LOAN AND SECURITY AGREEMENT
among
ELECSYS CORPORATION and (individually, a "Debtor" and
DCI, INC. collectively, the "Debtors")
Mailing Address: 00000 X. 000xx Xxxxxx
Xxxxxx, XX 00000
Fax No.: 000-000-0000
GOLD BANK (the "Secured Party")
Mailing Address 000 Xxxx 00xx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Fax No.: 000-000-0000
December 31, 2002
TABLE OF CONTENTS
Page
1. DEFINITIONS...........................................................1
1.1. CERTAIN SPECIFIC TERMS.......................................1
1.2. SINGULARS AND PLURALS........................................8
1.3. U.C.C. DEFINITIONS...........................................8
2. REVOLVING CREDIT LOANS................................................8
3. COLLATERAL AND INDEBTEDNESS SECURED..................................10
3.1. SECURITY INTEREST...........................................10
3.2. OTHER COLLATERAL............................................10
3.3. INDEBTEDNESS SECURED........................................10
4. REPRESENTATIONS AND WARRANTIES.......................................11
4.1. EXISTENCE...................................................11
4.2. CAPACITY....................................................11
4.3. VALIDITY OF RECEIVABLES.....................................11
4.4. INVENTORY...................................................11
4.5. TITLE TO COLLATERAL.........................................12
4.6. NOTES RECEIVABLE............................................12
4.7. PLACE OF BUSINESS...........................................12
4.8. FINANCIAL CONDITION.........................................12
4.9. TAXES.......................................................12
4.10. LITIGATION..................................................13
4.11. ERISA MATTERS...............................................13
4.12. ENVIRONMENTAL MATTERS.......................................13
4.13. VALIDITY OF TRANSACTION DOCUMENTS...........................14
4.14. NO CONSENT OR FILING........................................14
4.15. NO VIOLATIONS...............................................14
4.16. TRADEMARKS AND PATENTS......................................15
4.17. CONTINGENT LIABILITIES......................................15
4.18. COMPLIANCE WITH LAWS........................................15
4.19. LICENSES, PERMITS, ETC......................................15
4.20. LABOR CONTRACTS.............................................15
4.21. CONSOLIDATED SUBSIDIARIES...................................15
5. BORROWING AGENCY PROVISIONS..........................................15
6. PAYMENT OF PRINCIPAL, INTEREST, FEES, AND COSTS AND EXPENSES.........16
6.1. PROMISE TO PAY PRINCIPAL....................................16
6.2. PROMISE TO PAY INTEREST.....................................17
6.3. PROMISE TO PAY FEES.........................................17
6.4. PROMISE TO PAY COSTS AND EXPENSES...........................18
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6.5. METHOD OF PAYMENT...........................................18
6.6. ACCOUNT STATED..............................................19
7. AFFIRMATIVE COVENANTS................................................19
7.1. FINANCIAL STATEMENTS........................................19
7.2. GOVERNMENT AND OTHER SPECIAL RECEIVABLES....................20
7.3. BANK ACCOUNTS...............................................20
7.4. BOOKS AND RECORDS...........................................20
7.5. COLLATERAL IN POSSESSION OF THIRD PARTIES...................20
7.6. EXAMINATIONS................................................20
7.7. VERIFICATION OF COLLATERAL..................................20
7.8. RESPONSIBLE PARTIES.........................................21
7.9. TAXES.......................................................21
7.10. LITIGATION..................................................21
7.11. INSURANCE...................................................21
7.12. GOOD STANDING; BUSINESS.....................................22
7.13. PENSION REPORTS.............................................22
7.14. NOTICE OF NON-COMPLIANCE....................................23
7.15. COMPLIANCE WITH ENVIRONMENTAL LAWS..........................23
7.16. DEFEND COLLATERAL...........................................23
7.17. USE OF PROCEEDS.............................................23
7.18. COMPLIANCE WITH LAWS........................................23
7.19. MAINTENANCE OF PROPERTY.....................................23
7.20. LICENSES, PERMITS, ETC......................................24
7.21. TRADEMARKS AND PATENTS......................................24
7.22. ERISA.......................................................24
7.23. ACTIVITIES OF CONSOLIDATED SUBSIDIARIES.....................24
8. NEGATIVE COVENANTS...................................................24
8.1. LOCATION OF INVENTORY AND BUSINESS RECORDS..................24
8.2. BORROWED MONEY..............................................24
8.3. SECURITY INTERESTS AND OTHER ENCUMBRANCES...................24
8.4. STORING AND USE OF COLLATERAL...............................25
8.5. MERGERS, CONSOLIDATIONS, OR SALES...........................25
8.6. CAPITAL STOCK...............................................25
8.7. DIVIDENDS OR DISTRIBUTIONS..................................25
8.8. INVESTMENTS AND ADVANCES....................................25
8.9. GUARANTIES..................................................25
8.10. NOTES RECEIVABLE............................................26
8.11. STATE OF ORGANIZATION.......................................26
8.12. NAME CHANGE.................................................26
8.13. DISPOSITION OF COLLATERAL...................................26
8.14. FINANCIAL COVENANTS.........................................26
8.15. AGREEMENTS WITH AFFILIATES..................................26
9. EVENTS OF DEFAULT....................................................26
9.1. EVENTS OF DEFAULT...........................................26
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9.2. EFFECTS OF AN EVENT OF DEFAULT..............................29
10. SECURED PARTY'S RIGHTS AND REMEDIES..................................30
10.1. GENERALLY...................................................30
10.2. NOTIFICATION OF ACCOUNT DEBTORS.............................30
10.3. POSSESSION OF COLLATERAL....................................30
10.4. COLLECTION OF RECEIVABLES...................................30
10.5. ENDORSEMENT OF CHECKS; DEBTORS' MAIL........................30
10.6. LICENSE TO USE PATENTS, TRADEMARKS, AND TRADE NAMES.........30
11. MISCELLANEOUS........................................................31
11.1. PERFECTING THE SECURITY INTEREST; PROTECTING THE COLLATERAL.31
11.2. PERFORMANCE OF DEBTOR'S DUTIES..............................31
11.3. NOTICE OF SALE..............................................31
11.4. COMPLIANCE WITH OTHER LAWS..................................31
11.5. WARRANTIES..................................................31
11.6. SALES ON CREDIT.............................................31
11.7. WAIVER BY SECURED PARTY.....................................31
11.8. WAIVER BY EITHER DEBTOR.....................................32
11.9. SETOFF......................................................32
11.10. ASSIGNMENT..................................................32
11.11. SUCCESSORS AND ASSIGNS......................................32
11.12. MODIFICATION................................................32
11.13. COUNTERPARTS................................................32
11.14. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES....................32
11.15. INDEMNIFICATION.............................................33
11.16. TERMINATION.................................................33
11.17. FURTHER ASSURANCES..........................................34
11.18. HEADINGS....................................................34
11.19. CUMULATIVE SECURITY INTEREST, ETC...........................34
11.20. SECURED PARTY'S DUTIES......................................34
11.21. NOTICES GENERALLY...........................................34
11.22. SEVERABILITY................................................34
11.23. INCONSISTENT PROVISIONS.....................................35
11.24. ENTIRE AGREEMENT............................................35
11.25. APPLICABLE LAW..............................................35
11.26. CONSENT TO JURISDICTION.....................................35
11.27. JURY TRIAL WAIVER...........................................35
11.28. ORAL AGREEMENTS.............................................36
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EXHIBITS
A. Financial Statement Certification
B. Compliance Certificate
ATTACHMENTS
#1 Revolving Credit Note ($2,000,000.00)
iv
RECITALS
A. Debtors have requested that Secured Party provide certain credit
facilities to Debtors to provide ongoing working capital to Debtors and for such
other legal and proper corporate purposes as are consistent with all applicable
laws.
B. Secured Party is willing to provide the credit facilities requested by
Debtors, but only on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, Debtors and Secured Party agree as follows:
1. DEFINITIONS.
1.1. CERTAIN SPECIFIC TERMS. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) ACCOUNT DEBTORS means the Person obligated to pay a Receivable.
(b) ADVANCE means a loan made to Debtors by Secured Party pursuant to
this Agreement.
(c) AFFILIATE means, with respect to any Person (i) any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person, (ii) any other Person
that owns, directly or indirectly, ten percent (10%) or more of such
Person's capital stock, or (iii) any officer or director of any such
Person.
(d) AGREEMENT means this Loan and Security Agreement, as amended,
supplemental or modified from time to time.
(e) BONDS means the $2,570,000 in aggregate principal amount of City
of Lenexa, Kansas Variable Rate Demand Industrial Revenue Bonds (DCI, Inc.
Project), Series 1998, issued under the Trust Indenture dated September 1,
1998 between the City of Lenexa, Kansas and UMB Bank, n.a., as Trustee.
(f) BORROWING CAPACITY means, at the time of computation, the net
amount determined by taking the lesser of:
(A) $2,000,000.00
or
(B) an amount equal to the sum of
(i) 75% of the Receivables Borrowing Base; and
(ii) the lesser of $1,000,000 or the amount of the Inventory
Borrowing Base;
and subtracting from the lesser of (A) or (B) above the undrawn
amount of all outstanding Letters of Credit.
(g) BUSINESS DAY means a day other than a Saturday, Sunday, or other
day on which banks are authorized or required to close under the laws of
the State.
(h) CLOSING DATE means the date on which all Transaction Documents
have been fully executed and delivered, all conditions precedent to funding
the initial funding of Revolving Credit Loans have been satisfied or waived
by Secured Party and the initial fundings of Revolving Credit Loans have
occurred.
(i) COLLATERAL means collectively all of the property of Debtors
subject to the Security Interest described in Section 3.1 and all other
property of Debtors, real or personal, described in Section 3.2.
(j) CONSOLIDATED SUBSIDIARY means any corporation or other entity
(other than a Debtor) of which at least 50% of the voting stock or other
equity interests are owned by a Debtor directly, or indirectly through one
or more Consolidated Subsidiaries. If Debtors have no Consolidated
Subsidiaries, the provisions of this Agreement relating to Consolidated
Subsidiaries shall be inapplicable without affecting the applicability of
such provisions to Debtors alone.
(k) CONTROL means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract, or
otherwise, and CONTROLLING and CONTROLLED shall have meanings correlative
thereto.
(l) DCI means DCI, Inc., a Kansas corporation.
(m) DEBTOR AND DEBTORS means the entity or entities listed as such on
the cover page of this Agreement.
(n) DISPOSAL means the intentional or unintentional abandonment,
discharge, deposit, injection, dumping, spilling, leaking, storing,
burning, thermal destruction, or placing of any Hazardous Substance so that
it or any of its constituents may enter the Environment.
(o) ELECSYS means Elecsys Corporation, a Kansas corporation.
(p) ELIGIBLE INVENTORY means all Inventory owned by either Debtor of
the types described in the definition of Inventory Borrowing Base in which
Secured Party has a first priority perfected security interest reduced by
2
(i) any such Inventory as to which a representation or warranty contained
in Section 4.4 or 4.5 is not, or does not continue to be, true and
accurate; (ii) any Inventory located on premises for which Secured Party
has not received landlord's, mortgagee's, warehouseman's, processor's or
other waivers (all in form reasonably acceptable to Secured Party) as may
be reasonably required by Secured Party to protect Secured Party's lien on
the Inventory and provide Secured Party access to such Inventory, except
that with respect to Inventory acquired from Crystaloid Technologies, Inc.,
no such waivers shall be required for a period of thirty (30) days after
the Closing Date; and (iii) any such Inventory which in Secured Party's
reasonable judgment is obsolete, damaged, slow-moving or not otherwise
saleable in the ordinary course of the Debtors' business.
(q) ENVIRONMENT means any water including, but not limited to,
surface water and ground water or water vapor; any land including land
surface or subsurface; stream sediments; air; fish, wildlife, or plants;
and all other natural resources or environmental media.
(r) ENVIRONMENTAL LAWS means all federal, state, and local
environmental, land use, zoning, health, chemical use, safety and
sanitation laws, statutes, ordinances, regulations, codes, and rules
relating to the protection of the Environment and/or governing the use,
storage, treatment, generation, transportation, processing, handling,
production, or disposal of Hazardous Substances and the policies,
guidelines, procedures, interpretations, decisions, orders, and directives
of federal, state, and local governmental agencies and authorities with
respect thereto.
(s) ENVIRONMENTAL REPORT means a written environmental report
prepared for Secured Party by an environmental consulting or environmental
engineering firm acceptable to Secured Party relating to either Debtor, its
properties and operations.
(t) ERISA means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
(u) EVENT OF DEFAULT means an Event of Default or Events of Default
as defined in Section 9.1.
(v) FEDERAL BANKRUPTCY CODE means Title 11 of the United States Code,
entitled "Bankruptcy," as amended, or any successor federal bankruptcy law.
(w) GAAP means generally accepted accounting principles as in effect
in the United States from time to time and consistently applied.
(x) HAZARDOUS SUBSTANCES means, without limitation, any explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products, methane,
hazardous materials, hazardous wastes, hazardous or toxic substances,
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and any other material defined as a hazardous substance in Section 101(14)
of the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, 42 U.S.C. Section 9601(14).
(y) INDEBTEDNESS means the indebtedness secured by the Security
Interest and other liens described in Section 3.3.
(z) INELIGIBLE RECEIVABLES means the following described Receivables
and any other Receivables which are not reasonably satisfactory to Secured
Party, for credit or any other reason:
(i) Any Receivable which has remained unpaid for more than
ninety (90) days past invoice date.
(ii) Any Receivable with respect to which a representation or
warranty contained in Sections 4.3, 4.5, or 4.6 is not, or does not
continue to be, true and accurate, including, without limitation, any
Receivable subject to a setoff, provided, however, that such
Receivable shall be an Ineligible Receivable only to the extent of the
claimed offset.
(iii)Any Receivable as to which any one or more of the following
events occurs: a Responsible Party shall die or be judicially declared
incompetent; a request or petition for liquidation, reorganization,
arrangement, adjustment of debts, adjudication as a bankrupt, or other
relief under the bankruptcy, insolvency, or similar laws of the United
States, any state or territory thereof, or any foreign jurisdiction,
now or hereafter in effect, shall be filed and remain outstanding by
or against a Responsible Party; a Responsible Party shall make any
general assignment for the benefit of creditors; a receiver or
trustee, including, without limitation, a "custodian," as defined in
the Federal Bankruptcy Code, shall be appointed for a Responsible
Party or for any of the assets of a Responsible Party; any other type
of insolvency proceeding with respect to a Responsible Party (under
the bankruptcy laws of the United States or otherwise) or any formal
or informal proceeding for the dissolution or liquidation of,
settlement of claims against, or winding up of affairs of, a
Responsible Party shall be instituted; all or any material part of the
assets of a Responsible Party shall be sold, assigned, or transferred;
a Responsible Party shall fail to pay its debts as they become due; or
a Responsible Party shall cease doing business as a going concern.
(iv) All Receivables owed by an Account Debtor owing Receivables
classified as ineligible under any criterion set forth in any of
Sections 1.1(z)(i) through 1.1(z)(iii), if the outstanding dollar
amount of such Ineligible Receivables constitutes more than fifty
percent (50%) of the aggregate outstanding dollar amount of all
Receivables owed by such Account Debtor.
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(v) All Receivables owed by an Account Debtor which does not
maintain its principal office in the United States or which is not
organized under the laws of the United States or any state thereof.
(vi) All Receivables owed by an Affiliate.
(vii)Any Receivable that is booked by any Debtors upon
consignment of Inventory to a third party rather than upon completion
of the sale of such Inventory to or by the third party; any Receivable
constituting a partial billing under terms providing for payment only
after full shipment or performance; any Receivable arising from a xxxx
and hold sale or in connection with any prebilling where the Inventory
or services have not been delivered, performed, or accepted by Account
Debtor if Secured Party has not entered into a satisfactory written
agreement with such Account Debtor relating to such Receivables; and
such portion of any Receivable as to which Account Debtor contends the
balance reported by Debtor is incorrect or not owing.
(viii) Any Receivable which is unenforceable against the Account
Debtor for any reason.
(ix) Any Receivable which is an Instrument, Document, or Chattel
Paper or which is evidenced by a note, draft, trade acceptance, or
other instrument for the payment of money where such Instrument,
Document, Chattel Paper, note, draft, trade acceptance, or other
instrument has not been endorsed and delivered by Debtor to Secured
Party.
(aa) INTERNAL REVENUE CODE means the Internal Revenue Code of 1986, as
amended from time to time.
(bb) INVENTORY means inventory, as defined in the Uniform Commercial
Code as in effect in the State as of the date of this Agreement, and in any
event shall include returned or repossessed Goods.
(cc) INVENTORY BORROWING BASE means, at the time of computation, an
amount up to the following percentages of the dollar value of Eligible
Inventory, such dollar value to be calculated at the lower of cost or
market value:
[X] finished goods, to the extent of 0%
[X] raw materials, to the extent of 35%; and
[X] work-in-process, to the extent of 0%.
(dd) KCEP means KCEP Ventures II, L.P.
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(ee) LETTERS OF CREDIT means any documentary or standby letter of
credit issued by Secured Party for the account of either Debtor, excluding
any standby or direct pay letter of credit issued by Secured Party as
credit enhancement for the Bonds.
(ff) PENSION EVENT means, with respect to any Pension Plan, the
occurrence of: (i) any prohibited transaction described in Section 406 of
ERISA or in Section 4975 of the Internal Revenue Code; (ii) any Reportable
Event; (iii) any complete or partial withdrawal, or proposed complete or
partial withdrawal, of either Debtor or any Consolidated Subsidiary from
such Pension Plan; (iv) any complete or partial termination, or proposed
complete or partial termination, of such Pension Plan; or (v) any
accumulated funding deficiency (whether or not waived), as defined in
Section 302 of ERISA or in Section 412 of the Internal Revenue Code.
(gg) PENSION PLAN means any pension plan, as defined in Section 3(2)
of ERISA, which is a multi-employer plan or a single employer plan, as
defined in Section 4001 of ERISA, and subject to Title IV of ERISA and
which is: (i) a plan maintained by either Debtor or any Consolidated
Subsidiary for employees or former employees of either Debtor or of any
Consolidated Subsidiary; (ii) a plan to which either Debtor or any
Consolidated Subsidiary contributes or is required to contribute; (iii) a
plan to which either Debtor or any Consolidated Subsidiary was required to
make contributions at any time during the five (5) calendar years preceding
the date of this Agreement; or (iv) any other plan with respect to which
either Debtor or any Consolidated Subsidiary has incurred or may incur
liability, including, without limitation, contingent liability, under Title
IV of ERISA either to such plan or to the Pension Benefit Guaranty
Corporation. For purposes of this definition, and for purposes of Sections
1.1(hh), 4.12, and 9.1(h), Debtors shall include any trade or business
(whether or not incorporated) which, together with Debtor or any
Consolidated Subsidiary, is deemed to be a "single employer" within the
meaning of Section 4001(b)(1) of ERISA.
(gg-1) PERMITTED LIENS means: (i) liens for taxes, assessments and
similar charges not yet due and payable, (ii) liens of landlords, bailees,
materialmen, mechanics, warehousemen or carriers, or other like liens
arising in the ordinary course of business and securing obligations that
are not yet delinquent, (iii) pledges or deposits in the ordinary course of
business for worker's compensation, unemployment insurance and other social
security legislation, and (iv) easements, rights-of-way, restrictions and
other similar encumbrances affecting real property which, in the aggregate,
are not substantial in amount, and which do not in any case materially
detract from the value of the property subject thereto or materially
interfere with the ordinary conduct of the Debtor's business thereon.
(hh) PERSON means and includes an individual, a partnership (general
or limited), a joint venture, a corporation, a limited liability company, a
limited
6
liability partnership, a trust, an estate, an unincorporated organization
and a government or any department or agency thereof.
(ii) PRIME RATE means the Prime Rate as published from time to time in
the "Money Rates" Section of the Midwest Edition of the Wall Street
Journal, or if unavailable, the prime rate published in any other
nationally recognized financial news service used by Secured Party from
time to time. The Prime Rate may or may not be the most favorable rate
charged by Secured Party to its customers.
(jj) RECEIVABLE means the right to payment for Goods sold, leased or
licensed or services rendered by either Debtor, whether or not earned by
performance, and may, without limitation, in whole or in part, be in the
form of an Account, Chattel Paper, Document, or Instrument.
(kk) RECEIVABLES BORROWING BASE means, at the time of its computation,
the aggregate amount of the outstanding Receivables in which Secured Party
has a first priority perfected security interest less the amount of
Ineligible Receivables and any reserves reasonably established by Secured
Party in accordance with Section 2(d) of this Agreement.
(ll) RELEASE means "release," as defined in Section 101(22) of the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. Section 9601(22), and the regulations promulgated
thereunder.
(mm) REPORTABLE EVENT means any event described in Section 4043(b) of
ERISA or in regulations issued thereunder with regard to a Pension Plan.
(nn) RESPONSIBLE PARTY means an Account Debtor, a general partner of
an Account Debtor, or any other party in any way directly or indirectly
liable for the payment of a Receivable.
(oo) REVOLVING CREDIT LOAN means a revolving credit loan made pursuant
to Section 2 hereof.
(pp) REVOLVING CREDIT NOTE means the Promissory Note of even date
herewith in the original principal amount of $2,000,000.00 from Debtors, as
maker, payable to the order of Secured Party, and all renewals, extensions,
modifications, amendments, restatements and substitutions thereof and
therefor.
(qq) REVOLVING CREDIT TERMINATION DATE means December 31, 2003.
(rr) SCHEDULE means the schedule executed in connection with, and
which is a part of, this Agreement.
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(ss) SECURED PARTY means Gold Bank and any successors or assigns of
Secured Party.
(tt) SECURITY INTEREST means the security interest granted to Secured
Party by Debtors as described in Section 3.1.
(uu) STATE means the State of Missouri.
(vv) SUBORDINATED DEBT means the following promissory notes which will
be subordinated to the Indebtedness in writing in form satisfactory to
Secured Party on or before Closing Date: (i) Promissory Notes dated
February 1, 2002 in the original principal amount of $405,625.00 from DCI,
as maker, payable to Xxxxx X. Xxxxxxx, Xxxxx X. Xxxxxxx and Xxxxxxx X. Xxxx
having an unpaid balance of $405,625.00 on the Closing Date; (ii)
Promissory Note dated February 1, 2002 in the original amount of $31,650.00
from DCI, as maker, payable to Xxxxx X. Xxxxxxx, Xxxxx X. Xxxxxxx and
Xxxxxxx X. Xxxx having an unpaid balance of $31,650.00 on the Closing Date;
(iii) Promissory Note dated February 7, 2000 in the original amount of
$500,000.00 from Elecsys, as maker, payable to KCEP Ventures II, L.P.
having an unpaid balance of $500,000.00 on the Closing Date.
(ww) THIRD PARTY means any Person who has executed and delivered, or
who in the future may execute and deliver, to Secured Party any agreement,
instrument, or document pursuant to which such Person has guaranteed to
Secured Party the payment of the Indebtedness or has granted Secured Party
a security interest in or lien on some or all of such Person's real or
personal property to secure the payment of the Indebtedness.
(xx) THRESHOLD AMOUNT means $50,000.00.
(yy) TRANSACTION DOCUMENTS means this Agreement and all documents,
including, without limitation, collateral documents, letter of credit
agreements, reimbursement agreements, notes, security agreements, pledges,
guaranties, mortgages, deeds of trust, title insurance, assignments, and
subordination agreements now or hereafter required to be executed by either
Debtor or any Third Party pursuant hereto or in connection herewith.
1.2. SINGULARS AND PLURALS. Unless the context otherwise requires, words in
the singular number include the plural, and in the plural include the singular.
1.3. U.C.C. DEFINITIONS. Unless otherwise defined in Section 1.1 or
elsewhere in this Agreement, capitalized words shall have the meanings set forth
in the Uniform Commercial Code as in effect in the State as of the date of this
Agreement.
2. REVOLVING CREDIT LOANS.
(a) Request for an Advance. Subject to the terms and conditions of
this Agreement, from time to time through but excluding the Revolving
Credit
8
Termination Date, Debtors may make a written, oral or e-mail request for an
Advance under the Revolving Credit Note, so long as the sum of the
aggregate principal balance of outstanding Advances under the Revolving
Credit Note and the requested Advance does not exceed the Borrowing
Capacity as most recently computed; and Secured Party shall make such
requested Advance under the Revolving Credit Note, provided that (i) the
Borrowing Capacity would not be so exceeded; (ii) there has not occurred an
Event of Default or an event which with notice or lapse of time or both,
would constitute an Event of Default; and (iii) all representations and
warranties contained in this Agreement and in the other Transaction
Documents are true and correct on the date such requested Advance is made
as though made on and as of such date. Notwithstanding any other provision
of this Agreement, Secured Party may from time to time reduce the
percentages applicable to the Receivables Borrowing Base and the Inventory
Borrowing Base as they relate to the amount of the Borrowing Capacity if
Secured Party determines in its reasonable judgment that there has been a
material adverse change in circumstances related to all or any Receivables
or Inventory from those circumstances in existence on or prior to the date
of this Agreement or in the financial or other condition of either Debtor.
The making of an Advance to either Debtor under the Revolving Credit Note
as herein provided shall conclusively establish Debtor's obligation to
repay the Advance. The Revolving Credit Note shall be in the form attached
hereto as Attachment #1 which is incorporated herein by reference.
(b) Proceeds of an Advance. Advances under the Revolving Credit Note
shall be made to DCI's operating account number 1430042796 at Secured
Party.
(c) Letters of Credit. At the request of Debtors, and upon execution
of Letter of Credit documentation satisfactory to Secured Party, Secured
Party, within the limits of the Borrowing Capacity as most recently
computed, shall issue Letters of Credit from time to time for the account
of Debtors in an amount not exceeding in the aggregate at any one time
outstanding the sum of $250,000.00. All Letters of Credit shall be on terms
mutually acceptable to Secured Party and Debtors, and no Letter of Credit
shall have an expiration date later than the Revolving Credit Termination
Date. An Advance on the Revolving Credit Note in an amount equal to any
amount paid by Secured Party on any draft submitted under any Letter of
Credit shall be made to Secured Party, without request therefor,
immediately upon payment by Secured Party of any such draft. In connection
with the issuance of Letters of Credit, Debtors shall pay to Secured Party
the fees set forth in Section 6.3 of this Agreement. In addition, Debtors
shall pay to Secured Party all amendment, extension and drawing fees
pursuant to Secured Party's standard charges for such services.
(d) Establishment of Reserves. Secured Party may, at any time and
from time to time, in its reasonable judgment, establish reserves against
the Receivables or Inventory of Debtors. The amount of such reserves shall
be
9
deducted from the Receivables Borrowing Base or Inventory Borrowing Base,
as applicable, when calculating the amount of the Borrowing Capacity.
3. COLLATERAL AND INDEBTEDNESS SECURED.
3.1. SECURITY INTEREST. Debtors hereby grant to Secured Party a
security interest in, and a lien on, the following property of Debtors
wherever located and whether now owned or hereafter acquired or arising:
(a) All Accounts, Inventory, General Intangibles (including,
without limitation, patents, trademarks and trade names and
applications for patents, trademarks and trade names), Chattel Paper,
Documents, Instruments, Deposit Accounts and Letter of Credit Rights,
whether or not specifically assigned to Secured Party, including,
without limitation, and all Receivables.
(b) All Supporting Obligations, including, without limitation,
all guaranties, collateral, liens on, or security interests in, real
or personal property, leases, letters of credit, and other rights,
agreements, and property securing or relating to payment of
Receivables.
(c) All books, records, ledger cards, data processing records,
Software, and other property at any time evidencing or relating to
Collateral.
(d) All monies, securities, and other property now or hereafter
held, or received by, or in transit to, Secured Party, from or for
either Debtor, and all of Debtor's Deposit Accounts, credits and
balances with Secured Party existing at any time.
(e) All Proceeds and products of all of the foregoing in any
form, including, without limitation, amounts payable under any
policies of insurance insuring the foregoing against loss or damage,
and all increases and profits received from all of the foregoing.
3.2. OTHER COLLATERAL. Nothing contained in this Agreement shall limit
the rights of Secured Party in and to any other collateral securing the
Indebtedness which may have been, or may hereafter be, granted to Secured
Party by either Debtor or any Third Party pursuant to any other Transaction
Document.
3.3. INDEBTEDNESS SECURED. The Security Interest secures payment of
any and all indebtedness, and performance of all obligations and
agreements, of Debtors to Secured Party, including, without limitation,
reimbursement obligations relating to Letters of Credit and overdrafts on
bank accounts of either Debtor at Secured Party, whether now existing or
hereafter incurred or arising, of every kind and character, primary or
secondary, direct or indirect, absolute or contingent, sole, joint or
several, and whether such indebtedness is from time to time reduced and
thereafter increased, or entirely extinguished and thereafter reincurred,
including, without limitation: (a) all Advances under the Revolving Credit
Note; (b) all interest which accrues on any such indebtedness, until
payment of such indebtedness in full, including, without limitation, all
10
interest provided for under this Agreement and the Schedule; (c) all other
monies payable by Debtor, and all obligations and agreements of either
Debtor to Secured Party, pursuant to the Transaction Documents; (d) all
debts owed, or to be owed, by either Debtor to others which Secured Party
has obtained, or may obtain, by assignment or otherwise; (e) all monies
payable by any Third Party, and all obligations and agreements of any Third
Party to Secured Party, pursuant to any of the Transaction Documents; and
(f) all monies due, and to become due, pursuant to Sections 6.3 and 6.4.
The Collateral shall secure all portions of the Indebtedness with equal
priority and without preference.
4. REPRESENTATIONS AND WARRANTIES. To induce Secured Party to enter into this
Agreement, and make Advances to Debtors from time to time as herein
provided, Debtors represent and warrant and, so long as any Indebtedness
remains unpaid or this Agreement remains in effect, shall be deemed
continuously to represent and warrant as follows:
4.1. EXISTENCE. Each Debtor is a corporation duly organized and
existing and in good standing under the laws of the state specified below
and is duly licensed or qualified to do business and in good standing in
every state in which the nature of its business or ownership of its
property requires such licensing or qualification. Debtor's federal
employer identification number and organizational number are as specified
below:
Debtor State of FEIN Organizational
------ Incorporation ---- Number
------------- ------
Elecsys Corporation Kansas 00-0000000 1786011
DCI, Inc. Kansas 00-0000000 0529685
4.2. CAPACITY. The execution, delivery, and performance of the
Transaction Documents to which Debtors are a party are within Debtor's
corporate powers, have been duly authorized by all necessary and
appropriate corporate and shareholder action, and are not in contravention
of any law or the terms of Debtor's Articles of Incorporation or Bylaws or
any amendment thereto, or of any indenture, agreement, undertaking, or
other document to which either Debtor is a party or by which either Debtor
or any of Debtor's property is bound or affected.
4.3. VALIDITY OF RECEIVABLES. (a) Each Receivable (other than
Ineligible Receivables) owed to Debtor is genuine and enforceable in
accordance with its terms and represents an undisputed and bona fide
indebtedness owing to such Debtor by the Account Debtor obligated thereon
arising in the ordinary course of business; and (b) to the best of Debtor's
knowledge, there are no defenses, setoffs, or counterclaims against any
Receivable (other than Ineligible Receivables) owed to either Debtor.
4.4. INVENTORY. (a) All representations made by Debtors to Secured
Party, and all documents and schedules given by Debtors to Secured Party,
relating to the description, quantity, quality, condition, location and
valuation of the Inventory are true
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and correct in all material respects; (b) no Debtor has received any
Inventory on consignment or approval unless Debtor (i) has delivered
written notice to Secured Party describing any Inventory which such Debtor
has received on consignment or approval, (ii) has marked such Inventory on
consignment or approval or has segregated it from all other Inventory, and
(iii) has appropriately marked its records to reflect the existence of such
Inventory on consignment or approval; (c) Inventory is located only at the
address or addresses of Debtors specified in Item 1 of the Schedule, or
such other place or places as may be approved by Secured Party in writing;
and (d) all Inventory is insured as required by Section 7.11 pursuant to
policies in full compliance with the requirements of such Section.
4.5. TITLE TO COLLATERAL. (a) Debtors are the owner of the Collateral
free of all security interests, liens, and other encumbrances except the
Security Interest and Permitted Liens; (b) Debtors have the unconditional
authority to grant the Security Interest to Secured Party; and (c) assuming
that all necessary Uniform Commercial Code filings have been made and, if
applicable, assuming compliance with the Federal Assignment of Claims Act
of 1940, as amended, Secured Party has an enforceable first lien (subject
to Permitted Liens) on all Collateral that can be perfected by filing under
the UCC.
4.6. NOTES RECEIVABLE. No Receivable is an Instrument, Document, or
Chattel Paper or is evidenced by any note, draft, trade acceptance, or
other instrument for the payment of money, except such Instrument,
Document, Chattel Paper, note, draft, trade acceptance, or other instrument
as has been endorsed and delivered by applicable Debtor to Secured Party
and has not been presented for payment and returned uncollected for any
reason.
4.7. PLACE OF BUSINESS. (a) Debtors are engaged in business operations
which are in whole, or in part, carried on at the address or addresses
specified for Debtors in Item 1 of the Schedule and at no other address or
addresses; (b) if Debtors have more than one place of business, chief
executive office is at the address specified at the beginning of this
Agreement; and (c) each Debtor's records concerning the Collateral are kept
at the address or addresses specified in Item 1 of the Schedule.
4.8. FINANCIAL CONDITION. Debtors have furnished to Secured Party
Debtor's most current financial statements, which statements represent
correctly and fairly the results of the operations and transactions of
Debtors and the Consolidated Subsidiaries of Debtors as of the dates, and
for the period referred to in such financial statements, and have been
prepared in accordance with generally accepted accounting principles
consistently applied during each interval involved and from interval to
interval. Since the date of such financial statements, there have not been
any material adverse changes in the financial condition of either Debtor
reflected in such financial statements.
4.9. TAXES. (a) All federal and other tax returns required to be filed
by Debtors and each Consolidated Subsidiary have been filed, and all taxes
required to be paid by such returns have been paid, or if not yet due,
adequately reserved on the financial statements of Debtors; and (b) neither
any Debtor nor any Consolidated
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Subsidiary has received any notice from the Internal Revenue Service or any
other taxing authority proposing additional taxes.
4.10.LITIGATION. There are no actions, suits, proceedings, or
investigations pending or, to the knowledge of Debtor, threatened against
either Debtor or any Consolidated Subsidiary or any basis therefor which,
if adversely determined, would, in any case or in the aggregate, materially
adversely affect the property, assets, financial condition, or business of
either Debtor or any Consolidated Subsidiary or materially impair the right
or ability of either Debtor or any Consolidated Subsidiary to carry on its
operations substantially as conducted on the date of this Agreement.
4.11.ERISA MATTERS. (a) No Pension Plan has been terminated, or
partially terminated, or is insolvent, or in reorganization, nor have any
proceedings been instituted to terminate or reorganize any Pension Plan;
(b) neither any Debtor nor any Consolidated Subsidiary has withdrawn from
any Pension Plan in a complete or partial withdrawal, nor has a condition
occurred which, if continued, would result in a complete or partial
withdrawal; (c) neither any Debtor nor any Consolidated Subsidiary has
incurred any withdrawal liability, including, without limitation,
contingent withdrawal liability, to any Pension Plan, pursuant to Title IV
of ERISA; (d) neither any Debtor nor any Consolidated Subsidiary has
incurred any liability to the Pension Benefit Guaranty Corporation other
than for required insurance premiums which have been paid when due; (e) no
Reportable Event has occurred; (f) no Pension Plan or other "employee
pension benefit plan," as defined in Section 3(2) of ERISA, to which either
Debtor or any Consolidated Subsidiary is a party has an "accumulated
funding deficiency" (whether or not waived), as defined in Section 302 of
ERISA or in Section 412 of the Internal Revenue Code; (g) the present value
of all benefits vested under any Pension Plan does not exceed the value of
the assets of such Pension Plan allocable to such vested benefits; (h) each
Pension Plan and each other "employee benefit plan," as defined in Section
3(3) of ERISA, to which either Debtor or any Consolidated Subsidiary is a
party is in material compliance with ERISA, and no such plan or any
administrator, trustee, or fiduciary thereof has engaged in a prohibited
transaction described in Section 406 of ERISA or in Section 4975 of the
Internal Revenue Code; (i) each Pension Plan and each other "employee
benefit plan," as defined in Section 3(2) of ERISA, which is intended to
qualify under Section 401(a) of the Internal Revenue Code and to which
either Debtor or any Consolidated Subsidiary is a party has received a
favorable determination by the Internal Revenue Service with respect to
qualification under Section 401(a) of the Internal Revenue Code; and (j)
neither any Debtor nor any Consolidated Subsidiary has incurred any
liability to a trustee appointed pursuant to Section 4042(b) or (c) of
ERISA.
4.12. ENVIRONMENTAL MATTERS.
(a) No above ground or underground storage tanks containing
Hazardous Substances are, or to the best of each Debtor's knowledge
have been, located on any property owned, leased, or operated by
either Debtor or any Consolidated Subsidiary.
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(b) No property owned, leased, or operated by either Debtor or
any Consolidated Subsidiary is now, or to the best of Debtor's
knowledge has been, used for the Disposal of any Hazardous Substance
or for the treatment, storage, or Disposal of Hazardous Substances,
except storage of Hazardous Substances that is in compliance with all
applicable Environmental Laws.
(c) To the best of each Debtor's knowledge and with the
exception of any conditions described in the Environmental Reports, no
Release of a Hazardous Substance has occurred, or is threatened, on,
at, from, or, near any property owned, leased, or operated by either
Debtor or any Consolidated Subsidiary.
(d) Neither any Debtor nor any Consolidated Subsidiary is
subject to any existing, pending, or threatened suit, claim, notice of
violation, or request for information under any Environmental Law nor
has each Debtor or any Consolidated Subsidiary provided any notice or
information under any Environmental Law.
(e) Debtors and each Consolidated Subsidiary are in compliance
with, and have obtained all Environmental Permits required by, all
Environmental Laws, except where the failure to be in compliance would
not have a material adverse effect on the business, operations or
financial condition of either Debtor.
4.13.VALIDITY OF TRANSACTION DOCUMENTS. The Transaction Documents
constitute the legal, valid, and binding obligations of Debtors and any
Third Parties thereto, enforceable in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy and
insolvency laws and laws affecting creditors' rights generally.
0.00.XX CONSENT OR FILING. No consent, license, approval, or
authorization of, or registration, declaration, or filing with, any court,
governmental body or authority, or other Person is required: (i) in
connection with the valid execution, delivery, or performance of the
Transaction Documents by Debtors (other than filings and recordings to
perfect security interests in or liens on the Collateral in connection with
the Transactions Documents), or (ii) for the conduct of either Debtor's
business as now conducted, except ordinary business licenses or permits
which such Debtor has obtained.
0.00.XX VIOLATIONS. Neither any Debtor nor any Consolidated
Subsidiary is in violation of any term of its organizational documents or
of any mortgage, borrowing agreement, or other instrument or agreement
pertaining to indebtedness for borrowed money. Neither any Debtor nor any
Consolidated Subsidiary is in violation of any term of any other indenture,
instrument, or agreement to which it is a party or by which it or its
property may be bound, resulting, or which might reasonably be expected to
result, in a material and adverse effect upon its business or assets.
Neither any Debtor nor any Consolidated Subsidiary is in violation of any
order, writ, judgment, injunction, or decree of any court of competent
jurisdiction or of any statute, rule, or regulation of any governmental
authority. The execution and delivery of the Transaction Documents and
14
the performance of all of the same is, and will be, in compliance with the
foregoing and will not result in any violation thereof, or result in the
creation of any mortgage, lien, security interest, charge, or encumbrance
upon, any properties or assets of either Debtor except in favor of Secured
Party. There exists no fact or circumstance (whether or not disclosed in
the Transaction Documents) which materially adversely affects, or in the
future (so far as Debtors can now reasonably foresee) may materially
adversely affect, the financial condition, business or operations of either
Debtor or any Consolidated Subsidiary.
4.16.TRADEMARKS AND PATENTS. Debtor and each Consolidated Subsidiary
possess all trademarks, trademark rights, patents, patent rights, trade
names, trade name rights and copyrights that are required to conduct their
respective businesses as now conducted without conflict with the rights or
claimed rights of others.
4.17.CONTINGENT LIABILITIES. There are no suretyship agreements,
guaranties, or other contingent liabilities of either Debtor or any
Consolidated Subsidiary which are not disclosed by the financial statements
described in Section 4.8.
4.18.COMPLIANCE WITH LAWS. Debtors are in compliance with all
applicable laws, rules, regulations, and other legal requirements with
respect to its business and the use, maintenance, and operation of the real
and personal property owned or leased by Debtors in the conduct of its
business, except to the extent the failure to so comply would not have a
material adverse affect on the business, operations or financial condition
of either Debtor.
4.19.LICENSES, PERMITS, ETC. Each franchise, grant, approval,
authorization, license, permit, easement, consent, certificate, and order
of and registration, declaration, and filing with, any court, governmental
body or authority, or other Person required for or in connection with the
conduct of each Debtor's and each Consolidated Subsidiary's business as now
conducted is in full force and effect.
4.20.LABOR CONTRACTS. Neither any Debtor nor any Consolidated
Subsidiary is a party to any collective bargaining agreement or to any
existing or threatened labor dispute or controversies.
4.21.CONSOLIDATED SUBSIDIARIES. No Debtor has any Consolidated
Subsidiaries.
5. BORROWING AGENCY PROVISIONS.
(a) Each Debtor hereby irrevocably designates DCI to be its
attorney and agent and in such capacity to borrow on behalf of all
Debtors hereunder and execute and deliver all instruments, documents,
writings and further assurances now or hereafter required under this
Agreement, and hereby authorizes Secured Party to pay over or credit
all loan proceeds hereunder in accordance with the request of DCI. The
handling of the credit facilities described herein as a co-borrowing
facility with the borrowing agent in the manner set forth in this
Agreement is solely as an accommodation to Debtors and at their
request.
15
Secured Party shall not incur any liability to either Debtor as a
result thereof. To induce Secured Party to do so and in consideration
thereof, each Debtor hereby indemnifies Secured Party and holds
Secured Party harmless from and against any and all liabilities,
expenses, losses, damages and claim of damage or injury asserted
against Secured Party by any Person arising from or incurred by reason
of the handling of the financial arrangements of Debtors as provided
herein, reliance by Secured Party on any request or instruction from
DCI or any other action taken by Secured Party with respect to this
Section 5, except for those arising from the gross negligence or
willful misconduct of Secured Party.
(b) All Indebtedness shall be the joint and several obligations
of Debtors, and each Debtor shall make payment upon the maturity of
the Indebtedness by acceleration or otherwise, provided that the
aggregate amount of all liabilities of all Debtors hereunder shall not
exceed the aggregate amount of the Indebtedness. Each Debtor is a
maker with respect to the Indebtedness and not an accommodation party.
(c) Each Debtor expressly subordinates to the payment of the
Indebtedness and waives any and all rights of subrogation,
reimbursement, indemnity, exoneration, contribution or any other claim
which such Debtor may now or hereafter have against the other Debtor
or any other Person directly or contingently liable for the
Indebtedness, or against or with respect to the other Debtor's
property (including, without limitation, any property which is
Collateral for the Indebtedness) arising from the existence or
performance of this Agreement, until termination of this Agreement and
final and irrevocable payment in full of the Indebtedness.
(d) Notwithstanding any provision herein or in any other
Transaction Document to the contrary, each Debtor's joint and several
liability for the Indebtedness of all Debtors (including, without
limitation, under this Agreement and under the Revolving Credit Note)
shall be limited to an amount not to exceed as of any date of
determination the greater of (i) the net amount of all Advances
advanced to any other Debtor under this Agreement and then re-loaned
or otherwise transferred to, or for the benefit of, such Debtor, and
(ii) the maximum amount that could be claimed by Secured Party from
such Debtor without rendering such claim void or avoidable under
Section 548 of the Federal Bankruptcy Code or under applicable
provisions of comparable state law, in each case after taking into
account, among other things, any and all rights of such Debtor to
subrogation, reimbursement, indemnification or contribution from the
other Debtor (or any other Person) pursuant to applicable law or
pursuant to any agreement.
6. PAYMENT OF PRINCIPAL, INTEREST, FEES, AND COSTS AND EXPENSES.
6.1. PROMISE TO PAY PRINCIPAL. Debtors promise to pay to Secured Party
the outstanding principal of Advances under the Revolving Credit Note in
full on the Revolving Credit Termination Date, or acceleration of the time
for payment of the
16
Indebtedness pursuant to Section 9.2. Whenever the outstanding principal
balance of Advances under the Revolving Credit Note exceeds the Borrowing
Capacity, Debtors shall immediately pay to Secured Party the excess of the
outstanding principal balance of Advances under the Revolving Credit Note
over the Borrowing Capacity.
6.2. PROMISE TO PAY INTEREST.
(a) Debtors jointly and severally promise to pay to Secured
Party interest on the principal of Advances under the Revolving Credit
Note from time to time unpaid at the applicable per annum rates
specified in Item 3 of the Schedule. From the date of the occurrence
of, and during the continuance of, an Event of Default, Debtors, as
additional compensation to Secured Party for its increased credit
risk, promises to pay interest on (i) the principal of Advances under
the Revolving Credit Note, whether or not past due; and (ii) past due
interest and any other amounts past due under the Transaction
Documents, at a per annum rate 3% greater than the applicable rate of
interest specified in Item 3 of the Schedule.
(b) Interest on the Revolving Credit Note shall be paid (i) on
the first (1st) day of each month in arrears as provided in the
Revolving Credit Note, (ii) on the Revolving Credit Termination Date,
(iii) on acceleration of the time for payment of the Indebtedness
pursuant to Section 9.2, and (iv) on the date the Indebtedness is paid
in full.
(c) Any change in the interest rates resulting from a change in
the Prime Rate shall take effect simultaneously with such change in
the Prime Rate. Interest shall be computed on the daily unpaid
principal balance of Advances under the Revolving Credit Note.
Interest shall be calculated for each calendar day at 1/360th of the
applicable per annum rate which will result in an effective per annum
rate higher than that specified in Item 3 of the Schedule. In no event
shall the rate of interest exceed the maximum rate permitted by
applicable law. If Debtors pay to Secured Party interest in excess of
the maximum amount permitted by applicable law, such excess shall be
applied in reduction of the principal of Advances under the Revolving
Credit Note made pursuant to this Agreement, and any remaining excess
interest, after application thereof to the principal of Advances under
the Revolving Credit Note, shall be refunded to Debtors.
(d) Debtor agrees to pay a late charge equal to five percent
(5%) of any interest payment that is not paid within ten (10) days
after receipt of notice of nonpayment from Secured Party.
6.3. PROMISE TO PAY FEES. Debtors jointly and severally promise to pay
to Secured Party: (a) a per annum Letter of Credit fee equal to two percent
(2%) of the face amount of all outstanding Letters of Credit, payable in
accordance with Secured Party's customary practices, and (b) an unused line
fee equal to three-eighths of one percent (.375%) per annum of the unused
portion of the Revolving Credit Note, which
17
unused portion shall be computed on the average daily unused principal
balance of the Revolving Credit Note and shall be payable monthly in
arrears upon receipt of billing.
6.4. PROMISE TO PAY COSTS AND EXPENSES.
(a) Debtors jointly and severally promise to pay to Secured
Party, on demand, all reasonable costs and expenses as provided in
this Agreement, and all costs and expenses incurred by Secured Party
from time to time in connection with this Agreement, including,
without limitation, those incurred in: (i) preparing, negotiating,
amending, waiving, or granting consent with respect to the terms of
any or all of the Transaction Documents; (ii) enforcing the
Transaction Documents; (iii) performing, pursuant to Section 11.2,
Debtor's duties under the Transaction Documents upon Debtor's failure
to perform them; (iv) filing financing statements, deeds of trust,
mortgages, assignments, or other documents relating to the Collateral
(e.g., filing fees, recording taxes, mortgage registration taxes, and
documentary stamp taxes); (v) compromising, pursuing, or defending any
controversy, action, or proceeding resulting, directly or indirectly,
from Secured Party's relationship with either Debtor, regardless of
whether Debtors are a party to such controversy, action, or proceeding
and of whether the controversy, action, or proceeding occurs before or
after the Indebtedness has been paid in full; (vi) realizing upon or
protecting any Collateral; (vii) enforcing or collecting any
Indebtedness or guaranty thereof; (viii) employing collection agencies
or other agents to collect any or all of the Receivables; (ix)
following the occurrence of an Event of Default, examining Debtor's
books and records or inspecting the Collateral including, without
limitation, the reasonable costs of examinations and inspections
conducted by third parties; and (x) following the occurrence of an
Event of Default, obtaining independent appraisals from time to time
of Debtor's real estate and/or Inventory as deemed necessary or
appropriate by Secured Party.
(b) Without limiting Section 6.4(a), Debtor jointly and
severally promises to pay to Secured Party, on demand, the reasonable
fees and disbursements incurred by Secured Party for attorneys
retained by Secured Party for advice, suit, appeal, or insolvency or
other proceedings under the Federal Bankruptcy Code or otherwise, or
in connection with any purpose specified in Section 5.4(a).
6.5. METHOD OF PAYMENT. Without limiting Debtor's obligations pursuant
to Sections 6.1, 6.2, 6.3 and 6.4 to pay the principal of Advances,
interest, fees, costs and expenses, the following provision shall apply to
the payment thereof.
(a) Payment of Interest, Fees and Costs and Expenses. Without
limiting Debtor's obligation to pay accrued interest, fees and costs
and expenses, Debtors authorize Secured Party to provided, however,
Secured Party shall incur no liability for failure to make an Advance
under the Revolving Credit Note to pay for such items.
18
(b) Application of Funds. Notwithstanding any other provision of
this Agreement, Secured Party, in its sole discretion, shall determine
the manner and amount of application of Proceeds of Collateral, if
any, to be made on all or any part of any component or components of
the Indebtedness, whether principal, interest, fees, costs and
expenses, or otherwise.
6.6. ACCOUNT STATED. Debtors agree that each monthly or other
statement of account mailed or delivered by Secured Party to Debtors
pertaining to the outstanding principal balance of Advances, the amount of
interest due thereon, fees, and costs and expenses shall be final,
conclusive, and binding on Debtors and shall constitute an "account stated"
with respect to the matters contained therein unless, within thirty (30)
calendar days from when such statement is received by Debtors, Debtors
shall deliver to Secured Party written notice of any objections which they
may have as to such statement of account, and in such event, only the items
to which objection is expressly made in such notice shall be considered to
be disputed by Debtors.
7. AFFIRMATIVE COVENANTS. So long as any part of the Indebtedness remains
unpaid, or this Agreement remains in effect, Debtors shall comply with the
covenants listed below:
7.1. FINANCIAL STATEMENTS. Debtors shall furnish to Secured Party:
(a) Within ninety (90) days after the end of each fiscal year of
Debtors, financial statements of Debtors and each Consolidated
Subsidiary of Debtors as of the end of such year, fairly presenting
Debtors' and each Consolidated Subsidiary's financial position, which
statements shall consist of balance sheets and related statements of
income, retained earnings, and cash flow covering the period of
Debtors' immediately preceding fiscal year, and which shall be
prepared and audited by independent certified public accountants
satisfactory to Secured Party, together with copies of any management
letters provided by said accountants to either Debtor in connection
with performing such audit.
(b) Within thirty (30) days after the end of each fiscal quarter
of Debtors, financial statements of Debtors and each Consolidated
Subsidiary as of the end of such fiscal quarter, fairly presenting
Debtors' and each Consolidated Subsidiary's financial position, which
statements shall consist of balance sheets and related statements of
income, retained earnings and cash flow covering the period from the
end of the immediately preceding fiscal year to the end of such fiscal
quarter, all prepared in accordance with generally accepted accounting
principles consistently applied and signed and certified to be correct
by the president or chief financial officer of each Debtor or another
financial officer satisfactory to Secured Party in the form of Exhibit
A attached hereto and made a part hereof.
(c) Within thirty (30) days after the end of each fiscal quarter
of Debtors, a compliance certificate executed by the president or
chief financial
19
officer of each Debtor or another financial officer satisfactory to
the Secured Party in the form of Exhibit B attached hereto and made a
part hereof.
(d) Such additional information as Secured Party may from time
to time reasonably request regarding the financial and business
affairs of each Debtor or any Consolidated Subsidiary, including,
without limitation, the documents described in Item 2 of the Schedule
at the intervals described therein.
7.2. GOVERNMENT AND OTHER SPECIAL RECEIVABLES. Debtors shall promptly
notify Secured Party in writing of the existence of any Receivable as to
which the perfection, enforceability, or validity of the Security Interest
in such Receivable, or Secured Party's right or ability to obtain direct
payment to Secured Party of the Proceeds of such Receivable, is governed by
any federal or state statutory requirements other than those of the Uniform
Commercial Code, including, without limitation, any Receivable subject to
the Federal Assignment of Claims Act of 1940, as amended.
7.3. BANK ACCOUNTS. Debtors shall maintain its primary bank accounts
at Secured Party.
7.4. BOOKS AND RECORDS. Debtors shall maintain, at its own cost and
expense, accurate and complete books and records with respect to the
Collateral in a manner consistent with past practices. Debtors shall
deliver true and accurate copies of such books and records to Secured Party
or its representatives on request.
7.5. COLLATERAL IN POSSESSION OF THIRD PARTIES. If any Inventory
having a value in excess of $10,000.00 remains in the hands or control of
Debtor's agents, finishers, contractors, or processors, or any other third
party, such Debtor, if requested by Secured Party, shall notify such party
of the Security Interest in the Inventory, obtain such party's
acknowledgement that it holds the Inventory for Secured Party's benefit,
and instruct such party to hold such Inventory for the account of Secured
Party and subject to the instructions of Secured Party. Debtors shall
cooperate with Secured Party in obtaining control of Collateral consisting
of Deposit Accounts, Investment Property and Letter of Credit Rights, if
requested.
7.6. EXAMINATIONS. Debtors shall from time to time permit Secured
Party or its agents to inspect the Collateral and to examine and make
extracts from, or copies of, any of Debtor's books, ledgers, reports,
correspondence, and other records during normal business hours. So long as
no Event of Default exists and is continuing, Debtors shall not be charged
a fee for periodic field exams performed by Secured Party.
7.7. VERIFICATION OF COLLATERAL. Secured Party shall have the right to
verify all or any Collateral in any manner and through any medium Secured
Party may consider appropriate and Debtors agree to furnish all assistance
and information and perform any acts which Secured Party may require in
connection therewith.
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7.8. RESPONSIBLE PARTIES. Debtors shall notify Secured Party of the
occurrence of any event specified in Section 1.1(z)(iii) with respect to
any Responsible Party promptly after receiving notice thereof.
7.9. TAXES. Debtors shall promptly pay and discharge all of its taxes,
assessments, and other governmental charges prior to the date on which
penalties are attached thereto, establish adequate reserves for the payment
of such taxes, assessments, and other governmental charges, make all
required withholding and other tax deposits, and, upon request, provide
Secured Party with receipts or other proof that such taxes, assessments,
and other governmental charges have been paid in a timely fashion;
provided, however, that nothing contained herein shall require the payment
of any tax, assessment, or other governmental charge so long as its
validity is being contested in good faith, and by appropriate proceedings
diligently conducted, and adequate reserves for the payment thereof have
been established.
7.10. LITIGATION.
(a) Debtors shall promptly notify Secured Party in writing of
any litigation, proceeding, or counterclaim against, or of any
investigation of, either Debtor or any Consolidated Subsidiary if: (i)
the outcome of such litigation, proceeding, counterclaim, or
investigation may materially and adversely affect the finances or
operations of either Debtor or any Consolidated Subsidiary or title
to, or the value of, any Collateral; or (ii) such litigation,
proceeding, counterclaim, or investigation questions the validity of
any Transaction Document or any action taken, or to be taken, pursuant
to any Transaction Document.
(b) Debtors shall furnish to Secured Party such information
regarding any such litigation, proceeding, counterclaim, or
investigation as Secured Party shall reasonably request.
7.11. INSURANCE.
(a) Debtors shall at all times carry and maintain in full force
and effect insurance in coverage, form, and amount, and issued by
insurers, reasonably satisfactory to Debtors and Secured Party,
including, without limitation: workers' compensation or similar
insurance; public liability insurance; business interruption
insurance; and insurance against such other risks as are usually
insured against by business entities of established reputation engaged
in the same or similar businesses as Debtors and similarly situated.
(b) Debtors shall deliver to Secured Party certificates of
insurance or certified copies of the policies of insurance required by
Secured Party, with appropriate endorsements designating Secured Party
as an additional insured, mortgagee and lender loss payee as requested
by Secured Party. Each certificate and policy of insurance shall
provide that if such policy is cancelled for any reason whatsoever, if
any substantial change is made in the coverage which affects Secured
Party, or if such policy is allowed to lapse for nonpayment of
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premium, such cancellation, change, or lapse shall not be effective as
to Secured Party until thirty (30) days after receipt by Secured Party
of written notice thereof from the insurer issuing such policy.
(c) Debtors hereby appoints Secured Party as its
attorney-in-fact, with full authority in the place and stead of said
Debtor and in the name of said Debtor, Secured Party, or otherwise,
from time to time in Secured Party's discretion, to take any actions
and to execute any instruments which Secured Party may deem necessary
or desirable to obtain, adjust, make claims under, and otherwise deal
with insurance required pursuant hereto and to receive, endorse, and
collect any drafts or other instruments delivered in connection
therewith. Secured Party agrees to exercise such power of attorney
only in those instances where, in Secured Party's reasonable judgment,
a Debtor has failed to diligently pursue and protect its rights under
such policies.
(d) Unless Debtors provide Secured Party with evidence of the
insurance coverages required by this Agreement, Secured Party may
purchase insurance at Debtors' expense to protect Secured Party's
interest in the Collateral. This insurance may, but need not, protect
Debtors' interests. The coverage that Secured Party purchases may not
pay any claim that is made against Debtors in connection with the
Collateral. Debtors may later cancel any insurance purchased by
Secured Party, but only after providing Secured Party with evidence
that Debtors have obtained insurance as required by this Agreement. If
Secured Party purchases insurance for the Collateral, Debtors will be
responsible for the cost of that insurance, including interest and
other charges that may be imposed with the placement of the insurance,
until the effective date of the cancellation or expiration of the
insurance. The cost of the insurance may be added to the principal
amount of the Indebtedness owing hereunder. The costs of the insurance
may be more than the cost of the insurance that Debtors may be able to
obtain on their own.
7.12. GOOD STANDING; BUSINESS.
(a) Debtors shall take all necessary steps to preserve its
corporate existence and its right to conduct business in all states in
which the nature of its business or ownership of its property requires
such qualification.
(b) Debtors shall engage only in the business conducted by it on
the date of this Agreement.
7.13.PENSION REPORTS. Upon the occurrence of any Pension Event,
Debtors shall furnish to Secured Party, as soon as possible and, in any
event, within thirty (30) days after Debtors know, or have reason to know,
of such occurrence, the statement of the president or chief financial
officer of each Debtor setting forth the details of such Pension Event and
the action which each Debtor proposes to take with respect thereto.
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7.14.NOTICE OF NON-COMPLIANCE. Debtors shall notify Secured Party in
writing of any failure by Debtors or any Third Party to comply with any
provision of any Transaction Document immediately upon Debtors' obtaining
knowledge of such non-compliance, or if any representation or warranty
contained in any Transaction Document is no longer true.
7.15. COMPLIANCE WITH ENVIRONMENTAL LAWS.
(a) Debtors shall comply with all Environmental Laws.
(b) Debtors shall not suffer, cause, or permit the Disposal of
Hazardous Substances at any property owned, leased, or operated by it
or any Consolidated Subsidiary, except in compliance with the
Environmental Laws.
(c) Debtors shall promptly notify Secured Party in the event of
the Disposal, Release or threatened Release of any Hazardous Substance
at or from any property owned, leased, or operated by either Debtor or
any Consolidated Subsidiary, which is not in accordance with the
Environmental Laws.
(d) Debtors shall deliver promptly to Secured Party: (i) copies
of any documents received from the United States Environmental
Protection Agency or any state, county, or municipal environmental or
health agency concerning Debtor's or any Consolidated Subsidiary's
operations; and (ii) copies of any documents submitted by any Debtor
or any Consolidated Subsidiary to the United States Environmental
Protection Agency or any state, county, or municipal environmental or
health agency concerning its operations.
7.16.DEFEND COLLATERAL. Debtors shall defend the Collateral against
the claims and demands of all other parties (other than Secured Party),
including, without limitation, defenses, setoffs, and counterclaims
asserted by any Account Debtor against Debtors or Secured Party.
7.17.USE OF PROCEEDS. Debtors shall use the proceeds of Advances
under the Revolving Credit Note for Debtors working capital and for such
other legal and proper corporate purposes as are consistent with all
applicable laws, Debtors' Articles of Incorporation and Bylaws, resolutions
of Debtors' Board of Directors, and the terms of this Agreement.
7.18.COMPLIANCE WITH LAWS. Debtors shall comply with all applicable
laws, rules, regulations, and other legal requirements with respect to its
business and the use, maintenance, and operation of the real and personal
property owned or leased by it in the conduct of its business.
7.19.MAINTENANCE OF PROPERTY. Debtors shall maintain its properties,
including, without limitation, the Collateral, in good condition and
repair, ordinary wear and tear excepted, and shall prevent the Collateral,
or any part thereof, from being or becoming an accession to other goods not
constituting Collateral.
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7.20.LICENSES, PERMITS, ETC. Debtors shall maintain all of its
franchises, grants, authorizations, licenses, permits, easements, consents,
certificates, and orders, if any, in full force and effect until their
respective expiration dates, except where the failure to so maintain such
item would not have a material adverse effect on the business, operations,
assets or condition (financial or otherwise) of either Debtor.
7.21.TRADEMARKS AND PATENTS. Debtors shall maintain all of its
trademarks, trademark rights, patents, patent rights, licenses, permits,
trade names, trade name rights, and approvals required for the conduct of
the business of each Debtor, if any, in full force and effect until their
respective expiration dates.
7.22.ERISA. Debtors shall comply with the provisions of ERISA and the
Internal Revenue Code with respect to each Pension Plan.
7.23.ACTIVITIES OF CONSOLIDATED SUBSIDIARIES. Unless the provisions
of this Section 7.23 are expressly waived by Secured Party in writing,
Debtors shall cause each Consolidated Subsidiary to comply with Sections
7.1(b), 7.9, 7.11(a), 7.12, 7.15, and 7.18 through 7.22, inclusive, and
shall cause each Consolidated Subsidiary to refrain from doing any of the
acts proscribed by Sections 8.2, 8.3, and 8.5 through 8.14, inclusive.
8. NEGATIVE COVENANTS. So long as any part of the Indebtedness remains unpaid
or this Agreement remains in effect, Debtors, without the written consent
of Secured Party, shall not:
8.1. LOCATION OF INVENTORY AND BUSINESS RECORDS. Move the Inventory or
the records concerning the Collateral from the locations where they are
kept as specified in Item 1 of the Schedule.
8.2. BORROWED MONEY. Create, incur, assume, or suffer to exist any
liability for borrowed money, except (a) liability for borrowed money owed
to Secured Party, (b) the Subordinated Debt, (c) lease obligations owed by
DCI under the lease relating to the Bonds, (d) inter-company loans between
Debtors, (e) additional indebtedness for borrowed money of up to
$100,000.00 per transaction without Secured Party's prior written consent
and in excess of $100,000.00 per transaction with Secured Party's prior
written consent, and (f) purchase money obligations incurred to purchase or
lease Equipment of up to $100,000.00 in the aggregate per fiscal year.
8.3. SECURITY INTERESTS AND OTHER ENCUMBRANCES. Create, incur, assume,
or suffer to exist any mortgage, security interest, lien, or other
encumbrance upon any of its properties or assets, whether now owned or
hereafter acquired, except (a) mortgages, security interests, liens, and
encumbrances in favor of Secured Party, (b) liens in favor of UMB Bank,
n.a., as trustee under the Trust Indenture dated September 1, 1998 relating
to the Bonds (the "Trust Indenture") encumbering DCI's interest in its
Lenexa,
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Kansas real estate, improvements thereon and certain Equipment located
thereon, (c) liens in favor of Bank of America, N.A. as the letter of
credit provider under the Trust Indenture encumbering DCI's interest in its
Lenexa, Kansas real estate, improvements thereon and certain Equipment
located thereon, (d) Permitted Liens, and (e) purchase money security
interests securing debt permitted under Section 8.2(f).
8.4. STORING AND USE OF COLLATERAL. Place the Collateral in any
warehouse which may issue a negotiable Document with respect thereto or use
the Collateral in violation of any provision of the Transaction Documents,
of any applicable statute, regulation, or ordinance, or of any policy
insuring the Collateral.
8.5. MERGERS, CONSOLIDATIONS, OR SALES. (a) Merge or consolidate with
or into any corporation or other entity; (b) enter into any joint venture
or partnership with any Person; (c) convey, lease, or sell all or
substantially all of its property or assets or business to any other
Person, except for (i) the sale of Inventory in the ordinary course of its
business and in accordance with the terms of this Agreement, (ii) sales of
fixed assets acquired by DCI from Crystaloid Technologies, Inc. pursuant to
the asset purchase agreement described in subparagraph (f) below, and (iii)
the sale of Equipment that is either obsolete or no longer usable in the
ordinary course of Debtors' businesses; (d) convey, lease, or sell any of
its assets to any Person for less than the fair market value thereof; (e)
organize any new subsidiaries; or (f) purchase or otherwise acquire any
material portion of the assets of any business or the stock or other equity
interests of any entity; provided, however, that Secured Party consents to
DCI's acquisition of certain assets and the assumption of certain
liabilities of Crystaloid Technologies, Inc. pursuant to an asset purchase
agreement, a copy of which has been provided by DCI to Secured Party.
8.6. CAPITAL STOCK. Purchase or retire any of its capital stock if an
Event of Default exists and is continuing or would result from such
purchase, or otherwise change the capital structure of either Debtors or
change the relative rights, preferences, or limitations relating to any of
its capital stock.
8.7. DIVIDENDS OR DISTRIBUTIONS. Pay or declare any cash or other
dividends or distributions of earnings on any of its corporate stock if an
Event of Default exists and is continuing or would result from payment of
such dividend or distribution.
8.8. INVESTMENTS AND ADVANCES. Make any investment in, or advances to,
any other Person, except: (a) advance payments or deposits against
purchases made in the ordinary course of either Debtor's regular business;
(b) direct obligations of the United States of America; (c) any existing
investments in, or existing advances to, the Consolidated Subsidiaries; (d)
loans to officers of Debtors not to exceed $250,000.00 in the aggregate
outstanding at any one time, and (e) inter-company loans from one Debtor to
the other Debtor.
8.9. GUARANTIES. Become a guarantor, a surety, or otherwise liable for
the debts or other obligations of any other Person (other than the other
Debtor), whether by guaranty or suretyship agreement, agreement to purchase
indebtedness, agreement for furnishing funds through the purchase of goods,
supplies, or services (or by way of stock purchase, capital contribution,
advance, or loan) for the purpose of paying or discharging
25
indebtedness, or otherwise, except as an endorser of instruments for the
payment of money deposited to its bank account for collection in the
ordinary course of business.
8.10.NOTES RECEIVABLE. Accept any note or other instrument (except
for a check or other instrument for the immediate payment of money) with
respect to any Receivable without the prior written consent of Secured
Party. If Secured Party consents to the acceptance by either Debtor of a
note or instrument, such note or instrument shall be promptly endorsed by
said Debtor to the order of the Secured Party and delivered to Secured
Party.
8.11.STATE OF ORGANIZATION. Change its form or state of organization
without giving at least thirty (30) days' prior written notice to Secured
Party of such change.
0.00.XXXX CHANGE. Change its name without giving at least thirty (30)
days' prior written notice of its proposed new name to Secured Party.
8.13.DISPOSITION OF COLLATERAL. Sell, assign, or otherwise transfer,
dispose of, or encumber the Collateral or any interest therein, or grant a
security interest therein, or license thereof, except to Secured Party, and
except for the sale of Inventory in the ordinary course of business of
either Debtor and in accordance with the terms of this Agreement.
0.00.XXXXXXXXX COVENANTS. Fail to comply with the financial covenants
set forth in Item 4 of the Schedule.
8.15.AGREEMENTS WITH AFFILIATES. Enter into any agreement or
transaction with any Affiliate (excluding the other Debtor) except: (i)
agreements or transactions in the ordinary course of business which contain
terms that are fair and reasonable to both parties and are no less
favorable to the applicable Debtor than would be the case if the other
party to the agreement or transaction were not an Affiliate, (ii)
agreements or transactions that have the prior written consent of Secured
Party, and (iii) a management advisory agreement with Merit Capital
Management, Inc. ("Merit") pursuant to which Elecsys agrees to pay to Merit
a monthly management fee not to exceed $150,000.00 per fiscal year of
Debtors.
9. EVENTS OF DEFAULT.
9.1. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an event of default (individually, an
"Event of Default" and, collectively, "Events of Default"):
(a) Nonpayment. Nonpayment when due of any principal, interest,
premium, fee, cost, or expense due under the Transaction Documents.
(b) Negative Covenants. Default in the observance of any of the
covenants or agreements of either Debtor contained in Article 8.
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(c) Other Covenants. Default in the observance of any of the
covenants or agreements of Debtor contained in the Transaction
Documents, other than in Article 8, or Sections 6.1, 6.2, 6.3, or 6.4,
or in any other agreement with Secured Party which is not remedied
within the earlier of thirty (30) days after (i) notice thereof by
Secured Party to Debtors, or (ii) the date Debtors were required to
give notice to Secured Party under Section 7.14.
(d) Cessation of Business or Voluntary Insolvency Proceedings.
The (i) cessation of operations of Debtor's business as conducted on
the date of this Agreement; (ii) filing by either Debtor of a petition
or request for liquidation, reorganization, arrangement, adjudication
as a bankrupt, relief as a debtor, or other relief under the
bankruptcy, insolvency, or similar laws of the United States of
America or any state or territory thereof or any foreign jurisdiction
now or hereafter in effect; (iii) making by either Debtor of a general
assignment for the benefit of creditors; (iv) consent by either Debtor
to the appointment of a receiver or trustee, including, without
limitation, a "custodian," as defined in the Federal Bankruptcy Code,
for either Debtor or any of such Debtor's assets; (v) making of any,
or sending of any, notice of any intended bulk sale by either Debtor;
or (vi) execution by either Debtor of a consent to any other type of
insolvency proceeding (under the Federal Bankruptcy Code or otherwise)
or any formal or informal proceeding for the dissolution or
liquidation of, or settlement of claims against, or winding up of
affairs of, either Debtor.
(e) Involuntary Insolvency Proceedings. (i) The appointment of a
receiver, trustee, custodian, or officer performing similar functions,
including, without limitation, a "custodian," as defined in the
Federal Bankruptcy Code, for Debtor or any of such Debtor's assets; or
the filing against either Debtor of a request or petition for
liquidation, reorganization, arrangement, adjudication as a bankrupt,
or other relief under the bankruptcy, insolvency, or similar laws of
the United States of America, any state or territory thereof, or any
foreign jurisdiction now or hereafter in effect; or of any other type
of insolvency proceeding (under the Federal Bankruptcy Code or
otherwise) or any formal or informal proceeding for the dissolution or
liquidation of, settlement of claims against, or winding up of affairs
of either Debtor shall be instituted against either Debtor; and (ii)
such appointment shall not be vacated, or such petition or proceeding
shall not be dismissed, within sixty (60) days after such appointment,
filing, or institution.
(f) Other Indebtedness and Agreements. Failure by either Debtor
to pay, when due (or, if permitted by the terms of any applicable
documentation, within any applicable grace period) any indebtedness in
excess of the Threshold Amount owing by either Debtor to Secured Party
or any other Person (other than the Indebtedness incurred pursuant to
this Agreement, and including, without limitation, indebtedness
evidencing a deferred purchase price), whether such indebtedness shall
become due by scheduled maturity, by required prepayment, by
acceleration, by demand, or otherwise, or failure by either Debtor to
perform any term, covenant, or agreement on its part to be performed
under any agreement or instrument (other than a Transaction Document)
evidencing or securing or
27
relating to any such indebtedness owing by such Debtor when required
to be performed if the effect of such failure is to permit the holder
to accelerate the maturity of such indebtedness.
(g) Judgments. Any judgment or judgments in an amount in excess
of the Threshold Amount in the aggregate against either Debtor (other
than any judgment for which either Debtor is fully insured subject to
the applicable deductible) shall remain unpaid, unstayed on appeal,
undischarged, unbonded, or undismissed for a period of thirty (30)
days.
(h) Pension Default. Any Reportable Event which Secured Party
shall determine in good faith constitutes grounds for the termination
of any Pension Plan by the Pension Benefit Guaranty Corporation, or
for the appointment by an appropriate United States district court of
a trustee to administer any Pension Plan, shall occur and shall
continue thirty (30) days after written notice thereof to Debtors by
Secured Party; or the Pension Benefit Guaranty Corporation shall
institute proceedings to terminate any Pension Plan or to appoint a
trustee to administer any Pension Plan; or a trustee shall be
appointed by an appropriate United States district court to administer
any Pension Plan; or any Pension Plan shall be terminated; or either
Debtor or any Consolidated Subsidiary shall withdraw from a Pension
Plan in a complete withdrawal or a partial withdrawal; or there shall
arise vested unfunded liabilities under any Pension Plan that, in the
good faith opinion of Secured Party, have or will or might have a
material adverse effect on the finances or operations of either
Debtor; or either Debtor or any Consolidated Subsidiary shall fail to
pay to any Pension Plan any contribution which it is obligated to pay
under the terms of such plan or any agreement or which is required to
meet statutory minimum funding standards.
(i) Collateral; Impairment. There shall occur with respect to
the Collateral any (i) misappropriation, conversion, diversion, or
fraud, (ii) material levy, seizure, or attachment, or (iii) material
loss, theft, or damage that is not covered by insurance.
(j) Material Adverse Change. There shall occur any material
adverse change in the business or financial condition of either
Debtor.
(k) Third Party Default. There shall occur with respect to any
Third Party or any Consolidated Subsidiary, including, without
limitation, any guarantor: (i) any event described in Section 9.1(d),
9.1(e), 9.1(f), or 9.1(g); (ii) any pension default event such as
described in Section 9.1(h) with respect to any pension plan
maintained by such Third Party or such Consolidated Subsidiary; or
(iii) any failure by any Third Party or such Consolidated Subsidiary
to perform in accordance with the terms of any agreement between such
Third Party and Secured Party, subject to any right to cure contained
in the applicable documentation.
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(l) Representations. Any certificate, statement, representation,
warranty, or financial statement furnished by, or on behalf of, either
Debtor or any Third Party, pursuant to, or in connection with, this
Agreement (including, without limitation, representations and
warranties contained herein) or as an inducement to Secured Party to
enter into this Agreement or any other lending agreement with either
Debtor shall prove to have been false in any material respect at the
time as of which the facts therein set forth were certified or to have
omitted any substantial contingent or unliquidated liability or claim
against either Debtor or any such Third Party, or if on the date of
the execution of this Agreement there shall have been any materially
adverse change in any of the facts disclosed by any such statement or
certificate which shall not have been disclosed in writing to Secured
Party at, or prior to, the time of such execution.
(m) Challenge to Validity. Either Debtor or any Third Party
commences any action or proceeding to contest the validity or
enforceability of any Transaction Document or any lien or security
interest granted or obligations evidenced by any Transaction Document.
(n) Termination. Any Third Party terminates or attempts to
terminate, in accordance with its terms or otherwise, any guaranty or
other Transaction Document executed by such Third Party.
(o) Change of Ownership. If all, or a controlling interest of,
the capital stock of either Debtor shall be sold, assigned or
otherwise transferred or if a security interest or other encumbrance
shall be granted or otherwise acquired therein or with respect
thereto.
9.2. EFFECTS OF AN EVENT OF DEFAULT.
(a) Upon the happening of one or more Events of Default (except
an Event of Default under either Section 9.1(d) or 9.1(e)), Secured
Party may declare any obligation Secured Party may have hereunder to
be cancelled, and the principal of the Indebtedness then outstanding
to be immediately due and payable, together with all interest thereon
and costs and expenses accruing under the Transaction Documents. Upon
such declaration, any obligations Secured Party may have hereunder
shall be immediately cancelled, and the Indebtedness then outstanding
shall become immediately due and payable without presentation, demand,
or further notice of any kind to Debtors.
(b) Upon the happening of one or more Events of Default under
Section 9.1(d) or 9.1(e), Secured Party's obligations hereunder shall
be cancelled immediately, automatically, and without notice, and the
Indebtedness then outstanding shall become immediately due and payable
without presentation, demand, or notice of any kind to Debtors.
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10. SECURED PARTY'S RIGHTS AND REMEDIES.
10.1.GENERALLY. Secured Party's rights and remedies with respect
to the Collateral, in addition to those rights granted herein and in
any other agreement between Debtors and Secured Party now or hereafter
in effect, shall be those of a secured party under, the Uniform
Commercial Code as in effect in the State and under any other
applicable law.
10.2.NOTIFICATION OF ACCOUNT DEBTORS. Upon the occurrence and
during the continuation of an Event of Default, Secured Party may, at
any time and from time to time, notify any or all Account Debtors of
the Security Interest and may direct such Account Debtors to make all
payments on Receivables directly to Secured Party.
10.3.POSSESSION OF COLLATERAL. Whenever Secured Party may take
possession of the Collateral pursuant to Section 10.1, Secured Party
may take possession of the Collateral on Debtor's premises or may
remove the Collateral, or any part thereof, to such other places as
Secured Party may, in its sole discretion, determine. If requested by
Secured Party, Debtors shall assemble the Collateral and deliver it to
Secured Party at such place as may be designated by Secured Party.
10.4.COLLECTION OF RECEIVABLES. Upon the occurrence of an Event
of Default, Secured Party may demand, collect, and xxx for all monies
and Proceeds due, or to become due, on the Receivables (in either
Debtor's or Secured Party's name at the latter's option) with the
right to enforce, compromise, settle, or discharge any or all
Receivables. If Secured Party takes any action contemplated by this
Section with respect to any Receivable, Debtors shall not exercise any
right that Debtor would otherwise have had to take such action with
respect to such Receivable.
10.5.ENDORSEMENT OF CHECKS; DEBTORS' MAIL. Each Debtor hereby
irrevocably appoints Secured Party such Debtor's agent with full
power, in the same manner, to the same extent, and with the same
effect as if such Debtor were to do the same: upon the occurrence of
an Event of Default, to endorse such Debtor's name on any Instruments
or Documents pertaining to any Collateral, to receive and collect all
mail addressed to such Debtor, to direct the place of delivery of such
mail to any location designated by Secured Party, to open such mail,
to remove all contents therefrom, and to retain all contents thereof
constituting or relating to the Collateral. This agency is
unconditional and shall not terminate until all of the Indebtedness is
paid in full and this Agreement has been terminated. Secured Party
agrees to give such Debtor notice in the event it exercises this
agency, except with respect to the endorsement of Debtor's name on any
Instruments or Documents pertaining to any Collateral.
10.6.LICENSE TO USE PATENTS, TRADEMARKS, AND TRADE NAMES. Each
Debtor grants to Secured Party a royalty-free license to use any and
all patents, trademarks, and trade names now or hereafter owned by, or
licensed to, such Debtor for the purposes of manufacturing and
disposing of Inventory after the occurrence of an Event of Default.
All Inventory produced pursuant to this license shall at least meet
quality standards maintained by such Debtor prior to such Event of
Default.
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11. MISCELLANEOUS.
11.1.PERFECTING THE SECURITY INTEREST; PROTECTING THE COLLATERAL.
Each Debtor hereby authorizes Secured Party to file such financing
statements relating to the Collateral without such Debtor's signature
thereon as Secured Party may deem appropriate (subject to Section
11.17), and appoints Secured Party as such Debtor's attorney-in-fact
(without requiring Secured Party) to execute any such financing
statement or statements in Debtor's name and to perform all other acts
which Secured Party deems appropriate to perfect and continue the
Security Interest and to protect, preserve, and realize upon the
Collateral. Debtors will not file a termination statement under the
Uniform Commercial Code without the prior written consent of Secured
Party.
11.2.PERFORMANCE OF DEBTOR'S DUTIES. Upon Debtor's failure to
perform any of its duties under the Transaction Documents, including,
without limitation, the duty to obtain insurance as specified in
Section 7.11, Secured Party may, but shall not be obligated to,
perform any or all such duties.
11.3.NOTICE OF SALE. Without in any way requiring notice to be
given in the following manner, Debtors agree that any notice by
Secured Party of sale, disposition, or other intended action
hereunder, or in connection herewith, whether required by the Uniform
Commercial Code as in effect in the State or otherwise, shall
constitute reasonable notice to Debtors if such notice is mailed by
regular or certified mail, postage prepaid, at least ten (10) days
prior to such action, to Debtor's mailing addresses specified above or
to any other addresses which Debtor has specified in writing to
Secured Party as the addresses to which notices hereunder shall be
given to Debtors. Secured Party shall have no obligation to clean up
or otherwise prepare the Collateral for sale.
11.4.COMPLIANCE WITH OTHER LAWS. Secured Party may comply with
any applicable legal requirements in connection with the disposition
of the Collateral, and compliance therewith will not be considered
adversely to affect the commercial reasonableness of any sale of the
Collateral.
11.5.WARRANTIES. Secured Party may sell the Collateral without
giving any warranties. Secured Party may specifically disclaim any
warranties of title or the like. This procedure will not be considered
adversely to affect the commercial reasonableness of any sale of the
Collateral.
11.6.SALES ON CREDIT. If Secured Party sells any of the
Collateral on credit, Debtors will be credited only with the payments
actually made by the purchaser, received by Secured Party and applied
to the Indebtedness. If the purchaser fails to pay for the Collateral,
Secured Party may resell the Collateral, and Debtors shall be credited
with the proceeds of the sale.
11.7.WAIVER BY SECURED PARTY. No course of dealing between
Debtors and Secured Party and no delay or omission by Secured Party in
exercising any
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right or remedy under the Transaction Documents or with respect to any
Indebtedness shall operate as a waiver thereof or of any other right
or remedy, and no single or partial exercise thereof shall preclude
any other or further exercise thereof or the exercise of any other
right or remedy. All rights and remedies of Secured Party are
cumulative and may be exercised simultaneously.
11.8.WAIVER BY EITHER DEBTOR. Secured Party shall have no
obligation to take, and Debtors shall have the sole responsibility for
taking, any and all steps to preserve rights against any and all
Account Debtors and against any and all prior parties to any note,
Chattel Paper, draft, trade acceptance, or other instrument for the
payment of money covered by the Security Interest whether or not in
Secured Party's possession. Secured Party shall not be responsible to
Debtors for loss or damage resulting from Secured Party's failure to
enforce any Receivables or to collect any moneys due, or to become
due, thereunder or other Proceeds constituting Collateral hereunder.
11.9.SETOFF. Without limiting any other right of Secured Party,
whenever Secured Party has the right to declare any Indebtedness to be
immediately due and payable (whether or not it has so declared),
Secured Party, at its sole election, may setoff against the
Indebtedness any and all monies then or thereafter owed to either
Debtor by Secured Party in any capacity, whether or not the
indebtedness or the obligation to pay such monies owed by Secured
Party is then due, and Secured Party shall be deemed to have exercised
such right of setoff immediately at the time of such election even
though any charge therefor is made or entered on such Secured Party's
records subsequent thereto.
11.10. ASSIGNMENT. The rights and benefits of Secured Party
hereunder shall, if Secured Party so agrees, inure to any party
acquiring any interest in the Indebtedness or any part thereof.
11.11. SUCCESSORS AND ASSIGNS. Secured Party and Debtors, as used
herein, shall include the successors or assigns of those parties,
except that Debtors shall not have the right to assign its rights
hereunder or any interest herein.
11.12. MODIFICATION. No modification, rescission, waiver,
release, or amendment of any provision of this Agreement shall be
made, except by a written agreement signed by Debtors and a duly
authorized officer of Secured Party.
11.13. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, and by Secured Party and Debtors on separate
counterparts, each of which, when so executed and delivered, shall be
an original, but all of which shall together constitute one and the
same agreement.
11.14. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Any financial
calculation to be made, all financial statements and other financial
information to be provided, and all books and records to be kept in
connection with the provisions of this Agreement, shall be in
accordance with generally accepted accounting principles consistently
applied during each interval and from interval to interval; provided,
32
however, that in the event changes in generally accepted accounting
principles shall be mandated by the Financial Accounting Standards
Board or any similar accounting body of comparable standing, or should
be recommended by Debtor's certified public accountants, to the extent
such changes would affect any financial calculations to be made in
connection herewith, such changes shall be implemented in making such
calculations only from and after such date as Debtors and Secured
Party shall have amended this Agreement to the extent necessary to
reflect such changes in the financial and other covenants to which
such calculations relate.
11.15. INDEMNIFICATION.
(a) If after receipt of any payment of all, or any part of,
the Indebtedness, Secured Party is, for any reason, compelled to
surrender such payment to any Person because such payment is
determined to be void or voidable as a preference, an
impermissible setoff, or a diversion of trust funds, or for any
other reason, the Transaction Documents shall continue in full
force and Debtors shall be liable, and shall indemnify and hold
Secured Party harmless for, the amount of such payment
surrendered. The provisions of this Section shall be and remain
effective notwithstanding any contrary action which may have been
taken by Secured Party in reliance upon such payment, and any
such contrary action so taken shall be without prejudice to
Secured Party's rights under the Transaction Documents and shall
be deemed to have been conditioned upon such payment having
become final and irrevocable. The provisions of this Section
11.15(a) shall survive the termination of this Agreement and the
Transaction Documents.
(b) Debtors jointly and severally agree to pay, indemnify,
and hold Secured Party harmless from, and against, any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, or disbursements of any kind
or nature whatsoever (including, without limitation, counsel and
special counsel fees and disbursements in connection with any
litigation, investigation, hearing, or other proceeding) with
respect, or in any way related, to the existence, execution,
delivery, enforcement, performance, and administration of this
Agreement and any other Transaction Document, except such
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements that arise out
of or result from Secured Party's gross negligence or willful
misconduct (all of the foregoing, collectively, the "Indemnified
Liabilities"). The provisions of this Section 11.15(b) shall
survive repayment of the Indebtedness.
11.16. TERMINATION. This Agreement is, and is intended to be, a
continuing agreement and shall remain in full force and effect through
the Revolving Credit Termination Date. On the Revolving Credit
Termination Date, the Indebtedness shall become immediately due and
payable. Secured Party may terminate this Agreement immediately and
without notice upon the occurrence of an Event of Default.
Notwithstanding the foregoing or anything in this Agreement or
elsewhere to the contrary, the Security Interest, Secured Party's
rights and remedies under the Transaction
33
Documents and Debtor's obligations and liabilities under the
Transaction Documents, shall survive any termination of this Agreement
and shall remain in full force and effect until all of the
Indebtedness outstanding, or contracted or committed for (whether or
not outstanding), and any extensions or renewals thereof, together
with interest accruing thereon after such notice, shall be finally and
irrevocably paid in full.
11.17. FURTHER ASSURANCES. From time to time, Debtors shall take
such action and execute and deliver to Secured Party such additional
documents, instruments, certificates, and agreements as Secured Party
may reasonably request to effectuate the purposes of the Transaction
Documents; provided, however, that so long as no Event of Default
exists and is continuing, Debtors will not be required to reimburse
Secured Party for any filing fees or expenses incurred by Secured
Party in perfecting its liens on the Collateral through any means
other than filing.
11.18. HEADINGS. Article and Section headings used in this
Agreement are for convenience only and shall not affect the
construction of this Agreement.
11.19. CUMULATIVE SECURITY INTEREST, ETC. The execution and
delivery of this Agreement shall in no manner impair or affect any
other security (by endorsement or otherwise) for payment or
performance of the Indebtedness, and no security taken hereafter as
security for payment or performance of the Indebtedness shall impair
in any manner or affect this Agreement, or the Security Interest
granted hereby, all such present and future additional security to be
considered as cumulative security.
11.20. SECURED PARTY'S DUTIES. Without limiting any other
provision of this Agreement: (a) the powers conferred on Secured Party
hereunder are solely to protect its interests and shall not impose any
duty to exercise any such powers; and (b) except as may be required by
applicable law, Secured Party shall not have any duty as to any
Collateral or as to the taking of any necessary steps to preserve
rights against any parties or any other rights pertaining to any
Collateral.
11.21. NOTICES GENERALLY. All notices and other communications
hereunder shall be made by hand delivery, facsimile transmission,
overnight air courier, or certified or registered mail, return receipt
requested, and shall be deemed to be received by the party to whom
sent on the date of hand delivery or facsimile transmission (so long
as sent prior to 3:00 p.m. local time), one (1) Business Day after
sending, if sent by overnight air courier, and three (3) Business Days
after mailing, if sent by certified or registered mail. All such
notices and other communications to a party hereto shall be addressed
to such party at the address set forth on the cover page hereof or to
such other address as such party may designate for itself in a notice
to the other party given in accordance with this Section 11.21.
11.22. SEVERABILITY. The provisions of this Agreement are
independent of, and separable from, each other, and no such provision
shall be affected or rendered invalid or unenforceable by virtue of
the fact that for any reason any other such provision may be invalid
or unenforceable in whole or in part. If any provision of this
Agreement is prohibited or unenforceable in any jurisdiction, such
provision shall be ineffective in
34
such jurisdiction only to the extent of such prohibition or
unenforceability, and such prohibition or unenforceability shall not
invalidate the balance of such provision to the extent it is not
prohibited or unenforceable nor render prohibited or unenforceable
such provision in any other jurisdiction.
11.23. INCONSISTENT PROVISIONS. The terms of this Agreement and
the other Transaction Documents shall be cumulative except to the
extent that they are specifically inconsistent with each other, in
which case the terms of this Agreement shall prevail.
11.24. ENTIRE AGREEMENT. This Agreement and the other Transaction
Documents constitute the entire agreement and understanding between
the parties hereto with respect to the transactions contemplated
hereby and supersede all prior negotiations, understandings, and
agreements between such parties with respect to such transactions,
including, without limitation, those expressed in any commitment
letter delivered by Secured Party to Debtors.
11.25. APPLICABLE LAW. THIS AGREEMENT, AND THE TRANSACTIONS
EVIDENCED HEREBY, SHALL BE GOVERNED BY, AND CONSTRUED UNDER, THE
INTERNAL LAWS OF THE STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW, AS THE SAME MAY FROM TIME TO TIME BE IN EFFECT, INCLUDING,
WITHOUT LIMITATION, THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN THE
STATE.
11.26. CONSENT TO JURISDICTION. DEBTORS AND SECURED PARTY AGREE
THAT ANY ACTION OR PROCEEDING TO ENFORCE, OR ARISING OUT OF, THE
TRANSACTION DOCUMENTS MAY BE COMMENCED IN THE CIRCUIT COURT OF XXXXXXX
COUNTY, MISSOURI OR IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI, AND DEBTOR WANES PERSONAL SERVICE OF
PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN ACTION
OR PROCEEDING IN ANY SUCH COURT SHALL BE PROPERLY SERVED AND SHALL
CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL
TO DEBTOR, OR AS OTHERWISE PROVIDED BY THE LAWS OF THE STATE OR THE
UNITED STATES.
11.27. JURY TRIAL WAIVER. DEBTORS AND SECURED PARTY HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY
JURY DEBTORS AND SECURED PARTY MAY HAVE IN ANY ACTION OR PROCEEDING,
IN LAW OR IN EQUITY, IN CONNECTION WITH THE TRANSACTION DOCUMENTS OR
THE TRANSACTIONS RELATED THERETO. DEBTORS REPRESENT AND WARRANT THAT
NO REPRESENTATIVE OR AGENT OF SECURED PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SECURED PARTY WILL NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THIS RIGHT TO JURY TRIAL WAIVER. DEBTORS ACKNOWLEDGE
THAT SECURED PARTY HAS BEEN
35
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
PROVISIONS OF THIS SECTION 11.27.
11.28. ORAL AGREEMENTS. ORAL AGREEMENTS OR COMMITMENTS TO LOAN
MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT
INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE.
TO PROTECT THEM (DEBTORS) AND US (SECURED PARTY) FROM MISUNDERSTANDING
OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE
CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN
WRITING TO MODIFY IT.
DEBTORS:
ELECSYS CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------------------
Name (print): Xxxxxxx X. Xxxxx
-------------------------------
Title: Chairman
--------------------------------------
DCI, INC.
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------------------
Name (print): Xxxx X. Xxxxxxxx
-------------------------------
Title: President
--------------------------------------
SECURED PARTY:
GOLD BANK
By: /s/ Xxxxxx Xxxxx
-----------------------------------------
Name (print): Xxxxxx Xxxxx
-------------------------------
Title: Vice President
--------------------------------------
36
EXHIBIT A
FINANCIAL STATEMENT CERTIFICATION
The undersigned, the _________________________ of _________________________
(the "Debtor"), hereby certifies to GOLD BANK that attached hereto is a true,
correct and complete copy of Debtor's financial statements as of the month
ending _____________, ______, which financial statements fairly present Debtor's
financial position and consist of a balance sheet and related statement of
income, retained earnings and cash flow covering the period from the end of the
immediately preceding fiscal year to the end of such month.
DEBTORS:
ELECSYS CORPORATION
By:
-----------------------------------------
Name (print):
-------------------------------
Title:
--------------------------------------
DCI, INC.
By:
-----------------------------------------
Name (print):
-------------------------------
Title:
--------------------------------------
EXHIBIT B
COMPLIANCE CERTIFICATE
The undersigned (the "Debtors") hereby certify to GOLD BANK (the "Secured
Party") pursuant to the Loan and Security Agreement between Debtors and Secured
Party dated December ___, 2002, as amended from time to time (the "Loan
Agreement"), that:
A. General.
1. Capitalized terms not defined herein shall have the meanings set
forth in the Loan Agreement.
2. Debtors have complied with all the terms, covenants and
conditions to be performed or observed by it contained in the Loan Agreement and
the Transaction Documents to which Debtors are a party.
3. Neither on the date hereof nor, if applicable, after giving
effect to any Advance made under the Revolving Credit Note on the date hereof,
does there exist an Event of Default or an event or circumstance which with
notice or lapse of time, or both, would constitute an Event of Default.
4. The representations and warranties contained in the Loan
Agreement, in any Transaction Document to which either Debtor is a party and in
any certificate, document or financial or other statement furnished at anytime
thereunder are true, correct and complete in all material respects on or as of
the date given with the same effect as though such representations and
warranties had been made on the date hereof, except to the extent that any such
representation and warranty relates solely to an earlier date (in which case,
such representation and warranty shall be true, correct and complete on and as
of such earlier date).
B. Financial Covenants.
1. As of the date hereof or for such period as may be designated
below, the computations, ratios and calculations as set forth below in
accordance with Item 4 of the Schedule, are true and correct:
(a) Tangible Net Worth of DCI as
of __________ ___, ____:
(i) Book Net Worth = $
----------------
(ii) Subordinated Debt = $
----------------
(iii) (i) plus (ii) = $
----------------
(iv) Intangible Assets = $
----------------
(v) (iii) less (iv) = $
----------------
Required Amount: $2,000,000.00
(b) Debt Service Coverage Ratio of DCI
as of __________ ___, ____:
(i) EBITDA = $
----------------
(ii) Taxes = $
----------------
(iii) Dividends and Distributions = $
----------------
(iv) Non-financed capital expenditures = $
----------------
(v) (i) minus (ii), (iii) and (iv) = $
----------------
(v) Principal and interest
payments = $
----------------
(vii) (v) divided by (vi) _______ to _______
Required Ratio: 1.2 to 1
(c) Total Liabilities to Tangible Net Worth of DCI
(i) Total Liabilities = $
----------------
(ii) Tangible Net Worth
(line (a)(v) above) = $
----------------
(iii) (i) divided by (ii) = $
----------------
Required Ratio: 3 to 1
IN WITNESS WHEREOF, the undersigned, a duly authorized officer each Debtor,
has executed and delivered this Compliance Certificate in the name of and on
behalf of each Debtor on ________________ ___, 20___.
ELECSYS CORPORATION
By:
-----------------------------------------
Name (print):
-------------------------------
Title:
--------------------------------------
DCI, INC.
By:
-----------------------------------------
Name (print):
-------------------------------
Title:
--------------------------------------
ATTACHMENT #1
PROMISSORY NOTE
(Revolving Credit Note)
$2,000,000.00 December 31, 2002
Kansas City, Missouri
FOR VALUE RECEIVED, the undersigned makers (hereinafter referred to as the
"Debtors"), jointly and severally promise to pay to the order of GOLD BANK
(herein, together with its successors and assigns who become holders of this
Note, called the "Secured Party") at 000 Xxxx 00xx Xxxxxx, Xxxxxx Xxxx, Xxxxxxxx
00000, or at such other place as may be designated in writing by Secured Party
from time to time, the principal sum of TWO MILLION AND NO/100 DOLLARS
($2,000,000.00), or such lesser amount which shall from time to time be owing
hereunder on account of Advances made by Secured Party to or for the benefit or
account of Debtors in accordance with the terms of the Loan and Security
Agreement of even date herewith among Debtors and Secured Party (as amended from
time to time, the "Loan Agreement"), together with interest on the unpaid
principal balances from time to time outstanding hereunder at the variable rate
per annum from time to time in effect under the Loan Agreement. Principal and
interest due under this Note will be payable as provided in Section 6.1 and
Section 6.2 of the Loan Agreement.
The unpaid principal balance of this note may be prepaid at any time and
from time to time, in whole or in part, without premium or penalty.
If any Event of Default shall have occurred and be continuing, Debtors
jointly and severally promise to pay the default rate of interest, as specified
in Section 6.2(a) of the Loan Agreement, on the outstanding unpaid principal and
interest balance hereof at the times and in the amount and manner provided for
more particularly in the Loan Agreement. Principal, interest, fees, charges,
expenses and other costs owing hereunder are payable in lawful money of the
United States of America such that Secured Party has received immediately
available funds for the credit of Debtors on the date that such payment or
payments is or are due.
This Note is secured by the Collateral and any other collateral now or
hereafter given by Debtors to Secured Party to secure the Indebtedness. The
cancellation or surrender of this Note, upon payment or otherwise, shall not
affect any right Secured Party has to retain the Collateral or any other
collateral for any other Indebtedness of Debtors to Secured Party.
Upon the occurrence of any of the following events:
1. Failure to pay when due any principal or interest on this Note or any
costs, fees, reimbursable expenses or other amounts payable by Debtors
under the Loan Agreement or under any of the other Transaction
Documents; or
2. The occurrence of any other Event of Default under the Loan Agreement,
or under any of the other Transaction Documents, which is not cured
within any applicable cure period contained in the Loan Agreement;
then Secured Party may, at Secured Party's option: (i) have all principal,
interest, fees, charges, expenses and other costs outstanding or owing hereunder
bear interest at the default rate of interest specified in Section 5.2(a) of the
Loan Agreement for so long as said Event of Default shall continue; and (ii)
declare all sums outstanding or owing hereunder, including principal, interest,
fees, charges, expenses and other costs to be immediately due and payable
without presentment, demand or notice of any kind, all of which are hereby
expressly waived by Debtors; provided, however, that the principal, interest,
fees, expenses, charges and other costs owing on this Note shall be and become
automatically due and payable if the Loan Agreement, or any of the other
Transaction Documents, provide for the automatic acceleration of the payment of
the principal, interest, fees, charges, expenses and other costs owing on this
Note upon the occurrence of an Event of Default.
If an attorney is engaged by Secured Party because of any Event of Default
under this Note, the Loan Agreement, or any of the other Transaction Documents,
or to enforce or defend any provision of any such document or instrument, then
Debtors shall pay upon demand, to the extent permitted or not prohibited by
applicable law, reasonable attorneys' fees and all costs so incurred by Secured
Party.
No waiver of any breach, Event of Default, default or failure of condition
under the terms of this Note, the Loan Agreement, or the other Transaction
Documents shall be implied from any failure of Secured Party to take, or any
delay by Secured Party in taking, any action with respect to any such breach,
Event of Default, default or failure of condition or from any previous waiver of
any similar or unrelated breach, Event of Default, default or failure of
condition. A waiver of any term of this Note, the Loan Agreement or the other
Transaction Documents must be made in writing and shall be limited to the
express written terms of such waiver.
All obligations of Debtors and all rights, powers and remedies of Secured
Party expressed herein shall be in addition to and not in limitation of those
provided by law or in any written agreement or instrument (other than this Note)
relating to any of the Indebtedness of Debtors to Secured Party or the security
therefor.
Debtors waive presentment; demand; notice of dishonor; notice of protest
and nonpayment; notice of default interest and late charges; notice of intent to
accelerate; notice of acceleration; and diligence in taking any action to
collect any sums owing under this Note or in proceeding against any of the
rights and interests in and to properties securing payment of this Note.
Time is of the essence with respect to every provision hereof.
This Note is issued pursuant to the Loan Agreement and is subject to the
terms and conditions specified therein. Capitalized terms used and not otherwise
defined in this Note shall have the meanings assigned to them under the Loan
Agreement.
2
This Note shall be construed and enforced in accordance with the laws of
the State of Missouri, without regard to principles of conflicts of law, except
to the extent that federal laws preempt the laws of the State of Missouri.
ELECSYS CORPORATION
By:
-----------------------------------------
Name (print):
-------------------------------
Title:
--------------------------------------
DCI, INC.
By:
-----------------------------------------
Name (print):
-------------------------------
Title:
--------------------------------------
3
AMENDMENT NO. 1
TO LOAN AND SECURITY AGREEMENT
AND OTHER TRANSACTION DOCUMENTS
This Amendment No. 1 to Loan and Security Agreement and Other Transaction
Documents (the "Amendment") is made and entered into as of the 1st day of March,
2003, by and among GOLD BANK, a Kansas banking corporation (the "Secured
Party"), and DCI, INC., a Kansas corporation ("DCI"), and ELECSYS CORPORATION, a
Kansas corporation ("Elecsys," and together with DCI, collectively the
"Debtors").
RECITALS
A. Debtors and Secured Party are parties to a Loan and Security Agreement
dated December 31, 2002 pursuant to which Secured Party agreed to
provide certain credit facilities to Debtors (as amended from time to
time, the "Loan Agreement").
B. DCI and Secured Party entered into a Reimbursement Agreement dated as
of March 1, 2003 (the "Reimbursement Agreement") pursuant to which:
(i) Secured Party agreed to cause LaSalle Bank National Association
(the "LOC Bank") to issue a direct pay, irrevocable letter of credit
in favor of UMB Bank, n.a., as Trustee (the "Letter of Credit"), and
(ii) DCI agreed to reimburse Secured Party for any payments made by
Secured Party to the LOC Bank to reimburse the LOC Bank for draws paid
under the Letter of Credit.
C. By separate agreement, Secured Party has agreed to reimburse the LOC
Bank for any draw payments on the Letter of Credit (as amended from
time to time, the "LaSalle Agreement").
D. Elecsys has guaranteed DCI's obligations to Secured Party under the
Reimbursement Agreement pursuant to a Guaranty dated as of March 1,
2003 (as amended from time to time, the "Guaranty").
E. Secured Party would not have entered into the Reimbursement Agreement
or the LaSalle Agreement unless, among other things, Debtors executed
and delivered this Amendment to Secured Party.
NOW, THEREFORE, in consideration of the mutual covenants of the parties
hereto, the parties agree as follows:
1. Debtors represent and warrant to Secured Party that as of the date of
this Amendment, there are no claims, setoffs or defenses to Secured Party's
enforcement of the remedies available to it under the terms of the Loan
Agreement and the other Transaction Documents.
2. The Loan Agreement and the other Transaction Documents are hereby
amended in the following respects:
(a) The following definitions are added to Section 1.1 of the Loan
Agreement in the appropriate alphabetical order:
"(w-1) GUARANTY means the Guaranty dated as of March 1, 2003 from
Elecsys in favor of Secured Party pursuant to which Elecsys guaranteed
to Secured Party payment and performance by DCI of its obligations to
Secured Party under the Reimbursement Agreement.
(dd-1) LEASEHOLD MORTGAGE means the Leasehold Mortgage, Security
Agreement and Assignment of Leases and Rents dated as of March 1, 2003
from Debtors in favor of Secured Party encumbering Debtors' right,
title and interest in the real and personal property described
therein, including, without limitation, DCI's leasehold interest in
certain real property and improvements thereon located in Lenexa,
Kansas, as amended from time to time.
(kk-1) REIMBURSEMENT AGREEMENT means the Reimbursement Agreement
dated as of March 1, 2003 between DCI and Secured Party pursuant to
which: (i) Secured Party agreed to cause LaSalle Bank National
Association (the "LOC Bank") to issue a direct pay, irrevocable letter
of credit in favor of UMB Bank, n.a., as Trustee (the "Letter of
Credit"), and (ii) DCI agreed to reimburse Secured Party for any
payments made by Secured Party to the LOC Bank to reimburse the LOC
Bank for draws paid under the Letter of Credit, as such agreement may
be amended from time to time."
(b) The term "Transaction Documents" defined in Section 1.1(yy) of
the Loan Agreement shall specifically include, without limitation, the
Reimbursement Agreement, the Leasehold Mortgage and the Guaranty.
(c) The existing Section 3.1 of the Loan Agreement is hereby deleted
and the following is inserted in place thereof
"3.1 SECURITY INTEREST. Debtors hereby grant to Secured Party a
security interest in, and a lien on, the following property of Debtors
wherever located and whether now owned or hereafter acquired or
arising:
(a) All Accounts, Inventory, General Intangibles
(including, without limitation, patents, trademarks and trade names
and applications for patents, trademarks and trade names), Chattel
Paper, Documents, Instruments, Deposit Accounts and Letter of Credit
Rights, whether or not specifically assigned to Secured Party,
including, without limitation, all Receivables, and all Equipment and
Fixtures.
(b) All Supporting Obligations, including, without
limitation, all guaranties, collateral, liens on, or security
interests in, real or personal property, leases, letters of credit,
and other rights, agreements, and property securing or relating to
payment of Receivables.
2
(c) All books, records, ledger cards, data processing
records, Software, and other property at any time evidencing or
relating to the foregoing.
(d) All monies, securities, and other property now or
hereafter held or received by, or in transit to, Secured Party, from
or for either Debtor, and all of Debtor's Deposit Accounts, credits
and balances with Secured Party existing at any time.
(e) All Proceeds and products of all of the foregoing in
any form, including, without limitation, amounts payable under any
policies of insurance insuring the foregoing against loss or damage,
and all increases and profits received from all of the foregoing."
3. Debtors represent and warrant that as of the date of this Amendment:
(a) the representations and warranties of Debtors contained in Section 4 of the
Loan Agreement remain true and correct in all material respects, (b) Debtors are
in compliance with all covenants and agreements contained in Sections 7 and 8 of
the Loan Agreement, and (c) no Event of Default exists under the Loan Agreement
or the other Transaction Documents.
4. All of the terms and conditions of the Loan Agreement and the other
Transaction Documents, except to the extent the same have been amended herein,
shall remain in Rill force and effect. To the extent that any provision of this
Amendment conflicts with any term or condition set forth in the Loan Agreement
or the other Transaction Documents, the provisions of this Amendment shall
supersede and control.
5. Unless otherwise expressly defined herein, capitalized terms will have
the meanings assigned to them under the terms of the Loan Agreement.
6. Debtors jointly and severally agree to pay on demand all reasonable
costs and expenses of Secured Party in connection with the preparation,
execution and delivery of this Amendment, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for Secured Party.
7. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR
RENEW SUCH DEBT, ARE NOT ENFORCEABLE. TO PROTECT YOU (DEBTORS) AND US (SECURED
PARTY) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING
SUCH MATTERS ARE CONTAINED IN THE LOAN AGREEMENT AND THE OTHER TRANSACTION
DOCUMENTS, WHICH ARE THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT
BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.
3
IN WITNESS WHEREOF, this Amendment has been executed by Debtors and Secured
Party as of the date first above written.
DEBTORS:
ELECSYS CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------------
Name (print): Xxxxxxx X. Xxxxx
------------------------------
Title: Chairman
-------------------------------------
DCI, INC.
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------------------
Name (print): Xxxx X. Xxxxxxxx
-------------------------------
Title: President
--------------------------------------
SECURED PARTY:
GOLD BANK
By: /s/ Xxxxxx Xxxxx
-----------------------------------------
Name (print): Xxxxxx Xxxxx
-------------------------------
Title: Vice President
--------------------------------------
4
