Exhibit 10.40
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
THIS LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT (this "Agreement")
dated as of March 28, 2003 is between LSI LOGIC CORPORATION (the "Applicant")
and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association (the
"Bank").
STATEMENT OF PURPOSE
The Applicant has requested the Bank to issue two irrevocable standby
letters of credit in an aggregate amount not to exceed $65,000,000 (the "Letters
of Credit") to support certain of the Applicant's obligations under the
following operating leases:
(a) Lease and Security Agreement dated as of March 28, 2003 (
"Lease A") among Wells Fargo Bank Northwest, National Association, as Agent, the
Applicant, as Lessee and Bank of America, National Association or another entity
to be designated, as Lessor; and
(b) Lease and Security Agreement dated as of March 28, 2003
("Lease B") to be entered into among Wells Fargo Bank Northwest, National
Association, as Agent, the Applicant, as Lessee and Bank of America, National
Association or another entity to be designated, as Lessor.
The Applicant desires to enter into this Agreement to provide for the
issuance of the letters of credit and the Applicant's reimbursement obligations
with respect thereto, all as more fully set forth in this Agreement.
In consideration of the Bank's agreement to issue the letters of credit
and for other good and valuable consideration, the Applicant hereby agrees as
follows:
ARTICLE I.
DEFINITIONS
Section 1.1 Defined Terms. The terms defined in this Article I
have, for all purposes of this Agreement, the meanings specified herein or in
this Article, unless defined elsewhere herein or the context clearly requires
otherwise.
"Agreement" means this Letter of Credit and Reimbursement Agreement, as
amended, restated, supplemented or otherwise modified from time to time.
"Applicable Law" means all applicable provisions of constitutions,
laws, statutes, ordinances, rules, treaties, regulations, permits, licenses,
approvals, interpretations and orders of courts or Governmental Authorities and
all orders and decrees of all courts and arbitrators.
"Applicant" means LSI Logic Corporation.
"Bank" means Wachovia Bank, National Association and all of its
branches, whether in the United States or foreign and any of the Bank's
affiliates that issue letters of credit; the Applicant authorizes and directs
the Bank to select the branch or affiliate which will issue or process the
Letters of Credit; and for the purposes of Sections 5 and 9, "Bank" includes
correspondents of the Bank.
"Base Rate" means, at any time, the higher of (a) the Prime Rate and
(b) the Federal Funds Rate plus 1/2 of 1%; each change in the Base Rate shall
take effect simultaneously with the corresponding change or changes in the Prime
Rate or the Federal Funds Rate.
"Beneficiary" means, with respect to Lease A, the entity designated as
Lessor under Lease A or any successor beneficiary named in an amendment to the
Lease A Letter of Credit, and, with respect to Lease B, the entity designated as
Lessor under Lease B or any successor beneficiary named in an amendment to the
Lease B Letter of Credit.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks are authorized or required to close at the place
where the Bank is obligated to honor a presentation or otherwise act under the
Letters of Credit or this Agreement.
"Collateral" means cash or cash equivalents acceptable to the Bank in
which the Bank holds a perfected first priority security interest as security
for the Obligations, including without limitation deposit account No.
2000009173978 maintained at the Bank in the name of the Applicant and all cash
deposited therein from time to time, all interest and other distributions
thereon and all proceeds of the foregoing.
"Collateral Deficiency" has the meaning assigned to such term in
Section 6.1.
"Default" means the occurrence of an event which with the passage of
time, the giving of notice, or both, would constitute an Event of Default.
"Documents" means, collectively, the Letters of Credit, this Agreement,
each other document, instrument, certificate and agreement executed and
delivered by the Applicant in connection with this Agreement or otherwise
referred to herein or contemplated hereby (other than the Operative Documents,
as defined in Lease A or Lease B), all as may be amended, restated, supplemented
or otherwise modified from time to time.
"Draft" means any written demand for payment under either Letter of
Credit by the Beneficiary thereof evidenced by submission of a Demand
Certificate in form and substance as that attached as Exhibit A to the Letters
of Credit.
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"Drawing Fee" means the fee described in Section 3.3(b).
"Event of Default" means any of the events described in Section 8.1.
"Expiration Date" means, with respect to each of the Lease A Letter of
Credit and the Lease B Letter of Credit, November 13, 2006.
"Federal Funds Rate" means, the rate per annum (rounded upwards, if
necessary, to the next higher 1/100th of 1%) representing the daily effective
federal funds rate as quoted by the Bank and confirmed in Federal Reserve Board
Statistical Release H.15 (519) or any successor or substitute publication
selected by the Bank. If, for any reason, such rate is not available, then
"Federal Funds Rate" shall mean a daily rate which is determined, in the opinion
of the Bank, to be the rate at which federal funds are being offered for sale in
the national federal funds market at 9:00 a.m. (Charlotte time). Rates for
weekends or holidays shall be the same as the rate for the most immediately
preceding Business Day.
"Financial Statements" means, with respect to any accounting period for
any Person, statements of income, shareholders' equity and cash flows of such
Person for such period, and a balance sheet of such Person as of the end of such
period, setting forth in each case in comparative form figures for the
corresponding period in the preceding fiscal year if such period is less than a
full fiscal year or, if such period is a full fiscal year, corresponding figures
from the preceding annual audit, all prepared in reasonable detail and in
accordance with GAAP.
"Fronting Fee" means the fee described in Section 3.3(a).
"GAAP" means generally accepted accounting principles, as recognized by
the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board, consistently applied and maintained on a consistent
basis for the Applicant and its subsidiaries throughout the period indicated and
consistent with the prior financial practice of the Applicant and its
subsidiaries.
"Good Faith" means honesty in fact in the conduct or transaction
concerned.
"Governmental Authority" means any nation, province, state or political
subdivision thereof, and any government or any Person exercising executive,
legislative, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Indemnified Party" has the meaning assigned to such term in Section
9.2.
"ISP 98" means the International Standby Practices, International
Chamber of Commerce ("ICC") Publication No. 590, or any subsequent revisions or
restatement thereof which may be adopted by the ICC and in use by the Bank.
"Lease A Letter of Credit" means the Letter of Credit issued by the
Bank to support certain of the Applicant's obligations as Lessee under Lease A.
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"Lease B Letter of Credit" means the Letter of Credit issued by the
Bank to support certain of the Applicant's obligations as Lessee under Lease B.
"Letters of Credit" means, collectively, the Lease A Letter of Credit
and the Lease B Letter of Credit.
"Lien" means, with respect to any asset, any mortgage, leasehold
mortgage, lien, pledge, charge, security interest, hypothecation or encumbrance
of any kind in respect of such asset. For the purposes of this Agreement, a
Person shall be deemed to own subject to a Lien any asset which it has acquired
or holds subject to the interest of a vendor or lessor under any conditional
sale agreement, capital lease or other title retention agreement relating to
such asset.
"Material Adverse Effect" means a material adverse effect on (A) the
assets, business, operations, properties, income or condition (financial or
otherwise) or prospects of the Applicant and its consolidated subsidiaries taken
as a whole or (B) the ability or authority of the Applicant to perform its
obligations under any of the Documents.
"Obligations" means, in each case, whether now in existence or
hereafter arising: the principal of and interest on (including interest accruing
after the filing of any bankruptcy or similar petition) any reimbursement
obligation of the Applicant under this Agreement or any other Document and all
other fees and commissions (including attorneys' fees), charges, indebtedness,
loans, liabilities, financial accommodations, obligations, covenants and duties
owing by the Applicant to Bank under this Agreement or any of the other
Documents of every kind, nature and description, direct or indirect, absolute or
contingent, due or to become due, contractual or tortious, liquidated or
unliquidated, and whether or not evidenced by any note.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust, business trust, joint venture, joint stock
company, pool, syndicate, sole proprietorship, unincorporated organization,
Governmental Authority or any other form of entity or group thereof.
"Prime Rate" means at any time, the rate of interest per annum publicly
announced from time to time by the Bank as its prime rate. Each change in the
Prime Rate shall be effective as of the opening of business on the day such
change in such prime rate occurs. The parties hereto acknowledge that the rate
announced publicly by the Bank as its prime rate is an index or base rate and
shall not necessarily be its lowest or best rate charged to its customers or
other banks.
"UCC" means the Uniform Commercial Code as in effect in the State of
New York, as amended or modified from time to time.
Section 1.2 Internal References. The words "hereof," "herein,"
"hereunder" and similar terms when used in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement.
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ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE APPLICANT
Applicant represents and warrants to the Bank that, as of the date
hereof:
Section 2.1 Organization and Good Standing. The Applicant is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has the corporate power and authority to own its
properties and assets and to transact the business in which it is presently
engaged.
Section 2.2 Authorization and Power. The Applicant has the
corporate power and authority and approvals to execute, deliver and perform this
Agreement and the Documents to which it is a party and to perform its
obligations contemplated thereby.
Section 2.3 No Conflicts; No Consents. Neither the execution and
delivery of this Agreement and the Documents to which the Applicant is a party,
nor the consummation of the transactions contemplated in this Agreement or the
Documents, nor the compliance by the Applicant with the terms of this Agreement
or the Documents to which the Applicant is a party, will violate or conflict
with any law or regulation, or any judgment, license, order or permit, or any
indenture, loan agreement, mortgage, deed of trust, or other agreement or
instrument to which the Applicant is a party or by which the Applicant or its
assets may be bound or to which the Applicant may be subject, or violate any
provision of the Applicant's articles of incorporation or bylaws, or create any
Lien upon any of the property of the Applicant except as contemplated in the
Documents. No consent, approval, authorization, license or order of any
Governmental Authority or third party is required in connection with the
execution and delivery by the Applicant of this Agreement or the Documents to
which it is a party, or for the consummation of the contemplated transactions.
Section 2.4 Enforceable Obligations. This Agreement and the
Documents to which the Applicant is a party have been duly executed and
delivered by the Applicant and are the legal, valid and binding obligations of
the Applicant, enforceable in accordance with their respective terms.
Section 2.5 Liens. The Collateral is free and clear of all Liens
and other adverse claims of any nature, except the Lien in favor of the Bank
created hereby.
Section 2.6 Full Disclosure. There is no material fact which is
known or which should be known by the Applicant that the Applicant has not
disclosed to the Bank which could have a Material Adverse Effect. Neither this
Agreement, the Documents, nor any agreement, document, certificate or statement
delivered by the Applicant or any affiliate of the Applicant to the Bank
contains any untrue statement of a material fact or omits to state any material
fact which is known or which should be known by the Applicant necessary to keep
the other statements from being misleading in any material respect.
Section 2.7 Compliance with Laws. The Applicant (a) is in
compliance with all requirements of Applicable Law binding upon the Applicant or
its properties and assets, including all building, zoning and occupational
safety ordinances or regulations relating to its structure or equipment, or the
operation thereof or its business, or any applicable fair employment, equal
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opportunity or similar law, ordinance or regulation, (b) has not failed to
obtain any material license, permit, certificate or other governmental
authorization necessary for the conduct of its business or the ownership and
operation or its properties, (c) has not received any notice from any
Governmental Authority, and to the best knowledge of the Applicant none is
threatened, alleging that the Applicant has violated, or not complied with, any
such condition, standard, law, ordinance or regulation, or (d) is not in
violation, noncompliance or default under any agreement or instrument in each
case except for any such actual or alleged failure, violation, noncompliance or
default which would not have or might not reasonably be expected to have a
Material Adverse Effect.
Section 2.8 No Material Adverse Change. Since December 31, 2001,
there has been no material adverse change in the properties, business,
operations, prospects, or condition (financial or otherwise) of the Applicant
and no event has occurred or condition arisen that could reasonably be expected
to have a Material Adverse Effect.
Section 2.9 Litigation. There are no actions, suits, proceedings,
judgements or orders pending nor, to the knowledge of the Applicant, threatened
against or in any other way relating adversely to or affecting the Applicant,
any of its assets or properties or the Collateral in any court or before any
arbitrator of any kind or before or by any Governmental Authority which are
reasonably expected to have a Material Adverse Effect.
Section 2.10 Security Interest. This Agreement creates in favor of
the Bank a valid Lien in the Collateral, subject to no prior Liens. The Liens
granted in favor of the Bank as contemplated by this Agreement and the Documents
do not constitute fraudulent conveyances under the Federal Bankruptcy Code or
any applicable state law.
Section 2.11 Operative Documents. No amendments, modifications or
revisions have been made to any of the material terms or provisions of any of
the Operative Documents dated as of March ___, 2003 delivered by the Applicant
to the Bank.
Section 2.12 No Default. No Default or Event of Default has
occurred, and the execution, delivery and performance of this Agreement and the
Documents will not cause a Default or Event of Default.
Section 2.13 Survival of Representations and Warranties. All of
the representations and warranties by the Applicant shall survive delivery of
this Agreement and the Documents and the Expiration Date of the Letters of
Credit. Any investigation at any time made by or on behalf of the Bank will not
diminish the Bank's right to rely on the representations and warranties.
ARTICLE III.
LETTERS OF CREDIT; REIMBURSEMENT AND OTHER PAYMENTS
Section 3.1 Issuance of Letters of Credit. The Bank agrees, on
the terms and conditions hereinafter set forth, to issue and deliver the Letters
of Credit in substantially the form of Exhibit A attached hereto upon
fulfillment of the applicable conditions set forth in Article VII.
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Section 3.2 Applicant's Reimbursement of Bank.
(a) Payment Obligations. Applicant shall pay the Bank on
demand in immediately available funds (in United States Dollars):
(i) on or before 5:00 P.M. Eastern time, on the
date of any Draft under the Letters of Credit, a sum equal to
the amount of any such Draft, together with interest on such
sum from the date such Draft until the same is paid, at the
rate provided in clause (b) of this Section 3.2; and
(ii) all fees, charges, commissions, costs and
expenses set forth in Section 3.3.
(b) Manner of Payment. All of the foregoing payment
obligations of the Applicant shall be paid by immediate application by
the Bank of Collateral in an amount sufficient to pay in full the
amount so drawn and any other Obligations then due and payable to the
Bank. In the event that the Bank is unable for any reason to so apply
the Collateral to such outstanding Obligations of the Applicant by 5:00
P.M. Eastern time on the date such payment is due, interest shall
accrue on all amounts not so paid when due at a fluctuating rate per
annum equal to the Base Rate plus 2%, but in no event at an interest
rate exceeding the highest rate permitted by Applicable Law.
Section 3.3 Fees, Costs and Expenses. The Applicant will pay to\
the Bank the following fees, costs and expenses, which payment shall be due when
invoiced and payable within thirty (30) days following Applicant's receipt of
the Bank's invoice therefor (other than those fees, costs and expenses to be
paid as a condition precedent to the issuance of the Letters of Credit
hereunder, which will be paid on or before the date hereof):
(a) Fronting Fee. An amount equal to 0.40% per annum
multiplied by the amount available to be drawn under the Letters of
Credit, payable to the Bank quarterly in advance (the "Fronting Fee");
(b) Drawing Fee. A drawing fee in an amount equal to
0.25% of each draw under the Letters of Credit, but not less than $300
nor more than $1,500 per draw (the "Drawing Fee");
(c) Other Fees. The Bank's customary fees then in effect
with respect to any transfers of the Letter of Credit, any amendments
or assignments of the Letters of Credit or assignments of the right to
receive the proceeds of any draw thereunder; and
(d) Costs and Expenses. On demand, all costs and expenses
that the Bank reasonably incurs in connection with the Letters of
Credit, this Agreement or any of the other Documents, including,
without limitation:
(i) all reasonable, third party, out of pocket
fees and expenses, including reasonable attorneys' fees,
incurred in connection with the preparation,
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execution, and enforcement of this Agreement and the other
Documents, the modification hereof, and the exercise of any
rights and remedies of the Bank hereunder, including, without
limitation, any defense by the Bank in any action in which an
injunction is sought or obtained against presentation or
honor;
(ii) reasonable, third party, out of pocket costs
and expenses in connection with any requested amendment to or
waiver under the Letters of Credit, this Agreement or any
other Document;
(iii) actual costs and expenses in complying with
any governmental exchange, currency control or other laws,
rules or regulations of any country now or hereafter
applicable to the purchase or sale of, or dealings in, foreign
currency; and
(iv) any stamp taxes, recording taxes, or similar
taxes or fees payable in connection with the Letters of
Credit, this Agreement or any other Document.
The obligations of the Borrower contained in this Section 3.3 shall
survive the Expiration Date of the Letters of Credit.
Section 3.4 Increased Costs and Taxes. The Applicant shall pay
the Bank on demand increased costs or the Bank's reduction in yield from any new
or changed reserve, capital, special deposit, tax, insurance or other
requirement or guideline affecting the Bank's or its parent's contingent or
absolute rights or obligations under or in connection with this Agreement, the
Letters of Credit or any of the other Documents first arising or applied to the
Bank after the date hereof, provided the Bank acts reasonably to avoid or
minimize the increased costs or reduction in the yield and computes the same on
a reasonable basis. Applicant agrees that all payments hereunder shall be made
without withholding, deduction or set-off and shall be made free and clear of
taxes other than federal and state income and franchise taxes imposed on the
Bank.
Section 3.5 Automatic Debit for Payment. In the event that the
Applicant fails to timely pay any of the amounts due under this Agreement, the
Applicant authorizes the Bank to debit any of the Applicant's accounts at the
Bank (including, without limitation, the Collateral) for any payments due under
this Agreement or any of the Documents. Applicant further certifies that it
holds legitimate ownership of each of these accounts and hereby authorizes any
such debit.
Section 3.6 Computation. All payments of interest, commissions,
fees and other charges under this Agreement shall be computed on the per annum
basis of a year of 360 days and calculated for the actual number of days
elapsed.
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ARTICLE IV.
COVENANTS
Until all Obligations of the Applicant hereunder to be performed and
paid shall have been performed and paid in full, and for so long as the Letters
of Credit shall be outstanding, the Applicant covenants and agrees that, unless
the Bank consents otherwise in writing:
Section 4.1 Financial and Other Information, Notices. The
Applicant will furnish or cause to be furnished to the Bank all of the following
financial and other information and notices:
(a) As soon as available and in any event within fifty
(50) days after the end of each of the first three fiscal quarters of
each fiscal year, the consolidated Financial Statements of the
Applicant and its subsidiaries for such fiscal quarter, prepared in
accordance with GAAP consistently applied, all in reasonable detail;
(b) As soon as available and in any event within one
hundred (100) days after the end of each fiscal year, the consolidated
Financial Statements of the Applicant and its subsidiaries for such
fiscal year, prepared in accordance with GAAP consistently applied, all
in reasonable detail, and accompanied by a report thereon of
PricewaterhouseCoopers LLP or another firm of independent certified
public accountants of recognized national standing, which report shall
be unqualified as to scope of audit;
(c) Promptly after the giving, sending or filing thereof,
copies of all reports, if any which the Applicant or any of its
subsidiaries sends generally to any class of holders of its respective
capital stock or other securities and of all reports or filings, if
any, by the Applicant or any of its subsidiaries with the United States
Securities and Exchange Commission, and any successor thereto, or any
national securities exchange; and
(d) Promptly after the Applicant has knowledge or becomes
aware thereof, notice of the occurrence or existence of any Default or
Event of Default.
Section 4.2 Liquidity of Applicant. The Applicant shall not,
without the prior written consent of the Bank, permit any deletion of or
amendment or modification to the covenant contained in Section 18.3(a) of Lease
A or the defined terms used in Section 18.3(a) of Lease A.
Section 4.3 Notice of Litigation and Other Matters. The Applicant
shall furnish or cause to be furnished to the Bank promptly (but in no event
later than ten (10) days after an officer of the Applicant obtains knowledge
thereof) telephonic and written notice of:
(a) the commencement of all proceedings and
investigations by or before any Governmental Authority and all actions
and proceedings in any court or before any arbitrator against or
involving the Applicant or any of its properties, assets or businesses
which may have a Material Adverse Effect;
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(b) any notice of any violation received by the Applicant
from any Governmental Authority which in any such case could reasonably
be expected to have a Material Adverse Effect; and
(c) (i) any Default or Event of Default, or (ii) any
event which constitutes or which with the passage of time or giving of
notice or both would constitute an event of default under Lease A or
Lease B.
Section 4.4 Preservation of Corporate Existence and Related
Matters. The Applicant shall preserve and maintain its separate corporate
existence and all rights, franchises, licenses and privileges necessary to the
conduct of its business, and qualify and remain qualified as a foreign
corporation and authorized to do business in each jurisdiction in which the
failure to so qualify could reasonably be expected to have a Material Adverse
Effect.
Section 4.5 Payment and Performance of Obligations. The Applicant
shall pay and perform all Obligations under this Agreement and the other
Documents, and pay or perform (a) all taxes, assessments and other governmental
charges that may be levied or assessed upon it or any of its property, and (b)
all other indebtedness, obligations and liabilities in accordance with customary
trade practices; provided, that the Applicant may contest any item described in
clauses (a) or (b) of this Section 4.5 in good faith so long as adequate
reserves are maintained with respect thereto in accordance with GAAP.
Section 4.6 Compliance With Laws and Approval. The Applicant
shall observe and remain in compliance in all material respects with all
Applicable Laws and maintain in full force and effect all licenses, consents and
approvals from Government Authorities, in each case applicable to the conduct of
its business.
Section 4.7 Further Assurances. The Applicant shall make, execute
and deliver all such additional and further acts, things, deeds and instruments
as the Bank may reasonably require to document and consummate the transactions
contemplated hereby and to vest completely in and ensure the Bank its respective
rights under this Agreement, and the other Documents.
ARTICLE V.
OBLIGATIONS ABSOLUTE
Section 5.1 Claims Against Bank; Waivers; Exculpations;
Limitations of Liability, Ratification; Accounting.
(a) The Applicant's Obligations shall be irrevocable and
unconditional and performed strictly in accordance with the terms of
this Agreement, irrespective of:
(i) any change or waiver in the time, manner or
place of payment of or any other term of the Obligations
(including any release of any other party who, if
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applicable, has guaranteed or is jointly and severally liable
for any of the Obligations or has granted any security
therefor);
(ii) any exchange, change or release of any
Collateral or other collateral (including any failure of the
Bank to perfect any security interest therein), for any of the
Obligations;
(iii) any presentation under the Letters of Credit
being forged, fraudulent or any statement therein being untrue
or inaccurate; or
(iv) any agreement by the Bank and the
Beneficiary extending or decreasing the Bank's time after
presentation to examine documents or to honor or give notice
of discrepancies.
(b) Without limiting the foregoing, it is expressly
agreed that the obligations of the Applicant to reimburse or to pay the
Bank pursuant to this Agreement will not be excused by ordinary
negligence, gross negligence, wrongful conduct or willful misconduct of
the Bank. However, the foregoing shall not excuse the Bank from
liability to the Applicant in any independent action or proceeding
brought by the Applicant against the Bank following such reimbursement
or payment by the Applicant to the extent of any damages suffered by
the Applicant that are caused directly and immediately by the Bank's
gross negligence or willful misconduct; provided that (i) the Bank
shall be deemed to have acted with due diligence and reasonable care if
it acts in accordance with standard letter of letter of credit practice
of commercial banks located in New York, New York; and (ii) the
Applicant's aggregate remedies against the Bank for wrongfully honoring
a presentation or wrongfully retaining honored documents shall in no
event exceed the aggregate amount paid by the Applicant to the Bank
with respect to the honored presentation, plus interest.
(c) Without limiting any other provision of this
Agreement, the Bank and, as applicable, its correspondents:
(i) may rely upon any oral, telephonic,
telegraphic, facsimile, electronic, written or other
communication believed in Good Faith to have been authorized
by the Applicant, whether or not given or signed by an
authorized person;
(ii) shall not be responsible for any acts or
omissions by, or the solvency of, the Beneficiary or any other
person;
(iii) may honor any presentation or drawing under
the Letters of Credit that appears on its face substantially
to comply with the terms and conditions of the Letters of
Credit;
(iv) may disregard any requirement of the Letters
of Credit that presentation be made to it at a particular
place or by a particular time of day (but
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not any requirement for presentation by a particular day) or
that notice of dishonor be given in a particular manner, and
Bank may amend or specify any such requirement in the Letters
of Credit;
(v) may honor, before or after its expiration, a
previously dishonored presentation under the Letters of
Credit, whether pursuant to court order, to settle or
compromises any claim that is wrongfully dishonored or
otherwise, and shall be entitled to reimbursement to the same
extent (if any) as if it had initially honored such
presentation, plus reimbursement of any interest paid by it;
(vi) may honor, upon receipt, any drawing that is
payable upon presentation of a statement advising negotiation
or payment (even if such statement indicates that a draft or
other document is being separately delivered) and shall not be
liable for any failure of any Draft or document to arrive or
to conform with the Draft or document referred to in the
statement or any underlying transaction;
(vii) may select any branch or affiliate of the
Bank or any other bank to act as advising, transferring,
confirming and/or nominated bank under the law and practice of
the place where it is located;
(viii) shall not be responsible for any other
action or inaction taken or suffered by the Bank or its
correspondents under or in connection with the Letters of
Credit, with any presentation thereunder or with any
Collateral, if required or permitted under any applicable
domestic or foreign law or letter of credit practice. Examples
of laws or practice that may be applicable, depending upon the
terms of the Letters of Credit and where and when it is
issued, include the UCC, the Uniform Rules for Demand
Guarantees ("URG"), UCP, ISP 98, published rules of practice,
applicable standard practice of banks that regularly issue
letters of credit, and published statements or interpretations
on matters of standard bank practice.
(d) Neither the Bank nor any of its correspondents shall
be liable in contract, tort, or otherwise, for any punitive, exemplary,
consequential, indirect or special damages. Any claim by the Applicant
under or in connection with this Agreement or the Letters of Credit
shall be reduced by an amount equal to the sum of (i) the amount (if
any) saved by the Applicant as a result of the breach or other wrongful
conduct complained of; and (ii) the amount (if any) of the loss that
would have been avoided had the Applicant taken all reasonable steps to
mitigate any loss, including by enforcing its rights in the
transaction(s) underlying the Letters of Credit, and in case of a claim
of wrongful dishonor, by specifically and timely authorizing the Bank
to effect a cure.
ARTICLE VI.
SECURITY
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Section 6.1 Security Agreement; Adequacy of Collateral. As
security for the payment and performance of the Obligations, Applicant assigns,
pledges and grants to the Bank a security interest in the Collateral. The
Applicant agrees that it shall at all times, during the term of this Agreement
and so long as the Letters of Credit remain outstanding, cause cash Collateral
to be pledged to and maintained with the Bank in an amount equal to or in excess
of one hundred percent (100%) of the amount available to be drawn under the
Letters of Credit on the date of issuance plus $50,000. If at any time the
amount of the Collateral is less than an amount equal to one hundred (100%) of
the amount available to be drawn under the Letters of Credit on the date of
issuance plus $50,000, such condition shall be deemed a "Collateral Deficiency,"
and Applicant shall remedy such Collateral Deficiency by delivery to the Bank of
cash Collateral in an amount sufficient to remedy such Collateral Deficiency
within three (3) Business Days of Applicant's receiving notice of such
Collateral Deficiency.
Section 6.2 Actions Regarding Collateral. The Applicant will
execute and deliver to the Bank any documents, and take any action, which the
Bank deems necessary or desirable to evidence or perfect the security interest
in favor of Bank, to permit the Bank to acquire possession or control (as such
term is defined in the UCC) of the Collateral, or to protect the Bank's
interests with respect to the Collateral in connection with the security
interests granted hereunder.
Section 6.3 Care of Collateral; Modification. The Bank will
exercise the same care in the preservation of the Collateral as with all other
deposit accounts maintained at the Bank and in accordance with its customary
commercial deposit account agreements. The Applicant shall remain obligated
under the terms of this Agreement notwithstanding the release or substitution of
any Collateral at any time(s), or any delay, extension of time, renewal,
compromise or other indulgence granted by the Bank with respect to any of the
Obligations. The Applicant waives notice of any such delay, extension, release,
substitution, renewal, compromise or other indulgence, and consents to be bound
thereby as fully as if the Applicant had expressly agreed thereto in advance.
The Collateral may be applied, in whole or in part, by the Bank to pay any
matured Obligations.
ARTICLE VII.
CONDITIONS PRECEDENT
Section 7.1 Conditions to Issuance of Letters of Credit.
The obligation of the Bank to issue the Letters of Credit shall be subject
to the Bank's receipt of the following, in form and substance satisfactory to
the Bank:
(a) two (2) original executed counterparts of this
Agreement;
(b) a copy of an executed counterpart of each of the
Lease Documents;
(c) receipt by the Bank of the Collateral in immediately
available funds subject to no Liens;
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(d) an opinion of counsel for the Applicant dated the
date of this Agreement addressed to the Bank in form and substance
acceptable to the Bank;
(e) a certificate from the secretary or an assistant
secretary of the Applicant certifying as to the incumbency and
genuineness of the signature of each officer of the Applicant executing
the Documents and certifying that attached thereto is a true, correct
and complete copy of (A) the articles of incorporation of the Applicant
and all amendments thereto, certified as of a recent date by the
appropriate Governmental Authority in its jurisdiction of
incorporation, (B) the bylaws of the Applicant as in effect on the date
of such certifications, and (C) resolutions duly adopted by the Board
of Directors of the Applicant authorizing the transactions contemplated
hereunder and the issuance of the Letters of Credit on its behalf, and
the execution, delivery and performance of this Agreement and the other
Documents;
(f) a certificate as of a recent date of the good
standing of Applicant under the laws of its jurisdiction of
organization;
(g) payment to the Bank of the initial Fronting Fee and
all other fees payable pursuant to Section 3.3 of this Agreement; and
(h) an original executed counterpart of the Commitment
Letter
Section 7.2 Additional Conditions Precedent to Issuance of
Letters of Credit.
(a) On the date of issuance of the Letters of Credit the
following statements shall be true and the Bank shall have received a
certificate signed by an authorized officer of the Applicant, dated the
date of issuance, stating that:
(i) The representations and warranties contained
in Article II of this Agreement are true and correct on and as
of the date of issuance of the Letters of Credit as though
made on and as of such date;
(ii) The Applicant shall have obtained all
necessary approvals, authorizations and consents of any Person
and of all Governmental Authorities and courts having
jurisdiction with respect to the transactions contemplated by
this Agreement and the other Documents;
(iii) No action, proceeding, investigation,
regulation or legislation shall have been instituted,
threatened or proposed before any Governmental Authority to
enjoin, restrain, or prohibit, or to obtain substantial
damages in respect of, or which is related to or arises out of
this Agreement or the other Documents or the consummation of
the transactions contemplated hereby or thereby, or which, in
the Bank's sole discretion, would make it inadvisable to
consummate the transactions contemplated by this Agreement and
such other Documents; and
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(iv) No event has occurred, or would result from
the issuance of the Letters of Credit, which constitutes a
Default or an Event of Default.
(b) There shall have been no introduction of or change
in, or in the interpretation of, any law or regulation that would make
it unlawful or unduly burdensome for the Bank to issue the Letters of
Credit, no outbreak or escalation of hostilities, terrorism or other
calamity or crisis directly or indirectly affecting the Bank, no
suspension of or material limitation on trading on the New York Stock
Exchange or any other national securities exchange, no declaration of a
general banking moratorium by United States, New York or North Carolina
banking authorities, and no establishment of any new restrictions on
transactions in securities or on banks materially affecting the free
market for securities or the extension of credit by banks.
Section 7.3 Delivery of Letters of Credit Into Escrow. The Bank
agrees that upon satisfaction of the conditions precedent described in
clause (a) and clauses (c) through (h) of Section 7.1, the Bank will
deliver the Letters of Credit to Chapman & Cutler, counsel to the
Lessors under Lease A and Lease B, on or before March 27, 2003, to be
held in escrow by Chapman & Cutler and not released to the applicable
Lessor until the Bank or its counsel has advised Chapman & Cutler in
writing that all of the conditions precedent contained in Sections 7.1
and 7.2 have been satisfied. In the event that the Letters of Credit
shall not have been released from escrow on or before the close of
business on April 4, 2003, the original Letters of Credit shall be
returned to the Bank.
ARTICLE VIII.
EVENTS OF DEFAULT
Section 8.1 Event of Default. Each of the following shall
constitute an Event of Default, whatever the reason for such event and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment or order of any court or any order, rule or regulation
of any Governmental Authority or otherwise:
(a) Failure of Applicant to pay when due (whether upon
demand, by reason of acceleration or otherwise) the amount of each
Draft under the Letters of Credit, together with all interest, if any,
fees, charges, costs, expenses or other sums required to be paid
pursuant to the terms of Sections 3.2, 3.4 and 9.2 of this Agreement;
(b) Failure of the Applicant to pay the fees, charges,
costs, expenses or other sums required to be paid pursuant to the terms
of Section 3.3 with thirty (30) days following the date same are due;
(c) Termination of the Applicant's existence;
(d) The Applicant shall (i) commence a voluntary case
under the federal bankruptcy laws (as now or hereafter in effect), (ii)
file a petition seeking to take advantage
15
of any other laws, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, winding up or composition for adjustment of
debts, (iii) consent to or fail to contest in a timely and appropriate
manner any petition filed against it in an involuntary case under such
bankruptcy laws or other laws, (iv) apply for or consent to, or fail to
contest in a timely and appropriate manner, the appointment of, or the
taking of possession by, a receiver, custodian, trustee, or liquidator
of itself or of a substantial part of its property, domestic or
foreign, (v) admit in writing its inability to pay its debts as they
become due, (vi) make a general assignment for the benefit of
creditors, or (vii) take any corporate action for the purpose of
effecting any of the foregoing;
(e) A case or other proceeding shall be commenced against
the Applicant in any court of competent jurisdiction seeking (i) relief
under the federal bankruptcy laws (as now or hereafter in effect) or
under any other laws, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, winding up or adjustment of debts, or (ii)
the appointment of a trustee, receiver, custodian, liquidator or the
like for the Applicant or for all or any substantial part of their
respective assets, domestic or foreign, and such case or proceeding
shall continue without dismissal or stay for a period of sixty (60)
consecutive days, or an order granting the relief requested in such
case or proceeding (including, but not limited to, an order for relief
under such federal bankruptcy laws) shall be entered;
(f) Seizure or forfeiture of the Applicant or any of its
property;
(g) (i)(A) Any person or group of persons (within the
meaning of Section 13(d) of the Securities Exchange Act of 1934, as
amended) shall obtain ownership or control in one or more series of
transactions of more than fifty percent (50%) of the common stock or
fifty percent (50%) of the voting power of the Applicant entitled to
vote in the election of members of the board of directors of the
Applicant, (B) the Applicant is not the surviving entity after such
change of control, and (C) the surviving entity does not assume in
writing all of the Applicant's obligations and liabilities under this
Agreement; or (ii) there shall have occurred under any indenture or
other instrument evidencing any Debt in excess of $10,000,000 a change
in control of the Applicant that constitutes an event of default under
such indenture or other instrument evidencing such Debt;
(h) Any attempted attachment or restraint of or other
legal process against the Collateral;
(i) Any material provision of this Agreement or any
material provision of any other Document shall for any reason cease to
be valid and binding on the Applicant or any such Person shall so state
in writing, or if the Bank's valid and perfected first priority Lien on
and security interest in any of the Collateral shall cease or shall be
deemed to be invalid for any reason, in each case other than in
accordance with the express terms hereof or thereof;
(j) Any representation, warranty, certification or
statement of fact made by or on behalf of the Applicant under this
Agreement, any other Document or in any document
16
delivered in connection herewith or therewith shall be incorrect or
misleading in any material respect when made;
(k) The Applicant shall default in the performance or
observance of any term, covenant, condition or agreement contained in
this Agreement or any other Document which does not require the payment
of money by the Applicant and such default shall not have been remedied
within thirty (30) days (or any shorter period set forth herein or in
such Document) after the earlier of: (i) the Applicant having knowledge
thereof, or (ii) written notice having been received by it from the
Bank; provided that if any default under Section 4.4 hereof (other than
a default relating to the preservation and maintenance of the
Applicant's separate corporate existence) or under Section 4.6 hereof
(so long as any such default does not have a Material Adverse Effect or
could not reasonably be expected to have a Material Adverse Effect) is
not reasonably capable of being remedied in such thirty (30) day
period, it shall not be an Event of Default hereunder if the Applicant
commences to remedy the default within such period and thereafter
diligently pursues such remedy to completion, provided that the
Applicant achieves such completion to the reasonable satisfaction of
the Bank within ninety (90) days after the date of such default;
(l) The occurrence of any event of default under either
of Lease A or Lease B; or
(m) The existence of a Collateral Deficiency which is not
remedied by the Applicant within three (3) Business Days of the
Applicant receiving notice of such Collateral Deficiency.
Section 8.2 Remedies. On and after the occurrence of any Default
or Event of Default:
(a) The amount of the Obligations, shall, at the Bank's
option, become due and payable immediately without demand or notice to
the Applicant or if contingent, may be treated by the Bank as due and
payable for its maximum face amount.
(b) The Bank may immediately and without notice to any
Person set off and apply the Collateral and any other deposits or any
other indebtedness at any time owing by the Bank to or for the
Applicant's credit or account (including, without limitation, the
Collateral) against any matured or unmatured Obligations, irrespective
of whether or not the Bank shall have made any demand under this
Agreement and although such deposits, indebtedness or Obligations may
be unmatured or contingent.
(c) The Bank may exercise all rights and remedies
available to it in law or equity.
(d) This Agreement shall constitute a security agreement
under the UCC. In respect of any Collateral, the Bank may exercise all
the rights and remedies of a secured party under the UCC or any other
Applicable Law. The Applicant will pay on demand
17
all reasonable costs and expenses (including reasonable attorneys' fees
and legal expenses, incurred prior to or after a bankruptcy filing)
related to the custody, preservation or sale of, or collection from, or
realization upon, any Collateral and related to the collections of the
Obligations and the enforcement of the Bank's rights against the
Collateral. The Bank may apply the Collateral as the Bank deems
appropriate to the payment of costs and expenses and/or to one or more
of the Obligations, whether or not then due.
Upon the expiration or cancellation of the Letters of Credit
if all outstanding Obligations have been satisfied in full and the
Bank's commitments under this Agreement and the Letters of Credit are
terminated, the balance of the Collateral remaining, if any, shall be
returned to the Applicant.
ARTICLE IX.
MISCELLANEOUS
Section 9.1 Notices.
(a) Method of Communication. Except as otherwise provided
in this Agreement, all notices and communications hereunder shall be in
writing (for purposes hereof, the term "writing" shall include
information sent by electronic mail. Any notice shall be effective if
delivered by hand delivery or sent via electronic mail, telecopy,
recognized overnight courier service or certified mail, return receipt
requested, and shall be presumed to be received by a party hereto (i)
on the date of delivery if delivered by hand or sent by electronic mail
or telecopy, (ii) on the next Business Day if sent by recognized
overnight courier service and (iii) on the third Business Day following
the date sent by certified mail, return receipt requested.
(b) Addresses for Notices. Notices to any party shall be
sent to it at the following addresses, or any other address as to which
all the other parties are notified in writing.
If to the Applicant:
LSI Logic Corporation
1621 Barber Lane
Milpitas, California 95035
Attention: Stella Musso, Assistant Treasurer
If to the Bank:
Wachovia Bank, National Association
401 Linden Street
Winston-Salem, NC 27101
Attention: Standby Letter of Credit Department
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(c) Bank's Office. The Bank hereby designates its office
located at the address set forth above, or any subsequent office which
shall have been specified for such purpose by written notice to the
Applicant, as the Bank's office referred to herein, to which Drafts are
to be presented and to which payments on Obligations are to be made.
Section 9.2 Indemnification. The Applicant will indemnify and
hold harmless the Bank and its officers, directors, affiliates,
employees, attorneys and agents (each, an "Indemnified Party") from and
against any and all claims, liabilities, losses, damages, costs and
expenses (including reasonable attorneys' fees and disbursements and
other dispute resolution expenses (which shall include fees and
expenses in preparation for a defense of any investigation, litigation
or proceeding) and costs of collection) that arise out of or in
connection with:
(a) the Letters of Credit;
(b) any payment or action taken or omitted to be taken in
connection with the Letters of Credit, this Agreement or any other
Document, including any action or proceeding to:
(i) restrain any presentation;
(ii) compel or restrain any payment or the taking
of any other action under either of the Letters of Credit;
(iii) obtain damages for wrongful dishonor or
honor of either of the Letters of Credit or for breach of any
other duty arising out of or related to either of the Letters
of Credit;
(iv) compel or restrain the taking of any action
under this Agreement; or
(v) obtain similar relief (including by way of
interpleader, declaratory judgment, attachment or otherwise),
regardless of who the prevailing party is in any such action
or proceeding.
(c) the enforcement of this Agreement or any rights or
remedies under or in connection with this Agreement, the Collateral,
the Letters of Credit or any other Document; or
(d) any act or omission, whether rightful or wrongful, of
any present or future government or Governmental Authority (including
with respect to any document or property received under this Agreement
or the Letters of Credit) or any other cause beyond the Bank's control,
19
except, in each case, to the extent such claim, liability, loss,
damage, cost or expense is found in a final, non-appealable judgment by
a court of competent jurisdiction to have resulted directly from such
Indemnified Party's gross negligence or willful misconduct.
The Applicant will pay on demand from time to time all amounts
owing under this Section. If and to the extent that the obligations of
the Applicant under this Section are unenforceable for any reason, the
Applicant agrees to make the maximum contribution to the payment of
such obligation that is permissible under Applicable Law.
Section 9.3 Governing Law; ISP 98. ISP 98 governs this Agreement
and is incorporated herein. Subject to the other provisions of this Agreement,
this Agreement shall be governed by and construed in accordance with the
substantive laws of the State of New York, without regard to conflicts of law
principles, except to the extent that such law is inconsistent with ISP 98. In
the event any provision of ISP 98, is or is construed to vary from or be in
conflict with any provision of any applicable law of the State of New York or
the federal law of the United States, to the extent permitted by law, ISP 98
shall govern. The Applicant agrees that each of the Letters of Credit will be
issued subject to ISP 98 as in effect at the time of issuance of the Letters of
Credit. The Bank's privileges, rights and remedies under ISP 98 shall be in
addition to, and not in limitation of, its privileges, rights, and remedies
expressly provided for herein. ISP 98 shall serve, in the absence of proof to
the contrary, as evidence of standard practice with respect to the subject
matter thereof.
Section 9.4 Savings Clause. Whenever possible, each provision of
this Agreement shall be interpreted in a manner as to be effective and valid
under Applicable Law, but if any provision of this Agreement shall be prohibited
by or invalid under Applicable Law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
Section 9.5 Bankruptcy and Forfeiture Reinstatement. If any
consideration transferred to the Bank in payment of, or as collateral for, or in
satisfaction of the Obligations, shall be voided in whole or in part as a result
of:
(a) a subsequent bankruptcy or insolvency proceeding;
(b) any forfeiture or in rem seizure action or remedy;
(c) any fraudulent transfer or preference action or
remedy; or
(d) any other criminal or equitable proceeding or remedy,
then the Bank may at its option recover the Obligations or the consideration so
voided from the Applicant. In such event, the Bank's claim to recover the voided
consideration shall be a new and independent claim arising under this Agreement,
and shall be jointly and severally due and payable immediately by Applicant.
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Section 9.6 Miscellaneous. The rights and remedies granted to the
Bank in this Agreement are in addition to all other rights or remedies afforded
to the Bank under applicable law, equity or other agreements. The terms of this
Agreement may not be waived or amended, unless the parties consent in writing.
This Agreement shall be binding on the Applicant's successors and permitted
assigns and the Bank's successors and assigns, and shall inure to the benefit of
the Applicant's successors and permitted assigns and the Bank's successors and
assigns. The Bank may assign this Agreement and its rights to reimbursement
regarding the Letters of Credit without the Applicant's consent. The Applicant
shall not assign any rights or remedies related to this Agreement, the Letters
of Credit or any other Document without the prior written consent of the Bank.
This Agreement will continue in full force and effect until the expiration or
cancellation of the Letters of Credit and all outstanding Obligations have been
satisfied in full and the Bank's commitments under this Agreement and the
Letters of Credit are terminated. The Applicant will comply with all laws,
regulations and customs now or hereafter applicable to this Agreement or to the
transactions related to the Letters of Credit, and will furnish such evidence of
compliance as the Bank may require. This Agreement contains the final, complete
and exclusive understanding of, and supersedes all prior or contemporaneous,
oral or written, agreements, understandings, representations and negotiations
between, the parties relating to the subject matter of this Agreement.
Section 9.7 Consent to Jurisdiction and Venue. IN ANY PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER, THE APPLICANT IRREVOCABLY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
IN NEW YORK, NEW YORK OR MECKLENBURG COUNTY, NORTH CAROLINA AND AGREES NOT TO
RAISE ANY OBJECTION TO SUCH JURISDICTIONS OR TO THE LAYING OR MAINTAINING OF THE
VENUE OF ANY SUCH PROCEEDING IN ANY OF SUCH JURISDICTIONS. THE APPLICANT AGREES
THAT SERVICE OF PROCESS IN ANY SUCH PROCEEDING MAY BE DULY EFFECTED UPON IT BY
MAILING TO THE APPLICANT A COPY THEREOF, BY CERTIFIED MAIL, POSTAGE PREPAID.
Section 9.8 Waiver of Jury Trial. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THE APPLICANT AND THE BANK KNOWINGLY AND VOLUNTARILY WAIVE ALL
RIGHTS TO TRIAL BY JURY WITH RESPECT TO ANY LITIGATION BASED ON, ARISING OUT OF,
OR RELATING TO THIS AGREEMENT, THE LETTERS OF CREDIT, OR ANY DOCUMENT OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (ORAL OR WRITTEN) OR ACTIONS OF
ANY PARTY WITH RESPECT THERETO. THIS WAIVER IS A MATERIAL INDUCEMENT FOR THE
BANK TO ISSUE AND MAINTAIN THE LETTERS OF CREDIT.
Section 9.9 Effectiveness of Agreement. The Applicant agrees that
the terms and conditions of this Agreement shall be continuing and shall apply
to the Letters of Credit and any letter of credit hereafter issued by the Bank
on the Applicant's behalf in replacement or substitution of the Letters of
Credit.
[Signature page follows]
21
IN WITNESS WHEREOF, the Applicant and the Bank have caused this
Agreement to be executed as of the day and year first written.
APPLICANT:
LSI LOGIC CORPORATION
By:__________________________________________
Name:________________________________________
Title:_______________________________________
BANK:
WACHOVIA BANK, NATIONAL
ASSOCIATION
By:__________________________________________
Name:________________________________________
Title:_______________________________________