EXHIBIT 10.1 EXECUTION COPY SUBSIDIARIES SECURITY AGREEMENT SECURITY AGREEMENT, dated as of May 23, 1997, made by each of the corporations that are signatories hereto (each a "Grantor"; collectively, the "Grantors"), in favor of THE CHASE MANHATTAN BANK, as collateral agent (in such capacity, the "Collateral Agent") for the several banks and other financial institutions (collectively, the "Lenders"; individually, a "Lender") from time to time parties to the Amended and Restated Credit Agreement, dated as of May __, 1997 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the Lenders and the Collateral Agent. W I T N E S S E T H: WHEREAS, pursuant to the Credit Agreement, the Lenders have severally agreed to make Loans to the Borrower upon the terms and subject to the conditions set forth therein; WHEREAS, pursuant to the Credit Agreement, the Borrower has agreed to cause the Grantors to execute and deliver this Security Agreement to the Collateral Agent for the ratable benefit of the Lenders; and WHEREAS, each Grantor is a Domestic Subsidiary of the Borrower and has guaranteed all obligations of the Borrower with respect to the Credit Agreement pursuant to the Amended and Restated Subsidiaries Guarantee, dated as of May 23, 1997, made by each Grantor in favor of the Collateral Agent for the ratable benefit of the Lenders. NOW, THEREFORE, in consideration of the premises contained herein and to induce the Lenders to make their respective Loans to the Borrower, each Grantor hereby agrees with the Collateral Agent for the ratable benefit of the Lenders, as follows: 1. Defined Terms. 1.1 Definitions. (a) Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement, and the following terms which are defined in the Uniform Commercial Code in effect in the State of New York on the date hereof are used herein as so defined: Accounts, Chattel Paper, Documents, Equipment, Farm Products, Instruments, Inventory and Proceeds. (b) The following terms shall have the following meanings: "Agreement": this Security Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "Code": the Uniform Commercial Code as from time to time in effect in the State of New York. "Collateral": as defined in Section . "Collateral Account": any collateral account established by the Collateral Agent as provided in subsection or subsection . "Obligations": with respect to any Grantor, all obligations, liabilities and indebtedness of such Grantor under and pursuant to the Subsidiaries Guarantee and the other Loan Documents to which it is a party, subject to the limitations set forth in the Subsidiaries Guarantee. "Receivable": any right to payment for goods sold or leased or for services rendered, whether or not such right is evidenced by an Instrument or Chattel Paper and whether or not it has been earned by performance (including, without limitation, any Account). 1.2 Other Definitional Provisions. (a) The words "hereof," "herein", "hereto" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection and Schedule references are to this Agreement unless otherwise specified. (b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 2. Grant of Security Interest. As collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations, each of the Grantors hereby grants to the Collateral Agent for the ratable benefit of the Lenders a security interest in all of the following property now owned or at any time hereafter acquired by such Grantor or in which the Borrower now has or at any time in the future may acquire any right, title or interest (collectively, the "Collateral"): (a) all Accounts and Receivables; (b) all Inventory; (c) all books and records pertaining to the Collateral; and (d) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing. 3. Representations and Warranties. Each Grantor hereby represents and warrants that: 3.1 Title; No Other Liens. Except for the security interest granted to the Collateral Agent for the ratable benefit of the Lenders pursuant to this Agreement, such Grantor owns each item of the Collateral free and clear of any and all Liens or claims of others. No financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such as have been filed in favor of the Collateral Agent, for the ratable benefit of the Lenders, pursuant to this Agreement. 3.2 Perfected First Priority Liens. The security interests granted pursuant to this Agreement (a) upon completion of the actions specified in Schedule 3.2, constitute perfected security interests in the Collateral in favor of the Collateral Agent, for the ratable benefit of the Lenders, as collateral security for the Obligations and (b) are prior to all other Liens on the Collateral in existence on the date hereof. 3.3 Inventory. The Inventory is kept at the locations listed on Schedule 3.3 or any other location specified pursuant to subsection 4.4. 3.4 Chief Executive Office. The chief executive office and the office where each individual Grantor's records with respect to the Receivables are maintained as provided on the signature pages hereto. 3.5 Farm Products. None of the Collateral constitutes, or is the Proceeds of, Farm Products. 4. Covenants. Each Grantor covenants and agrees with the Collateral Agent and the Lenders that, from and after the date of this Agreement until the Obligations shall have been paid in full and the Commitments shall have expired or otherwise been terminated: 4.1 Delivery of Instruments and Chattel Paper. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument or Chattel Paper, such Instrument or Chattel Paper shall be immediately delivered to the Collateral Agent, duly indorsed in a manner satisfactory to the Collateral Agent, to be held as Collateral pursuant to this Agreement. 4.2 Maintenance of Insurance. (a) Each Grantor will maintain, with financially sound and reputable companies, insurance policies (1) insuring the Inventory against loss by fire, explosion, theft and such other casualties as may be reasonably satisfactory to the Collateral Agent and (2) insuring such Grantor, the Collateral Agent and the Lenders against liability for personal injury and property damage relating to such Inventory, such policies to be in such form and amounts and having such coverage as may be reasonably satisfactory to the Collateral Agent and the Lenders, with losses payable to such Grantor, the Collateral Agent and the Lenders as their respective interests may appear. (b) All such insurance shall (1) provide that no cancellation, material reduction in amount or material change in coverage thereof shall be effective until at least 30 days after receipt by the Collateral Agent of written notice thereof, (2) name the Collateral Agent and the Lenders as insured parties, (3) include a breach of warranty clause and (4) be reasonably satisfactory in all other respects to the Collateral Agent. (c) Each Grantor shall deliver to the Collateral Agent and the Lenders a report of a reputable insurance broker with respect to such insurance during the month of in each calendar year and such supplemental reports with respect thereto as the Lenders may from time to time reasonably request. 4.3 Maintenance of Perfected Security Interest; Further Documentation. (a) Each Grantor shall maintain the security interest created by this Agreement as a perfected security interest having at least the priority described in subsection 3.2 and shall defend such security interest against the claims and demands of all Persons whomsoever. (b) At any time and from time to time, upon the written request of the Collateral Agent, and at the sole expense of the Grantors, each Grantor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Collateral Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any jurisdiction with respect to the security interests created hereby. 4.4 Changes in Locations, Name, etc. Each Grantor will not: (a)Epermit any of the Inventory to be kept at a location other than those listed on Schedule 3.3; or (b) change the location of its chief executive office from that specified in subsection ; (c)Echange its name, identity or corporate structure to such an extent that any financing statement filed by the Collateral Agent in connection with this Agreement would become seriously misleading; unless, in any such case, such Grantor shall have given at least 30 days prior written notice thereof to the Collateral Agent and the Lenders and shall have taken all actions (including the filing of financing statements) required to continue the perfection of the security intereset granted pursuant to this Agreement. 4.5 Further Identification of Collateral. Each Grantor will furnish to the Collateral Agent and the Lenders from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Lenders may reasonably request, all in reasonable detail. 4.6 Notices. Each Grantor will advise the Collateral Agent and the Lenders promptly, in reasonable detail, at their respective addresses for notices provided for in the Credit Agreement of: (a) any Lien (other than security interests created hereby or Liens permitted under the Credit Agreement) on any of the Collateral; and (b) of the occurrence of any other event which could reasonably be expected to have a material adverse effect on the aggregate value of the Collateral or on the security interests created hereby. 5. Provisions Relating to Receivables. 5.1 Each Grantor Remains Liable under Receivables. Anything herein to the contrary notwithstanding, each Grantor shall remain liable under each of the Receivables to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise to each such Receivable. Neither the Collateral Agent nor the Lenders shall have any obligation or liability under any Receivable (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by any Lender of any payment relating to such Receivable pursuant hereto, nor shall the Collateral Agent or any Lender be obligated in any manner to perform any of the obligations of any Grantor under or pursuant to any Receivable (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any Receivable (or any agreement giving rise thereto), to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. 5.2 Analysis of Receivables. The Collateral Agent shall have the right to make test verifications of the Receivables in any manner and through any medium that it reasonably considers advisable, and each Grantor shall furnish all such assistance and information as the Collateral Agent may require in connection with such test verifications. At any time and from time to time, upon the Collateral Agent's request and at the expense of the Grantors, each Grantor shall cause independent public accountants or others satisfactory to the Collateral Agent to furnish to the Collateral Agent reports showing reconciliations, aging and test verifications of, and trial balances for, the Receivables. The Collateral Agent in its own name or in the name of others may at any time after the occurrence and during the continuance of an Event of Default communicate with the obligors on the Receivables to verify with them to the Collateral Agent's satisfaction the existence, amount and terms of any Receivables. 5.3 Collections on Receivables. (a) The Collateral Agent hereby authorizes the Grantors to collect the Receivables, subject to the Collateral Agent's direction and control, and the Collateral Agent may curtail or terminate said authority at any time after the occurrence and during the continuance of an Event of Default. If required by the Collateral Agent at any time after the occurrence and during the continuance of an Event of Default, any payments of Receivables, when collected by any Grantor, (1) shall be forthwith (and, in any event, within two Business Days) deposited by such Grantor in the exact form received, duly indorsed by such Grantor to the Collateral Agent if required, in a Collateral Account maintained under the sole dominion and control of the Collateral Agent, subject to withdrawal by the Collateral Agent for the account of the Lenders only as provided in subsection , and (2) until so turned over, shall be held by such Grantor in trust for the Collateral Agent, segregated from other funds of such Grantor. (b) Each such deposit of Proceeds of Receivables shall be accompanied by a report identifying in reasonable detail the nature and source of the payments included in the deposit. (c) At the Collateral Agent's request, each Grantor shall deliver to the Collateral Agent all original and other documents evidencing, and relating to, the agreements and transactions which gave rise to the Receivables, including, without limitation, all original orders, invoices and shipping receipts. 5.4 Representations and Warranties. (a) None of the obligors on any Receivables is a Governmental Authority. (b) The amounts represented by each Grantor to the Lenders from time to time as owing to such Grantor in respect of the Receivables will at such times be accurate. 5.5 Covenants. (a) Other than in the ordinary course of business consistent with its past practice, each Grantor will not (i) grant any extension of the time of payment of any Receivable, (ii) compromise or settle any Receivable for less than the full amount thereof, (iii) release, wholly or partially, any Person liable for the payment of any Receivable, (iv) allow any credit or discount whatsoever on any Receivable, (v) amend, supplement or modify any Receivable in any manner that could adversely affect the value thereof or (vi) fail to exercise promptly and diligently each and every material right which it may have under each agreement giving rise to a Receivable (other than any right of termination). (b) Each Grantor will deliver to the Collateral Agent a copy of each material demand, notice or document received by it that questions the validity or enforceability of more than 5% of the aggregate amount of the then outstanding Receivables. 6. Remedies. 6.1 Notice to Obligors and Contract Parties. Upon the request of the Collateral Agent at any time after the occurrence and during the continuance of an Event of Default, each Grantor shall notify obligors on the Receivables that the Receivables have been assigned to the Collateral Agent for the ratable benefit of the Lenders and that payments in respect thereof shall be made directly to the Collateral Agent. 6.2 Proceeds to be Turned Over To Collateral Agent. In addition to the rights of the Collateral Agent and the Lenders specified in subsection with respect to payments of Receivables, if an Event of Default shall occur and be continuing all Proceeds received by any Grantor consisting of cash, checks and other near-cash items shall be held by such Grantor in trust for the Collateral Agent and the Lenders, segregated from other funds of such Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to the Collateral Agent in the exact form received by such Grantor (duly indorsed by such Grantor to the Collateral Agent, if required) and held by the Collateral Agent in a Collateral Account maintained under the sole dominion and control of the Collateral Agent. All Proceeds while held by the Collateral Agent in a Collateral Account (or by any Grantor in trust for the Collateral Agent) shall continue to be held as collateral security for all the Obligations and shall not constitute payment thereof until applied as provided in subsection . 6.3 Application of Proceeds. At such intervals as may be agreed upon by the Grantors and the Collateral Agent, or, if an Event of Default shall have occurred and be continuing, at any time at the Collateral Agent's election, the Collateral Agent may apply all or any part of Proceeds held in any Collateral Account in payment of the Obligations in such order as the Collateral Agent may elect, and any part of such funds which the Collateral Agent elects not so to apply and deems not required as collateral security for the Obligations shall be paid over from time to time by the Collateral Agent to the Grantors or to whomsoever may be lawfully entitled to receive the same. Any balance of such Proceeds remaining after the Obligations shall have been paid in full and the Commitments shall have expired or otherwise been terminated shall be paid over to the Grantors or to whomsoever may be lawfully entitled to receive the same. 6.4 Code Remedies. If an Event of Default shall occur and be continuing, the Collateral Agent, on behalf of the Lenders may exercise, in addition to all other rights and remedies granted to them in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the Code. Without limiting the generality of the foregoing, the Collateral Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon the Grantors or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker's board or office of the Collateral Agent or any Lender or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Collateral Agent or any Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in the Grantors, which right or equity is hereby waived or released. Each Grantor further agrees, at the Collateral Agent's request, to assemble the Collateral and make it available to the Collateral Agent at places which the Collateral Agent shall reasonably select, whether at such Grantor's premises or elsewhere. The Collateral Agent shall apply the net proceeds of any action taken by it pursuant to this subsection, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Collateral Agent and the Lenders hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the Collateral Agent may elect, and only after such application and after the payment by the Collateral Agent of any other amount required by any provision of law, including, without limitation, Section 9-504(1)(c) of the Code, need the Collateral Agent account for the surplus, if any, to the Grantors. To the extent permitted by applicable law, each Grantor waives all claims, damages and demands it may acquire against the Collateral Agent or any Lender arising out of the exercise by them of any rights hereunder. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition. 7. Collateral Agent's Appointment as Attorney-in-Fact; Collateral Agent's Performance of Such Grantors' Obligations. 7.1 Powers. Each Grantor hereby irrevocably constitutes and appoints the Collateral Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Grantor and in the name of such Grantor or in its own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, such Grantor hereby gives the Collateral Agent the power and right, on behalf of such Grantor, without notice to or assent by such Grantor, to do any or all of the following: (a) in the name of such Grantor or its own name, or otherwise, take possession of and indorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Receivable or with respect to any other Collateral and file any claim or take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Collateral Agent for the purpose of collecting any and all such moneys due under any Receivable or with respect to any other Collateral whenever payable; (b) pay or discharge taxes and Liens levied or placed on or threatened against the Collateral, effect any repairs or any insurance called for by the terms of this Agreement and pay all or any part of the premiums therefor and the costs thereof; (c) execute, in connection with any sale provided for in subsection , any indorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral; and (d) (1) direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the Collateral Agent or as the Collateral Agent shall direct; (2) ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (3) sign and indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral; (4) commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any thereof and to enforce any other right in respect of any Collateral; (5) defend any suit, action or proceeding brought against the Grantors with respect to any Collateral; (6) settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, to give such discharges or releases as the Collateral Agent may deem appropriate; and (7) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Collateral Agent were the absolute owner thereof for all purposes, and do, at the Collateral Agent's option and the Grantors' expense, at any time, or from time to time, all acts and things which the Collateral Agent deems necessary to protect, preserve or realize upon the Collateral and the Collateral Agent's and the Lenders' security interests therein and to effect the intent of this Agreement, all as fully and effectively as the Grantor might do. Anything in this subsection to the contrary notwithstanding, the Collateral Agent agrees that it will not exercise any rights under the power of attorney provided for in this subsection unless an Event of Default shall have occurred and be continuing. 7.2 Performance by Collateral Agent of Grantors' Obligations. If any Grantor fails to perform or comply with any of its agreements contained herein, the Collateral Agent, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such agreement. 7.3 Grantors' Reimbursement Obligation. The expenses of the Collateral Agent incurred in connection with actions undertaken as provided in this Section, together with interest thereon at a rate per annum equal to the rate per annum at which interest would then be payable on past due ABR Loans under the Credit Agreement, from the date of payment by the Collateral Agent to the date reimbursed by any Grantor, shall be payable by the Grantors to the Collateral Agent on demand. 7.4 Ratification; Power Coupled With An Interest. Each Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released. 8. Duty of Collateral Agent. The Collateral Agent sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the Code or otherwise, shall be to deal with it in the same manner as the Collateral Agent deals with similar property for its own account. Neither the Collateral Agent, any Lender nor any of their respective officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. The powers conferred on the Collateral Agent hereunder are solely to protect the Collateral Agent's and the Lenders' interests in the Collateral and shall not impose any duty upon the Collateral Agent or any Lender to exercise any such powers. The Collateral Agent and the Lenders shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct. 9. Execution of Financing Statements. Pursuant to Section 9-402 of the Code, each Grantor authorizes the Collateral Agent to file financing statements with respect to the Collateral without the signature of such Grantor in such form and in such filing offices as the Collateral Agent reasonably determines appropriate to perfect the security interests of the Collateral Agent under this Agreement. A carbon, photographic or other reproduction of this Agreement shall be sufficient as a financing statement for filing in any jurisdiction. 10. Authority of Collateral Agent. Each Grantor acknowledges that the rights and responsibilities of the Collateral Agent under this Agreement with respect to any action taken by the Collateral Agent or the exercise or non- exercise by the Collateral Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Collateral Agent and the Lenders, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Collateral Agent and the Grantors, the Collateral Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting, and the Grantors shall be under no obligation, or entitlement, to make any inquiry respecting such authority. 11. Notices. All notices, requests and demands to or upon the Collateral Agent or any Grantor hereunder shall be effected in the manner provided for in subsection 9.2 of the Credit Agreement. 12. Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 13. Amendments in Writing; No Waiver; Cumulative Remedies. 13.1 Amendments in Writing. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by each Grantor and each Lender, provided that any provision of this Agreement imposing obligations on each Grantors may be waived by the Lenders in a written instrument executed by the Lenders. 13.2 No Waiver by Course of Conduct. Neither the Collateral Agent nor any Lender shall by any act (except by a written instrument pursuant to subsection ), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. No failure to exercise, nor any delay in exercising, on the part of the Collateral Agent or any Lender, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Collateral Agent or any Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Collateral Agent or such Lender would otherwise have on any future occasion. 13.3 Remedies Cumulative. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 14. Section Headings. The Section and subsection headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 15. Successors and Assigns. This Agreement shall be binding upon the successors and assigns of the Grantors and shall inure to the benefit of the Collateral Agent and the Lenders and their successors and assigns. 16. Governing Law. This Agreement shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. IN WITNESS WHEREOF, the each of the undersigned has caused this Security Agreement to be duly executed and delivered as of the date first above written. STANDARD MICROSYSTEMS CORPORATION (ASIA) By --------------- Title ------------- Address for Notices: ----------------- FAX: -------------- SMC FRANCE, INC. By --------------- Title ------------- Address for Notices: ----------------- Fax: -------------- SMC SINGAPORE, INC. By --------------- Title ------------- Address for Notices: ---------------- Fax: -------------- SMC NORTH AMERICA, INC. By --------------- Title ------------- Address for Notices: ----------------- Fax: -------------- SMC MASSACHUSETTS, INC. By --------------- Title ------------- Address for Notices: ----------------- Fax: -------------- Schedule 3.2 FILINGS AND OTHER ACTIONS REQUIRED TO PERFECT SECURITY INTERESTS Uniform Commercial Code Filings [List each office where a financing statement is to be filed]1 Other Actions [Describe other actions to be taken] Schedule 3.3 INVENTORY Item Location Schedule 5.4 GOVERNMENTAL AUTHORITY OBLIGORS 1Note that perfection of security interests in patents and trademarks requires filings under the UCC in the jurisdictions where filings would be made for general intangibles. AMENDED AND RESTATED CREDIT AGREEMENT, dated as of May 23, 1997, among STANDARD MICROSYSTEMS CORPORATION, a Delaware corporation (the "Borrower"), the several banks and other financial institutions from time to time parties to this Agreement (collectively, the "Lenders"; individually, a "Lender") and THE CHASE MANHATTAN BANK, as collateral agent for the Lenders hereunder (in such capacity, the "Collateral Agent"). W I T N E S S E T H : WHEREAS, the Borrower and the Lenders are parties to the Credit Agreement, dated as of January 13, 1995 (as amended prior to the date hereof, the "Existing Credit Agreement"); WHEREAS, the Borrower has requested that the Existing Credit Agreement be amended and restated as set forth herein; and WHEREAS, the Lenders are willing to so amend and restate the Existing Credit Agreement, but only on the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto hereby agree that, subject to the satisfaction of the conditions set forth in subsection 4.1, the Existing Credit Agreement shall be amended and restated in its entirety as follows: SECTION 1. DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "ABR": for any day with respect to any ABR Loan made by any Lender, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate of such Lender in effect on such day and (b) the Federal Funds Effective Rate determined by such Lender as in effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the relevant Lender as its prime rate in effect at its principal office (the Prime Rate not being intended to be the lowest rate of interest charged by such Lender in connection with extensions of credit to debtors); and "Federal Funds Effective Rate" shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of NewEYork, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day of such transactions received by the relevant Lender from three federal funds brokers of recognized standing selected by it. Any change in the ABR due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, as the case may be. "ABR Loans": Loans the rate of interest applicable to which is based upon the ABR. "Accounts": as to any Person, at the date of determination thereof, any right to payment for goods sold or leased or for services rendered, whether or not such right is evidenced by an Instrument or Chattel Paper (as each such term is defined in the Uniform Commercial Code in effect in the State of New York on such date of determination) and whether or not it has been earned by performance at such time. "Adjustment Date": each date which is five Business Days after delivery of (a) financial statements pursuant to subsection 5.1(a) or 5.1(b), as the case may be, and (b) the certificate required to be delivered in connection with such financial statements pursuant to subsection 5.3(b). "Affiliate": as to any Person, any other Person (other than a Subsidiary) which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Agreement": this Amended and Restated Credit Agreement, as amended, supplemented or otherwise modified from time to time. "Applicable Margin": with respect to any Eurodollar Loan, 2.25%; provided that the Applicable Margin for Eurodollar Loans shall be adjusted as necessary on each Adjustment Date to be equal to the Applicable Margin set forth below opposite the range of Consolidated EBITDA within which the Consolidated EBITDA for the period of four consecutive fiscal quarters ending on the last day of the period covered by the financial statements relating to such Adjustment Date falls: Consolidated EBITDA Range Applicable Margin Less than $10,000,000 2.25% Greater than or equal to $10,000,000 but less than $15,000,000 1.75% Greater than or equal to $15,000,000 but less than $20,000,000 1.50% Greater than or equal to $20,000,000 but less than $25,000,000 1.25% Greater than or equal to $25,000,000 0.625% "Assignee": as defined in subsection 9.6(c). "Available Commitment": as to any Lender at any time, an amount equal to the excess, if any, of (a) the amount of such Lender's Commitment over (b) the aggregate principal amount of all Loans made by such Lender then outstanding. "Board of Governors": the Board of Governors of the Federal Reserve System or any Governmental Authority which succeeds to the powers and functions thereof. "Borrower Security Agreement": the Security Agreement to be made by the Borrower, substantially in the form of Exhibit B, as the same may be amended, supplemented or otherwise modified from time to time. "Borrowing Date": any Business Day specified in a notice pursuant to subsection 2.2 as a date on which the Borrower requests the Lenders to make Loans hereunder. "Business": as defined in subsection 3.17. "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close. "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing. "Chase": The Chase Manhattan Bank, a New York banking corporation. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Commitment": as to any Lender, the obligation of such Lender to make Loans to the Borrower hereunder in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 1.1(a), as such amount may be reduced from time to time in accordance with the provisions of this Agreement. "Commitment Percentage": as to any Lender at any time, the percentage which such Lender's Commitment then constitutes of the aggregate Commitments (or, at any time after the Commitments shall have expired or terminated, the percentage which the aggregate principal amount of such Lender's Loans then outstanding constitutes of the aggregate principal amount of the Loans of all the Lenders then outstanding). "Commitment Period": the period from and including the date hereof to but not including the Termination Date or such earlier date on which the Commitments shall terminate as provided herein. "Commonly Controlled Entity": an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under Section 414 of the Code. "Consolidated Current Liabilities": at any date of determination, all liabilities of the Borrower and its Subsidiaries which, in accordance with GAAP, would be classified on a consolidated balance sheet of the Borrower and its Subsidiaries as current liabilities and, including, in any event, the Loans. "Consolidated EBITDA": for any period, the Consolidated Net Income for such period, plus, to the extent deducted in determining such Consolidated Net Income, (i) interest expense, (ii) depreciation, (iii) amortization, (iv) all Federal, state, local and foreign income taxes and (v) all other non-cash expenses, minus, to the extent added in determining such Consolidated Net Income, any non-cash income or non-cash gains, all as determined on a consolidated basis in accordance with GAAP. "Consolidated Funded Debt": at any date of determination thereof, all Indebtedness of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, which by its terms matures more than one year after such date of determination (including the current portion of any such Indebtedness) and any such Indebtedness maturing within one year after such date of determination which is renewable or extendable at the option of the obligor to a date more than one year from such date of determination and, including, in any event, the Loans. "Consolidated Net Income": for any period, the net income of the Borrower and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP but excluding from the determination thereof (without duplication) any extraordinary gains. If Consolidated Net Income is less than zero for any period, Consolidated Net Income may be referred to as a "Consolidated Net Loss" for such period. "Consolidated Net Worth": at any date of determination thereof, all items which would, in accordance with GAAP, be included under shareholders' equity on a consolidated balance sheet of the Borrower and its Subsidiaries at such date of determination. "Consolidated Quick Assets": at any date of determination thereof, all cash, cash equivalents and accounts receivable of the Borrower and its Subsidiaries at such date of determination, determined in accordance with GAAP and set forth on the then most recent consolidated balance sheet of the Borrower and its Subsidiaries. "Consolidated Tangible Net Worth": at any date of determination thereof, Consolidated Net Worth at such date of determination, minus (a) any surplus resulting from the write-up of assets subsequent to August 31, 1994, (b) goodwill, including any amounts (however designated on the balance sheet) representing the cost of acquisitions of Subsidiaries in excess of underlying tangible assets, (c) patents, trademarks, copyrights, (d) leasehold improvements not recoverable at the expiration of a lease and (e) deferred charges (including, but not limited to, unamortized debt discount and expense, organization expenses and experimental and development expenses, but excluding prepaid expenses). "Consolidated Total Unsubordinated Liabilities": at any date of determination thereof, all items which would, in accordance with GAAP be included on a consolidated balance sheet of the Borrower and its Subsidiaries as liabilities, excluding Subordinated Debt and any minority interests in Subsidiaries owned by Persons other than the Borrower or any of its Subsidiaries. "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Core Assets": on any date of determination thereof, the sum of (i) 80% of the aggregate amount of all Eligible Accounts of the Borrower and its Domestic Subsidiaries on such date of determination and (ii) the lesser of (a) 25% of the aggregate amount of raw materials and finished goods of the Borrower and its Domestic Subsidiaries on such date of determination and (b) $5,000,000. "Default": any of the events specified in SectionE7, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Dollars" and "$": dollars in lawful currency of the United States of America. "Domestic Subsidiary": any Subsidiary which is not a Foreign Subsidiary. "Effective Date": the date on which the conditions precedent set forth in subsection 4.1 shall be satisfied. "Eligible Accounts": as to any Person, on any date of determination thereof, the total outstanding balance of Accounts of such Person which have been invoiced by such Person as of such date of determination and which have not been past due for more than 90 days after the payment dates specified in the invoices related to such Accounts. "Environmental Laws": any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time hereafter be in effect. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurocurrency Reserve Requirements": for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board of Governors) maintained by a member bank of the Federal Reserve System. "Eurodollar Base Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan made by any Lender, the rate per annum equal to the rate at which such Lender is offered Dollar deposits at or about 10:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations in respect of such Lender's Eurodollar Loans are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of such Lender's Eurodollar Loan to be outstanding during such Interest Period. "Eurodollar Loans": Loans the rate of interest applicable to which is based upon the Eurodollar Rate. "Eurodollar Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th ofE1%): Eurodollar Base Rate 1.00 - Eurocurrency Reserve Requirements "Event of Default": any of the events specified in Section 7, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Financing Lease": any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee. "Fleet": Fleet Bank N.A., a national banking association. "Foreign Subsidiary": any Subsidiary that is organized or incorporated under the laws of any jurisdiction outside the United States of America. "GAAP": generally accepted accounting principles and practices in the United States of America as in effect from time to time set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants acting through the Financial Accounting Standards Board or through other appropriate boards or committees thereof or in such other statements by such other entity as may be in general use by significant segments of the accounting profession and which are consistently applied for all periods so as to properly reflect the financial condition, operations and cash flows of the Borrower and its Subsidiaries. "Governmental Authority": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith. "Guarantor": any Person delivering a Guarantee pursuant to this Agreement. "Indebtedness": of any Person at any date, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities and accrued expenses incurred in the ordinary course of business and payable in accordance with customary practices), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations of such Person under Financing Leases, (d) all obligations of such Person in respect of acceptances issued or created for the account of such Person and (e) all liabilities secured by any Lien on any property owned by such Person if such Person has not assumed or otherwise become liable for the payment thereof. "Initial Closing Date": the "Closing Date" under the Existing Credit Agreement. "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. "Insolvent": pertaining to a condition of Insolvency. "Interest Payment Date": as to any Loan, the last Business Day of each month during which such Loan is outstanding. "Interest Period": with respect to any Eurodollar Loan: (i) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower by irrevocable notice to the Lenders no later than 12:00EP.M. Noon, New York City time, three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following: (1) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (2) any Interest Period that would otherwise extend beyond the Termination Date shall end on the Termination Date; (3) any 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) shall end on the last Business Day of a calendar month; and (4) the Borrower shall select Interest Periods so as not to require a payment or prepayment of any Eurodollar Loan during an Interest Period for such Eurodollar Loan. "Interest Rate Protection Agreements": as to any Person, all interest rate swaps, caps or collar agreements or similar arrangements entered into by such Person providing for protection against fluctuations in interest rates or currency exchange rates or the exchange of nominal interest obligations, either generally or under specific contingencies. "Inventory Turnover Ratio": at any date of determination thereof, the ratio of (a) the aggregate amount of "cost of goods sold" expensed during the then most recently completed period of four consecutive fiscal quarters to (b) the aggregate amount of inventory of the Borrower and its Subsidiaries as set forth on the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such period. "Investments": as defined in subsection 6.9. "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Financing Lease having substantially the same economic effect as any of the foregoing). "Loan Documents": this Agreement, any Notes,Ethe Subsidiaries Guarantee and the Security Agreements. "Loan Parties": the Borrower and each Domestic Subsidiary. "Loans": as defined in subsection 2.1. "Material Adverse Effect": a material adverse effect on (a) the business, operations, property, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole or (b)Ethe validity or enforceability of this or any of the other Loan Documents or the rights or remedies of any Lender hereunder or thereunder. "Materials of Environmental Concern": any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls and urea- formaldehyde insulation. "Material Subsidiary": at any time, any Subsidiary (a) the Total Assets of which exceed 5% of the Total Assets of the Borrower and its Subsidiaries at such time and (b) the Total Revenues of which for the then most recently completed fiscal quarter exceed 5% of the Total Revenues of the Borrower and its Subsidiaries for such fiscal quarter. "Multiemployer Plan": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Non-Excluded Taxes": as defined in subsection 2.14(a). "Notes": as defined in subsection 2.5(d). "Participant": as defined in subsection 9.6(b). "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. "Permitted Investments": (a) securities issued or directly and fully guaranteed or insured by the United States Government or any agency or instrumentality thereof having maturities of not more than one year from the date of acquisition, (b) Dollar denominated time deposits and certificates of deposit, having maturities of not more than one year from the date of acquisition thereof, of any Lender or of any domestic commercial bank which has a capital and surplus of at least $1,000,000,000, (c)Ecommercial paper rated at least A-1 or the equivalent thereof by Standard & Poor's Ratings Group or P-1 or the equivalent thereof by Moody's Investors Service, Inc. and in either case maturing within one year after the date of acquisition, (d) securities issued by money-market funds with assets of $2,500,000,000 or more, (e) tax-exempt debt securities, having maturities of not more than one year from the date of acquisition thereof, issued by any Person organized under the laws of any State of the United States or of the District of Columbia, which securities are rated A or better by Standard and Poor's Ratings Group or a or better by Moody's Investors Service, Inc, (f) preferred stock, having maturities of not more than one year from the date of acquisition thereof, issued by closed end municipal bond funds which are rated AAA by Standard & Poor's Ratings Group and Aaa by Moody's Investors Services, Inc., (g) repurchase obligations with a term of not more than seven days for underlying securities of the type described in clause (a), (h) equity securities issued by any Person organized under the laws of any State of the United States or of the District of Columbia with an aggregate purchase price not to exceed $1,000,000 at any time, which equity securities have been registered under the Securities Act of 1933 or the Securities Exchange Act of 1934 and are traded on a stock exchange or the National Association of Securities Dealers, Inc. National Market System and (i) equity securities of Mosaid Limited owned by the Borrower on the date hereof. "Person": an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan": at a particular time, any employee benefit plan which is covered by ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Properties": as defined in subsection 3.17. "Regulation U": Regulation U of the Board of Governors as in effect from time to time. "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043(b) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. 2615. "Required Lenders": at any time, Lenders the Commitment Percentages of which aggregate more than 75%. "Requirement of Law": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer": the chief executive officer and the president of the Borrower or, with respect to financial matters, the chief financial officer of the Borrower. "Security Agreements": collectively, Borrower Security Agreement and the Subsidiaries Security Agreement. "Single Employer Plan": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "Subordinated Debt": any unsecured Indebtedness of the Borrower or any of its Subsidiaries: no part of the principal of which is required to be paid (whether by way of mandatory sinking fund, mandatory redemption, mandatory prepayment or otherwise) prior to the Termination Date; the payment of the principal of and interest on which and other obligations of the Borrower in respect thereof are subordinated to the prior payment in full of the principal of and interest (including post-petition interest) on the Loans and all other obligations and liabilities of the Borrower to and the Lenders hereunder on terms and conditions approved in writing by the Required Lenders; and all other terms and conditions of which are satisfactory in form and substance to the Required Lenders (as evidenced by their prior written approval thereof). "Subsidiaries Guarantee": the Amended and Restated Guarantee to be executed by all the Domestic Subsidiaries, substantially in the form of Exhibit A, as the same may be amended, supplemented or otherwise modified from time to time. "Subsidiaries Security Agreement": the Security Agreement to be executed by all the Domestic Subsidiaries, substantially in the form of Exhibit C, as the same may be amended, supplemented or otherwise modified from time to time. "Subsidiary": as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "Supplier Contract": collectively, (a) the Consignment Agreement, dated as of September 15, 1994 (SMC Contract No. 165-GWH), between the Borrower and AT&T Corp. and (b) the Integrated Circuit Supply Agreement (SMC Contract No. 166- GWH), dated September 15, 1994, between the Borrower and AT&T Corp. "Termination Date": July 31, 1998; provided that, if the Borrower defaults in its obligations under subsection 5.2, the "Termination Date" shall be permanently changed to January 13, 1998. "Total Assets": as to any Person at any date of determination, the total assets of such Person and its Subsidiaries at such date of determination as determined on a consolidated basis in accordance with GAAP, excluding assets attributable to any minority interests in Subsidiaries owned by Persons other than such Person or any of its Subsidiaries. "Total Revenues": as to any Person for any period, the total revenues of such Person and its Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP excluding revenues attributable to any minority interests in Subsidiaries owned by Persons other than such Person or any of its Subsidiaries. "Transferee": as defined in subsection 9.6(d). "Type": as to any Loan, its nature as an ABR Loan or a Eurodollar Loan. 1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any Loan Document or any certificate or other document made or delivered pursuant hereto. (b) As used herein and in any Loan Document, and any certificate or other document made or delivered pursuant hereto, accounting terms relating to the Borrower and its Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 2.1 Commitments. (a) Subject to the terms and conditions hereof, each Lender severally agrees to make revolving credit loans ("Loans") to the Borrower from time to time during the Commitment Period in an aggregate principal amount at any one time outstanding not to exceed the amount of such Lender's Commitment. During the Commitment Period, the Borrower may use the Commitments by borrowing, prepaying the Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. (b) The Loans may from time to time be (i) Eurodollar Loans, (ii) ABR Loans or (iii)Ea combination thereof, as determined by the Borrower and notified to each Lender in accordance with subsections 2.2 and 2.7, provided that no Loan shall be made as a Eurodollar Loan after the day that is one month prior to the Termination Date. 2.2 Procedure for Borrowing. The Borrower may borrow under the Commitments during the Commitment Period on any Business Day, provided that the Borrower shall give each Lender irrevocable telephonic notice (which notice must be received by each Lender prior to 12:00 P.M. Noon, New York City time and must be promptly confirmed in writing), (a) three Business Days prior to the requested Borrowing Date, if all or any part of the requested Loans are to be initially Eurodollar Loans or (b) on such Business Day, otherwise, specifying (i) the amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, ABR Loans or a combination thereof and (iv) if the borrowing is to be entirely or partly of Eurodollar Loans, the amount of each such Eurodollar Loan and the respective lengths of the initial Interest Periods therefor. Each borrowing from each Lender under the Commitments shall be in an amount equal to $500,000 or a whole multiple thereof. Each Lender will make the amount of its pro rata share of each borrowing available to the Borrower by crediting the account of the Borrower maintained by the Borrower with such Lender. 2.3 Commitment Fee. The Borrower agrees to pay to each Lender a commitment fee for the period from and including the first day of the Commitment Period to the Termination Date, computed at the rate of 1/4 of 1% per annum on the average daily amount of the unused Commitment of such Lender during the period for which payment is made, payable monthly in arrears on the last Business Day of each month and on the Termination Date or such earlier date as the Commitments shall terminate as provided herein, commencing on the first of such dates to occur after the date hereof. 2.4 Termination or Reduction of Commitments. The Borrower shall have the right, upon not less than three Business Days' prior written notice to each Lender, to terminate the Commitments or, from time to time, to reduce the amount of the Commitments. Any such reduction shall be in a minimum amount of at least $2,000,000 or a whole multiple of $500,000 in excess thereof and shall reduce permanently the Commitments then in effect. 2.5 Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay to each Lender the then unpaid principal amount of each Loan made by such Lender on the Termination Date (or such earlier date on which the Loans become due and payable pursuant to Section 7). The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Loans from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 2.8. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (c) The entries made in the accounts of each Lender maintained pursuant to subsection 2.5(b) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender to maintain or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower by such Lender in accordance with the terms of this Agreement. (d) The Borrower agrees that, upon the request of any Lender, the Borrower will execute and deliver to such Lender a promissory note of the Borrower evidencing the Loans made by such Lender, substantially in the form of Exhibit D (a "Note"), dated the Effective Date and payable to the order of such Lender and in a principal amount equal to the lesser of (a) the amount of the then Commitment of such Lender or (b) the aggregate unpaid principal amount of all Loans made by such Lender. Each Lender is hereby authorized to record the date, Type and amount of each Loan made by such Lender and the date and amount of each payment or prepayment of principal with respect thereto, each conversion of all or a portion thereof to another Type, each continuation of all or a portion thereof as the same Type and, in the case of Eurodollar Loans, the length of each Interest Period and Eurodollar Rate with respect thereto, on the schedule annexed to and constituting a part of its Note or any continuation thereof, and any such recordation shall, to the extent permitted by applicable law, constitute prima facie evidence of the accuracy of the information so recorded, provided that the failure to make any such recordation or any error therein shall not affect the obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower in accordance with the terms of this Agreement. 2.6 Optional Prepayments. The Borrower may on any Business Day prepay the Loans, in whole or in part in multiples of $500,000, without premium or penalty (subject to the next succeeding sentence), upon irrevocable notice to each Lender on the date of such prepayment, specifying the date and amount of prepayment and whether the prepayment is of Eurodollar Loans, ABR Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with any amounts payable pursuant to subsection 2.15. 2.7 Conversion and Continuation Options. (a) The Borrower may elect from time to time to convert Eurodollar Loans to ABR Loans by giving each Lender at least two Business Days' prior irrevocable telephonic notice of such election (which must be promptly confirmed in writing), provided that any such conversion of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert ABR Loans to Eurodollar Loans by giving each Lender at least three Business Days' prior irrevocable notice of such election. Any such notice of conversion to Eurodollar Loans shall specify the length of the initial Interest Period or Interest Periods therefor. All or any part of outstanding Eurodollar Loans and ABR Loans may be converted as provided herein, provided that (i) no Loan may be converted into a Eurodollar Loan when any Event of Default has occurred and is continuing and the Required Lenders have determined that such a conversion is not appropriate and (ii) no Loan may be converted into a Eurodollar Loan after the date that is one month prior to the Termination Date. (b) Any Eurodollar Loan may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving notice to each Lender, in accordance with the applicable provisions of the term "Interest Period" set forth in subsection 1.1, of the length of the next Interest Period to be applicable to such Eurodollar Loan, provided that no Eurodollar Loan may be continued as such (i) when any Event of Default has occurred and is continuing and the Required Lenders have determined that such a continuation is not appropriate or (ii) after the date that is one month prior to the Termination Date and provided, further, that if the Borrower shall fail to give such notice or if such continuation is not permitted such Loans shall be automatically converted to ABR Loans on the last day of such then expiring Interest Period. 2.8 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin. (b) Each ABR Loan shall bear interest at a rate per annum equal to the ABR. (c) If all or a portion of (i) the principal amount of any Loan, (ii) any interest payable thereon or (iii) any commitment fee or other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum which is equal to the ABR plus 2%, from the date of such non-payment until such amount is paid in full (as well after as before judgment). (d) Interest shall be payable in arrears on each Interest Payment Date and on the Termination Date and, (i)Ein the case of a Eurodollar Loan, the last day of each Interest Period for such Eurodollar Loan, and (ii)Ein the case of an ABR Loan, the date of conversion of such ABR Loan into a Eurodollar Loan pursuant to subsectionE2.7, provided that interest accruing pursuant to paragraph (c) of this subsection shall be payable from time to time on demand. (e) The Applicable Margin for each Eurodollar Loan shall be determined on the first day of each Interest Period with respect thereto. 2.9 Computation of Interest and Fees. Commitment fees and interest shall be calculated on the basis of a 360-day year for the actual days elapsed. Any change in the interest rate on a Loan resulting from a change in the ABR or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. 2.10 Inability to Determine Interest Rate. If prior to the first day of any Interest Period: (a) any Lender shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining such Lender's Eurodollar Rate for such Interest Period, or (b) any Lender shall have determined that such Lender's Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lender (as conclusively certified by such Lender) of making or maintaining its affected Loans during such Interest Period, such Lender shall give telecopy or telephonic notice thereof to the Borrower as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as ABR Loans, (y)Eany Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be continued as ABR Loans and (z) any outstanding Eurodollar Loans shall be converted, on the first day of such Interest Period, to ABR Loans. Until such notice has been withdrawn by such Lender, no further Eurodollar Loans shall be made or continued as such by such Lender, nor shall the Borrower have the right to convert Loans made by such Lender to Eurodollar Loans. 2.11 Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower from the Lenders hereunder, each conversion or continuation of Loans by the Borrower, each payment by the Borrower on account of any commitment fee hereunder and any reduction of the Commitments of the Lenders shall be made pro rata according to the respective Commitment Percentages of the Lenders. Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Loans shall be made pro rata according to the respective outstanding principal amounts of the Loans then held by the Lenders. All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without set off or counterclaim and shall be made prior to 2:00EP.M., New York City time, on the due date thereof to each Lender in immediately available funds. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. 2.12 Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert ABR Loans to Eurodollar Loans shall forthwith be cancelled and (b) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to ABR Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to subsection 2.15. 2.13 Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Note or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by subsection 2.14 and changes in the rate of tax on the overall net income of such Lender); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the Eurodollar Rate; or (iii) shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduced amount receivable. (b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, the Borrower shall promptly pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. (c) If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify the Borrower of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this subsection submitted by such Lender to the Borrower shall be conclusive in the absence of manifest error. The Borrower shall not be obligated to compensate any Lender pursuant to subsectionE2.13(b) for amounts accruing prior to the date which is 180 days before such Lender notifies the Borrower of its obligation to compensate such Lender for such amounts. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.14 Taxes. (a) All payments made by the Borrower under this Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on any Lender as a result of a present or former connection between such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any Note). If any such non- excluded taxes, levies, imposts, duties, charges, fees deductions or withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts payable to any Lender hereunder or under any Note, the amounts so payable to such Lender shall be increased to the extent necessary to yield to such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender that is not organized under the laws of the United States of America or a state thereof if such Lender fails to comply with the requirements of paragraph (b) of this subsection. Whenever any Non- Excluded Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to such Lender a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non- Excluded Taxes when due to the appropriate taxing authority or fails to remit to any Lender the required receipts or other required documentary evidence, the Borrower shall indemnify each Lender for any incremental taxes, interest or penalties that may become payable by such Lender as a result of any such failure. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. (b) Each Lender that is not incorporated under the laws of the United States of America or a state thereof shall: (i) deliver to the Borrower (A) two duly completed copies of United States Internal Revenue Service FormE1001 or 4224, or successor applicable form, as the case may be, and (B) an Internal Revenue Service Form W-8 or W-9, or successor applicable form, as the case may be; (ii) deliver to the Borrower two further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower; and (iii) obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by the Borrower; unless in any such case an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Borrower. Such Lender shall certify (i) in the case of a Form 1001 or 4224, that it is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes and (ii) in the case of a Form W-8 or W-9, that it is entitled to an exemption from United States backup withholding tax. Each Person that shall become a Lender or a Participant pursuant to subsection 9.6 shall, upon the effectiveness of the related transfer, be required to provide all of the forms and statements required pursuant to this subsection, provided that in the case of a Participant such Participant shall furnish all such required forms and statements to the Lender from which the related participation shall have been purchased. 2.15 Indemnity. The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of (a)Edefault by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.16 Change of Lending Office. Each Lender agrees that if it makes any demand for payment under subsection 2.13 or 2.14(a), or if any adoption or change of the type described in subsection 2.12 shall occur with respect to it, it will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, as determined in its sole discretion) to designate a different lending office if the making of such a designation would reduce or obviate the need for the Borrower to make payments under subsection 2.13 or 2.14(a), or would eliminate or reduce the effect of any adoption or change described in subsection 2.12. SECTION 3. REPRESENTATIONS AND WARRANTIES To induce the Collateral Agent and the Lenders to enter into this Agreement and to induce the Lenders to make Loans under this Agreement, the Borrower hereby represents and warrants to each Lender that: 3.1 Financial Condition. The consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at February 28, 1997 and the related consolidated statements of income and of cash flows for the fiscal year ended on such date, reported on by Arthur Andersen LLP, copies of which have heretofore been furnished to each Lender, are complete and correct and present fairly the financial condition of the Borrower and each of its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the fiscal year then ended. The consolidating balance sheet of the Borrower and its consolidated Subsidiaries as at February 28, 1997 and the related consolidating statements of income and of cash flows for the fiscal year ended on such date, certified by a Responsible Officer, copies of which have heretofore been furnished to each Lender, are complete and correct and present fairly the consolidated financial condition of the Borrower and each of its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the fiscal year then ended. The unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at August 31, 1996 and November 30, 1996 and the related unaudited consolidated statements of income and of cash flows for the six- month and nine-month periods, respectively, ended on such dates, certified by a Responsible Officer, copies of which have heretofore been furnished to each Lender, are complete and correct and present fairly the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such dates, and the consolidated results of their operations and their consolidated cash flows for the six-month and nine-month periods then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by such accountants or Responsible Officer, as the case may be, and as disclosed therein). Except as set forth on Schedule 3.1(a), neither the Borrower nor any of its consolidated Subsidiaries had, at the date of the most recent balance sheet referred to above, any material Guarantee Obligation, contingent liability or liability for taxes, or any long-term lease or unusual forward or long-term commitment, including, without limitation, any interest rate or foreign currency swap or exchange transaction, which is not reflected in the foregoing statements or in the notes thereto. Except as set forth on Schedule 3.1(a), during the period from February 28, 1997 to and including the date hereof there has been no sale, transfer or other disposition by the Borrower or any of its consolidated Subsidiaries of any material part of its business or property and no purchase or other acquisition of any business or property (including any capital stock of any other Person) material in relation to the consolidated financial condition of the Borrower and its consolidated Subsidiaries at February 28, 1997. 3.2 No Change. (a) Since February 28, 1997 or, if later, the date of the most recent audited financial statements delivered to the Lenders pursuant to subsection 5.1(a), there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect and (b) during the period from February 28, 1997 to and including the date hereof,Eno dividends or other distributions have been declared, paid or made upon the Capital Stock of the Borrower nor has any of the Capital Stock of the Borrower been redeemed, retired, purchased or otherwise acquired for value by the Borrower or any of its Subsidiaries. 3.3 Corporate Existence; Compliance with Law. Each of the Borrower and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 3.4 Corporate Power; Authorization; Enforceable Obligations. The Borrower has the corporate power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and to borrow hereunder and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Agreement and any Notes and to authorize the execution, delivery and performance of the Loan Documents to which it is a party. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Loan Documents to which the Borrower is a party. This Agreement has been, and each other Loan Document to which it is a party will be, duly executed and delivered on behalf of the Borrower. This Agreement constitutes, and each other Loan Document to which it is a party when executed and delivered will constitute, a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 3.5 No Legal Bar. The execution, delivery and performance of the Loan Documents to which the Borrower is a party, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or Contractual Obligation of the Borrower or of any of its Subsidiaries and will not result in, or require, the creation or imposition of any Lien, except as contemplated by this Agreement, on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation. 3.6 No Material Litigation. Except as set forth on Schedule 3.6, no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Borrower or any of its Subsidiaries or against any of its or their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby or (b) which could reasonably be expected to have a Material Adverse Effect. 3.7 No Default. Neither the Borrower nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 3.8 Ownership of Property; Liens. Each of the Borrower and its Subsidiaries has good record and marketable title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property, and none of such property is subject to any Lien except as permitted by subsection 6.3. 3.9 Intellectual Property. The Borrower and each of its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted except for those the failure to own or license which could not reasonably be expected to have a Material Adverse Effect (the "Intellectual Property"). No claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Borrower know of any valid basis for any such claim, except to the extent such claims, individually or collectively, could not reasonably be expected to have a Material Adverse Effect. The use of such Intellectual Property by the Borrower and its Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 3.10 No Burdensome Restrictions. No Requirement of Law or Contractual Obligation of the Borrower or any of its Subsidiaries could reasonably be expected to have a Material Adverse Effect. 3.11 Taxes. Each of the Borrower and its Subsidiaries has filed or caused to be filed all tax returns which, to the knowledge of the Borrower, are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Borrower or its Subsidiaries, as the case may be); no tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge. 3.12 Federal Regulations. No part of the proceeds of any Loans will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation G or Regulation U of the Board of Governors as now and from time to time hereafter in effect. If requested by any Lender, the Borrower will furnish to each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-1 or FR Form U-1 referred to in said Regulation G or Regulation U, as the case may be. 3.13 ERISA. Neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of SectionE412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. No termination of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan, and neither the Borrower nor any Commonly Controlled Entity would become subject to any liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No such Multiemployer Plan is in Reorganization or Insolvent. 3.14 Investment Company Act; Other Regulations. The Borrower is not an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. The Borrower is not subject to regulation under any Federal or State statute or regulation (other than Regulation X of the Board of Governors) which limits its ability to incur Indebtedness. 3.15 Subsidiaries. Schedule 3.15 sets forth a complete list of all Subsidiaries of the Borrower as of the date hereof. 3.16 Purpose of Loans. The proceeds of the Loans will be used to finance capital expenditures and the ongoing working capital requirements of the Borrower and its Subsidiaries. 3.17 Environmental Matters. Except as set forth on Schedule 3.17: (a) The facilities and properties owned, leased or operated by the Borrower or any of its Subsidiaries (the "Properties") do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations which (i) constitute or constituted a violation of, or (ii) could reasonably be expected to give rise to liability under, any Environmental Law except in either case insofar as such violation or liability, or any aggregation thereof, is not reasonably likely to result in a Material Adverse Effect. (b) The Properties and all operations at the Properties are in compliance, and have in the last 5 years been in compliance, in all material respects with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to the Properties or the business operated by the Borrower or any of its Subsidiaries (the "Business") which could materially interfere with the continued operation of the Properties or materially impair the fair saleable value thereof. (c) Neither the Borrower nor any of its Subsidiaries has received any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the Business, nor does the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened except insofar as such notice or threatened notice, or any aggregation thereof, does not involve a matter or matters that is or are reasonably likely to result in a Material Adverse Effect. (d) Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability under, any Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could reasonably be expected to give rise to liability under, any applicable Environmental Law except insofar as any such violation or liability referred to in this paragraph, or any aggregation thereof, is not reasonably likely to result in a Material Adverse Effect. (e) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which the Borrower or any Subsidiary is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business except insofar as such proceeding, action, decree, order or other requirement, or any aggregation thereof, is not reasonably likely to result in a Material Adverse Effect. (f) There has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of the Borrower or any Subsidiary in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could reasonably give rise to liability under Environmental Laws except insofar as any such violation or liability referred to in this paragraph, or any aggregation thereof, is not reasonably likely to result in a Material Adverse Effect. 3.18 Security Agreements. Upon execution and delivery thereof, the Security Agreements will be effective to create in favor of the Collateral Agent for the ratable benefit of the Lenders, legal, valid and enforceable Liens in the respective collateral described therein and the proceeds thereof, and when financing statements have been filed in the jursidictions listed on Schedule 3.18 or as contemplated pursuant to subsection 4.4 of the Security Agreements, such Liens will constitute fully perfected, first priority Liens on all right, title and interest of the Borrower in such collateral and the proceeds thereof superior in right to any other Person other than Liens permitted pursuant to subsection 6.3. SECTION 4. CONDITIONS PRECEDENT 4.1 Conditions to Effectiveness. This Agreement shall become effective upon the satisfaction of the following conditions precedent: (a) Loan Documents. Each Lender shall have received (i)Ethis Agreement, executed and delivered by a duly authorized officer of the Borrower, (ii) if requested by such Lender, a Note executed and delivered by a duly authorized officer of the Borrower and (iii) the Subsidiaries Guarantee, executed and delivered by a duly authorized officer of each Domestic Subsidiary. (b) Corporate Proceedings of the Borrower. Each Lender shall have received a copy of the resolutions, in form and substance satisfactory to such Lender, of the Board of Directors of the Borrower authorizing (i) the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party and (ii) the borrowings contemplated hereunder, certified by the Secretary or an Assistant Secretary of the Borrower as of the Effective Date, which certificate shall be substantially in the form of Exhibit E and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (c) Borrower Incumbency Certificate. Each Lender shall have received a Certificate of the Borrower, dated the Effective Date, as to the incumbency and signature of the officers of the Borrower executing any Loan Document, satisfactory in form and substance to such Lender, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Borrower. (d) Corporate Proceedings of Subsidiaries. Each Lender shall have received a copy of the resolutions, in form and substance satisfactory to such Lender, of the Board of Directors of each Domestic Subsidiary of the Borrower which is a party to a Loan Document authorizing the execution, delivery and performance of the Loan Documents to which it is a party, certified by the Secretary or an Assistant Secretary of each such Domestic Subsidiary as of the Effective Date, which certificate shall be in form and substance satisfactory to such Lender and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (e) Subsidiary Incumbency Certificates. Each Lender shall have received a certificate of each Domestic Subsidiary of the Borrower, dated the Effective Date, as to the incumbency and signature of the officers of such Subsidiaries executing any Loan Document, satisfactory in form and substance to such Lender, executed by the President or any Vice President and the Secretary or any Assistant Secretary of each such Domestic Subsidiary. (f) Corporate Documents. Each Lender shall haveEreceived true and complete copies of the certificate of incorporation and by-laws of the Borrower and each of its Subsidiaries certified as of the Effective Date as complete and correct copies thereof by the Secretary or an Assistant Secretary of the Borrower and each of its Subsidiaries. (g) Fees. Each Lender shall have received a closing fee of $12,500 on or prior to the Effective Date. (h) Legal Opinions. Each Lender shall have received the executed legal opinion of Loeb & Loeb LLP, counsel to the Borrower, substantially in the form of Exhibit F. Such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as any Lender may reasonably require. (i) Lien Searches. Each Lender shall have received the results of a recent search by a Person satisfactory to such Lender, of the Uniform Commercial Code, judgment and tax lien filings which may have been filed with respect to personal property of the Borrower, and the results of such search shall be satisfactory to such Lender. 4.2 Conditions to Each Loan. The agreement of each Lender to make any Loan requested to be made by it on any date (including, without limitation, its initial Loan) is subject to the satisfaction of the following conditions precedent: (a) Representations and Warranties. Each of the representations and warranties made by the Borrower and its Subsidiaries in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date. (b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Loans requested to be made on such date. (c) Additional Matters. All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be satisfactory in form and substance to such Lender, and such Lender shall have received such other documents and legal opinions in respect of any aspect or consequence of the transactions contemplated hereby or thereby as it shall reasonably request. Each borrowing by the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date thereof that the conditions contained in this subsection have been satisfied. SECTION 5. AFFIRMATIVE COVENANTS The Borrower hereby agrees that, so long as the Commitments remain in effect or any amount is owing to any Lender hereunder or under any other Loan Document, the Borrower shall and (except in the case of delivery of financial information, reports and notices and subsection 5.12) shall cause each of its Subsidiaries to: 5.1 Financial Statements. Furnish to each Lender: (a) as soon as available, but in any event within 90Edays after the end of each fiscal year of the Borrower, a copy of (i) the consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related consolidated statements of income and retained earnings and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without qualification by Arthur Andersen LLP or other independent certified public accountants of nationally recognized standing satisfactory to the Required Lenders and (ii) the consolidating balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related consolidating statements of income and retained earnings and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects; and (b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and retained earnings and of cash flows of the Borrower and its consolidated Subsidiaries for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); all such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). 5.2 Security Agreements. Within 30 days after the Effective Date, execute and deliver the Security Agreements to the Collateral Agent (together with documents and certificates of the type described in subsections 4.1(b), (c), (d) and (e) relating to the execution and delivery of the Security Agreements and the financing statements described on Schedule 3.18), each executed and delivered by a duly authorized officer of the Borrower and the Domestic Subsidiaries, as the case may be, and cause to be executed and delivered to the Collateral Agent and the Lenders, a satisfactory legal opinion with respect to the Security Agreements and the perfection of the Liens granted pursuant thereto. 5.3 Certificates; Other Information. Furnish to each Lender: (a) concurrently with the delivery of the financial statements referred to in subsection 5.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate; (b) concurrently with the delivery of the financial statements referred to in subsections 5.1(a) and (b), a certificate of a Responsible Officer (i) stating that, to the best of such Officer's knowledge, the Borrower and its Subsidiaries during such period have observed or performed all of their respective covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Loan Documents to be observed, performed or satisfied by them, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate and (ii) setting forth the calculations required to determine (A) compliance with subsections 6.1 and 6.8 and (B) the Applicable Margin for Eurodollar Loans on the relevant Adjustment Date; (c) within 90 days after the beginning of each fiscal year of the Borrower, a copy of the projections by the Borrower of the balance sheet, income statement and cash flow budget of the Borrower and its Subsidiaries for such fiscal year and the subsequent three fiscal years, such projections to be accompanied by a certificate of the Chief Financial Officer of the Borrower to the effect that such projections have been prepared in good faith on the basis of sound financial planning practice and reasonable assumptions; (d) within five days after the same are sent, copies of all financial statements and reports which the Borrower sends to its stockholders, and within five days after the same are filed, copies of all financial statements and reports which the Borrower may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority; (e) within fifteen days after the end of each calendar month, a certificate of the Borrower (i) setting forth (A) the aggregate amount of all Eligible Accounts of the Borrower and its Domestic Subsidiaries as of the last day of such calendar month and (B) the aggregate amount of raw materials and finished goods of the Borrower and its Domestic Subsidiaries as of the last day of such calendar month and (ii) certifying that the Borrower is in compliance with subsection 6.1(h). (f) promptly, a copy of each management letter, if any, prepared by the accountants which audited the financial statements delivered pursuant to subsection 5.1(a); and (g) promptly, such additional financial and other information as any Lender may from time to time reasonably request. 5.4 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or its Subsidiaries, as the case may be. 5.5 Conduct of Business and Maintenance of Existence. Continue to engage in business of the same general type as now conducted by it and preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business except as otherwise permitted pursuant to subsection 6.5; comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, be reasonably expected to have a Material Adverse Effect. 5.6 Maintenance of Property; Insurance. Keep all property useful and necessary in its business in good working order and condition; maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business; and furnish to each Lender, upon written request, full information as to the insurance carried. 5.7 Inspection of Property; Books and Records; Discussions; Completion of Audit. Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired (including, without limitation, in connection with the audit contemplated by Section 7(l)) and to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with officers and employees of the Borrower and its Subsidiaries and with its independent certified public accountants (including, without limitation, in connection with the audit contemplated by Section 7(l)); and cooperate with Chase to facilitate the prompt completion of the audit contemplated by Section 7(l). 5.8 Notices. Promptly give notice to each Lender of: (a) the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any Contractual Obligation of the Borrower or any of its Subsidiaries or (ii) litigation, investigation or proceeding which may exist at any time between the Borrower or any of its Subsidiaries and any Governmental Authority, which in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect; (c) any litigation or proceeding affecting the Borrower or any of its Subsidiaries in which the amount involved is $1,000,000 or more and not covered by insurance or in which injunctive or similar relief is sought; (d) the following events, as soon as possible and in any event within 30 days after the Borrower knows or has reason to know thereof: (i) the occurrence or expected occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the terminating, Reorganization or Insolvency of, any Plan; and (e) any development or event which could reasonably be expected to have a Material Adverse Effect. Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower proposes to take with respect thereto. 5.9 Environmental Laws. (a) Comply with, and ensure compliance by all tenants and subtenants, if any, with, all applicable Environmental Laws and obtain and comply in all material respects with and maintain, and ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws. (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws except to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not be reasonably expected to have a Material Adverse Effect. 5.10 Additional Guarantors and Collateral. Promptly inform each of the Lenders and the Collateral Agent of the creation or acquisition of each new Domestic Subsidiary after the Effective Date and cause each such new Domestic Subsidiary of the Borrower (i) to execute promptly after creation or acquisition thereof a Supplement in the form attached to the Subsidiaries Guarantee as ExhibitEA pursuant to which such new Domestic Subsidiary shall become a party to the Subsidiaries Guarantee as a guarantor thereunder, (ii) to become a party to the Subsidiary Security Agreement pursuant to documentation which is in form and substance satisfactory to the Collateral Agent and (iii) to take all actions necessary or advisable to cause the Lien created by the Subsidiaries Security Agreement to be duly perfected in accordance with all applicable Requirements of Law, including, without limitation, the filing of financing statements in such jurisdictions as may be requested by the Collateral Agent. 5.11 Additional Collateral. (a) With respect to any assets acquired after the Closing Date by the Borrower or any of its Domestic Subsidiaries that are intended to be subject to the Lien created by any of the Security Documents but which are not so subject (other than any assets described in paragraph (b) of this subsection), promptly (and in any event within 30 days after the acquisition thereof): (i) execute and deliver to the Collateral Agent such amendments to the relevant Security Agreement or such other documents as the Collateral Agent shall deem necessary or advisable to grant to the Collateral Agent, for the benefit of the Lenders, a Lien on such assets, (ii) take all actions necessary or advisable to cause such Lien to be duly perfected in accordance with all applicable Requirements of Law, including, without limitation, the filing of financing statements in such jurisdictions as may be requested by the Collateral Agent, and (iii) if requested by the Collateral Agent, deliver to the Collateral Agent legal opinions relating to the matters described in clauses (i) and (ii) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Collateral Agent. (b) With respect to any Person that, subsequent to the Closing Date, becomes a Subsidiary (other than a Foreign Subsidiary), promptly upon the request of the Agent: (i) cause such new Subsidiary (A)Eto become a party to the Subsidiary Guarantee and the Subsidiary Security Agreement, in each case pursuant to documentation which is in form and substance satisfactory to the Agent, and (B) to take all actions necessary or advisable to cause the Lien created by the Subsidiary Security Agreement to be duly perfected in accordance with all applicable Requirements of Law, including, without limitation, the filing of financing statements in such jurisdictions as may be requested by the Collateral Agent and (ii) if requested by the Collateral Agent, deliver to the Collateral Agent legal opinions relating to the matters described in clause (i) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Collateral Agent. 5.12 Assets. (a) Own at least 90% of the Total Assets of the Borrower and its Subsidiaries (other than the assets owned by Toyo Microsystems Corporation on the date hereof) at all times and (b) cause at least 90% of the Total Assets of the Borrower to be located in the United States of America at all times. SECTION 6. NEGATIVE COVENANTS The Borrower hereby agrees that, so long as the Commitments remain in effect or any amount is owing to any Lender hereunder or under any other Loan Document, the Borrower shall not, and (except with respect to subsections 6.1) shall not permit any of its Subsidiaries to, directly or indirectly: 6.1 Financial Condition Covenants. (a) Maintenance of Net Worth. Permit Consolidated Net Worth at any time (i) on or prior to February 27, 1998, to be less than $170,000,000 or (ii) thereafter, to be less than $175,000,000. (b) Consolidated Net Loss. Permit the Consolidated Net Loss (i) for the quarter ended May 31, 1997 to be greater than $9,000,000, (ii) for the quarter ended August 31, 1997 to be greater than $4,000,000 or (iii) for the fiscal year ended February 28, 1998 to be greater than $10,000,000. (c) Consolidated EBITDA. Permit Consolidated EBITDA for any quarter ending (i) on August 31, 1997 to be less than $1,500,000, (ii) during the period from and including November 30, 1997 to and including February 27, 1998 to be less than $5,500,000 or (iii) thereafter, to be less than $6,500,000. (d) Maintenance of Quick Asset Ratio. Permit the ratio of Consolidated Quick Assets to Consolidated Current Liabilities to be less than 0.75 to 1.00 at any time. (e) Ratio of Total Unsubordinated Liabilities to Consolidated Tangible Net Worth. Permit the ratio of Consolidated Total Unsubordinated Liabilities to Consolidated Tangible Net Worth at any time to be greater than 1.25 to 1.00. (f) Ratio of Consolidated Funded Debt to Consolidated EBITDA. Permit the ratio of Consolidated Funded Debt at any time to Consolidated EBITDA for the most recently completed period of four consecutive fiscal quarters then ended to be greater than 1.75 to 1.00. (g) Maintenance of Inventory Turnover. Permit the Inventory Turnover Ratio to be less than 3.00 to 1.00 at any time. (h) Maintenance of Core Assets. Permit the amount of Core Assets at any time to be less than the aggregate principal amount of all Loans outstanding hereunder at such time. 6.2 Limitation on Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness of the Borrower under this Agreement; (b) Indebtedness of the Borrower to any Subsidiary and of any Subsidiary to the Borrower or any other Subsidiary, provided that the maximum amount of any such Indebtedness of the Foreign Subsidiaries to the Borrower shall not exceed $1,000,000 in the aggregate at any time outstanding; (c) Indebtedness of the Borrower and any of its Subsidiaries incurred to finance the acquisition of fixed or capital assets to the extent permitted under subsection 6.8 (whether pursuant to a loan, a Financing Lease or otherwise) in an aggregate principal amount not exceeding in the aggregate $3,000,000 at any time outstanding; (d) Subordinated Debt of the Borrower or any of its Subsidiaries; (e) Indebtedness outstanding on the date hereof and listed on Schedule 6.2(e); (f) Indebtedness of a corporation which becomes a Subsidiary after the date hereof, provided that (i) such indebtedness existed at the time such corporation became a Subsidiary and was not created in anticipation thereof and (ii) immediately after giving effect to the acquisition of such corporation by the Borrower no Default or Event of Default shall have occurred and be continuing or would result therefrom; and (g) Indebtedness under foreign exchange lines of credit, provided that the aggregate principal amount of such Indebtedness at any time outstanding does not exceed $500,000. 6.3 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for: (a) Liens created pursuant to the Security Agreements; (b) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP; (c) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings; (d) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements; (e) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (f) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or such Subsidiary; (g) Liens in existence on the date hereof listed on Schedule 6.3(g), provided that no such Lien is spread to cover any additional property after the Effective Date and that the amount of Indebtedness secured thereby is not increased; (h) Liens securing Indebtedness of the Borrower and its Subsidiaries permitted by subsection 6.2(c) incurred to finance the acquisition of fixed or capital assets, provided that (i) such Liens shall be created substantially simultaneously with the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness, (iii) the amount of Indebtedness secured thereby is not increased and (iv) the principal amount of Indebtedness secured by any such Lien shall at no time exceed 100% of the original purchase price of such property at the time it was acquired; and (i) Liens on the property or assets of a corporation which becomes a Subsidiary after the date hereof securing Indebtedness permitted by subsection 6.2(f), provided that (i) such Liens existed at the time such corporation became a Subsidiary and were not created in anticipation thereof, (ii) any such Lien is limited to the property and assets subject to such Lien at the time such corporation becomes a Subsidiary and is not spread to cover any property or assets of such corporation after the time such corporation becomes a Subsidiary (including, without limitation, pursuant to after-acquired property or similar clause) and (iii) the amount of Indebtedness secured thereby is not increased. 6.4 Limitation on Guarantee Obligations. Create, incur, assume or suffer to exist any Guarantee Obligation except: (a) Guarantee Obligations in existence on the date hereof and listed on Schedule 6.4(a); (b) Guarantee Obligations of the Borrower and its Subsidiaries created after the Initial Closing Date in an aggregate amount not to exceed $250,000 in the aggregate at any one time outstanding; (c) Guarantee Obligations of the Borrower in respect of operating leases entered into by any Subsidiary in the ordinary course of business; and (d) the Guarantees. 6.5 Limitation on Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, or make any material change in its present method of conducting business, except: (a) any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with or into any one or more wholly owned Domestic Subsidiaries of the Borrower (provided that the wholly owned Domestic Subsidiary or Domestic Subsidiaries shall be the continuing or surviving corporation); (b) any wholly owned Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any wholly owned Domestic Subsidiary of the Borrower; and (c) as permitted under subsection 6.9. 6.6 Limitation on Sale of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person other than the Borrower or any wholly owned Subsidiary, except: (a) the sale or other disposition of obsolete or worn out property in the ordinary course of business; (b) the sale of inventory in the ordinary course of business; (c) the sale or discount without recourse of accounts receivable in the ordinary course of business in connection with the compromise or collection thereof; (d) the sale of equipment to AT&T Corp. pursuant to the terms of the Supplier Contract as in effect on the Initial Closing Date; (e) the sale of equipment with an aggregate net book value not exceeding $500,000 in any fiscal year; and (f) as permitted by subsection 6.5(b). 6.7 Limitation on Dividends. Declare or pay any dividend (other than dividends payable solely in common stock of the Borrower) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock of the Borrower or any Domestic Subsidiary which is not wholly owned by the Borrower or any warrants or options to purchase any such Capital Stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Subsidiary, except for (i) repurchases of its common stock in an amount not to exceed $5,000,000 in the aggregate after the Initial Closing Date, (ii) dividends in respect of the Capital Stock of any Domestic Subsidiary which is not wholly owned by the Borrower which is paid on a ratable basis to all holders of such Capital Stock and (iii) dividends and/or purchases of common stock of the Borrower in respect of employee benefit plans of the Borrower as in effect on the Initial Closing Date not exceeding $500,000 in the aggregate in any year. 6.8 Limitation on Capital Expenditures. Make or commit to make (by way of the acquisition of securities of a Person or otherwise) any expenditure in respect of the purchase or other acquisition of fixed or capital assets (excluding any such asset acquired in connection with normal replacement and maintenance programs properly charged to current operations) except for expenditures in the ordinary course of business not exceeding, in the aggregate for the Borrower and its Subsidiaries during the fiscal year ending on February 28, 1998, $14,500,000. 6.9 Limitation on Investments, Loans and Advances. Make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, or make any other investment in, any Person ("Investments"), except: (a) extensions of trade credit in the ordinary course of business; (b) Permitted Investments; and (c) Investments by the Borrower in its Subsidiaries as of the Effective Date listed in Schedule 3.15 hereto and additional equity Investments (including, without limitation, by virtue of a transaction permitted under subsection 6.5) in Subsidiaries, provided that the aggregate amount of such Investments in Foreign Subsidiaries shall not exceed $1,000,000 in the aggregate subsequent to the Initial Closing Date. 6.10 Limitation on Optional Payments and Modifications of Debt Instruments. (a) Make any optional payment or prepayment on or redemption or purchase of any Subordinated Debt, (b) amend, modify or change, or consent or agree to any amendment, modification or change to any of the terms of any such Subordinated Debt (other than any such amendment, modification or change which would extend the maturity or reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date for payment of interest thereon), or (c) amend the subordination provisions of the Subordinated Debt. 6.11 Limitation on Transactions with Affiliates. Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (a)Eotherwise permitted under this Agreement, (b) in the ordinary course of the Borrower's or such Subsidiary's business and (c)Eupon fair and reasonable terms no less favorable to the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person which is not an Affiliate, except for contracts with directors and executive officers of the Borrower and its Subsidiaries entered into in the ordinary course of business with respect to services rendered to the Borrower and its Subsidiaries. 6.12 Limitation on Sales and Leasebacks. Enter into any arrangement with any Person providing for the leasing by the Borrower or any Subsidiary of real or personal property which has been or is to be sold or transferred by the Borrower or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or such Subsidiary. 6.13 Limitation on Changes in Fiscal Year; Accounting Changes. (a) Permit the fiscal year of the Borrower to end on a day other than the last day of February or (b) change any accounting treatments or reporting practices used in connection with the preparation of the consolidated financial statements of the Borrower and its Subsidiaries as of the date hereof except as required or permitted by GAAP. 6.14 Limitation on Negative Pledge Clauses. Enter into with any Person any agreement, other than (a) this Agreement or (b) any industrial revenue bonds, purchase money mortgages or Financing Leases permitted by this Agreement (in which cases, any prohibition or limitation shall only be effective against the assets financed thereby), which prohibits or limits the ability of the Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired. 6.15 Limitation on Lines of Business. Enter into any business, either directly or through any Subsidiary, except for those businesses in which the Borrower and its Subsidiaries are engaged on the date of this Agreement. 6.16 Limitation on Interest Rate Protection Agreements. Enter into any Interest Rate Protection Agreements other than Interest Rate Protection Agreements with respect to the Loans, provided that (i) the aggregate notional amount of all such Interest Rate Protection Agreements shall not exceed the Commitments and (ii) such Interest Rate Protection Agreements shall be unsecured. SECTION 7. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Loan when due in accordance with the terms thereof or hereof; or the Borrower shall fail to pay any interest on any Loan, or any other amount payable hereunder, within five days after any such interest or other amount becomes due in accordance with the terms thereof or hereof; or (b) Any representation or warranty made or deemed made by the Borrower or any other Loan Party herein or in any other Loan Document or which is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (c) The Borrower or any other Loan Party shall default in the observance or performance of any agreement contained in Section 6 or the observance and performance of any agreement contained in subsection 4.4 of either Security Agreement; or (d) The Borrower or any other Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and in the case of any such default under Section 5 (other than subsection 5.1, 5.2, 5.3(a), 5.3(b), 5.5, 5.6, 5.7 or 5.8), such default shall continue unremedied for a period of 20 days; or (e) The Borrower or any of its Subsidiaries shall (i)Edefault in any payment of principal of or interest of any Indebtedness (other than the Loans) or in the payment of any Guarantee Obligation, beyond the period of grace (not to exceed 30 days), if any, provided in the instrument or agreement under which such Indebtedness or Guarantee Obligation was created, if the aggregate amount of the Indebtedness and/or Guarantee Obligations in respect of which such default or defaults shall have occurred is at least $100,000; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or Guarantee Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable; or (f) (i) The Borrower or any of its Material Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Borrower or any of its Material Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower or any of its Material Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 30 days; or (iii) there shall be commenced against the Borrower or any of its Material Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 30 days from the entry thereof; or (iv) the Borrower or any of its Material Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any of its Material Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (g) (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or SectionE4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v)Ethe Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; or (h) One or more judgments or decrees shall be entered against the Borrower or any of its Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance) of $250,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof; or (i) Any Guarantee shall cease, for any reason, to be in full force and effect with respect to any Material Subsidiary or any Guarantor shall so assert; or (j) Any Security Agreement shall cease, for any reason to be in full force and effect, or any Loan Party shall so assert or the Liens or security interests created by any such Security Agreement shall cease for any reason, other than a release by the Lenders, to be enforceable and of the same effect and priority purported to be created thereby; or (k) (i) Any Person or "group" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) (A) shall have acquired beneficial ownership of 20% or more of any outstanding class of Capital Stock having ordinary voting power in the election of directors of the Borrower or (B) shall obtain the power (whether or not exercised) to elect a majority of the Borrower's directors or (ii) the Board of Directors of the Borrower shall not consist of a majority of Continuing Directors; "Continuing Directors" shall mean the directors of the Borrower on the Effective Date and each other director, if such other director's nomination for election to the Board of Directors of the Borrower is recommended by a majority of the then Continuing Directors; or (l) The audit of Accounts, raw materials, work in process and finished goods of the Borrower and its Subsidiaries to be completed by Chase shall be reasonably judged to be unsatisfactory in any respect to the Lenders, in their sole discretion; then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) of this Section with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) the Required Lenders may, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) the Required Lenders may, by notice to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived. SECTION 8. COLLATERAL AGENT 8.1 Appointment of Collateral Agent. Each Lender hereby irrevocably designates and appoints Chase as the Collateral Agent of such Lender under the Security Agreements and the other Loan Documents, and each such Lender irrevocably authorizes the Collateral Agent, in such capacity, to take such action on its behalf under the provisions of the Security Agreements and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Collateral Agent by the terms of the Security Agreements and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in the Security Agreements or any other Loan Document, the Collateral Agent shall not have any duties or responsibilities, except those expressly set forth therein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement, any other Loan Document or the Security Agreements or otherwise exist against the Collateral Agent. 8.2 Delegation of Duties. The Collateral Agent may execute any of its duties under the Security Agreements and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Collateral Agent shall not be responsible for the negligence or misconduct of any agents or attorneys in- fact selected by it with reasonable care. 8.3 Exculpatory Provisions. Neither the Collateral Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with the Security Agreements or any other Loan Document (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Loan Party or any officer thereof contained in this Agreement, the other Loan Documents or the Security Agreements or in any certificate, report, statement or other document referred to or provided for in, or received by the Collateral Agent under or in connection with, the Security Agreements or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, any other Loan Document or the Security Agreements or for any failure of any Loan Party to perform its obligations hereunder or thereunder. The Collateral Agent shall not 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, any other Loan Document or the Security Agreements, or to inspect the properties, books or records of any Loan Party. 8.4 Reliance by Collateral Agent. The Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order 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, without limitation, counsel to the Borrower), independent accountants and other experts selected by the Collateral Agent. The Collateral Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Collateral Agent. The Collateral Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of the Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Collateral Agent shall in all cases be fully protected in acting, or in refraining from acting, under the Loan Documents in accordance with a request of the requisite Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. 8.5 Notice of Default. The Collateral Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Collateral Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Collateral Agent receives such a notice, the Collateral Agent shall give notice thereof to the Lenders. The Collateral Agent shall take such action with respect to such Default or Event of Default as permitted under the Loan Documents as shall be reasonably directed by the Required Lenders; provided that unless and until the Collateral Agent shall have received such directions, the Collateral 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 in the best interests of the Lenders. 8.6 Non-Reliance on Collateral Agent and Other Lenders. Each Lender expressly acknowledges that neither the Collateral Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Collateral Agent hereinafter taken, including any review of the affairs of any Loan Party, shall be deemed to constitute any representation or warranty by the Collateral Agent to any Lender. Each Lender represents to the Collateral Agent that it has, independently and without reliance upon the Collateral Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrower and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Collateral Agent 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 analysis, appraisals and decisions in taking or not taking action under this Agreement, the other Loan Documents and the Security Agreements, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower. The Collateral Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party which may come into the possession of the Collateral Agent or any of its officers, directors, employees, agents, attorneys- in-fact or Affiliates. 8.7 Indemnification. The Lenders agree to indemnify the Collateral Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Commitment Percentages in effect on the date on which indemnification is sought, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against the Collateral Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents, the Security Agreements or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Collateral Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Collateral Agent's gross negligence or willful misconduct. The agreements in this subsection shall survive the payment of the Loans and all other amounts payable hereunder. 8.8 Collateral Agent in Its Individual Capacity. The Collateral Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with any Loan Party as though the Collateral Agent were not the Collateral Agent hereunder and under the other Loan Documents and the Security Agreements. With respect to the Loans made by it, the Collateral Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Collateral Agent, and the terms "Lender" and "Lenders" shall include the Collateral Agent in its individual capacity. 8.9 Successor Collateral Agent. The Collateral Agent may resign as Collateral Agent upon 10 days' notice to the Lenders. If the Collateral Agent shall resign as Collateral Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor collateral agent for the Lenders, which successor collateral agent (provided that it shall have been approved by the Borrower), shall succeed to the rights, powers and duties of the Collateral Agent hereunder. Effective upon such appointment and approval, the term "Collateral Agent" shall mean such successor collateral agent, and the former Collateral Agent's rights, powers and duties as Collateral Agent shall be terminated, without any other or further act or deed on the part of such former Collateral Agent or any of the parties to this Agreement or any holders of the Loans. After any retiring Collateral Agent's resignation as Collateral Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Collateral Agent under this Agreement, the other Loan Documents and the Security Agreements. SECTION 9. MISCELLANEOUS 9.1 Amendments and Waivers. Neither this Agreement nor any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this subsection. The Required Lenders may from time to time (a) enter into with the Borrower written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Borrower hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) reduce the amount or extend the scheduled date of maturity of any Loan or of any installment thereof, or reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof or increase the amount or extend the expiration date of any Lender's Commitments, in each case without the consent of each Lender affected thereby, or (ii)Eamend, modify or waive any provision of this subsection or reduce the percentage specified in the definition of Required Lenders, or consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents or the release of any Guarantor under the Subsidiaries Guarantee or release all or substantially all of the collateral, in each case without the written consent of all the Lenders. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders and all future holders of the Loans. In the case of any waiver, the Borrower and the Lenders shall be restored to their former positions and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. 9.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered, or five days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed as follows, or to such other address as may be hereafter notified by the respective parties hereto: The Borrower: Standard Microsystems Corporation 80 Arkay Drive Hauppauge, New York 11788 Attention: Eric Nowling Telecopy: (516) 434-4651 The Lenders: The Chase Manhattan Bank Middle Market Group 7600 Jericho Turnpike Woodbury, New York 11797 Attention: Account Officer Standard Microsystems Corporation Telecopy: (516) 364-3307 Fleet Bank N.A. 300 Broadhollow Road Melville, New York 11747 Attention: Thomas Dionian Standard Microsystems Corporation Telecopy: (516) 547-7815 The Collateral Agent: The Chase Manhattan Bank Middle Market Group 7600 Jericho Turnpike Woodbury, New York 11797 Attention: Account Officer Standard Microsystems Corporation Telecopy: (516) 364-3307 provided that any notice, request or demand to or upon the Lenders pursuant to subsection 2.2, 2.4, 2.7 orE2.11 shall not be effective until received. 9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 9.4 Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder. 9.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or reimburse the Collateral Agent and the Lenders for all their out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of counsel to the Collateral Agent and the Lenders, (b) to pay or reimburse the Collateral Agent and each Lender for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including, without limitation, the fees and disbursements of counsel to the Collateral Agent and each Lender, (c) to pay, indemnify, and hold the Collateral Agent and each Lender harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify, and hold the Collateral Agent and each Lender harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents and any such other documents, including, without limitation, any of the foregoing relating to the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Borrower, any of its Subsidiaries or any of the Properties (all the foregoing in this clause (d), collectively, the "indemnified liabilities"), provided, that the Borrower shall have no obligation hereunder to any Lender with respect to indemnified liabilities arising from (i)Ethe gross negligence or willful misconduct of any such Lender or (ii) legal proceedings commenced against any such Lender by any security holder or creditor thereof arising out of and based upon rights afforded any such security holder or creditor solely in its capacity as such. The agreements in this subsection shall survive repayment of the Loans and all other amounts payable hereunder. 9.6 Successors and Assigns; Participations and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. (b) Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender, any Commitment of such Lender or any other interest of such Lender hereunder and under the other Loan Documents. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Loan Documents, and the Borrower shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. The Borrower agrees that if amounts outstanding under this Agreement are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff 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, provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in subsection 9.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of subsections 2.12, 2.13 and 2.14 with respect to its participation in the Commitments and the Loans outstanding from time to time as if it was a Lender; provided that, in the case of subsection 2.14 such Participant shall have complied with the requirements of said subsection and, provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such subsection than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time and from time to time assign to any Lender or any affiliate thereof or, with the consent of the Borrower and the Collateral Agent (which shall not be unreasonably withheld), to an additional bank or financial institution ("an Assignee") all or any part of its rights and obligations under this Agreement and the other Loan Documents pursuant to an Assignment and Acceptance, substantially in the form of Exhibit G, executed by such Assignee, such assigning Lender (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrower and the Collateral Agent), provided that, (i) notwithstanding the foregoing, the consent of the Borrower shall not be required in the case of any such assignment to an additional bank or financial institution by any Lender unless the sum of the aggregate principal amount of the Loans and the aggregate amount of the unused Commitment being assigned is greater than 49% of the Commitment of Chase or Fleet, as the case may be, at such time (provided that Chase or Fleet, as the case may be, shall provide ten days notice to the Borrower prior to making any assignment pursuant to this clause (i)) and (ii) in the case of any such assignment to an additional bank or financial institution, the sum of the aggregate principal amount of the Loans and the aggregate amount of the unused Commitment being assigned and, if such assignment is of less than all of the rights and obligations of the assigning Lender, the sum of the aggregate principal amount of the Loans and the aggregate amount of the unused Commitment remaining with the assigning Lender are each not less than $10,000,000. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein, and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, 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, such assigning Lender shall cease to be a party hereto). Notwithstanding any provision of this paragraph (c) and paragraph (e) of this subsection, the consent of the Borrower shall not be required, and, unless requested by the Assignee and/or the assigning Lender, new Notes shall not be required to be executed and delivered by the Borrower, for any assignment which occurs at any time when any of the events described in Section 7(a) or 7(f) shall have occurred and be continuing. (d) The Borrower authorizes each Lender to disclose to any Participant or Assignee (each, a "Transferee") and any prospective Transferee, subject to the provisions of subsection 9.15, any and all financial information in such Lender's possession concerning the Borrower and its Affiliates which has been delivered to such Lender by or on behalf of the Borrower pursuant to this Agreement or which has been delivered to such Lender by or on behalf of the Borrower in connection with such Lender's credit evaluation of the Borrower and its Affiliates prior to becoming a party to this Agreement. (e) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this subsection concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law. 9.7 Adjustments; Set-off. (a) If any Lender (a "Benefitted Lender") shall at any time receive any payment of all or part of its Loans, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set- off, pursuant to events or proceedings of the nature referred to in Section 7(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans, or interest thereon, such benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Loan, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. 9.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 9.9 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 9.10 Integration. This Agreement and the other Loan Documents represent the agreement of the Borrower and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents. 9.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 9.12 Submission To Jurisdiction; Waivers. The Borrower hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgement in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of New York, the courts of the UnitedEStates of America for the Southern District of NewEYork, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address set forth in subsection 9.2 or at such other address of which each Lender shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this subsection any special, exemplary, punitive or consequential damages. 9.13 Acknowledgements. The Borrower hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents; (b) no Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders. 9.14 WAIVERS OF JURY TRIAL. THE BORROWER AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 9.15 Confidentiality. Each Lender agrees to keep confidential all non-public information provided to it by the Borrower pursuant to this Agreement that is designated by the Borrower in writing as confidential; provided that nothing herein shall prevent any Lender from disclosing any such information (i) to any other Lender, (ii) to any Transferee which receives such information and which agrees to keep such information confidential on substantially the same terms as those set forth in this subsection 9.15, (iii) to its employees, directors, agents, attorneys, accountants and other professional advisors, (iv) upon the request or demand of any Governmental Authority having jurisdiction over such Lender, (v) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (vi) which has been publicly disclosed other than in breach of this Agreement or (vii) in connection with the exercise of any remedy hereunder. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. STANDARD MICROSYSTEMS CORPORATION By: Title: THE CHASE MANHATTAN BANK, as Collateral Agent and as a Lender By: Title: FLEET BANK N.A. By: Title: EXECUTION COPY $25,000,000 AMENDED AND RESTATED CREDIT AGREEMENT among STANDARD MICROSYSTEMS CORPORATION and THE CHASE MANHATTAN BANK and FLEET BANK N.A., as Lenders and THE CHASE MANHATTAN BANK, as Collateral Agent Dated as of May 23, 1997 TABLE OF CONTENTS Page SECTION 1. DEFINITIONS 1 1.1 Defined Terms 1 1.2 Other Definitional Provisions 13 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 13 2.1 Commitments 13 2.2 Procedure for Borrowing 14 2.3 Commitment Fee 14 2.4 Termination or Reduction of Commitments 14 2.5 Repayment of Loans; Evidence of Debt 14 2.6 Optional Prepayments 15 2.7 Conversion and Continuation Options 15 2.8 Interest Rates and Payment Dates 16 2.9 Computation of Interest and Fees 16 2.10 Inability to Determine Interest Rate 16 2.11 Pro Rata Treatment and Payments 17 2.12 Illegality 17 2.13 Requirements of Law 17 2.14 Taxes 18 2.15 Indemnity 20 2.16 Change of Lending Office 20 SECTION 3. REPRESENTATIONS AND WARRANTIES 20 3.1 Financial Condition 20 3.2 No Change 21 3.3 Corporate Existence; Compliance with Law 21 3.4 Corporate Power; Authorization; Enforceable Obligations 22 3.5 No Legal Bar 22 3.6 No Material Litigation 22 3.7 No Default 22 3.8 Ownership of Property; Liens 22 3.9 Intellectual Property 22 3.10 No Burdensome Restrictions 23 3.11 Taxes 23 3.12 Federal Regulations 23 3.13 ERISA 23 3.14 Investment Company Act; Other Regulations 24 3.15 Subsidiaries 24 3.16 Purpose of Loans 24 3.17 Environmental Matters 24 3.18 Security Agreements 25 SECTION 4. CONDITIONS PRECEDENT 25 4.1 Conditions to Effectiveness 25 4.2 Conditions to Each Loan 27 SECTION 5. AFFIRMATIVE COVENANTS 27 5.1 Financial Statements 27 5.3 Certificates; Other Information 28 5.4 Payment of Obligations 29 5.5 Conduct of Business and Maintenance of Existence 29 5.6 Maintenance of Property; Insurance 30 5.7 Inspection of Property; Books and Records; Discussions 30 5.8 Notices 30 5.9 Environmental Laws 31 5.10 Additional Guarantors and Collateral 31 5.11 Additional Collateral 31 5.12 Assets 32 SECTION 6. NEGATIVE COVENANTS 32 6.1 Financial Condition Covenants 32 6.2 Limitation on Indebtedness 33 6.3 Limitation on Liens 34 6.4 Limitation on Guarantee Obligations 35 6.5 Limitation on Fundamental Changes 35 6.6 Limitation on Sale of Assets 35 6.7 Limitation on Dividends 36 6.8 Limitation on Capital Expenditures 36 6.9 Limitation on Investments, Loans and Advances 36 6.10 Limitation on Optional Payments and Modifications of Debt Instruments 37 6.11 Limitation on Transactions with Affiliates 37 6.12 Limitation on Sales and Leasebacks 37 6.13 Limitation on Changes in Fiscal Year; Accounting Changes 37 6.14 Limitation on Negative Pledge Clauses 37 6.15 Limitation on Lines of Business 38 6.16 Limitation on Interest Rate Protection Agreements 38 SECTION 7. EVENTS OF DEFAULT 38 SECTION 8. COLLATERAL AGENT 41 8.1 Appointment of Collateral Agent 41 8.2 Delegation of Duties 41 8.3 Exculpatory Provisions 41 8.4 Reliance by Collateral Agent 42 8.5 Notice of Default 42 8.6 Non-Reliance on Collateral Agent and Other Lenders 42 8.7 Indemnification 43 8.8 Collateral Agent in Its Individual Capacity 43 8.9 Successor Collateral Agent 43 SECTION 9. MISCELLANEOUS 44 9.1 Amendments and Waivers 44 9.2 Notices 44 9.3 No Waiver; Cumulative Remedies 45 9.4 Survival of Representations and Warranties 45 9.5 Payment of Expenses and Taxes 45 9.6 Successors and Assigns; Participations and Assignments 46 9.7 Adjustments; Set-off 48 9.8 Counterparts 48 9.9 Severability 49 9.10 Integration 49 9.11 GOVERNING LAW 49 9.12 Submission To Jurisdiction; Waivers 49 9.13 Acknowledgements 50 9.14 WAIVERS OF JURY TRIAL 50 9.15 Confidentiality 50 SCHEDULES Schedule 1.1(a) Commitments Schedule 3.1(a) Off-Balance Sheet Obligations Schedule 3.6 Litigation Schedule 3.15 Subsidiaries Schedule 3.17 Environmental Matters Schedule 3.18 Initial Filing Jurisdictions Schedule 6.2(e) Existing Indebtedness Schedule 6.3(g) Existing Liens Schedule 6.4(a) Existing Guarantee Obligations EXHIBITS Exhibit A Form of Subsidiaries Guarantee Exhibit B Form of Borrower Security Agreement Exhibit C Form of Subsidiaries Security Agreement Exhibit D Form of Note Exhibit E Form of Closing Certificate Exhibit F Form of Opinion of Counsel to Borrower Exhibit G Form of Assignment and Acceptance Schedule 1.1(a) Commitments Lender Amount The Chase Manhattan Bank $12,500,000 Fleet Bank N.A. 12,500,000 Total $25,000,000 Schedule 3.1(a) OFF-BALANCE SHEET OBLIGATIONS Schedule 3.15 STANDARD MICROSYSTEMS CORPORATION SCHEDULE OF SUBSIDIARIES All subsidiaries are wholly-owned, except Toyo Microsystems Corporation. Delaware corporations Standard Microsystems Corporation (Asia) SMC Singapore, Inc. SMC France, Inc. SMC Massachusetts, Inc. SMC North America, Inc. Foreign corporations Standard Microsystems Corporation (Canada) (incorporated in Ontario, Canada) Standard Microsystems (Europe) Limited (incorporated in United Kingdom) Standard Microsystems GmbH (incorporated in Germany) Toyo Microsystems Corporation (incorporated in Japan) SMC International Limited (incorported in ) SMC Australia ETY Limited (incorporated in Australia) SMC Mexico de Mexico S.A. de C.V. (incorporated in Mexico) Schedule 3.17 ENVIRONMENTAL MATTERS [NONE] Schedule 3.18 INITIAL FILING JURISDICTIONS Schedule 6.2(e) EXISTING INDEBTEDNESS Schedule 6.3(g) EXISTING LIENS Schedule 6.4(a) EXISTING GUARANTEE OBLIGATIONS EXECUTION COPY AMENDED AND RESTATED SUBSIDIARIES GUARANTEE AMENDED AND RESTATED GUARANTEE, dated as of May 23, 1997, made by each of the corporations that are signatories hereto (collectively, the "Guarantors"; individually, a "Guarantor"), in favor of The Chase Manhattan Bank, as collateral agent (in such capacity, the "Collateral Agent") for the several banks and other financial institutions (collectively, the "Lenders"; individually, a "Lender") parties from time to time to the Amended and Restated Credit Agreement, dated as of May , 1997 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among Standard Microsystems Corporation, a Delaware corporation (the "Borrower"), the Lenders and the Collateral Agent. W I T N E S S E T H: WHEREAS, the Guarantors are parties to the Guarantee, dated as of January 24, 1995 (the "Existing Guarantee") pursuant to which the Guarantors guaranteed the Borrower's obligations under the Credit Agreement, dated as of January 13, 1995 (the "Existing Credit Agreement"); WHEREAS, the Borrower has requested the Lenders to amend and restate the Existing Credit Agreement pursuant to the Credit Agreement; and WHEREAS, it is a condition precedent to the effectiveness of the pursuant to the Credit Agreement, that each Guarantor shall have executed and delivered this Amended and Restated Guarantee to the Collateral Agent for the ratable benefit of the Lenders. NOW, THEREFORE, in consideration of the premises and to induce the Lenders to make their respective Loans to the Borrower under the Credit Agreement, each Guarantor hereby agrees with the Collateral Agent and the Lenders, that the Existing Guarantee is hereby amended and restated in its entirety as follows: 1. Defined Terms. (a) Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. (b) As used herein, "Obligations" means the collective reference to the unpaid principal of and interest on the Loans and all other obligations and liabilities of the Borrower to Collateral Agent and the Lenders (including, without limitation, interest accruing at the then applicable rate provided in the Credit Agreement after the maturity of the Loans and interest accruing at the then applicable rate provided in the Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter incurred, which may arise under, out of, or in connection with, the Credit Agreement, any Notes, the other Loan Documents or any other document made, delivered or given in connection therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Collateral Agent or the Lenders that are required to be paid by the Borrower or any Guarantor pursuant to the terms of the Credit Agreement or this Guarantee or any other Loan Document). (c) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Guarantee shall refer to this Guarantee as a whole and not to any particular provision of this Guarantee, and section and paragraph references are to this Guarantee unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 2. Guarantee (a) Subject to the provisions of Section , each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably, guarantees to the Collateral Agent and the Lenders and their respective successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations. (b) Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Loan Documents shall in no event the maximum aggregate amount equal to the largest amount that would not render its obligations hereunder and thereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Code or any applicable provisions of comparable state law. (c) Each Guarantor further agrees to pay any and all expenses (including, without limitation, all fees and disbursements of counsel) which may be paid or incurred by the Collateral Agent or any Lender in enforcing, or obtaining advice of counsel in respect of, any rights with respect to, or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or collecting against, such Guarantor under this Guarantee. This Guarantee shall remain in full force and effect until the Obligations are paid in full and the Commitments are terminated, notwithstanding that from time to time prior thereto the Borrower may be free from any Obligations. (d) Each Guarantor agrees that the Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing this Guarantee or affecting the rights and remedies of the Collateral Agent or any Lender hereunder. (e) No payment or payments made by the Borrower, any of the Guarantors, any other guarantor or any other Person or received or collected by the Collateral Agent or any Lender from the Borrower, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment or payments other than payments made by such Guarantor in respect of the Obligations or payments received or collected from such Guarantor in respect of the Obligations, remain liable for the Obligations up to the maximum liability of such Guarantor hereunder until the Obligations are paid in full and the Commitments are terminated. (f) Each Guarantor agrees that whenever, at any time, or from time to time, it shall make any payment to any Lender on account of its liability hereunder, it will notify the Collateral Agent and the Lenders in writing that such payment is made under this Guarantee for such purpose. 3. Right of Contribution. Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder who has not paid its proportionate share of such payment. Each Guarantor's right of contribution shall be subject to the terms and conditions of Section hereof. The provisions of this Section shall in no respect limit the obligations and liabilities of any Guarantor to the Lenders, and each Guarantor shall remain liable to the Lenders for the full amount guaranteed by such Guarantor hereunder. 4. Right of Set-off. Upon the occurrence of any Event of Default, each Guarantor hereby irrevocably authorizes the Collateral Agent and each Lender at any time and from time to time without notice to such Guarantor or any other Guarantor, any such notice being expressly waived by each Guarantor, to set-off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Collateral Agent or such Lender, as the case may be, to or for the credit or the account of such Guarantor, or any part thereof in such amounts as such Lender may elect, against and on account of the obligations and liabilities of such Guarantor to the Collateral Agent or such Lender hereunder, as the case may be, and claims of every nature and description of such Lender against such Guarantor, in any currency, whether arising hereunder, under the Credit Agreement, any Note, any other Loan Document or otherwise, as the Collateral Agent or such Lender, as the case may be, may elect, whether or not the Collateral Agent or any Lender has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The Collateral Agent and each Lender shall notify such Guarantor promptly of any such set-off and the application made by the Collateral Agent or such Lender, as the case may be, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Collateral Agent and each Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Collateral Agent or such Lender, as the case may be, may have. 5. No Subrogation. Notwithstanding any payment or payments made by any of the Guarantors hereunder or any set-off or application of funds of any of the Guarantors by the Collateral Agent or any Lender, no Guarantor shall be entitled to be subrogated to any of the rights of the Collateral Agent or any Lender against the Borrower or any other Guarantor or any collateral security or guarantee or right of offset held by the Collateral Agent or any Lender for the payment of the Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from the Borrower or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to Lenders by the Borrower on account of the Obligations are paid in full and the Commitments are terminated. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amount shall be held by such Guarantor in trust for the Collateral Agent and the Lenders, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Collateral Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Collateral Agent or the Lenders, as the case may be, if required), to be applied against the Obligations, whether matured or unmatured, in such order as the Collateral Agent or the Lenders may determine. 6. Amendments, etc. with respect to the Obligations; Waiver of Rights. Each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Obligations made by the Collateral Agent, the Required Lenders or any Lender may be rescinded by the Collateral Agent, the Required Lenders or such Lender and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Collateral Agent, the Required Lenders or any Lender, and the Credit Agreement, any Notes, any other Loan Document and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Collateral Agent, the Required Lenders or such Lender may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Collateral Agent or any Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Neither the Collateral Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Obligations or for this Guarantee or any property subject thereto. When making any demand hereunder against any of the Guarantors, the Collateral Agent and the Required Lenders may, but shall be under no obligation to, make a similar demand on the Borrower or any other Guarantor or guarantor, and any failure by the Collateral Agent or the Required Lenders to make any such demand or to collect any payments from the Borrower or any such other Guarantor or guarantor or any release of the Borrower or such other Guarantor or guarantor shall not relieve any of the Guarantors in respect of which a demand or collection is not made or any of the Guarantors not so released of their several obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of the Collateral Agent or any Lender against any of the Guarantors. For the purposes hereof "demand" shall include the commencement and continuance of any legal proceedings. 7. Guarantee Absolute and Unconditional. Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by any Lender upon this Guarantee or acceptance of this Guarantee, the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guarantee; and all dealings between the Borrower and any of the Guarantors, on the one hand, and the Lenders, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon this Guarantee. Each Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Borrower or any of the Guarantors with respect to the Obligations. Each Guarantor understands and agrees that this Guarantee shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity, regularity or enforceability of the Credit Agreement, any Note, any other Loan Document, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Collateral Agent or any Lender, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by the Borrower against the Collateral Agent or any Lender or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Borrower or such Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Borrower for the Obligations, or of such Guarantor under this Guarantee, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against any Guarantor, the Collateral Agent, the Required Lenders or any Lender may, but shall be under no obligation to, pursue such rights and remedies as they or it may have against the Borrower or any other Person or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by the Collateral Agent, the Required Lenders or such Lender to pursue such other rights or remedies or to collect any payments from the Borrower or any such other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Borrower or any such other Person or any such collateral security, guarantee or right of offset, shall not relieve such Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Collateral Agent, the Required Lenders or such Lender against such Guarantor. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon each Guarantor and the successors and assigns thereof, and shall inure to the benefit of the Collateral Agent and the Lenders, and their respective successors, indorsees, transferees and assigns, until all the Obligations and the obligations of each Guarantor under this Guarantee shall have been satisfied by payment in full and the Commitments shall be terminated, notwithstanding that from time to time during the term of the Credit Agreement the Borrower may be free from any Obligations. 8. Reinstatement. This Guarantee shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Collateral Agent or any Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made. 9. Payments. Each Guarantor hereby guarantees that payments hereunder will be paid to the Collateral Agent and each Lender without set-off or counterclaim in U.S. Dollars at the office of the Collateral Agent or such Lender, as the case may be, set forth in subsection 9.2 of the Credit Agreement. 10. Representations and Warranties Each Guarantor hereby represents and warrants that: (a) it is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the corporate power and authority and the legal right to own and operate its property, to lease the property it operates and to conduct the business in which it is currently engaged; (b) it has the corporate power and authority and the legal right to execute and deliver, and to perform its obligations under, this Guarantee and the other Loan Documents to which it is a party, and has taken all necessary corporate action to authorize its execution, delivery and performance of this Guarantee and the other Loan Documents to which it is a party; (c) this Guarantee and each of the other Loan Documents to which it is a party constitutes a legal, valid and binding obligation of such Guarantor enforceable in accordance with its terms, except as affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting the enforcement of creditors' rights generally, general equitable principles and an implied covenant of good faith and fair dealing; (d) the execution, delivery and performance of this Guarantee and the other Loan Documents to which it is a party will not violate any provision of any Requirement of Law or Contractual Obligation of such Guarantor and will not result in or require the creation or imposition of any Lien on any of the properties or revenues of such Guarantor pursuant to any Requirement of Law or Contractual Obligation of the Guarantor; (e) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person (including, without limitation, any stockholder or creditor of such Guarantor) is required in connection with the execution, delivery, performance, validity or enforceability of this Guarantee or any other Loan Document to which it is a party; (f) no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of such Guarantor, threatened by or against such Guarantor or against any of its properties or revenues (i) with respect to this Guarantee or any other Loan Document to which it is a party or any of the transactions contemplated hereby or (ii) which could have a material adverse effect on the business, operations, property or financial or other condition of such Guarantor; (g) to the extent that the representations and warranties set forth in subsection 3.8 through and including subsection 3.17 of the Credit Agreement apply to such Guarantor, each such representation and warranty is true and correct; and (h) if such Guarantor is not incorporated under the laws of the United States of America or a state thereof, (1) such Guarantor is not subject to any exchange controls which would affect its ability to make payments under this Guarantee, (2) any payments made by such Guarantor under this Guarantee will not be subject to any withholding tax or other similar obligations of any Governmental Authority outside the United States of America and (3) the obligations of such Guarantor under this Guarantee will be pari passu with all other unsecured obligations of such Guarantor. Each Guarantor agrees that the foregoing representations and warranties shall be deemed to have been made by such Guarantor on the date of each borrowing by the Borrower under the Credit Agreement on and as of such date of borrowing as though made hereunder on and as of such date. 11. Covenants. Each Guarantor hereby covenants and agrees with the Collateral Agent and each Lender that, from and after the date of this Guarantee until the Obligations are paid in full and the Commitments are terminated, such Guarantor will comply with provisions of Sections 5 and 6 of the Credit Agreement to the extent such provisions apply to such Guarantor. 12. Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered, or five days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed as follows: (a) if to the Collateral Agent, at its address or transmission number for notices provided in subsection 9.2 of the Credit Agreement; (b) if to any Lender, at its address or transmission number for notices provided in subsection 9.2 of the Credit Agreement; and (c) if to any Guarantor, at its address or transmission number for notices set forth under its signature below. The Collateral Agent, each Lender and each Guarantor may change its address and transmission numbers for notices by notice in the manner provided in this Section. 13. Counterparts. This Guarantee may be executed by one or more of the Guarantors on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the counterparts of this Guarantee signed by all the Guarantors shall be delivered to the Collateral Agent and each Lender. 14. Severability. Any provision of this Guarantee which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 15. Integration. This Guarantee represents the agreement of each Guarantor with respect to the subject matter hereof and there are no promises or representations by the Collateral Agent or any Lender relative to the subject matter hereof not reflected herein. 16. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of the terms or provisions of this Guarantee may be waived, amended, supplemented or otherwise modified except by a written instrument executed by each Guarantor provided that any provision of this Guarantee may be waived by the Lenders in a letter or agreement by facsimile transmission. (b) Neither the Collateral Agent nor any Lender shall by any act (except by a written instrument pursuant to Section 16(a) hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Collateral Agent or any Lender, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Collateral Agent or any Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Collateral Agent or such Lender, as the case may be, would otherwise have on any future occasion. (c) The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 17. Section Headings. The Section headings used in this Guarantee are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 18. Successors and Assigns. This Guarantee shall be binding upon the successors and assigns of each Guarantor and shall inure to the benefit of the Lenders and their successors and assigns. 19. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 20. Submission To Jurisdiction; Waivers. Each Guarantor hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Guarantee and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Guarantor at its address set forth under its signature below or at such other address of which the Collateral Agent and the Lenders shall have been notified pursuant Section 12; (d) agrees that nothing herein shall affect the right to effect service or process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this subsection any special, exemplary, consequential or punitive damages. 21. WAIVERS OF JURY TRIAL. EACH GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTEE OR ANY OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY AND FOR ANY COUNTERCLAIM THEREIN. 22. Addition of Guarantors. Subsection 5.10 of the Credit Agreement requires that any Subsidiary (other than a Foreign Subsidiary) of the Borrower created or acquired after the Effective Date become a Guarantor hereunder by executing and delivering a Supplement to this Guarantee in the form attached hereto as Exhibit A. From and after the date any such Subsidiary executes and delivers a Supplement to this Guarantee in the form attached hereto as Exhibit A to the Collateral Agent, such Subsidiary shall be deemed to be a Guarantor for all purposes under this Guarantee. IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be duly executed and delivered by its duly authorized officer as of the day and year first above written. STANDARD MICROSYSTEMS CORPORATION (ASIA) By --------------- Title ------------- Address for Notices: ----------------- Fax: -------------- SMC FRANCE, INC. By --------------- Title ------------- Address for Notices:----------------- Fax: -------------- SMC SINGAPORE, INC. By --------------- Title ------------- Address for Notices: ----------------- Fax: -------------- SMC NORTH AMERICA, INC. By --------------- Title ------------- Address for Notices: -------------- Fax: -------------- SMC MASSACHUSETTS, INC. By --------------- Title ------------- Address for Notices: ----------------- Fax: -------------- EXHIBIT A TO SUBSIDIARIES GUARANTEE [FORM OF ADDITIONAL SUBSIDIARIES SUPPLEMENT] SUPPLEMENT, dated _______________ to the Amended and Restated Subsidiaries Guarantee, dated as of May 23, 1997 (as amended, supplemented or otherwise modified, the "Subsidiaries Guarantee"), made by certain subsidiaries of Standard Microsystems Corporation, a Delaware corporation (the "Borrower"), from time to time parties thereto (collectively, the "Guarantors"). W I T N E S S E T H : WHEREAS, the Subsidiaries Guarantee provides that any Subsidiary of the Borrower, although not a Guarantor thereunder at the time of the initial execution thereof, may become a Guarantor under the Subsidiaries Guarantee upon the delivery to the Lenders of a supplement in substantially the form of this Supplement; and WHEREAS, the undersigned was not a Subsidiary on the Effective Date and, therefore, was not a party to the Subsidiaries Guarantee but is required by the Credit Agreement and now desires to become a Guarantor thereunder; NOW, THEREFORE, the undersigned hereby agrees as follows: The undersigned agrees to be bound by all of the provisions of the Subsidiaries Guarantee applicable to a Guarantor thereunder and agrees that it shall, on the date this Supplement is delivered to the Lenders, become a Guarantor, for all purposes of the Subsidiaries Guarantee to the same extent as if originally a party thereto with the representations and warranties contained therein being deemed to be made by the undersigned as of the date hereof. Without limiting the foregoing, the undersigned hereby, jointly and severally, unconditionally and irrevocably, guarantees to the Collateral Agent and the Lenders and their respective successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations. Terms defined in the Subsidiaries Guarantee shall have their defined meanings when used herein. IN WITNESS WHEREOF, the undersigned has caused this Supplement to be executed and delivered by a duly authorized officer on the date first above written. [NAME OF SUBSIDIARY GUARANTOR] By --------------- Title ------------- Address for Notices: ----------------- Fax: --------------