-1 Real Property Collateral None Schedule 2.7(a) Ireland Cash Management Banks Palm Global Operations Ltd. [*] Schedule 5.5 Locations of Inventory and Equipment The Eligible Inventory locations listed below are owned by third parties and, therefore, Inventory at such locations may be subject to warehousemen liens. INVENTORY LOCATIONS - ------------------- [*] EQUIPMENT LOCATIONS - ------------------- 43B Park West Business Park 3/rd/ Floor Nangor Road Dublin 12, Republic of Ireland Schedule 5.7 Chief Executive Office 43B Park West Business Park 3/rd/ Floor Nangor Road Dublin 12, Republic of Ireland Schedule 5.8(b) Capitalization of Subsidiary Borrower Palm Global Operations Ltd. is a corporation organized under the laws of the Republic of Ireland. As of 6/1/01, authorized share capital in US dollars 100,000 divided into 100,000 ordinary shares of $1 US each, 100 shares are issued and outstanding to Palm Ireland Investment. Schedule 5.8(c) Capitalization of Subsidiary Borrower's Subsidiaries NONE Schedule 5.10 Litigation NONE Schedule 5.14 Environmental Matters NONE Schedule 5.18 Demand Deposit Accounts Palm Global Operations Ltd. [*] Schedule 5.20 Permitted Indebtedness Equipment Leases - ---------------- NONE Letters of Credit Palm Global Operations Ltd. - --------------- ------------------ ---------------------- ---------------------- Issuer Letter of Credit # Purpose/Country Currency/Amount - --------------- ------------------ ---------------------- ---------------------- [*] [*] VAT/France EUR 7,622.45 - --------------- ------------------ ---------------------- ---------------------- [*] [*] Customs Import/Ireland EUR 101,579.05 - --------------- ------------------ ---------------------- ---------------------- Schedule 6.7. Taxes NONE Schedule 7.6 Guarantees . Additional guaranties entered into prior to the date hereof in the ordinary course of Borrower's business of obligations incurred by Subsidiaries in the ordinary course of business, which guaranties are not, in the aggregate, a material obligation of Borrower. -----END PRIVACY-ENHANCED MESSAGE-----