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EXHIBIT 10.27
LOAN AGREEMENT
THIS LOAN AGREEMENT is entered into as of January 23, 1998 (this "Loan
Agreement") between DIAMOND MULTIMEDIA SYSTEMS, INC., a Delaware corporation
(herein called "Borrower"), and IMPERIAL BANK (herein called "Bank").
1. COMMITMENT.
A. COMMITMENT. Subject to all the terms and conditions of this Loan
Agreement and prior to the termination of its commitment as hereinafter
provided, Bank hereby agrees to make loans (each a "Loan" and collectively,
"Loans") to Borrower, in such amounts as Borrower shall request pursuant to this
Section 1.A., at any time from the date hereof through January 21, 1999 (the
"Maturity Date"), in an aggregate principal amount not to exceed $15,000,000.00
(the "Commitment"). If at any time or for any reason, the outstanding principal
amount of the Loan Account (as hereinafter defined) is greater than the
Commitment, Borrower shall immediately pay to Bank, in cash, the amount of such
excess. Any commitment of Bank, pursuant to the terms of this Loan Agreement, to
make Loans shall expire on the Maturity Date, subject to Bank's right to renew
said commitment in its sole and absolute discretion at Borrower's request. Any
such renewal of said commitment shall not be binding upon Bank unless it is in
writing and signed by an officer of Bank. Provided that no Event of Default has
occurred and is continuing, all or any portion of the Loans advanced by Bank
which are repaid by Borrower shall be available for reborrowing in accordance
with the terms hereof. Borrower promises to pay to Bank the entire outstanding
principal balance (and all accrued unpaid interest thereon) of the Loan Account
on the Maturity Date.
(1) LOANS. The amount of each Loan made by Bank to Borrower
hereunder shall be debited to the loan ledger account of Borrower maintained by
Bank for the Commitment (herein called the "Loan Account") and Bank shall credit
the Loan Account with all loan repayments in respect thereof made by Borrower.
When Borrower desires to obtain a Loan, Borrower shall notify Bank (which notice
shall be signed by an officer of Borrower and shall be irrevocable) in
accordance with Section 2 hereof, to be received no later than 3:00 p.m. Pacific
time one (1) Banking Day before the day on which the Loan is to be made. Loans
may only be used for working capital purposes, the issuance of letters of
credit, or the purchase of foreign exchange futures contracts.
(a) LETTER OF CREDIT USAGE AND SUBLIMIT. Subject to the
availability of the Commitment and in reliance on the representations and
warranties of Borrower set forth herein, at any time and from time to time from
the date hereof through the Banking Day immediately prior to the Maturity Date,
Bank shall issue for the account of Borrower such standby and commercial letters
of credit ("Letters of Credit") as Borrower may request, which request shall be
made by delivering to Bank a duly executed letter of credit application on
Bank's standard form; provided, however, that the outstanding and undrawn
amounts under all such Letters of Credit (i) shall not at any time exceed
$15,000,000 and (ii) shall be deemed to constitute Loans for the purpose of
calculating availability under the Commitment. Unless Borrower shall have
deposited with Bank cash collateral in an amount sufficient to cover all undrawn
amounts under each such Letter of Credit and Bank shall have agreed in writing,
no Letter of Credit shall have an expiration date that is later than 90 days
after the Maturity Date. All Letters of Credit shall be in form and substance
acceptable to Bank in its sole discretion and shall be subject to the terms and
conditions of Bank's form application and letter of credit agreement. Borrower
will pay any standard issuance and other fees that Bank notifies Borrower will
be charged for issuing and processing Letters of Credit for Borrower.
(b) FOREIGN EXCHANGE USAGE AND SUBLIMIT. Subject to the
availability of the Commitment and in reliance on the representations and
warranties of Borrower set forth herein, at any time and from time to time from
the date hereof through the Banking Day immediately prior to the Maturity Date.
Bank shall arrange the purchase by Borrower of foreign exchange futures
contracts ("Exchange Contracts") as Borrower may request, which request shall be
made by delivering to Bank a duly executed exchange contract application on
Bank's standard form; provided, however, that the maximum aggregate notional
contract amount under all such Exchange Contracts shall not at any time exceed
$10,000,000; provided, further, that 10% of the maximum aggregate notional
contract amount under all such Exchange Contracts shall be deemed to constitute
outstanding Loans for the purpose of calculating availability under the
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Commitment. Unless Borrower shall have deposited with Bank cash collateral in
an amount sufficient to cover all undrawn amounts under each such Exchange
Contract and Bank shall have agreed in writing, no Exchange Contract shall have
a due date that is later than the Maturity Date. All Exchange Contracts shall
be in form and substance acceptable to Bank in its sole discretion and shall be
subject to the terms and conditions of Bank's form exchange contract
application. Borrower will pay any standard issuance and other fees that Bank
notifies Borrower will be charged for issuing and processing Exchange Contracts
for Borrower. After and during the continuance of an Event of Default, Bank
may, in its sole and absolute discretion, terminate any or all of the Exchange
Contracts. Borrower agrees to indemnify and hold harmless Bank from and against
all loss, costs and expense associated with any such termination of any
Exchange Contract.
(2) INTEREST PAYMENTS ON LOANS. Except as otherwise provided in
the Interest Rate Addendum, Borrower further promises to pay to Bank from the
date of the advance of the initial Loan through the Maturity Date, on or before
the twenty-first (21st) day of each month, interest on the average daily unpaid
balance of the Loan Account during the immediately preceding month at a rate of
interest equal to the rate of interest which Bank has announced as its prime
lending rate ("Prime Rate"), which shall vary concurrently with any change in
the Prime Rate. Interest shall be computed at the above rate on the basis of
the actual number of days during which the principal balance of the Loan
Account is outstanding divided by 360, which shall for interest computation
purposes be considered one (1) year.
2. LOAN REQUESTS. Requests for Loans hereunder shall be in writing
duly executed by Borrower in a form satisfactory to Bank and shall contain a
certification setting forth the matters referred to in Section 1, which shall
disclose that Borrower is entitled to the amount and type of Loan being
requested. Bank is hereby authorized to charge Borrower's deposit account with
Bank for all sums due Bank under this Loan Agreement.
3. DELIVERY OF PAYMENTS. Payment to Bank of all amounts due hereunder
shall be made at its Santa Xxxxx Valley Regional office, or at such other place
as may be designated in writing by Bank from time to time. If any payment date
fall on a day that is not a day that Bank is open for the transaction of
business ("Banking Day"), the payment due date shall be extended to the next
Banking Day.
4. LATE CHARGE. If any interest payment, principal payment or
principal balance payment required hereunder is not received by Bank on or
before ten (10) days from the date in which such payment becomes due, Borrower
shall pay to Bank, a late charge equal to the lesser of (a) five percent (5.0%)
of the amount of such unpaid payment, in addition to said unpaid payment or (b)
the maximum amount permitted to be charged by applicable law, until remitted to
Bank; provided, however, nothing contained in this SECTION 4, shall be
construed as any obligation on the part of Bank to accept payment of any past
due payment or less than the total unpaid principal balance of the Loan Account
following the Maturity Date. All payments shall be applied first to any late
charges due hereunder, next to accrued interest then payable and the remainder,
if any, to reduce any unpaid principal due under the Loan Account.
5. DEFAULT INTEREST. From and after the Maturity Date or such earlier
date as all sums owing under the Loan Account becomes due and payable by
acceleration or otherwise, or upon the occurrence of an Event of Default, at
the option of Bank all sums owing under the Loan Account shall bear interest
until paid in full at a rate equal to the lesser of (a) five percent (5.0%) per
annum in excess of the then applicable interest rate provided for in SECTION
1.A(2) hereof or (b) the maximum amount permitted to be charged by applicable
law, until all obligations hereunder are repaid in full or the Event of Default
is waived or cured to the satisfaction of Bank, as applicable.
6. DEFINITIONS. As used in this Loan Agreement and unless otherwise
defined herein, all initially capitalized terms shall have the meanings set
forth on EXHIBIT A attached hereto and incorporated herein by this reference.
7. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Bank:
(a) That Borrower is a corporation, duly organized and existing
in the State of Delaware and is authorized and in good standing to do
business in the State of California. The execution, delivery and
performance of each of the Loan Documents are within Borrower's corporate
powers, have been duly authorized and are not in conflict with law or the
terms of any charter, by-law or other incorporation papers, or of any
indenture, agreement or undertaking to which Borrower is a party or by
which Borrower is bound or affected;
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(b) Borrower has good title to its assets and the same are not subject
to any liens or encumbrances other than Permitted Liens;
(c) Any and all financial information submitted by Borrower to
Bank,whether previously or in the future, is and will be true and correct;
(d) There is no litigation or other proceeding pending or threatened
against or affecting Borrower, and Borrower is not in default with respect to
any order, writ, injunction, decree or demand of any court or other
governmental or regulatory authority except as disclosed in EXHIBIT B;
(e)(i) The consolidated balance sheets of Borrower dated as of September
30, 1997, and the related consolidated profit and loss statements for the fiscal
year then ended, copies of which have heretofore been delivered to Bank by
Borrower, and all other statements and data submitted in writing by Borrower to
Bank in connection with Borrower's request for credit are true and correct, and
said balance sheet and profit and loss statement accurately present the
financial condition of Borrower as of the dates thereof and the results of the
operations of Borrower for the period covered thereby, and have been prepared in
accordance with GAAP, (ii) since such dates, there have been no material adverse
changes in the financial condition of Borrower, and (iii) Borrower has no
knowledge of any liabilities, contingent or otherwise, which are not reflected
in said balance sheet, and Borrower has not entered into any special commitments
or substantial contracts which are not reflected in said balance sheet, other
than in the ordinary and normal course of its business, which may have a
Material Adverse Effect upon its financial condition, operations or business as
now conducted;
(f) If the Borrower has a pension, profit sharing or retirement plan
subject to ERISA, such plan has been and will continue to be funded in
accordance with its terms and otherwise complies with and continues to comply
with the requirements of ERISA;
(g) Borrower has no liability for any delinquent local, state or
federal taxes, and, if Borrower has contracted with any government agency, it
has no liability for renegotiation of profits; and
(h) Borrower, as of the date hereof, possesses all necessary
trademarks, trade names, copyrights, patents, patent rights, and licenses to
conduct its business as now operated, without any known conflict with valid
trademarks, trade names, copyrights, patents, patent rights and license rights
of others.
8. NEGATIVE COVENANTS. Borrower agrees that so long as any loans,
obligations or liabilities remain outstanding or unpaid to Bank or the
commitment of Bank hereunder is in effect, neither Borrower, nor any of its
subsidiaries ("Subsidiaries") will, without the prior written consent of Bank:
A. Make any substantial change in the character of its
business as now conducted;
B. Create, incur, assume or permit to exist any
Indebtedness other than loans from Bank except obligations now existing as
shown in the financial statements referenced in SECTION 7(g)(i), excluding those
being refinanced by Bank, and Permitted Indebtedness; or sell or transfer,
either with or without recourse, any accounts or notes receivable or any monies
due or to become due;
C. Create, incur, assume or permit to exist any mortgage,
pledge, encumbrance, lien or charge of any kind (including the charge upon
property at any time purchased or acquired under conditional sale or other
title retention agreement) upon any asset now owned or hereafter acquired by
it, other than Permitted Liens and liens in favor of Bank;
D. Sell, dispose of or grant a security interest in any
asset now owned or hereafter acquired by it, other than to Bank (other than the
disposing of such asset in the ordinary and normal course of its business as
now conducted or other assets which are obsolete or otherwise considered
surplus), or execute any financing statements covering any assets in favor of
any secured party or Person;
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E. Make any loans or advances to any Person or other entity other
than in the ordinary and normal course of its business as now conducted
(provided that such loans or advances are not made to any Person or entity which
is controlled by or under common control with Borrower) or make any investment,
other than Permitted Investments, in the securities of any Person or other
entity other than the United States Government; provided, that Borrower may make
loans, investments or advances to its 100% owned subsidiaries not exceeding
$10,000,000 in the aggregate above existing amounts shown on the September 30,
1997 consolidating balance sheet;
F. Use the proceeds of any Loan to purchase or carry margin stock
(as defined in Regulation U of the Board of Governors of the Federal Reserve
system);
G. Purchase or otherwise acquire all or substantially all of the
assets or business of any Person or other entity; or liquidate, dissolve, merge
or consolidate, or commence any proceedings therefor; or, except in the ordinary
and normal course of its business as now conducted, sell (including, without
limitation, the selling of any property or other asset accompanied by the
leasing back of the same) any assets including any fixed assets, any property,
or other assets necessary for the continuance of its business as now conducted.
Notwithstanding the foregoing, Borrower may proceed with any acquisition, merger
or consolidation (as described above) for a total aggregate consideration of up
to $75,000,000 during the term of this agreement, provided that no more than
$20,000,000 of the acquisition price is paid in cash in any one transaction (or
$30,000,000 in the aggregate for all acquisitions, mergers, or consolidations
during the term of this Agreement), and (1) so long as no Event of Default has
occurred and is continuing or would exist after giving effect to such
transaction, and (2) Borrower is the surviving corporation, if applicable. In
the event that Bank approval is required under this subsection, Bank agrees to
respond in writing within three (3) business days of receipt of the written
request and information necessary to make a decision; and
H. Declare or pay any dividend or make any other distribution on any
of its capital stock now outstanding or hereafter issued or purchase, redeem or
retire any of such stock other than in dividends or distributions payable in
Borrower's or any such Subsidiary's capital stock, except for the repurchase of
up to $600,000 in any one fiscal year.
9. AFFIRMATIVE COVENANTS. Borrower affirmatively covenants that so long
as any loans, obligations or liabilities remain outstanding or unpaid to Bank
or the commitment of Bank hereunder is in effect, it will:
A. Furnish Bank from time to time such financial reports,
statements and information as Bank may reasonably request and inform Bank
immediately upon the occurrence of a material adverse change therein;
B. Promptly after the same are available, deliver to Bank copies of
all such proxy statements, financial statements and reports as Borrower shall
send to its shareholders, if any, and copies of all reports which Borrower may
file with the Securities Exchange Commission or any governmental authority at
any time substituted therefor;
C. Promptly notify Bank of any attachment or other legal process
levied against any of its Property and any information received by Borrower
relative thereto;
D. Reimburse Bank upon demand for any and all legal costs,
including reasonable attorneys' fees, and other expense incurred in collecting
any sums payable by Borrower under the Loan Account or any other obligation
secured hereby, enforcing any term or provision of this Loan Agreement or
otherwise or in the preparation and enforcement of any agreement relating
hereto;
E. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses;
F. In the event the unpaid balance of the Loan Account shall exceed
the maximum amount of outstanding loans to which Borrower is entitled under
SECTION 1 hereof, Borrower shall immediately pay to Bank for credit to the Loan
Account the amount of such excess;
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G. Maintain and preserve all rights, franchises and other
authority adequate and necessary for the conduct of its business and maintain
and preserve its existence in the State of its incorporation and any other
state(s) in which Borrower conducts its business, except with respect to such
other state(s), as the failure to do so would not have a Material Adverse
Effect:
H. Maintain public liability, property damage and workers
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses. Borrower shall provide evidence of property
insurance in amounts and types acceptable to Bank, and certificates naming Bank
as a loss payee;
I. Pay and discharge, before the same becomes delinquent and
penalties accrue thereon, all taxes, assessments and governmental charges upon
or against it or any of its properties, and any of its other liabilities at any
time existing, except to the extent and so long as: (1) the same are being
contested in good faith and by appropriate proceedings in such manner as not to
cause any Material Adverse Effect or the loss of any right of redemption from
any sale thereunder; and (2) it shall have set aside on its books reserves
(segregated to the extent required by GAAP);
J. Maintain a standard and modern system of accounting in
accordance with GAAP on a basis consistently maintained; permit Bank's
representatives to have access to, and to examine its properties, books and
records at all reasonable times; provided that Bank shall use its best efforts
to not interfere with the conduct of Borrower's business;
K. Maintain its properties, equipment and facilities in good
order and repair;
L. Maintain its principal operating accounts and banking
activities with Bank; and
M. Promptly notify the Bank in writing of the occurrence of
any Event of Default hereunder or any event which upon notice and lapse of time
would be an Event of Default.
10. FINANCIAL COVENANTS AND INFORMATION. All financial covenants and
financial information referenced herein shall be interpreted and prepared in
accordance with GAAP as used in the United States of America applied on a basis
consistent with previous years. Compliance with the financial covenants shall be
calculated and monitored on a quarterly basis, except as shall be expressly
stated to the contrary, Borrower affirmatively covenants that so long as any
loans, obligations or liabilities remain outstanding or unpaid to Bank or any
commitment is outstanding hereunder, it will, on a consolidated basis:
A. At all times, maintain a Minimum Tangible Net Worth
(meaning all assets, excluding any value for goodwill, trademarks, patents,
copyrights, organization expense and other similar intangible items, less total
liabilities, plus long term Subordinated Debt) of not less than the sum of
[$ ] plus [ ] of net profit after tax plus [ ] of the proceeds of any
public stock offerings;
B. At all times maintain a Maximum Ratio of Total Liabilities
(meaning all liabilities, excluding long term Subordinated Debt) to Tangible Net
Worth (as defined in Section 10.A. hereof) not to exceed [ ];
C. At all times maintain a Minimum Quick Ratio (meaning all
cash plus Accounts divided by current liabilities plus [ ] of any outstanding
Letters of Credit) of not less than [ ];
D. Measured on a quarterly basis on the last day of each
fiscal quarter, have a minimum net profit of not less than $1.00;
E. As soon as it is available, but not later than forty-five
(45) days after and as of the end of each quarter, deliver to Bank an
internally-prepared consolidating financial statement consisting of a balance
sheet and profit and loss statement, in form satisfactory to Bank, all in
reasonable detail, and certified by an appropriate officer of Borrower, subject,
however, to year-end audit adjustments, and a Compliance Certificate in the form
of EXHIBIT C attached hereto and incorporated herein by this reference,
certified by an officer of Borrower;
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F. As soon as it is available, but not later than
forty-five (45) days after and as of the end of the first three fiscal quarters
of each fiscal year, deliver to Bank a copy of Borrower's 10-Q report as filed
with the Securities Exchange Commission;
G. As soon as it is available, but not later than sixty
(60) days after the end of Borrower's fiscal year, deliver to Bank unqualified
copies of Borrower's consolidated financial statements together with changes in
financial position, all in reasonable detail and stating in comparative form the
figures as of the close of and for the previous fiscal year, audited by an
independent certified public accountant selected by Borrower but acceptable to
Bank, including Borrower's 10-K report as filed with the Securities Exchange
Commission.
H. Upon the reasonable request of Bank, deliver to Bank
current budgets, sales projections, operating plans and other financial exhibits
and information in form and substance satisfactory to Bank;
I. Upon any officer becoming aware, deliver immediately to
Bank written notice of an Event of Default or event which with notice or lapse
of time would constitute an Event of Default; and
J. Upon any officer becoming aware, deliver immediately to
Bank written notice of any pending or threatened litigation claiming, or
reasonably likely to result in damages against Borrower in an amount in excess
of $500,000.
11. LOAN FEE. In addition to any other amounts due, or to become
due, concurrent with the execution hereof, in connection with the Commitment,
Borrower shall deliver to Bank a loan fee in the amount of [ ].
12. DEFAULT AND REMEDIES. The occurrence of any one or more of the
following shall constitute an "Event of Default";
(a) Default be made in the payment of any obligation by Borrower under
any Loan Document;
(b) Except for any failure to pay as described in clause (a) above,
breach be made in any warranty, statement, promise, term or condition, contained
herein or in any other Loan Document and the same shall not have been cured to
the satisfaction of Bank within ten (10) days after Borrower shall have
received notice thereof or any Responsible Officer of Borrower became aware
thereof, whether by written notice from Bank, or otherwise; provided, that if
the default cannot by its nature be cured within the ten (10) day period or
cannot after diligent attempts by Borrower be cured within a reasonable time
then Borrower shall have an additional reasonable period (which shall not in any
case exceed thirty (30) days) to attempt to cure such default, and within such
reasonable time period the failure to have cured such default shall not be
deemed an Event of Default; provided further, that no cure period shall exist
for breaches in respect of Borrower's obligations under SECTION 8, SUBSECTIONS
9.A, 9.B, 9.C, 9.D, 9.F, 9.G, 9.H, 9.I and 9.L, and SECTION 10 of this Loan
Agreement); provided further, that no loans will be required to be made during
such cure period;
(c) Any statement, warranty or representation made by Borrower at any
time proves false;
(d) Borrower defaults in the repayment of any principal of or the
payment of any interest on any indebtedness exceeding in the aggregate principal
amount $500,000 or breaches or violates any term or provision of any promissory
note, loan agreement, mortgage, indenture or other evidence of such indebtedness
pursuant to which amounts outstanding in the aggregate exceed $500,000 if the
effect of such breach is to permit the acceleration of such indebtedness,
whether or not waived by the note holder or obligee, and such failure shall not
have been cured to Bank's satisfaction within fifteen (15) calendar days after
Borrower shall become aware thereof, whether by written notice from Bank or
otherwise, or there has in fact been an acceleration of such indebtedness;
(e) Borrower becomes insolvent or makes an assignment for the benefit
of creditors;
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(f) Any proceeding be commenced by Borrower under any bankruptcy,
reorganization, arrangement, readjustment of debt or moratorium law or statute
or, any such a proceeding is commenced against Borrower and is not dismissed or
stayed within ten (10) days (provided that no Loans will be made prior to the
dismissal of such proceeding);
(g) Any money judgment, writ of attachment, garnishment, execution or
other legal process be entered against Borrower or issued against any material
Property of Borrower which is not fully covered by insurance (subject to
reasonable deductibles) and remains unvacated, unbonded, unstayed or unpaid or
undischarged for more than fifteen (15) days (whether or not consecutive) or in
any event later than five (5) days prior to the date of any proposed sale
thereunder, or if any assessment for taxes against Borrower other than against
any of its real property, is made by the Federal or State government or any
department thereof;
(h) The occurrence of a Termination Event with respect to any Pension
Plan if the aggregate liability of Borrower and its ERISA Affiliates under
ERISA as a result thereof, when added to the amount of all other such
liabilities incurred since the date hereof, exceeds $500,000;
(i) Any change in Borrower's financial condition, prospects or operations
which has a Material Adverse effect; or
(j) There shall occur a sale, transfer, disposition or encumbrance
(whether voluntary or involuntary), or an agreement shall be entered into to do
so, with any Person or group of Persons (as such terms are defined pursuant to
Federal securities laws) with respect to more than 20% of the issued and
outstanding capital stock of the Borrower and, as a result thereof, such Person
or group of Persons has the ability to direct or cause the direction of the
management and policies of the Borrower.
Upon the occurrence and during the continuance of an Event of Default, Bank
may, at its option and without demand or presentment first made and without
notice to Borrower, all of which are hereby expressly waived, do any one or more
of the following: (i) Terminate its obligation to make loans to Borrower as
provided in SECTION 1 hereof; or (ii) Declare all Indebtedness of Borrower to
Bank immediately due and payable. Bank shall have the right to enforce one or
more remedies hereunder successively or concurrently, and any such action shall
not estop or prevent Bank from pursuing any further remedy which it may have
hereunder or by law.
13. RECORDS RETENTION. Borrower authorizes Bank to destroy all invoices,
delivery receipts, reports and other types of documents and records submitted
to Bank in connection with the transactions contemplated herein at any time
subsequent to four (4) months from the time such items are delivered to Bank.
14. ATTORNEYS' FEES; EXPENSES. Borrower agrees to reimburse Bank for (i)
its reasonable attorneys' fees and expenses incurred in connection with the
negotiation, preparation, execution and delivery of the Loan Documents and (ii)
its reasonable out-of-pocket expenses incurred in connection with its due
diligence and closing of this Agreement.
15. GOVERNING LAW; JUDICIAL REFERENCE.
A. GOVERNING LAW. This Agreement shall be deemed to have been made in
the State of California and the validity, construction, interpretation, and
enforcement hereof, and the rights of the parties hereto, shall be determined
under, governed by, and construed in accordance with the internal laws of the
State of California, without regard to principles of conflicts of law.
B. JUDICIAL REFERENCE.
(1) Other than (a) nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal property;
or (b) the appointment of a receiver, or the exercise of other provisional
remedies (any and all of which may be initiated pursuant to applicable law),
each controversy, dispute or claim between the parties arising out of or
relating to this Loan Agreement or the other Loan documents, which controversy,
dispute or claim is not settled in writing within thirty (30) days after the
"Claim Date" (defined as the date on which a party subject to this Loan
Agreement gives written notice to all other parties that a controversy, dispute
or claim exists), will be settled by a
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reference proceeding in California in accordance with the provisions of Section
638 et seq. of the California Code of Civil Procedure, or their successor
section ("CCP"), which shall constitute the exclusive remedy for the settlement
of any controversy, dispute or claim concerning this Loan Agreement, including
whether such controversy, dispute or claim is subject to the reference
proceeding and except as set forth above, the parties waive their rights to
initiate any legal proceedings against each other in any court or jurisdiction
other than the Superior Court in the County where the real property, if any, is
located or Santa Xxxxx County, if none (the "Court"). The referee shall be a
retired Judge of the Court selected by mutual agreement of the parties, and if
they cannot so agree within forty-five (45) days after the Claim Date, the
referee shall be promptly selected by the Presiding Judge of the Court (or
his/her representative). The referee shall be appointed to sit as a temporary
judge, with all of the powers for a temporary judge, as authorized by law, and
upon selection should take and subscribe to the oath of office as provided for
in Rule 244 of the California Rules of Court (or any subsequently enacted
Rule). Each party shall have one peremptory challenge pursuant to CCP Section
170.6. The referee shall (x) be requested to set the matter for hearing within
sixty (60) days after the date of selection of the referee and (y) try any and
all issues of law or fact and report a statement of decision upon them, if
possible, within ninety (90) days of the Claim Date. Any decision rendered by
the referee will be final, binding and conclusive and judgement shall be
entered pursuant to CCP Section 644 in any court in the State of California
having jurisdiction. Any party may apply for a reference proceeding at any time
after thirty (30) days following notice to any other party of the nature of the
controversy, dispute or claim, by filing a petition for a hearing and/or trial.
All discovery permitted by this Loan Agreement shall be completed no later than
fifteen (15) days before the first hearing date established by the referee. The
referee may extend such period in the event of a party's refusal to provide
requested discovery for any reason whatsoever, including, without limitation,
legal objections raised to such discovery or unavailability of a witness due to
absence or illness. No party shall be entitled to "priority" in conducting
discovery. Depositions may be taken by either party upon seven (7) days written
notice, and request for production or inspection of documents shall be
responded to within ten (10) days after service. All disputes relating to
discovery which cannot be resolved by the parties shall be submitted to the
referee whose decision shall be final and binding upon the parties. Pending
appointment of the referee as provided herein, the Superior Court is empowered
to issue temporary and/or provisional remedies, as appropriate.
(2) Except as expressly set forth in this Loan Agreement, the
referee shall determine the manner in which the reference proceeding is
conducted including the time and place of all hearings, the order of
presentation of evidence, and all other questions that arise with respect to
the course of the reference proceedings. All proceedings and hearings conducted
before the referee, except for trial, shall be conducted without a court
reporter except that when any party so requests, a court reporter will be used
at any hearing conducted before the referee. The party making such a request
shall have the obligation to arrange for and pay for the court reporter. The
costs of the court reporter at the trial shall be borne equally by the parties.
(3) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceedings. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the close
of the reference proceeding which shall dispose of all of the claims of the
parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provision.
(4) In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, Section 1280 through Section 1294.2 of the
CCP as amended from time to time. The limitations with respect to discovery as
set forth hereinabove shall apply to any such arbitration proceeding.
8.
9
16. MISCELLANEOUS PROVISIONS.
A. Nothing herein shall in any way limit the effect of the
conditions set forth in any other security or other agreement executed by
Borrower, but each and every condition hereof shall be in addition thereto.
B. No failure or delay on the part of Bank, in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof.
C. All rights and remedies existing under this Loan Agreement or any
other Loan Document are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
D. All headings and captions in this Loan Agreement and any related
documents are for convenience only and shall not have any substantive effect.
E. This Loan Agreement may be executed in any number of
counterparts, each of which when so delivered shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. Each
such agreement shall become effective upon the execution of a counterpart hereof
or thereof by each of the parties hereto and telephonic notification that such
executed counterparts has been received by Borrower and Bank.
Bank: Borrower:
IMPERIAL BANK DIAMOND MULTIMEDIA SYSTEMS, INC.
By: /s/ XXXXXXX X. LE DEIT By: /s/ XXXXXX X. XXXXXXXXXX
------------------------------ ----------------------------
Name: Xxxxxxx X. Le Deit Name: Xxxxxx X. Xxxxxxxxxx
Title: Assistant Vice President Title: Corporate Treasurer
LIST OF EXHIBITS AND SCHEDULES
EXHIBIT A: Definitions
SCHEDULE 1 TO EXHIBIT A: List of Specific Permitted Indebtedness
SCHEDULE 2 TO EXHIBIT A: List of Specific Permitted Investments
EXHIBIT B: Litigation
EXHIBIT C: Compliance Certificate
9.
10
EXHIBIT A
DEFINITIONS
"ACCOUNTS" means any right to payment for goods sold or leased, or to be
sold or to be leased, or for services rendered or to be rendered no matter how
evidenced, including accounts receivable, contract rights, chattel paper,
instruments, purchase orders, notes, drafts, acceptances, general intangibles
and other forms of obligations and receivables.
"CAPITAL LEASE" means, as to any Person, any lease of any Property by such
person as lessee that is, or should be in accordance with Financing Accounting
Standards Board Statement No. 13, classified and accounted for as a "capital
lease" on the balance sheet of such Person prepared in accordance with GAAP.
"CAPITAL LEASE OBLIGATION" means, with respect to any Capital Lease, the
amount of the obligation of the lessee thereunder that, in accordance with GAAP,
would appear on a balance sheet of such lessee in respect of such Capital Lease
or otherwise be disclosed in a note to such balance sheet.
"CONTINGENT OBLIGATION" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend, letter of credit or other obligation of another,
including, without limitation, any such obligation directly or indirectly
guaranteed, endorsed (otherwise than for collection or deposit in the ordinary
course of business), co-made or discounted or sold with recourse by that Person,
or in respect of which that Person is otherwise directly or indirectly liable,
including, without limitation any such obligation for which that Person is in
effect liable through any agreement (contingent or otherwise) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, capital stock purchases, capital contributions or
otherwise), or to maintain the solvency of the obligor of such obligation, or to
make payment for any products, materials or supplies or for any transportation,
services or lease regardless of the non-delivery or non-furnishing thereof, in
any such case if the purpose or intent of such agreement is to provide assurance
that such obligation will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such obligation will be
protected (in whole or in part) against loss in respect thereof. The amount of
any Contingent Obligation of any Person shall be deemed to be an amount equal to
the maximum amount of such Person's liability with respect to the stated or
determinable amount of the primary obligation for which such Contingent
Obligation is incurred or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to
perform thereunder).
"ERISA" means the Employee Retirement Income Security Act of 1974, and any
regulations issued pursuant thereto, as amended or replaced and as in effect
from time to time.
"ERISA AFFILIATE" means, with respect to any Person, any Person (or any
trade or business, whether or not incorporated) that is under common control
with that Person, within the meaning of Section 414 of the Internal Revenue Code
of 1986, as amended or replaced and as in effect from time to time.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 12.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other Person as may be approved by the significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"INDEBTEDNESS" means, as to any Person, without duplication, (a) all
indebtedness of such Person for borrowed money, including, without limitation,
all of such indebtedness outstanding under this Loan Agreement and any of the
other Loan Documents, (b) all Capital Lease Obligations of such Person, (c) to
the extent of the outstanding indebtedness thereunder, any obligation of such
Person representing an extension of credit to such Person, whether or not for
borrowed money, (d) any obligation of such Person for the deferred purchase
price of Property or services (other than (i) trade or other accounts payable in
the ordinary course of business in accordance with customary industry terms and
(ii) deferred franchise
Exhibit A
Page 1 of 4
11
fees), (e) all Contingent Obligations, (f) any obligation of such Person of the
nature described in clauses (a), (b), (c), (d) or (e) above, that is secured by
a Lien on assets of such Person and which is non-recourse to the credit of such
Person, but only to the extent of the fair market value of the assets so subject
to the Lien, (g) obligations of such Person arising under acceptance facilities
or under facilities for the discount of accounts receivable of such Person, (h)
any obligation of such Person to reimburse the issuer of any letter of credit
issued for the account of such Person upon which a draw has been made, and (i)
any lease having the effect of indebtedness, whether or not the same shall be
treated as such on the balance sheet of Borrower under GAAP.
"INTEREST RATE ADDENDUM" means that certain Libor and Competitive Rate
Addendum to Loan Agreement dated of even date herewith.
"LIEN" means any mortgage, pledge, security interest, lien or other
charge or encumbrance, including the lien or retained security title of a
conditional vendor, upon or with respect to any property or assets.
"LOAN ACCOUNT" has the meaning set forth in SECTION 1.A(1).
"LOAN DOCUMENTS" means this Loan Agreement, the Interest Rate Addendum,
and that certain Agreement to Provide Insurance (Real or Personal Property)
dated of even date herewith, each as executed by Borrower in favor of Bank,
together with all other documents entered into or delivered pursuant to any of
the foregoing, in each case as originally executed or as the same may from time
to time be modified, amended, supplemented or restated.
"LOANS" means individually and collectively, the Loans advanced pursuant
to SECTION 1.
"MATERIAL ADVERSE EFFECT" means any set of circumstances or events which
(a) has or could reasonably be expected to have any material adverse effect upon
the validity or enforceability of any material provision of any Loan Document,
(b) is or could reasonably be expected to be material and adverse to the
condition (financial or otherwise) or business operations of Borrower, (c)
materially impairs or could reasonably be expected to materially impair the
ability of Borrower, to perform its material Obligations, (d) materially impairs
or could reasonably be expected to materially impair the value of any material
assets of Borrower, or (e) materially impairs or could reasonably be expected to
materially impair the ability of Bank to enforce any of its legal remedies
pursuant to the Loan Documents.
"MATURITY DATE" has the meaning set forth in SECTION 1.A.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereof established under ERISA.
"PENSION PLAN" means any "employee pension benefit plan" that is subject
to Title IV of ERISA and which is maintained for employees of Borrower or any of
its ERISA Affiliates, other than a Multiemployer Plan.
"PERMITTED INDEBTEDNESS" means the following:
(1) indebtedness of Borrower or Indebtedness and Contingent
Obligations of its Subsidiaries in favor of Bank arising under this Loan
Agreement and the other Loan Documents;
(2) the existing Indebtedness and Contingent Obligations
disclosed on SCHEDULE 1 attached hereto and incorporated herein by this
reference; provided that the principal amount thereof is not increased
and the terms thereof are not modified to impose more burdensome terms
upon Borrower or any of its Subsidiaries;
(3) the Subordinated Debt;
(4) accrued dividends on the preferred stock of Borrower; and
(5) extensions, renewals, refinancings, modifications,
amendments and restatements of any indebtedness permitted under this
Loan Agreement, other than Indebtedness referred to in clause (3) above;
provided
Exhibit A
Page 2 of 4
12
that the principal amount thereof is not increased or the terms thereof are not
modified to impose more burdensome terms upon Borrower.
"PERMITTED INVESTMENTS" means the investments listed in SCHEDULE 2 to EXHIBIT A.
"PERMITTED LIENS" means the following:
(i) liens for taxes, fees, assessments or other governmental charges
or levies, either not delinquent or being contested in good faith by
appropriate proceedings;
(ii) liens and security interests (a) upon or in any equipment
acquired or held by Borrower to secure the purchase price of such equipment or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment and in an amount not greater than the lesser of the purchase
price of such equipment or the fair market value of such equipment on the date
of the acquisition, or (b) existing on such equipment at the time of its
acquisition, provided that the lien and security interest is confined solely to
the property so acquired and improvements thereon, and the proceeds of such
equipment;
(iii) liens consisting of leases or subleases and licenses and
sublicenses granted to others in the ordinary course of Borrower's business not
interfering in any material respect with the business of Borrower and any
interest or title of a lessor or licensor under any lease or license, as
applicable;
(iv) liens securing claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like persons or entities imposed
without action of such parties, provided that the payment thereof is not yet
required;
(v) liens incurred or deposits made in the ordinary course of
Borrower's business in connection with worker's compensation, unemployment
insurance, social security and other like laws;
(vi) liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default;
(vii) easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or encumbrances
affecting real property not interfering in any material respect with the
ordinary conduct of Borrower's business;
(viii) liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(ix) liens that are not prior to Bank's security interest which
constitute rights of set-off of a customary nature;
(x) any interest or title of a lessor in equipment subject to any
Capitalized Lease otherwise permitted hereunder; and
(xi) any liens arising from the filing or any financing statements
relating to true leases otherwise permitted hereunder.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, firm, joint stock
company, estate, entity or governmental agency.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, whether tangible or intangible.
Exhibit A
Page 3 of 4
13
"SUBORDINATED DEBT" means indebtedness of Borrower, the repayment of
principal and interest of which is fully subordinated in time and right of
payment to the Loans, and has been approved in Bank's sole and absolute
discretion and in writing.
"TERMINATION EVENT" means (a) a "reportable event" as defined in
Section 4043 of ERISA (other than a "reportable event" that is not subject to
the provision for 30 day notice to the PBGC), (b) the withdrawal of Borrower or
any of its ERISA Affiliates from a Pension Plan during any plan year in which
it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (c)
the filing of a notice of intent to terminate a Pension Plan or the treatment of
an amendment to a Pension Plan as a termination thereof pursuant to Section
4041 of ERISA, (d) the institution of proceedings to terminate a Pension Plan
by the PBGC or (e) any other event of condition which might reasonably be
expected to constitute grounds under ERISA for the termination of, or the
apportionment of a trustee to administer, any Pension Plan.
Exhibit A
Page 4 of 4
14
SCHEDULE 1 TO EXHIBIT A
SPECIFIC PERMITTED INDEBTEDNESS
1. $30,000,000 unsecured line of credit form Sanwa Bank.
2. [ ] unsecured line of credit from BHF Bank
3. [ ] unsecured line of credit to Borrower's subsidiary SPEA Software
GmbH from BHF Bank, guaranteed by Borrower
Schedule 1 to Exhibit A
Page 1 of 1
15
SCHEDULE 2 TO EXHIBIT A
SPECIFIC PERMITTED INVESTMENTS
Investments made in accordance with Borrower's investment policy, provided that
Borrower's investment policy has been disclosed to and approved in advance by
Bank:
The following subsidiaries are 100% owned by Borrower:
1. Diamond Multimedia Systems International, Inc.
2. Diamond Multimedia Systems Limited
3. Diamond Multimedia Contract Services Limited
4. Diamond Multimedia Systems GmbH
5. Supra Corporation, Communications Division
6. Spea Software GmbH (subsidiary of Supra Corporation)
7. Diamond Multimedia Systems Service Company Limited
8. Diamond Multimedia Systems KK
9. Supra GmbH
10. Supra Corp. (Inactive)
11. Diamond Multimedia Systems SARL
12. Spea Software GmbH (Sub. of Supra GmbH not Supra Corp. USA)
13. Spea UK (inactive)
14. Diamond Multimedia Systems Pty Ltd. (Australia)
15. Diamond Multimedia Systems International Inc. (Barbados)
16. Diamond Multimedia Systems Korea, Inc.
17. Diamond Multimedia Systems, Inc. Hong Kong
18. Diamond Multimedia Systems, Inc. Singapore
Schedule 2 to Exhibit A
Page 1 of 1
16
EXHIBIT B
LITIGATION
The Borrower has been named as a defendant in several putative class action
lawsuits which were filed in June and July, 1996 and June, 1997 in the
California Superior Court for Santa Xxxxx County and the U.S. District Court for
the Northern District of California. Certain executive officers and directors of
the Borrower are also named as defendants. The plaintiffs purport to represent a
class of all persons who purchased the Borrower's Common Stock between October
18, 1995 and June 20, 1996 (the "Class Period"). The complaints allege claims
under the federal securities laws and California law. The plaintiffs allege
claims under the federal securities laws and California law. The plaintiffs
allege that the Borrower and the other defendants made various material
misrepresentations and omissions during the Class Period. The complaints do not
specify the amount of damages sought. The Borrower believes that it has good
defenses to the claims alleged in the lawsuits and will defend itself vigorously
against these actions.
The Borrower is also party to other claims and pending legal proceedings that
generally involve employment and trademark issues. These cases are, in the
opinion of management of the Borrower, ordinary and routine matters incidental
to the normal business conducted by the Borrower. In the opinion of management
of the Borrower, the ultimate disposition of such proceedings will not have a
materially adverse effect on the Borrower's consolidated financial position or
future results of operations.
Exhibit B
Page 1 of 1
17
LIBOR AND COMPETITIVE RATE ADDENDUM
TO LOAN AGREEMENT
This Libor and Competitive Rate Addendum ("Addendum") is dated as of
January 23, 1998, and is by and between DIAMOND MULTIMEDIA SYSTEMS, INC.
("Borrower") and Imperial Bank ("Bank"). This Addendum amends and supplements
the Loan Agreement of even date herewith to which it is attached (the "Loan
Agreement") and forms a part of and is incorporated into the Loan Agreement.
In the event of any inconsistency between the terms herein and the terms
of the Loan Agreement, the terms herein shall in all cases govern and control.
All capitalized terms herein, unless otherwise defined herein, shall have the
meanings set forth in the Loan Agreement.
1. ADVANCES.
1.1 PRIME LOANS. Advances permitted pursuant to the terms of the Loan
Agreement or this Addendum which bear interest in relation to Bank's Prime Rate
shall be referred to herein as "Prime Loans" and each such advance shall be a
"Prime Loan." Each Prime Loan shall bear interest at an annual rate equal to
the Bank's Prime Rate. "Prime Rate" shall mean the rate of interest publicly
announced by Bank from time to time in Inglewood, California, as its prime rate
for lending. The Prime Rate is not intended to be the lowest rate of interest
charged by Bank in connection with extensions of credit to borrowers.
1.2 LIBOR LOANS. Advances permitted pursuant to the terms of the Loan
Agreement or this Addendum which bear interest in relation to the Libor Rate
shall be referred to herein as "Libor Loans" and each such advance shall be a
"Libor Loan." Each Libor Loan shall bear interest at the Libor Rate, as defined
below. A Libor Loan shall be in the minimum amount of [ ] or
such greater amount which is an integral multiple of Fifty Thousand Dollars
($50,000). No Libor Loan shall be made after the last Business Day that is at
least one (1) month prior to the Maturity Date described in the Loan Agreement.
1.3 COMPETITIVE RATE LOANS. Advances permitted pursuant to the terms of
the Loan Agreement or this Addendum which bear interest in relation to the
Competitive Rate shall be referred to herein as "Competitive Rate Loans" and
each such advance shall be a "Competitive Rate Loan." Each Competitive Rate
Loan shall bear interest at the Competitive Rate, as defined below. A
Competitive Rate Loan shall be in the minimum amount of [ ]
or such greater amount which is an integral multiple of Fifty Thousand Dollars
($50,000). No Competitive Rate Loan shall be made after the last Business Day
that is at least one (1) month prior to the Maturity Date described in the Loan
Agreement.
2. INTEREST ON FIXED RATE LOANS.
2.1 RATE OF INTEREST. Each Fixed Rate Loan shall bear interest on the
unpaid principal amount thereof from the Loan Date through the date paid
(whether by acceleration or otherwise) at a rate equal to (i) in the case of
Libor Loans, the sum of the Applicable Margin plus the Libor Rate for the
Interest Period or (ii) in the case of Fixed Rate Loans, the Competitive Rate
for the Interest Period. The "Applicable Margin" shall mean [ ] basis points
for borrowings under [ ] and [ ] basis points for borrowings of
and over.
(a) "Business Day" means any day on which Bank is open for
business in the State of California.
(b) "Competitive Rate" shall mean the rate quoted by Bank to
Borrower from time to time at Borrower's request, for money outstanding
for the particular specified period of [ ] days or less.
(c) "Competitive Rate Loan" shall mean any Loan which bears
interest at the Competitive Rate.
(d) "Fixed Rate Loan" shall mean, collectively, Libor Loans and
Competitive Rate Loans.
(e) "Governmental Regulation" means any (i) United States
Federal, state or foreign law or regulation (including without limitation
Regulation D); and (ii) the adoption or making of any interpretation,
application, directive or request applying to a class of lenders,
including Bank, of or under any United States Federal, state, or any
foreign law or
18
regulation (whether or not having the force of law) by any court or by any
governmental, central banking, monetary or taxing authority charged with the
interpretation or administration of such law or regulation.
(f) "Interest Period" shall mean (i) in the case of a Libor
Loan, a period of [ ] months, commencing on the applicable Loan Date, as
selected by Borrower pursuant to Section 2.2 or (ii) in the case of a
Competitive Rate Loan, the interest period selected by Borrower which shall be
[ ] in duration; provided, however, that Borrower may not select an Interest
Period that would otherwise extend beyond the Maturity Date of the Loan.
Borrower may also select a twelve (12) month Interest Period for Libor Loans if
and when Bank notifies Borrower that such interest Period is available, as
determined by Bank in its sole discretion.
(g) "Libor Base Rate" shall mean with respect to any Interest
Period, the rate equal to the arithmetic mean (rounded upwards, if necessary, to
the nearest 1/16 of 1%) of:
(i) the offered rates per annum for deposits in U.S.
Dollars for a period equal to such Interest Period which appears at 11:00 a.m.,
London time, on the Reuters Screen LIBOR Page on the Business Day that is two
(2) Business Days before the first day of such Interest Period, in each case if
at least four (4) such offered rates appear on such page, or
(ii) if clause (i) is inapplicable, (x) the offered rate
per annum for deposits in U.S. Dollars for a period equal to such Interest
Period which appears as of 11:00 a.m., London time on the Telerate Monitor on
Telerate Screen 3750 on the Business Day which is two (2) Business Days before
the first day of such Interest Period; or (y) if clause (x) above is
inapplicable, the arithmetic mean (rounded upwards, if necessary, to the nearest
1/16 of 1%) of the interest rates per annum offered by at least three (3) prime
banks selected by Bank at approximately 11:00 a.m. London time, on the Business
Day which is two (2) Business Days before such date for deposits in U.S. Dollars
to prime banks in the London interbank market, in each case for a period equal
to such Interest Period in an amount equal to the amount to which the Libor Rate
applies.
(h) "Libor Loan" shall mean any Loan which bears interest at a
rate based upon the Libor Rate.
(i) "Libor Rate" shall mean, for the applicable Interest Period
for a Libor Loan, a rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) equal to (i) the Libor Base Rate for such interest Period
divided by (ii) 1.00 minus the Reserve Requirement Rate (expressed as a decimal
faction) for such Interest Period.
(j) "Loan Date" shall mean the date on which a Fixed Rate Loan is
made, a Fixed Rate Loan is continued, or a Prime Loan is converted to a Fixed
Rate Loan.
(k) "Regulatory Change" means, with respect to Bank, any change
on or after the date of the Loan Agreement and this Addendum in any Governmental
Regulation, including the introduction of any new Governmental Regulation or the
rescission of any existing Governmental Regulation.
(l) "Reserve Requirement Rate" means, for any Interest Period,
the aggregate of the rates, effective as of the Business Day which is two (2)
Business Days before the first day of the Interest Period, at which:
(i) reserves (including any marginal, supplemental or
emergency reserves) are required to be maintained during such Interest Period
under Regulation D against "Eurocurrency liabilities" (as such term is used in
Regulation D) by member banks of the Federal Reserve System; and
(ii) any additional reserves are required to be maintained
by Bank by reason of any Regulatory Change against (x) any category of
liabilities which includes deposits by reference to which the Libor Rate is to
be determined as provided in the definition of "Libor Base Rate;" or (y) any
category of extensions of credit or other assets which include Libor Loans.
(m) "Reuters Screen LIBOR Page" means the display designated as
page LIBOR on the Reuters Monitor Money Rates Service or such other page as may
replace the LIBOR page on that service for the purpose of displaying London
interbank offered rates of major banks.
2.2 DETERMINATION OF INTEREST RATES. Subject to the terms and
conditions of the Loan Agreement and this Addendum, Borrower, at its option, may
request an advance in the form of a Fixed Rate Loan, a continuation of a Fixed
Rate Loan, or a conversion of a Prime Loan into a Fixed Rate Loan, only upon
delivery to Bank of an irrevocable written notice received by Bank
Page 2 of 6
19
at least three (3) Business Days prior to the requested Loan Date, specifying
(i) the principal amount of such Fixed Rate Loan, (ii) the requested Loan Date,
and (iii) the selected Interest Period. Upon receiving such notice, Bank shall
determine (which determination shall be in accordance with SECTION 2.1 and
shall, absent manifest error, be final, conclusive and binding upon all parties
hereto) the Libor Rate or Competitive Rate, as the case may be, applicable to
such Fixed Rate Loan two (2) Business Days prior to the Loan Date, and shall
promptly give notice thereof (in writing or by telephone confirmed in writing)
to Borrower. If Borrower shall fail to notify Bank of its selected Interest
Period for a Libor Loan (including the continuation of an existing Libor Loan or
the conversion of a Prime Loan into a Libor Loan), the Borrower shall be deemed
to have selected an Interest Period of three (3) months.
2.3 INTEREST PAYMENT DATES. Accrued interest on Fixed Rate Loans shall be
due and payable in full on the last day of the Interest Period; provided,
however, that if the Interest Period is longer than ninety (90) days, then
interest will be due on a quarterly basis and on the last day of the relevant
Interest Period.
2.4 COMPUTATION OF INTEREST AND FEES. All computations of interest and
fees payable pursuant to the Loan Agreement shall be calculated on the basis of
a three hundred sixty (360) day year for the actual number of days elapsed (less
the date of repayment).
2.5 RECORDATION BY BANK. Bank is hereby authorized to record the Loan
Date, the applicable Interest Period, the principal amount, and the interest
rate of each Fixed Rate Loan made (or continued or converted) by Bank, and the
date and amount of each payment or prepayment of principal thereof, in Bank's
records. Any such recordation shall constitute prima facie evidence of the
accuracy of the information recorded; provided that the failure to make any
such recordation shall not in any way affect the Borrower's obligations
hereunder.
3. CONVERSION TO PRIME LOANS.
3.1 ELECTION BY BORROWER. Subject to all the terms and conditions of this
Addendum, Borrower may elect from time to time to convert a Fixed Rate Loan to
a Prime Loan by giving Bank at least three (3) Business Days' prior irrevocable
notice of such election, and any such conversion of a Fixed Rate Loan shall be
made on the last day of the Interest Period with respect thereto.
3.2 FAILURE OF NOTICE BY BORROWER. If Borrower otherwise fails to give
notice specifying its requests with respect to any Fixed Rate Loans that are
scheduled to become due, such failure shall be deemed, in the absence of any
notice from Borrower to the contrary, to be notice of a requested advanced in
the form of a Prime Loan in a principal amount equal to the amount of said
Fixed Rate Loan.
4. PREPAYMENTS.
4.1 VOLUNTARY PREPAYMENT BY BORROWER. Subject to the terms and conditions
of the Loan Agreement and this Addendum, Borrower may, upon at least three (3)
Business Days' irrevocable notice to Bank as provided herein, at any time and
from time to time on any Business Day prepay any Prime Loan or Libor Loan in
whole or in part, without penalty or premium, other than customary actual
"Breakage Fees" and "Prepayment Costs" as defined below, resulting from
prepayment of any Libor Loan prior to the expiration of the Interest Period
relating thereto; provided, however, that if Borrower prepays (including
voluntarily or mandatory prepayment, voluntary or mandatory conversion into a
Prime Loan, or acceleration) a Competitive Rate Loan prior to the last day of
the Interest Period of such Loan, Borrower shall pay on the date of such
prepayment, in addition to the outstanding principal amount of the Loan, an
amount equal to the Competitive Rate Loan Product (as defined below). The
"Competitive Rate Loan Product" shall mean the product of: (1) the principal
amount of the Loan; (2) the Prime Rate, and (3) the number of days in the
Interest Period divided by 360. The notice of prepayment shall specify the date
and amount of the prepayment, and the Loan to which the prepayment applies.
Each partial prepayment of a Libor Loan shall be in an amount not less than
Fifty Thousand Dollars ($50,000) or such greater amount which is an integral
multiple of Fifty Thousand Dollars ($50,000); provided, that unless a Libor
Loan is prepaid in full, no prepayment shall be made if, after giving effect to
such prepayment, the aggregate principal amount of Libor Loans having the same
Interest Period shall be less than One Million Dollars ($1,000,000). Notice of
prepayment having been delivered as aforesaid, the principal amount of the
prepayment specified in such notice shall become due and payable on the
prepayment date set forth in such notice. All payments of principal under this
Section 4 shall be accompanied by accrued but unpaid interest on the amount
being prepaid through the date of such prepayment.
4.2 BREAKAGE FEES. If for any reason (including voluntary or mandatory
prepayment, voluntary or mandatory conversion of a Libor Loan into a Prime
Loan, or acceleration), Bank receives all or part of the principal amount of a
Libor Loan prior to the last day of the Interest Period for such Loan, Borrower
shall immediately notify Borrower's account officer at Bank and, on demand
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by Bank, pay Bank the Breakage Fees, defined as the amount (if any) by which (i)
the additional interest which would have been payable on the amount so received
had it not been received until the last day of such Interest Period exceeds (ii)
the interest which would have been recoverable by Bank (without regard to
whether Bank actually so invests said funds) by placing the amount so received
on deposit in the certificate of deposit markets or the offshore currency
interbank markets or United States Treasury investment products, as the case may
be, for a period starting on the date on which it was so received and ending on
the last day of such Interest Period at the interest role determined by Bank in
its reasonable discretion. Bank's determination as to such amount shall be
conclusive and final, absent manifest error.
4.3 PREPAYMENT COSTS. Borrower shall pay to Bank, upon the demand of
Bank, such other amount or amounts as shall be sufficient (in the sole good
faith opinion of Bank) to compensate it for any loss, costs or expense incurred
by it as a result of any prepayment by Borrower (including voluntary or
mandatory prepayment, voluntary or mandatory conversion of a LIBOR Rate Loan
into a Prime Loan, or prepayment due to acceleration) of all or part of the
principal amount of a LIBOR Rate Loan prior to the last day of the Interest
Period for such Loan (including without limitation any failure by Borrower to
borrow a LIBOR Rate Loan on the Loan Date for such borrowing specified in the
relevant notice of borrowing hereunder). Such costs shall include, without
limitation, any interest or fees payable by Bank to lenders of funds obtained by
it in order to make or maintain its loans based on the London interbank
eurodollar market. Bank's determination as to such costs shall be conclusive and
final, absent manifest error.
5. REMEDIES UPON EVENTS OF DEFAULT.
5.1 CONVERSION TO PRIME LOANS. If any Event of Default has occurred
and is continuing under the Loan Agreement or this Addendum, then in addition to
all other remedies available to Bank under the Loan Agreement, at the option of
Bank and without demand or notice, all Fixed Rate Loans then outstanding shall
be automatically converted to Prime Loans on the last day of each respective
Interest Period for each Fixed Rate Loan.
5.2 INDEMNITY. Borrower agrees to pay and indemnify Bank for, and to
hold Bank harmless from, any and all cost, loss or expense (including without
limitation any such cost, loss or expense arising from interest or fees payable
by Bank to lenders of funds obtained by it in order to maintain its Fixed Rate
Loans hereunder, or in its reemployment of funds obtained in connection with the
making or maintaining of Fixed Rate Loans) which Bank may sustain or incur as a
consequence of any default by Borrower in connection with or related to: (a)
payment of the principal amount of or interest on Fixed Rate Loans, (b) making a
borrowing or conversion of a Fixed Rate Loan after Borrower has given a notice
thereof in accordance with this Addendum, or (c) making a prepayment of a Fixed
Rate Loan after Borrower has given a notice thereof in accordance with this
Addendum, or any prepayment (whether optional or mandatory) of any Fixed Rate
Loan prior to the end of the applicable Interest Period for such Loan.
6. ADDITIONAL PROVISIONS REGARDING FIXED RATE LOANS.
6.1 LIBOR RATE TAXES. All payments of principal, interest, fees,
costs, expenses and all other amounts payable to Borrower pursuant to the Loan
Agreement and this Addendum shall be made free and clear of and without
reduction by reason of all present and future income, stamp and other taxes or
other charges whatsoever imposed, assessed, levied or collected by any national
government or any political subdivision or taxing authority thereof or any
organization of which it is a member (excluding (i) any taxes imposed on or
measured by the overall net income or gross receipts of Bank by any such entity,
and (ii) any taxes which would have been imposed even if no provisions for Libor
Loans had appeared in this Addendum) (collectively, "Libor Taxes").
If any Libor Taxes are required to be withheld from any amounts payable
to Bank, Borrower shall pay such additional amounts as may be necessary so as to
yield to Bank a net amount equal to the total amount of the payments provided
for in this Addendum or under the Loan Agreement which Bank would have received
if such amounts had not been subject to Libor Taxes.
If any Libor Taxes are payable directly by Borrower, they shall be paid
by Borrower prior to the date on which penalties attach for failure to timely
pay such Libor Taxes. Within forty five (45) days after the date on which
payment of any such Libor Taxes is due pursuant to applicable law, Borrower will
furnish Bank the original receipt for the full payment of such Libor Taxes or,
if such is not available, evidence of such payment satisfactory in form and
substance to Bank. Borrower shall indemnify and hold Bank harmless against, and
will reimburse to Bank, upon demand, any incremental taxes, interest or
penalties that may become payable by Bank as a result of any failure by Borrower
to pay any Libor Taxes when due.
6.2 INABILITY TO DETERMINE FAIR INTEREST RATE. If at any time Bank,
in its sole and absolute discretion, determines that: (i) the amount of the
Libor Loans for periods equal to the corresponding Interest Periods are not
available to Bank in the offshore currency interbank markets, (ii) the Libor
Rate does not accurately reflect the cost to Bank of lending the Libor Loan, or
(iii) by
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reason of any changes arising after the date of the Loan Agreement affecting the
London interbank eurodollar market, adequate and fair means do not exist for
ascertaining the applicable interest rate on the basis provided for in SECTIONS
2.1 and 2.2 above, then Bank shall promptly give notice thereof to Borrower.
Upon the giving of such notice, Bank's obligation to make Libor Loans shall
terminate, unless Bank and the Borrower agree in writing to a different interest
rate applicable to Libor Loans, or until such time as Bank notifies Borrower
that the circumstances giving rise to Bank's notice no longer exist. While such
circumstances continue to exist, (x) any requested Libor Loan shall be treated
as a request for a Prime Loan, (y) any Prime Loan that was to have been
converted to a Libor Loan shall be continued as a Prime Loan, and (z) any
outstanding Libor Loan shall be converted retroactively, on the first day of the
then current Interest Period with respect thereto, to a Prime Loan.
6.3 ILLEGALITY OR IMPRACTICABILITY. If (i) due to any Governmental
Regulation it shall become unlawful for Bank to continue to Fund or maintain any
Libor Loans, or to perform its obligations hereunder, or (ii) due to any
contingency occurring after the date of the Loan Agreement which has a material
adverse effect on the London interbank eurodollar market, it has become
impracticable for Bank to continue to Fund or maintain any Libor Loans, or to
perform its obligations hereunder, then Bank shall promptly give notice thereof
to Borrower. Upon the giving of such notice, Bank's obligation to make Libor
Loans shall terminate, and in such event, (x) any requested Libor Loan shall be
treated as a request for a Prime Loan, (y) any Prime Loan that was to have been
converted to a Libor Loan shall be continued as a Prime Loan, and (z) any
outstanding Libor Loan shall be converted retroactively, on the first day of the
then current Interest Period with respect thereto, to a Prime Loan.
6.4 GOVERNMENTAL REGULATIONS; INCREASED COSTS. Borrower shall pay to Bank,
within 15 days after demand by Bank, from time to time such amounts as Bank may
determine to be necessary to compensate it for any increased costs incurred by
Bank that Bank determines are attributable to its making or maintaining of any
Libor Loans to Borrower (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), in each case resulting from
any Regulatory Change which:
(a) imposes a new tax or changes the basis of taxation of any amounts
payable to Bank under the Loan Agreement or this Addendum in respect of any
Libor Loans (other than changes which affect taxes measured by or imposed on the
overall net income of Bank by the jurisdiction in which such Bank has its
principal office); or
(b) imposes or modifies any reserve, special deposit or similar
requirements relating to any extensions of credit or other assets of, or any
deposits or other liabilities with or for the account of Bank (including any
Libor Loans or any deposits referred to in the definition of Libor Based Rate);
or
(c) imposes any other condition affecting the Loan Agreement (or any
of such extensions of credit or liabilities); or
(d) imposes or modifies a Governmental Regulation regarding capital
adequacy which has or would have the effect of reducing the rate of return on
capital of Bank or any person or entity controlling Bank ("Parent") as a
consequence of its obligations hereunder to a level below that which Bank (or
its Parent) could have achieved but for such adoption, change or compliance
(taking into consideration its policies with respect to capital adequacy) by an
amount deemed by Bank to be material.
Bank will notify Borrower of any event occurring after the date of the Loan
Agreement which will entitle Bank to Additional Costs pursuant to this SECTION
6.4 as promptly as practicable after it obtains knowledge thereof and determines
to request such compensation. Bank will furnish Borrower with a statement
setting forth the basis and amount of such request by Bank for Additional Costs
under this SECTION 6.4. Determinations and allocations by Bank for purposes of
this SECTION 6.4 of the effect of any Regulatory Change on its costs of
maintaining its obligations to make Libor Loans or of making or maintaining
Libor Loans or on amounts receivable by it in respect of Libor Loans, and of the
additional amounts required to compensate Bank in respect of any Additional
Costs, shall be conclusive and final, absent manifest error.
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This Addendum is executed as of the date first written above.
BORROWER BANK
DIAMOND MULTIMEDIA SYSTEMS, INC. IMPERIAL BANK
a Delaware corporation a California banking corporation
By /s/ XXXXXX X. XXXXXXXXXX By /s/ XXXXXXX X. LE DEIT
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Its Corporate Treasurer Its AVP
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