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CREDIT AGREEMENT
by and between
THREE-FIVE SYSTEMS, INC.
and
IMPERIAL BANK
Dated as of May 23, 1997
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TABLE OF CONTENTS
Page
ARTICLE 1 RECITALS........................................................................................1
ARTICLE 2 DEFINITION OF TERMS.............................................................................2
Section 2.1 Definitions.................................................................................2
Section 2.2 Accounting Terms............................................................................6
ARTICLE 3 RLC.............................................................................................8
Section 3.1 RLC Commitment Amount.......................................................................8
Section 3.2 RLC Note....................................................................................8
Section 3.3 RLC Advances................................................................................8
Section 3.4 Conversion of Advances......................................................................9
Section 3.5 RLC Payments................................................................................9
Section 3.6 Prepayments................................................................................10
Section 3.7 RLC Service Fee............................................................................11
Section 3.8 Additional Provisions for LIBOR Rate Advances..............................................11
Section 3.9 Method of Payment..........................................................................12
Section 3.10 Conditions................................................................................12
Section 3.11 [Intentionally left blank.]...............................................................13
Section 3.12 Assignment................................................................................13
ARTICLE 4 CONDITIONS PRECEDENT...........................................................................14
Section 4.1 Conditions Precedent.......................................................................14
Section 4.2 Conditions Precedent to All Future Advances................................................15
ARTICLE 5 GENERAL REPRESENTATIONS AND WARRANTIES.........................................................16
Section 5.1 Recitals...................................................................................16
Section 5.2 Organization and Good Standing.............................................................16
Section 5.3 Business...................................................................................16
Section 5.4 Authorization and Power....................................................................16
Section 5.5 Enforceability.............................................................................16
Section 5.6 No Conflicts...............................................................................16
Section 5.7 No Litigation..............................................................................16
Section 5.8 Financial Condition........................................................................16
Section 5.9 Taxes......................................................................................17
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Section 5.10 No Stock Purchase.........................................................................17
Section 5.11 Advances..................................................................................17
Section 5.12 Solvency..................................................................................17
Section 5.13 ERISA.....................................................................................17
ARTICLE 6 AFFIRMATIVE COVENANTS..........................................................................18
Section 6.1 Maintenance of Existence...................................................................18
Section 6.2 Maintain Business..........................................................................18
Section 6.3 Insurance..................................................................................18
Section 6.4 Compliance with Credit Documents...........................................................18
Section 6.5 Financial Statements and Reports...........................................................18
Section 6.6 Books and Records; Access..................................................................19
Section 6.7 Payment of Taxes and Other Indebtedness....................................................19
Section 6.8 Notice of Default..........................................................................20
Section 6.9 Other Notices..............................................................................20
Section 6.10 ERISA Compliance..........................................................................20
Section 6.11 Further Assurances........................................................................20
ARTICLE 7 NEGATIVE COVENANTS.............................................................................21
Section 7.1 Indebtedness...............................................................................21
Section 7.2 Liens......................................................................................21
Section 7.3 Loans......................................................................................21
Section 7.4 Dividends..................................................................................21
Section 7.5 Existence..................................................................................21
Section 7.6 Fiscal Year................................................................................22
Section 7.7 Margin Stock...............................................................................22
Section 7.8 Tangible Net Worth.........................................................................22
Section 7.9 Leverage Ratio.............................................................................22
Section 7.10 Debt Coverage Ratio.......................................................................22
Section 7.11 Current Ratio.............................................................................23
ARTICLE 8 DEFAULT AND REMEDIES...........................................................................24
Section 8.1 Event of Default...........................................................................24
Section 8.2 Remedies...................................................................................25
Section 8.3 Delay or Omission by Lender................................................................26
ARTICLE 9 ACTION UPON AGREEMENT..........................................................................27
Section 9.1 Third Party................................................................................27
Section 9.2 Entire Agreement...........................................................................27
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Section 9.3 Writing Required...........................................................................27
Section 9.4 No Partnership.............................................................................27
ARTICLE 10 GENERAL........................................................................................28
Section 10.1 Survival..................................................................................28
Section 10.2 Context...................................................................................28
Section 10.3 Time......................................................................................28
Section 10.4 Notices...................................................................................28
Section 10.5 Costs.....................................................................................29
Section 10.6 Successors................................................................................29
Section 10.7 Headings..................................................................................29
Section 10.8 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial..................................29
Section 10.9 Arbitration Provision.....................................................................29
Section 10.10 Confidentiality...........................................................................29
EXHIBITS
A Form of Advance Notice
B Covenant Certificate
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CREDIT AGREEMENT
BY THIS CREDIT AGREEMENT (the "Agreement"), made and entered into as of
this 23rd day of May, 1997, IMPERIAL BANK, a California banking corporation
(hereinafter called "Lender"), and THREE-FIVE SYSTEMS, INC., a Delaware
corporation (hereinafter called "Borrower"), in consideration of the mutual
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, hereby confirm and
agree as follows:
ARTICLE 1
RECITALS
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Section 1.1 Borrower has requested that Lender establish a revolving
line of credit (the "RLC") with Borrower in the principal amount of
$15,000,000.00, under which revolving line of credit advances shall be made to
Borrower for the purposes of providing Borrower with financing for general
corporate purposes.
Section 1.2 Lender has agreed to do so upon the terms, conditions and
provisions set forth herein.
Section 1.3 Notwithstanding anything herein to the contrary, Borrower
and Lender acknowledge that:
(a) the RLC has been approved by Lender at its principal
office in California;
(b) all RLC Advances are to be made by Lender from its
principal office in California;
(c) all payments hereunder are to be sent by Borrower to the
principal office of Lender in California; and
(d) the election of Arizona law as the governing law hereunder
has been agreed to by Lender as an accommodation to Borrower.
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ARTICLE 2
DEFINITION OF TERMS
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Section 2.1 Definitions. For the purposes of this Agreement, unless the
context otherwise requires, the following terms shall have the respective
meanings assigned to therein in this Article 2 of in the Section hereof referred
to below:
"Advance" means an RLC Advance.
"Agreement" means this Credit Agreement, as amended, modified or
restated from time to time.
"Applicable Interest Rate" with respect to any given Advance shall mean
either the Variable Rate or the LIBOR Rate, as applicable under the provisions
of this Agreement.
"Authorized Officer" means the chief executive officer or chief
financial officer of Borrower, or such other individual who is from time to time
designated to Lender in writing by said officer as authorized to act for
Borrower with respect to the Loan.
"Banking Day" means a day of the year on which banks are not required
or authorized to close in Inglewood California, and, with respect to a LIBOR
Rate Advance, a day on which dealings are carried on in the London interbank
market.
"Borrower": See the Preamble hereto.
"Cash Flow": See Section 7.10.
"Closing Date" means May 23, 1997.
"Code" means the Internal Revenue Code of 1986, as amended.
"Controlled Group" means, severally and collectively, the members of
the group controlling, controlled by and/or in common control of Borrower,
within the meaning of Section 4001(b) of ERISA.
"Convert," "Conversion," and "Converted" each refers to a conversion of
Advances of one Type into Advances of another Type pursuant to Section 3.4.
"Credit Documents" means this Agreement, the Note (including any
renewals, extensions and refundings thereof), and any written agreements,
certificates or documents (and with respect to this Agreement and such other
written agreements and documents, any amendments or
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supplements thereto or modifications thereof) executed or delivered pursuant to
the terms of this Agreement.
"Current Assets": See Section 7.11.
"Current Liabilities": See Section 7.11.
"Debt service requirement": See Section 7.10.
"Default Rate" means at any time five percent (5%) over the Variable
Rate, which Default Rate shall change when and as the Variable Rate changes.
"Dollars" and the sign "$" mean lawful currency of the United States of
America.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, together with all final and permanent regulations issued pursuant
thereto. References herein to sections and subsections of ERISA are deemed to
refer to any successor or substitute provisions therefor.
"Event of Default": See Section 8.1.
"Financial Covenants" means those financial covenants specified in
Sections 7.8 through 7.11.
"Intangible Assets": See Section 7.8.
"Lender": See the Preamble.
"LIBOR" means the London Interbank Offered Rate, determined as provided
herein, for the applicable LIBOR Interest Period to be specified by the Borrower
as provided in Section 3.3(b) of this Agreement. For each Advance under the
LIBOR option, the LIBOR rate will remain in effect through the end of the LIBOR
Interest Period. If prior to the due date for a LIBOR Rate Advance Borrower
requests a continuation of said LIBOR Rate Advance, Borrower's request shall
comply with the request procedure specified below and the LIBOR rate for the
LIBOR Rate Advance shall be re-determined for the next LIBOR Interest Period as
provided below. LIBOR shall mean with respect to any LIBOR Interest Period the
rate equal to the arithmetic mean (rounded upwards, if necessary, to the nearest
one-sixteenth (1/16th) of one percent (1%)) of:
(a) the offered rates per annum for deposits in U.S.
Dollars for a period equal to such LIBOR Interest Period which appears
at 11:00 a.m., London time, on the Reuters Screen LIBOR Page on the
Banking Day that is two (2)
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Banking Days before the first day of such LIBOR Interest Period, in
each case if at least four (4) such offered rates appear on such page,
or
(b) if clause (a) is not available, (x) the offered
rate per annum for deposits in U.S. Dollars for a period equal to such
LIBOR Interest Period for a LIBOR Rate Advance hereunder which appears
as of 11:00 a.m., London time on the Telerate Monitor on Telerate
Screen 3750 on the Banking Day which is two (2) Banking Days before the
first day of such LIBOR Interest Period; or (y) if clause (x) above is
not available, the arithmetic mean (rounded upwards, if necessary, to
the nearest one-sixteenth (1/16th) of one percent (1%)) of the interest
rates per annum offered by at least three (3) prime banks selected by
Lender at approximately 11:00 a.m., London time, on the Banking Day
which is two (2) Banking Days before such date for deposits in U.S.
Dollars to prime banks in the London interbank market, in each case for
a period equal to such LIBOR Interest Period for a LIBOR Rate Advance
hereunder in an amount equal to the amount to which the LIBOR applies.
"Reuters Screen LIBOR Page" as used herein means the display designated
as page LIBOR on the Reuters Monitor Money Rates Service or such other
page as may replace the LIBOR page on that service for the purpose of
displaying London interbank offered rates of major banks.
"LIBOR Interest Period" means, for each LIBOR Rate Advance, the period
commencing on the date of such LIBOR Rate Advance and ending on the last day of
the period selected by Borrower pursuant to the provisions herein and,
thereafter, each subsequent period commencing on the last day of the immediately
preceding LIBOR Interest Period and ending on the last day of the period
selected by Borrower pursuant to the provisions herein. The duration of each
LIBOR Interest Period shall be 30, 60, 90 or 180 days, as selected by Borrower
(A), for a new Advance, in the request for a LIBOR Rate Advance or (B), for an
outstanding Advance, in the request for a LIBOR Rate Advance to continue bearing
interest at the LIBOR Rate or (C), for an outstanding Variable Rate Advance, in
the request to convert to a LIBOR Rate Advance, provided, however, that:
(i) LIBOR Interest Periods commencing on the same date shall
be of the same duration;
(ii) Whenever the last day of any LIBOR Interest Period would
otherwise occur on a day other than a Banking Day, the last day of such
LIBOR Interest Period shall be extended to occur on the next succeeding
Banking Day, provided that if such extension would cause the last day
of such LIBOR Interest Period to occur in the next following calendar
month, the last day of such LIBOR Interest Period shall occur on the
next preceding Banking Day; and
(iii) No LIBOR Interest Period with respect to any RLC Advance
shall extend beyond the RLC Maturity Date.
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"LIBOR Rate" means the rate per annum equal to the sum of (i) LIBOR,
and (ii) 1.75%.
"LIBOR Rate Advance" means an Advance that bears or that is requested
to bear interest at the applicable LIBOR Rate.
"LIBOR Rate RLC Advance" means an RLC Advance that bears or that is
requested to bear interest at the applicable LIBOR Rate.
"Loan" means the RLC.
"Material Adverse Event" means any circumstance or event which
materially and adversely impairs the ability of Borrower taken as a whole to
fulfill its obligations under this Agreement.
"Note" means the RLC Note.
"Notice of RLC Advance": See Section 3.3(b).
"PBGC" means the Pension Benefit Guaranty Corporation, and any
successor to all or substantially all of the Pension Benefit Guaranty
Corporation's functions under ERISA.
"Payment Date" means:
(a) As to each Variable Rate Advance, the first day of each
month.
(b) As to each LIBOR Rate Advance, the earlier of the last day
of the LIBOR Interest Period or the ninetieth (90th) day after the
beginning of the LIBOR Interest Period.
"Plan" means an employee defined benefit plan or other plan maintained
by Borrower for employees of Borrower and covered by Title IV of ERISA, or
subject to the minimum funding standards under Section 412 of the Code.
"Prime Rate" means the interest rate per annum publicly announced by
Lender, or its successors, as its "prime rate" as in effect from time to time.
Borrower acknowledges that the Prime Rate is not necessarily the best or lowest
rate offered by Lender and Lender may lend to its customers at rates that are
at, above or below its Prime Rate.
"Quarterly End Date" means the last day of March, June, September and
December.
"Regulatory Change" means any change effective after the date of this
Agreement in United States federal, state, or foreign law or regulations or the
adoption or making after such date of any interpretation, directive, or request
applying to a class of banks including Lender, of or under any United States
federal, state, or foreign law or regulations (whether or not having the
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force of law) by any court or governmental or monetary authority charged with
the interpretation or administration thereof.
"Reportable Event" means any "reportable event" as described in Section
4043(b) of ERISA with respect to which the thirty (30) day notice requirement
has not been waived by the PBGC.
"RLC": See Section 1.1.
"RLC Advance" means an advance by Lender to the Borrower under the RLC
pursuant to Section 3 and includes a Variable Rate RLC Advance or a LIBOR Rate
RLC Advance (each of which shall be a "Type" of RLC Advance).
"RLC Commitment Amount" means $15,000,000.00.
"RLC Maturity Date" means May 22, 1998.
"RLC Note" means that Revolving Promissory Note of even date herewith
in the face amount equal to the RLC Commitment Amount made by Borrower payable
to the order of Lender, evidencing the RLC, and extensions, modifications and
renewals thereof.
"RLC Service Fee": See Section 3.7.
"SEC" means the United States Securities and Exchange Commission.
"Subsidiaries" means all business associations directly or indirectly
controlled by Borrower.
"Tangible Net Worth": See Section 7.8.
"Variable Rate" means the Prime Rate.
"Variable Rate Advance" means an Advance that bears interest at the
Variable Rate.
"Variable Rate RLC Advance" means on RLC Advance that bears interest at
the Variable Rate.
Section 2.2 Accounting Terms. All accounting terms used herein without
definition shall be interpreted in accordance with generally accepted accounting
principles and, except as otherwise expressly provided herein, all
determinations required herein shall be made in accordance with generally
accepted accounting principles.
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Section 2.3 References. Capitalized terms shall be equally applicable
to both the singular and the plural forms of the terms therein defined.
References to "Agreement," "this Agreement," "herein," "hereof," "hereunder," or
other like words mean this Agreement as amended, supplemented, restated or
otherwise modified and in effect from time to time.
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ARTICLE 3
RLC
---
Section 3.1 RLC Commitment Amount. Subject to the conditions set forth
herein, Lender, from time to time, shall make such RLC Advances as Borrower may
request provided that the aggregate amount of RLC Advances at any one time
outstanding shall not exceed the RLC Commitment Amount. The RLC shall be a
revolving credit, against which RLC Advances may be made to Borrower, repaid by
Borrower, and readvances made to Borrower, provided that (i) Borrower is not in
default under any provision of this Agreement or under the RLC Note, (ii) no RLC
Advance shall be made that would cause the outstanding principal balance of the
RLC to exceed the RLC Commitment Amount, and (iii) no RLC Advance shall be made
on or after the RLC Maturity Date.
Section 3.2 RLC Note. The RLC shall be evidenced by the RLC Note in the
form approved by Lender, payable to the order of Lender upon the terms and
conditions therein contained, and executed and delivered simultaneously with the
execution of this Agreement.
Section 3.3 RLC Advances.
(a) Lender may from time to time make RLC Advances upon
written notice in substantially the form attached hereto as "Exhibit A"
from an Authorized Officer. Each such RLC Advance shall be in the
minimum amount of $500,000.00.
(b) Each request for an RLC Advance shall, in addition to
complying with the other requirements in this Agreement, (i) specify
the date and amount of the requested RLC Advance, (ii) specify whether
the RLC Advance shall be an RLC Advance that bears interest at the
Variable Rate or the LIBOR Rate, and (iii), if the RLC Advance is to
bear interest at the LIBOR Rate, (A) specify the LIBOR Interest Period,
(B) be delivered to Lender at least two (2) Banking Days prior to the
date of the requested RLC Advance, and (C) be in a minimum amount of
$500,000.00 with integral multiples of $1,000.00 in excess thereof. Any
request for an RLC Advance not complying with the foregoing
requirements for an RLC Advance bearing interest at the LIBOR Rate
shall bear interest at the Variable Rate; provided that in the event
such non-compliance is due to Borrower's failure to specify the
required information, Lender agrees to notify Borrower of such failure
and to provide Borrower the opportunity to provide such information
prior to directing that the RLC Advance bear interest at the Variable
Rate.
(c) If Borrower desires that a LIBOR Rate RLC Advance continue
to bear interest at the LIBOR Rate after the end of an existing LIBOR
Interest Period,
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Borrower shall deliver to Lender at least two (2) Banking Days prior to
the end of such LIBOR Interest Period, a notice making such election
and specifying the new LIBOR Interest Period. If Borrower does not
deliver such notice within such time, then after the existing LIBOR
Interest Period the LIBOR Rate RLC Advance shall become a Variable Rate
RLC Advance and shall bear interest at the Variable Rate.
(d) Notwithstanding any provision of the Credit Documents to
the contrary, Lender shall be entitled to fund and maintain its funding
of all or any part of any Advance in any manner it sees fit, provided,
however, that all determinations hereunder shall be made as if Lender
had actually funded and maintained each LIBOR Rate Advance during the
LIBOR Interest Period therefor through the purchase of deposits having
a maturity corresponding to the last day of the LIBOR Interest Period
and bearing an interest rate equal to the LIBOR Rate for such LIBOR
Interest Period.
Section 3.4 Conversion of Advances.
(a) Borrower may on any Banking Day, upon written notice to
and received by Lender not later than 12:00 p.m. (Inglewood, California
local time) (i) on the second Banking Day, in the case of any
conversion of a Variable Rate Advance into a LIBOR Rate Advance and
(ii) on the first Banking Day in the case of any conversion of a LIBOR
Rate Advance into a Variable Rate Advance, prior to the date of the
proposed conversion, converts any Advance of one type into an Advance
of the other type, provided, however, that any conversion of a LIBOR
Rate Advance (A) shall only be made on the last day of the applicable
LIBOR Interest Period, and (B) shall be made only as to an Advance in a
minimum amount of $500,000.00 with integral multiples of $1,000.00 in
excess thereof. Each such notice of a conversion shall specify the date
of such conversion and the Advance to be converted.
Section 3.5 RLC Payments.
(a) Interest on the RLC shall accrue on the unpaid principal
of each RLC Advance:
(i) At the Variable Rate if it is a Variable Rate RLC
Advance.
(ii) At the applicable LIBOR Rate if it is a LIBOR
Rate RLC Advance.
(b) All accrued interest on an RLC Advance shall be due and
payable on the Payment Date.
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(c) The entire outstanding principal balance of the RLC Note,
all accrued and unpaid interest and all other sums which may have
become payable thereunder shall be due and payable in full on the RLC
Maturity Date.
(d) If any payment of interest and/or principal is not
received by Lender when such payment is due, then in addition to the
remedies conferred upon the Lender under the Credit Documents, a late
charge of five percent (5%) of the amount of the installment due and
unpaid will be added to the delinquent amount to compensate the Lender
for the expense of handling the delinquency for any payment past due in
excess of five (5) days, regardless of any notice and cure period.
(e) Upon the occurrence of an Event of Default and after
maturity, including maturity upon acceleration, the unpaid principal
balance, all accrued and unpaid interest and all other amounts payable
hereunder shall bear interest at the Default Rate.
Section 3.6 Prepayments.
(a) Borrower shall have the option to prepay the Loan, in full
or in part, at any time, subject to payment of all amounts specified
hereinbelow with respect to any LIBOR Rate Advance.
(b) If for any reason (including voluntary prepayment,
voluntary conversion of a LIBOR Rate Advance into a Variable Rate
Advance, or acceleration, but excluding any mandatory prepayment or
mandatory conversion such as pursuant to Section 3.8(b)), the Lender
receives all or part of the principal amount of a LIBOR Rate Advance
prior to the last day of the LIBOR Interest Period for such Advance,
the Borrower shall immediately notify the Borrower's account officer at
the Lender and, on demand by the Lender, pay the "LIBOR Breakage Fees,"
defined as the amount (if any) by which (i) the additional interest
which would have been payable on the amount so received had it not been
received until the last day of such LIBOR Interest Period exceeds (ii)
the interest which would have been recoverable by Lender (without
regard to whether Lender actually so invests said funds) by placing the
amount so received on deposit in the certificate of deposit markets or
the offshore currency interbank markets or United States Treasury
investment products, as the case may be for a period starting on the
date on which it was so received and ending on the last day of such
LIBOR Interest Period at the interest rate determined by Lender in its
reasonable discretion. Lender's determination as to such amount shall
be conclusive and final, absent manifest error.
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(c) The Borrower shall pay to Lender, upon the demand of
Lender, such other amount or amounts as shall be sufficient to
compensate it for any loss, costs or expense ("LIBOR Prepayment
Charges") incurred by it as a result of any prepayment by the Borrower
(including voluntary prepayment, voluntary conversion of a LIBOR Rate
Advance into a Variable Rate Advance, or prepayment due to
acceleration, but excluding any mandatory prepayment or mandatory
conversion such as pursuant to Section 3.8(b)) of all or part of the
principal amount of a LIBOR Rate Advance prior to the last day of the
LIBOR Interest Period for such Advance (including without limitation,
any failure by the Borrower to borrow a LIBOR Rate Advance on the loan
date for such borrowing specified in the relevant notice of borrowing
hereunder). Such LIBOR Prepayment Charges shall include, without
limitation, any interest or fees payable by Lender to lenders of funds
obtained by it in order to make or maintain its loans based on the
London interbank eurodollar market. Lender's determination as to such
LIBOR Prepayment Charges shall be conclusive and final, absent manifest
error.
(d) Lender agrees that it shall make a best effort to minimize
any such LIBOR Breakage Fees or any such LIBOR Prepayment Charges.
Section 3.7 RLC Service Fee. Borrower agrees to pay to Lender,
commencing with the execution of this Agreement and continuing until the RLC
Maturity Date (such period being hereinafter referred to as the "RLC
Disbursement Period"), a commitment fee (the "RLC Service Fee") equal to
one-fourth of one percent (1/4%) per annum of the average daily undrawn balance
of the RLC, which shall be payable quarterly in arrears, within three (3) days
after Lender gives Borrower a notice showing the amount due with respect to the
prior three-month period, the first such payment to be due on June 30, 1997, and
thereafter on each Quarterly End Date.
Section 3.8 Additional Provisions for LIBOR Rate Advances.
(a) If, due to any Regulatory Change, there shall be any
increase in the cost to Lender of agreeing to make or making, funding,
or maintaining LIBOR Rate Advances (including, without limitation, any
increase in any applicable reserve requirement), then Borrower shall
from time to time, upon demand by Lender, pay to Lender such amounts as
Lender may reasonably determine to be necessary to compensate Lender
for any additional costs that Lender reasonably determines are
attributable to such Regulatory Change and Lender will notify the
Borrower of any Regulatory Change that will entitle Lender to
compensation pursuant to this paragraph as promptly as practicable.
Lender will furnish to Borrower a certificate setting forth in
reasonable detail the basis for the amount of each request by Lender
for compensation under this paragraph. Determinations by Lender of the
amounts required to compensate Lender shall be conclusive, absent
manifest error. Lender shall be entitled to compensation in connection
with any Regulatory Change only for costs actually incurred by Lender.
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(b) Notwithstanding any provision of the Credit Documents, if
Lender shall notify Borrower that as a result of a Regulatory Change it
is unlawful for Lender to make Advances at the LIBOR Rate, or to fund
or maintain LIBOR Rate Advances, (i) the obligations of Lender to make
Advances at the LIBOR Rate and to convert Advances to the LIBOR Rate
shall be suspended until Lender shall notify Borrower that the
circumstances causing such suspension no longer exist, and (ii) in the
event such Regulatory Change makes the maintenance of Advances at the
LIBOR Rate unlawful, Borrower shall forthwith prepay in full all LIBOR
Rate Advances then outstanding, together with interest accrued thereon
and all amounts in connection with such prepayment specified in the
Note, unless Borrower, within five (5) Banking Days of notice from
Lender, converts all LIBOR Rate Advances then outstanding into Variable
Rate Advances pursuant to the conversion procedures herein and pays all
amounts in connection with such prepayments or conversions specified
herein.
(c) Notwithstanding any other provision of the Credit
Documents, if prior to the commencement of any LIBOR Interest Period,
Lender shall determine (i) that United States dollar deposits in the
amount of any LIBOR Rate Advance to be outstanding during such LIBOR
Interest Period are not readily available to Lender in the London
interbank market, or (ii) by reason of circumstances affecting the
London interbank market, adequate and reasonable means do not exist for
ascertaining the LIBOR Rate for such LIBOR Interest Period in the
manner prescribed in the definition of "LIBOR Rate", then Lender shall
promptly give notice thereof to Borrower and the obligation of Lender
to create, continue, or effect by conversion any LIBOR Rate Advance in
such amount and for such LIBOR Interest Period shall terminate until
United States dollar deposits in such amount and for the LIBOR Interest
Period shall again be readily available in the London interbank market
and adequate and reasonable means exist for ascertaining the LIBOR
Rate.
Section 3.9 Method of Payment. All payments of principal of, and
interest on, the Note shall be made to Lender before 2:00 p.m. (Inglewood,
California local time), in immediately available funds. All payments made on the
Note shall be credited, to the extent of the amount thereof, in the following
manner: (i) first, to the payment of costs, fees or other charges incurred in
connection with the Loan; (ii) second, to the payment of accrued interest on the
Loan; and (iii) third, to the reduction of the principal balance of the Loan, in
the inverse order of maturity.
Section 3.10 Conditions. Lender shall have no obligation to make any
Advance unless and until all of the conditions and requirements of this
Agreement are fully satisfied. However, Lender in its sole and absolute
discretion may elect to make one or more Advances prior to full satisfaction of
one or more such conditions and/or requirements. Notwithstanding that such an
Advance or Advances are made, such unsatisfied conditions and/or requirements
shall not be waived or released thereby. Borrower shall be and continue to be
obligated to fully satisfy such
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conditions and requirements, and Lender, at any time, in Lender's sole and
absolute discretion, may stop making Advances until all conditions and
requirements are fully satisfied.
Section 3.11 [Intentionally left blank.]
Section 3.12 Assignment. Borrower shall have no right to any Advance
other than to have the same disbursed by Lender in accordance with the
disbursement provisions contained in this Agreement. Any assignment or transfer,
voluntary or involuntary, of this Agreement or any right hereunder shall not be
binding upon or in any way affect Lender without its written consent; Lender may
make Advances under the disbursement provisions herein, notwithstanding any such
assignment or transfer.
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ARTICLE 4
CONDITIONS PRECEDENT
--------------------
Section 4.1 Conditions Precedent. The obligation of Lender to fund the
Loan is subject to the fulfillment of the following conditions:
(a) Borrower shall have executed (or obtained the execution or
issuing of) and delivered to Lender the following documents or
information, all in form satisfactory to Lender:
(i) This Agreement.
(ii) The RLC Note.
(iii) A corporate resolution of Borrower authorizing
(i) the Loan, and (ii) the execution and delivery by an
Authorized Officer of all documents to be executed by
Borrower, and the performance by Borrower of all acts and
things to be performed by Borrower, pursuant to this
Agreement.
(iv) A copy of the current Certificate of
Incorporation and Bylaws, so certified by the Secretary of the
corporation, together with a copy of a current Certificate of
Good Standing in the State of incorporation for Borrower; and
such other documents as Lender may reasonably require relating
to the existence and good standing of Borrower and the
authority of any person acting or executing documents on
behalf of Borrower.
(v) Evidence satisfactory to Lender that Borrower
shall have terminated all other lines of credit excluding its
line of credit with Barclays Bank PLC (U.K.), but including
without limitation any revolving lines of credit and its $5
million ($5,000,000.00) line of credit for use in connection
with its purchase of treasury stocks.
(vi) Such other documents and information as may
reasonably be required by Lender or Lender's counsel.
(b) All representations and warranties by Borrower contained
in this Agreement shall remain true and correct and the Borrower shall
have performed or complied with all agreements of Borrower made in this
Agreement that Borrower is to have performed or complied with by the
date of the first Advance.
-14-
(c) No Event of Default shall exist and no event or condition
shall exist that after notice or lapse of time, or both would
constitute an Event of Default.
Section 4.2 Conditions Precedent to All Future Advances. The obligation
of the Lender to make any Advances to the Borrower following the initial Advance
under Section 4.1 hereof shall be subject to the condition precedent that, on
the date of each such Advance, no Event of Default shall exist and no event or
condition shall exist that after notice or lapse of time or both, would
constitute an Event of Default.
-15-
ARTICLE 5
GENERAL REPRESENTATIONS AND WARRANTIES
--------------------------------------
Borrower hereby represents and warrants to Lender as follows:
Section 5.1 Recitals. The recitals and statements of intent appearing
in this Agreement are true and correct.
Section 5.2 Organization and Good Standing. Borrower is duly organized,
validly existing and in good standing under the laws of the state of its
organization. Borrower is qualified to do business and is in good standing in
the State of Arizona and in each state in which it is required by law to do so.
Section 5.3 Business. Borrower has full corporate power and authority
to own its properties and assets and to carry on its business as presently being
conducted.
Section 5.4 Authorization and Power. Borrower is fully authorized and
permitted to enter into this Agreement, to execute any and all documentation
required herein, to borrow the amounts contemplated herein upon the terms set
forth herein and to perform the terms of this Agreement, none of which conflicts
with any provision of law or regulation applicable to Borrower.
Section 5.5 Enforceability. This Agreement and the other Credit
Documents are the valid and binding legal obligations of the Borrower and are
enforceable in accordance with their terms.
Section 5.6 No Conflicts. The execution, delivery and performance by
Borrower of this Agreement, the Note and all other documents and instruments
relating to the Loan are not in conflict with any provision of law applicable to
Borrower or with the Certificate of Incorporation or Bylaws of Borrower and will
not result in any breach of the terms or conditions or constitute a default
under any agreement or instrument under which Borrower is a party or is
obligated. Borrower is not in default in the performance or observance of any
material obligations, covenants or conditions of any such agreement or
instrument.
Section 5.7 No Litigation. There are no actions, suits or proceedings
pending or threatened against Borrower which materially affect the repayment of
the Loan, the performance by Borrower under this Agreement or the financial
condition, business or operations of Borrower.
Section 5.8 Financial Condition. All financial statements and profit
and loss statements, all statements as to ownership and all other statements or
reports previously or hereafter given to Lender by Borrower are and shall be
true and correct as of the date thereof. There has been no material adverse
change in the business, properties or condition (financial or otherwise) of
Borrower since the date of the latest financial statements given to Lender.
-16-
Section 5.9 Taxes. Borrower has filed all federal, state and local tax
returns by the due date as extended and has paid all federal, state and local
taxes shown due thereon by such extended due date and all other payments
required under federal, state or local law, except such assessments or taxes, if
any, which are being contested in good faith by appropriate proceedings.
Section 5.10 No Stock Purchase. No part of the proceeds of any
financial accommodation made by Lender in connection with this Agreement will be
used to purchase or carry "margin stock," as that term is defined in Regulation
U of the Board of Governors of the Federal Reserve System, or to extend credit
to others for the purpose of purchasing or carrying such margin stock.
Section 5.11 Advances. Each request by Borrower for an Advance
hereunder shall constitute an affirmation on the part of the Borrower that the
representations and warranties of Section 5.8 are true and correct with respect
to any financial statements submitted by Borrower to Lender between the date of
this Agreement and the date of such request, that the representations and
warranties of Sections 5.1, 5.5, 5.6, 5.7, 5.8 and 5.9 hereof are true and
correct as of the time of such request and that the condition precedents set
forth in Article 4 hereof are fully satisfied. All representations and
warranties made herein shall survive the execution of this Agreement, any and
all Advances or proceeds of the Loan and the execution and delivery of all other
documents and instruments in connection with the Loan, so long as Lender has any
commitment to lend to Borrower hereunder and until the Loan and all indebtedness
hereunder have been paid in full and all of Borrower's obligations hereunder
have been fully discharged.
Section 5.12 Solvency. Borrower (both before and after giving effect to
the transactions contemplated hereby) is solvent, has assets having a fair value
in excess of the amount required to pay its probable liabilities on its existing
debts as they become absolute and matured, and has, and will have, access to
adequate capital for the conduct of its business and the ability to pay its
debts from time to time incurred in connection therewith as such debts mature.
Section 5.13 ERISA. (a) No Reportable Event has occurred and is
continuing with respect to any Plan; (b) PBGC has not instituted proceedings to
terminate any Plan; (c) neither the Borrower, any member of the Controlled
Group, nor any duly-appointed administrator of a Plan (i) has incurred any
liability to PBGC with respect to any Plan other than for premiums not yet due
or payable or (ii) has instituted or intends to institute proceedings to
terminate any Plan under Section 4041 or 4041A of ERISA; and (d) each Plan of
Borrower has been maintained and funded in all material respects in accordance
with its terms and in all material respects in accordance with all provisions of
ERISA applicable thereto. Neither the Borrower nor any of its Subsidiaries
participates in, or is required to make contributions to, any Multi-employer
Plan (as that term is defined in Section 3(37) of ERISA).
-17-
ARTICLE 6
AFFIRMATIVE COVENANTS
---------------------
Borrower hereby covenants and agrees that so long as Lender has any
commitment to lend to Borrower hereunder and until the Loan and all other
indebtedness hereunder have been paid in full and all of Borrower's obligations
hereunder have been fully discharged:
Section 6.1 Maintenance of Existence. Borrower shall maintain its
existence with no material amendments or changes in its organizational documents
without the prior written approval of the Lender.
Section 6.2 Maintain Business. Borrower shall maintain in full force
and effect all agreements, rights, trademarks, patents and licenses necessary to
carry out its business in its reasonable business judgment, shall keep all of
its properties in good condition and repair, and shall make all needed and
proper repairs and improvements to its properties in order to properly conduct
its business in its reasonable business judgment.
Section 6.3 Insurance. To the extent Borrower is not self-insured,
Borrower shall maintain in full force and effect at all times policies of fire,
flood and extended coverage insurance and policies of public liability property
damage, xxxxxxx'x compensation insurance and product recall insurance in scope
and amount not less than, and not less extensive than, the scope and amount of
insurance coverages customary for companies of comparable size and financial
strength in the trades or businesses in which Borrower is from time to time
engaged. Upon request by Lender, Borrower shall deliver to Lender certificates
of, and copies of the originals of, all such policies of insurance in effect
from time to time, to be retained by Lender so long as Lender shall have any
commitment to lend to Borrower and/or any portion of the Loan shall be
outstanding or unsatisfied.
Section 6.4 Compliance with Credit Documents. Borrower shall make all
payments of interest and principal on the Loan as and when the same become due
and payable and shall keep and comply with all covenants, terms and provisions
of the Note.
Section 6.5 Financial Statements and Reports. Borrower shall maintain a
standard system of accounting in accordance with good business practices, that
reflects the application of generally accepted accounting principles,
consistently applied, and Borrower shall furnish to Lender, in a level of detail
acceptable to Lender, the following:
(a) Within forty-five (45) days after the end of the first
three (3) fiscal quarterly periods of each fiscal year of Borrower,
quarterly and year-to-date financial and operating statements for
Borrower as of the end of the preceding quarter and profit and loss
statements covering that period, certified by Borrower
-18-
to be a true and accurate representation of its operations and
financial condition during that period and at its end.
(b) Within ninety (90) days after the end of each fiscal year
of Borrower, financial statements which accurately and completely
reflect Borrower's assets, liabilities and net worth, as of the end of
the fiscal year, together with profit and loss statements for the
fiscal year, all prepared in accordance with generally accepted
accounting principles together with an opinion thereon of independent
certified public accountants of national standing selected by Borrower
to the effect that such financial statements have been prepared in
accordance with generally accepted accounting principles consistently
maintained and applied (except for changes in which such accountants
concur) and that their examination of such accounts in connection with
such financial statements has been made in accordance with generally
accepted auditing standards and, accordingly, included such tests of
the accounting records and such other auditing procedures as were
considered necessary under the circumstances.
(c) Within forty-five (45) days of each fiscal quarter of
Borrower, a certificate signed by an Authorized Officer, in the form of
Exhibit "B" attached hereto.
(d) Promptly after transmission or occurrence (but in any
event within fifteen days), other reports, including any communications
with shareholders or the financial community, filed by Borrower or its
officers and directors with any security exchange or the SEC.
(e) Promptly, from time to time, such other information
regarding the operations, business affairs and financial condition of
the Borrower as Lender may reasonably request.
Section 6.6 Books and Records; Access. Borrower shall maintain, in a
safe place, proper and accurate books, ledgers, correspondence and other records
relating to its operations and business affairs. Lender shall have the right
from time to time, upon reasonable notice to Borrower, to examine and audit
(within a reasonable scope of audit) at Borrower's expense (such expense not to
exceed $5,000.00 per annum) and to make abstracts from and photocopies of
Borrower's books, ledgers, correspondence and other records.
Section 6.7 Payment of Taxes and Other Indebtedness. Borrower shall pay
all of its current obligations before they become delinquent under applicable
agreements or normal trade practices, including all accounts payable and all
federal, state and local taxes, assessments, levies and governmental charges and
all other payments required under any federal state or local law. Borrower may,
however, contest in good faith the validity or amount of any such taxes,
assessments, levies or other such governmental charges provided that Lender may
require
-19-
Borrower to provide security with respect thereto in the form of a bond,
insurance, security deposit, cash reserve or other evidence satisfactory to
Lender of Borrower's ability to pay and discharge such matter in the event such
contest is unsuccessful where the failure to provide such security would result
in the occurrence of a Material Adverse Event.
Section 6.8 Notice of Default. Borrower will furnish to Lender
immediately upon becoming actually aware of the existence of any event or
condition that constitutes an Event of Default, a written notice specifying the
nature and period of existence thereof and the action which it is taking or
proposes to take with respect thereto.
Section 6.9 Other Notices. Borrower will promptly notify Lender of (a)
any Material Adverse Event, (b) any claim not covered by insurance against
Borrower or any of Borrower's properties that would result in the occurrence of
a Material Adverse Event, and (c) the commencement of, and any material
determination in, any litigation with any third party or any proceeding before
any governmental authority affecting it, except litigation or proceedings which,
if adversely determined, would not result in the occurrence of a Material
Adverse Event.
Section 6.10 ERISA Compliance. With respect to its Plans, Borrower
shall (a) at all times comply with the minimum funding standards set forth in
Section 302 of ERISA and Section 412 of the Code or shall have duly obtained a
formal waiver of such compliance from the proper authority; (b) at Lender's
request, within thirty (30) days after the filing thereof, furnish to Lender
copies of each annual report/return (Form 5500 Series), as well as all schedules
and attachments required to be filed with the Department of Labor and/or the
Internal Revenue Service pursuant to ERISA, in connection with each of its Plans
for each year of the plan; (c) notify Lender within a reasonable time of any
fact, including, but not limited to, any Reportable Event arising in connection
with any of its Plans, which constitutes grounds for termination thereof by the
PBGC or for the appointment by the appropriate United States District Court of a
trustee to administer such Plan, together with a statement, if requested by
Lender, as to the reason therefor and the action, if any, proposed to be taken
with respect thereto; and (d) furnish to Lender within a reasonable time, upon
Lender's request, such additional information concerning any of its Plans as may
be reasonably requested.
Section 6.11 Further Assurances. Borrower will make, execute or
endorse, and acknowledge and deliver or file or cause the same to be done, all
such notices, certifications and additional agreements, undertakings or other
assurances, and take any and all such other action, as Lender may, from time to
time, deem reasonably necessary or proper to fully evidence the Loan.
-20-
ARTICLE 7
NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that so long as Lender has any commitment
to lend to Borrower hereunder and until the Loan and all other indebtedness
hereunder have been paid in full and all of the Borrower's obligations hereunder
have been fully discharged, Borrower shall not without receiving the prior
written consent of Lender:
Section 7.1 Indebtedness. Become or remain obligated either directly or
as a guarantor or surety for any indebtedness for borrowed money, or for any
indebtedness incurred in connection with the acquisition (which shall not
include bona fide leases) of any property, real or personal, tangible or
intangible including, but not limited to, lease purchase agreements, except:
(a) Indebtedness to Lender hereunder.
(b) Unsecured trade, utility or accounts payable arising in
the ordinary course of its business.
(c) Lease purchase agreements and purchase money security
interests not exceeding the sum of $3,000,000.00 in payments during any
fiscal year.
(d) Borrower's line of credit up to $2,000,000 with Barclays
Bank PLC (U.K.) secured by U.K. receivables and inventory.
(e) Indebtedness secured by liens permitted under Section 7.2
hereof.
Section 7.2 Liens. Create or suffer to be created or to exist any
mortgages, pledges, security interests, encumbrances or other liens (i) on its
real property that aggregate more than $5,000,000.00 or (ii) on its accounts
receivable or its inventory.
Section 7.3 Loans. Make any loan, advance, or direct extension of
credit in excess of $1,000,000.00, or any investment (consisting of equity or
debt convertible into equity) in excess of $5,000,000.00, in aggregate on an
annual basis to any person(s) or entities other than in the ordinary course of
business.
Section 7.4 Dividends. Declare or pay any cash dividend.
Section 7.5 Existence. Dissolve or liquidate, or merge or consolidate
with or into any corporation or entity, or turn over the management or operation
of its property, assets or businesses to any other person, firm or corporation,
or make any material change in its ownership.
-21-
Section 7.6 Fiscal Year. Change the times of commencement or
termination of its fiscal year or other accounting periods; or change its
methods of accounting other than to conform to generally accepted accounting
principles applied on a consistent basis.
Section 7.7 Margin Stock. Use any proceeds of the Loan, or any proceeds
of any other or future financial accommodation from Lender to Borrower, directly
or indirectly, for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any "margin stock" as that term is defined in Regulation
U of the Board of Governors of the Federal Reserve System, and will not use such
proceeds in a manner that would involve Borrower in a violation of Regulation T,
U or X of such Board, nor use such proceeds for any purpose not permitted by
Section 7 of the Securities Exchange Act of 1934, as amended, or any of the
rules or regulations respecting the extensions of credit promulgated thereunder.
Section 7.8 Tangible Net Worth. Permit its Tangible Net Worth to be as
of each Quarterly End Date to be less than the Minimum Tangible Net Worth, where
"Minimum Tangible Net Worth" means the greater of (i) $45,000,000.00, or (b)
$48,000,000.00 less the amount of its treasury stock acquired by Borrower since
the Closing Date.
For purposes of this Agreement, "Tangible Net Worth" means, at any
given date, the total shareholder's equity (including capital stock, additional
paid in capital and retained earnings after deducting treasury stock) which
would appear on a balance sheet of Borrower prepared as of such date in
accordance with generally accepted accounting principles consistently applied,
less the aggregate book value of "Intangible Assets" (as defined below) shown on
such balance sheet. "Intangible Assets" means those assets that are (i) deferred
assets, other than prepaid taxes; (ii) patents, copyrights, trademarks,
tradenames, franchises, goodwill, experimental expenses and other similar assets
which would be classified as intangible assets on a balance sheet prepared in
accordance with generally accepted accounting principles consistently applied;
and (iii) unamortized debt discount and expense.
Section 7.9 Leverage Ratio. Permit its total liabilities-to-Tangible
Net Worth ratio as of each Quarterly End Date to exceed 0.5 to 1.
Section 7.10 Debt Coverage Ratio. Permit its debt coverage ratio,
calculated on a rolling four (4) quarter basis, to be less than 1.50 to 1 as of
each Quarterly End Date, where debt coverage ratio is defined as the ratio of
"cash flow" to "debt service requirement." In the ratio, the numerator "cash
flow" is defined as the sum for the relevant period of Borrower's net income,
tax expense, depreciation expense, amortization of intangibles expense, interest
expense and off- balance sheet lease expense, all to the extent deducted in the
calculation of net income; and the denominator "debt service requirement" is
defined as the sum of the following that are due within the relevant period: all
current maturities of long-term debt (excluding the RLC), capital lease
obligations, interest expense and off-balance sheet lease expense.
Notwithstanding anything herein to the contrary, for purposes of the calculation
of "cash flow", the inventory reserve taken in the
-22-
third fiscal quarter of 1996 shall not be considered in the calculation of net
income for the relevant period.
Section 7.11 Current Ratio. Permit the ratio of Borrower's Current
Assets to its Current Liabilities as of each Quarterly End Date to be less than
1.5 to 1 with both Current Assets and Current Liabilities determined in
accordance with generally accepted accounting principles.
-23-
ARTICLE 8
DEFAULT AND REMEDIES
--------------------
Section 8.1 Event of Default. The occurrence of any of the following
events or conditions shall constitute an "Event of Default" under this
Agreement:
(a) Failure to pay any installment of principal or interest
under the Loan within five (5) Banking Days of when the same become due
and payable, or the failure to pay any other sum due under the Loan or
this Agreement when the same shall become due and payable and such
failure continues for five (5) Banking Days after notice thereof to
Borrower;
(b) Any failure or neglect to perform or observe any of the
material terms, provisions, or covenants of this Agreement (other than
a failure or neglect described in one or more of the other provisions
of this Section 8.1) and such failure or neglect either (i) cannot be
remedied, (ii) can be remedied within fifteen (15) days by prompt and
diligent action, but it continues unremedied for a period of fifteen
(15) days after notice thereof to Borrower, or (iii) can be remedied,
although not within fifteen (15) days even by prompt and diligent
action, but such remedy is not commenced within fifteen (15) days after
notice thereof to Borrower or is not diligently prosecuted to
completion within a total of forty-five (45) days from the date of such
notice;
(c) Any warranty, representation or statement contained in
this Agreement, or made or furnished to the Lender by or on behalf of
the Borrower, that shall be or shall prove to have been false in any
material respect when made or furnished;
(d) The filing by Borrower (or against Borrower in which any
Borrower acquiesces or which is not dismissed within sixty (60) days of
the filing thereof) of any proceeding under the federal bankruptcy laws
now or hereafter existing or any other similar statute now or hereafter
in effect; the entry of an order for relief under such laws with
respect to Borrower; or the appointment of a receiver, trustee,
custodian or conservator of all or any part of the assets of Borrower;
(e) The insolvency of Borrower; or the execution by Borrower
of an assignment for the benefit of creditors; or the convening by
Borrower of a meeting of its creditors, or any class thereof, for
purposes of effecting a moratorium upon or extension or composition of
its debts; or if Borrower is generally not paying its debts as they
mature;
-24-
(f) The admission in writing by Borrower that it is unable to
pay its debts as they mature or that it is generally not paying its
debts as they mature;
(g) The failure of Borrower to comply with any Financial
Covenant at the end of any fiscal quarter;
(h) The occurrence of any default under the Note or any
document or instrument given by Borrower in connection with any other
indebtedness of Borrower to Lender and the expiration of any grace
period provided therein;
(i) The liquidation, termination or dissolution of Borrower;
(j) Either (i) proceedings shall have been instituted to
terminate, or a notice of termination shall have been filed with
respect to, any Plans (other than a Multi-Employer Pension Plan as that
term is defined in Section 4001(a)(3) of ERISA) by Borrower, any member
of the Controlled Group, PBGC or any representative of any thereof, or
any such Plan shall be terminated, in each case under Section 4041 or
4042 of ERISA, and such termination shall give rise to a liability of
the Borrower or the Controlled Group to the PBGC or the Plan under
ERISA having an effect in excess of $500,000.00 or (ii) a Reportable
Event, the occurrence of which would cause the imposition of a lien in
excess of $500,000.00 under Section 4062 of ERISA, shall have occurred
with respect to any Plan (other than a Multi-Employer Pension Plan as
that term is defined in Section 4001(a)(3) of ERISA) and be continuing
for a period of sixty (60) days;
(k) Any of the following events shall occur with respect to
any Multi- Employer Pension Plan (as that term is defined in Section
4001(a)(3) of ERISA) to which Borrower contributes or contributed on
behalf of its employees and Lender determines in good faith that the
aggregate liability likely to be incurred by Borrower, as a result of
any of the events specified in Subsections (i), (ii) and (iii) below,
will have an effect in excess of $500,000.00; (i) Borrower incurs a
withdrawal liability under Section 4201 of ERISA; (ii) any such plan is
"in reorganization" as that term is defined in Section 4241 of ERISA;
or (iii) any such Plan is terminated under Section 4041A of ERISA; or
(l) The occurrence of a Material Adverse Event if Lender in
good faith shall believe that the prospect of payment or performance of
the Loan is impaired.
Section 8.2 Remedies. Upon the occurrence of any Event of Default and
at any time thereafter while such Event of Default is continuing, Lender may do
one or more of the following:
-25-
(a) Cease making Advances or extensions of financial
accommodations in any form to or for the benefit of Borrower and
declare the entire Loan immediately due and payable, without notice or
demand;
(b) Proceed to protect and enforce its rights and remedies
under this Agreement and the Note; and
(c) Avail itself of any other relief to which Lender may be
legally or equitably entitled.
Section 8.3 Delay or Omission by Lender. No delay or omission by Lender
in exercising any right, power or remedy hereunder, and no indulgence given to
Borrower, with respect to any condition set forth herein, shall impair any
right, power or remedy of Lender under the Note, and/or this Agreement, or be
construed as a waiver by Lender of, or acquiescence in, any Event of Default.
Likewise, no such delay, omission or indulgence by Lender shall be construed as
a variation or waiver of any of the terms or provisions of this Agreement. Any
actual waiver by Lender of any Event of Default shall not be a waiver of any
other prior or subsequent Event of Default or of the same Event of Default after
notice to demanding strict performance.
-26-
ARTICLE 9
ACTION UPON AGREEMENT
---------------------
Section 9.1 Third Party. This Agreement is made for the sole protection
and benefit of the parties hereto, their successors and assigns, and no other
person or organization shall have any right of action hereon. No representation
of any kind is made to third parties by the execution hereof, by the existence
or form of the indebtedness treated herein, or by any performance, or failure or
waiver thereof, by any party of the terms hereof. Specifically, without
limitation of the foregoing, the Lender makes no representation to any third
party as to the solvency of the Borrower or of the commercial practicability of
any business enterprise to which or for which the RLC is made.
Section 9.2 Entire Agreement. This Agreement embodies the entire
Agreement of the parties with regard to the subject matter hereof. There are no
representations, promises, warranties, understandings or agreements express or
implied, oral or otherwise, in relation thereto, except those expressly referred
to or set forth herein. Borrower acknowledges that the execution and the
delivery of this Agreement is its free and voluntary act and deed, and that said
execution and delivery have not been induced by, nor done in reliance upon, any
representations, promises, warranties, understandings or agreements made by
Lender, its agents, officers, employees or representatives.
Section 9.3 Writing Required. No promise, representation, warranty or
agreement made subsequent to the execution and delivery hereof by either party
hereto, and no revocation, partial or otherwise, or change, amendment, addition,
alteration or modification of this Agreement shall be valid unless the same
shall be in writing signed by all parties hereto.
Section 9.4 No Partnership. Lender and Borrower each have separate and
independent rights and obligations under this Agreement. Nothing contained
herein shall be construed as creating, forming or constituting any partnership,
joint venture, merger or consolidation of Borrower and Lender for any purpose or
in any respect.
-27-
ARTICLE 10
GENERAL
-------
Section 10.1 Survival. This Agreement shall survive the making of the
Loan and shall continue so long as any part of the Loan, or any extension or
renewal thereof, remains outstanding.
Section 10.2 Context. This Agreement shall apply to the parties hereto
according to the context hereof, and without regard to the number or gender of
words or expressions used herein.
Section 10.3 Time. Time is expressly made of the essence of this
Agreement.
Section 10.4 Notices. All notices required or permitted to be given
hereunder shall be in writing and may be given in person or by United States
mail, by delivery service or by electronic transmission. Any notice directed to
a party to this Agreement shall become effective upon the earliest of the
following: (i) actual receipt by that party; (ii) delivery to the designated
address of that party, addressed to that party; or (iii) if given by certified
or registered United States mail, forty-eight (48) hours after deposit with the
United States Postal Service, postage prepaid, addressed as shown below, or to
such other address as such party may from time to time designate in writing:
Borrower: Three-Five Systems, Inc.
0000 Xxxxx Xxxxxx Xxxxx
Xxxxx, Xxxxxxx 00000-0000
Attention: Vice President - Administration
Telecopier: (000) 000-0000
Lender: Imperial Bank
0000 Xxxxx Xx Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Telecopier: (000) 000-0000
With a copy to: Imperial Bank
One Arizona Center
000 Xxxx Xxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxxxxx
Telecopier: (000) 000-0000
-28-
Section 10.5 Costs. Borrower shall pay all out of pocket costs and
expenses arising from the preparation of this Agreement, the Note, the closing
of the Loan, the making of Advances, and the enforcement of Lender's rights
hereunder, including but not limited to, accounting fees, appraisal fees,
attorneys' fees, UCC search fees and any charges that may be imposed on Lender
as a result of this transaction. At the option of Lender and with the agreement
of the Borrower, Advances may be made and disbursed from time to time by Lender
directly in payment of such costs and expenses.
Section 10.6 Successors. This Agreement shall, except as herein
otherwise provided, be binding upon and inure to the benefit of the successors
and assigns of the parties, hereto.
Section 10.7 Headings. The headings or captions of sections in this
Agreement are for convenience and reference only, and in no way define, limit or
describe the scope or intent of this Agreement or the provisions of such
sections.
Section 10.8 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial.
The Credit Documents shall be governed by and construed in accordance with the
substantive laws (other than conflict of law rules) of the State of Arizona,
except to the extent Lender has greater rights or remedies under Federal law,
whether as a national bank or otherwise, in which case such choice of Arizona
law shall not be deemed to deprive Lender of any such rights and remedies as may
be available under Federal law. Subject to the provisions of Section 10.9
hereof, each party consents to the personal jurisdiction and venue of the state
courts located in Phoenix, State of Arizona in connection with any controversy
related to this Agreement, waives any argument that venue in any such forum is
not convenient and agrees that any litigation initiated by any of them in
connection with this Agreement shall be venued in the Superior Court of Maricopa
County, Arizona. The parties waive any right to trial by jury in any action or
proceeding based on or pertaining to this Agreement.
Section 10.9 Arbitration Provision. All claims or controversies of any
type regarding matters occurring at any time arising under or relating to this
Agreement (including, but not limited to, claims under contract, law or
statute), except the parties rights to seek injunctive relief between Borrower
and Lender (including claims against any shareholders or affiliated entities of
Lender in claims against any directors, officers, employees or agents of Lender
or their affiliated entities), shall be settled and finally determined by one
arbitrator in Maricopa County, Arizona, in accordance with the arbitration rules
of JAMS/Endispute and judgment by the arbitrator may be entered into any court
having jurisdiction thereof. This Agreement to arbitrate includes all claims of
breach of contract and all other claims of any type to the maximum extent
permissible. The prevailing party in any such arbitration shall be awarded its
reasonable costs and attorneys' fees as determined by the arbitrator.
Section 10.10 Confidentiality. Lender agrees to keep confidential (and
to cause its respective officers, directors, employees, agents and
representatives to keep confidential) the Information (as defined below), except
that Lender shall be permitted to disclose Information (i)
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to such of its officers, directors, employees, agents and representatives
(including outside counsel) as need to know such Information; (ii) to the extent
required by applicable laws and regulations or by any subpoena or similar legal
process, or requested by any bank regulatory authority (provided that Lender
shall, except for Information requested by any such bank regulatory authority,
promptly notify Borrower (to the extent practicable and lawful, notice shall be
given to the Borrower before such disclosure is made so as to permit Borrower to
seek a protective order) of the circumstances and content of each such
disclosure and shall request confidential treatment of any Information so
disclosed); (iii) to the extent such Information (A) becomes publicly available
other than as a result of a breach of this Agreement, (B) becomes available to
Lender on a nonconfidential basis from a source other than the Borrower or (C)
was available to Lender on a nonconfidential basis prior to its disclosure to
Lender by the Borrower; or (iv) to the extent the Borrower shall have consented
to such disclosure in writing. As used in this Section 10.10, "Information"
shall mean any financial statements, materials, documents and other information
that the Borrower may have furnished or may hereafter furnish to Lender in
connection with this Agreement or any other materials prepared from any of the
foregoing.
IN WITNESS WHEREOF, these presents have been executed, as of the day
and year first set forth above.
THREE-FIVE SYSTEMS, INC., a Delaware
corporation
By:
-------------------------------------
Name:
-----------------------------------
Its:
------------------------------------
BORROWER
IMPERIAL BANK, a California banking
corporation
By
-------------------------------------
Its
----------------------------
LENDER
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REVOLVING PROMISSORY NOTE
$15,000,000.00 Phoenix, Arizona
May 23, 1997
FOR VALUE RECEIVED, the undersigned THREE-FIVE SYSTEMS, INC.
(hereinafter called "Maker"), promises to pay to the order of IMPERIAL BANK, a
California banking corporation (the "Payee"; Payee and each subsequent
transferee and/or owner of this Note, whether taking by endorsement or
otherwise, are herein successively called "Holder"), at 0000 Xxxxx Xx Xxxxxxx
Xxxxxxxxx, Lending Services, Xxxxxxxxx, Xxxxxxxxxx 00000, or at such other place
as Holder may from time to time designate in writing, the principal sum of
FIFTEEN MILLION AND NO/100 DOLLARS ($15,000,000.00) or so much thereof as Holder
may advance to or for the benefit of Maker plus interest calculated on a daily
basis (based on a 360-day year) from the date hereof on the principal balance
from time to time outstanding as hereinafter provided, principal, interest and
all other sums payable hereunder to be paid in lawful money of the United States
of America at the rates of interest per annum and at the times specified in that
Credit Agreement of even date herewith between the Maker and Payee (the "Credit
Agreement").
Maker agrees to an effective rate of interest that is the rate stated
above plus any additional rate of interest resulting from any other charges in
the nature of interest paid or to be paid by or on behalf of Maker, or any
benefit received or to be received by Holder, in connection with this Note.
This Note is issued pursuant to the Credit Agreement.
Time is of the essence of this Note.
Maker shall pay all costs and expenses, including reasonable attorneys'
fees and court costs, incurred in the collection or enforcement of all or any
part of this Note.
Failure of Holder to exercise any option hereunder shall not constitute
a waiver of the right to exercise the same in the event of any subsequent
default or in the event of continuance of any existing default after demand for
strict performance hereof.
Maker and all sureties, guarantors and/or endorsers hereof (or of any
obligation hereunder) and accommodation parties hereon (severally each
hereinafter called a "Surety") each: (a) agree that the liability under this
Note of all parties hereto is joint and several; and (b) severally waive any and
all formalities in connection with this Note to the maximum extent allowed by
law, including (but not limited to) demand, diligence, presentment for payment,
protest and demand, and notice of extension, dishonor, protest, demand and
nonpayment of this Note. In addition, each Surety, other than Maker, consent
that Holder may extend the time of payment or otherwise
modify the terms of payment of any part or the whole of the debt evidenced by
this Note, at the request of any other person liable hereon, and such consent
shall not alter nor diminish the liability of any person hereon.
This Note shall be binding upon Maker and its successors and assigns
and shall inure to the benefit of Payee, and any subsequent holders of this
Note, and their successors and assigns.
All notices required or permitted in connection with this Note shall be
given at the place and in the manner provided in the Credit Agreement for the
giving of notices.
If any payment of interest and/or principal is not received by the
Holder hereof when such payment is due, then in addition to the remedies
conferred upon the Holder hereof and the other loan documents, a late charge of
five percent (5%) of the amount of the installment due and unpaid will be added
to the delinquent amount to compensate the Holder hereof for the expense of
handling the delinquency for any payment past due in excess of five (5) days,
regardless of any notice and cure period.
In any action brought under or arising out of this Note, each obligor,
including successor(s) or assign(s), hereby consents to the application of
Arizona law, with the exception of provisions on conflicts of laws, to the
jurisdiction of any competent court within the State of Arizona, and to service
of process by any means authorized by Arizona law.
IN WITNESS WHEREOF, these presents are executed as of the date first
written above.
THREE-FIVE SYSTEMS, INC.
By:
-------------------------------------
Name:
-----------------------------------
Its:
------------------------------------
MAKER
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