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EXHIBIT 10.1
LINE OF CREDIT
LOAN AGREEMENT
(With Deposit Account Sweep)
In consideration of the covenants and conditions hereafter contained,
BANK ONE, UTAH, NA ("Bank" hereafter) and ZEVEX, INC. ("Borrower" hereafter)
and agree as follows:
1. REPRESENTATIONS.
A. To fund current operations and growth, Borrower has requested
that Bank extend to Borrower a revolving line or credit (Line of Credit).
B. Bank desires to lend to Borrower, on a revolving line of credit
basis, the amount set forth herein as the Line of Credit Limit, pursuant to the
terms and conditions of this Agreement and pursuant to the Loan Documents
executed in connection herewith.
C. All advances made to Borrower under this Line of Credit shall
be secured by the Collateral described herein or in a Security Agreement or
other lien instrument executed at any time prior to or in connection herewith.
D. Borrower has also established one or more demand deposit
accounts and an investment management account with Bank and desires to direct
and authorize Bank to transfer deposits from such deposit accounts to the line
of credit and from the line of credit to such accounts.
2. DEFINITIONS AND ACCOUNTING TERMS.
A. Defined Terms. As used in this Agreement, the following terms
have the following meanings (terms defined in the singular to have the same
meaning when used in the plural and vice versa):
"Accounts" means "accounts" as defined in the Utah Uniform Commercial
Code adopted in the state of Utah.
"Advances" means a borrowing under this Agreement.
"Affiliate" means any Person, (1) which directly or indirectly
controls, or is controlled by, or is under common control with the Borrower or
a Subsidiary; (2) which directly or indirectly beneficially owns or holds five
percent (5%) or more of any class of voting stock of the Borrower or any
Subsidiary; or (3) five percent (5%) or more of the voting stock of which is
directly or indirectly beneficially owned or held by the Borrower or a
Subsidiary. The term "control" means the possession, directly or
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indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise.
"Agreement" means this Line of Credit Loan Agreement, as amended,
supplemented, or modified from time to time.
"Authorized Agent" means the Person or Persons authorized to execute
and deliver this Agreement or any instrument or agreement required hereunder on
behalf of the Borrower, as well as the Person or Persons authorized to obtain
Advances on behalf of Borrower as described in this Agreement.
"Borrowing Base" shall have the meaning as described in Section 3,
Paragraph A.
"Borrowing Base Certificate" means the certificate in the form and
substance satisfactory to Bank.
"Business Day" means any day other than a Saturday, Sunday, or other
day on which commercial banks in Salt Lake City, Utah are authorized or
required to close under the laws of the State of Utah.
"Collateral" means all property which is subject to the Lien granted
by a Security Agreement, or any other lien instrument.
"Debt" means (1) indebtedness or liability for borrowed money; (2)
obligations evidenced by bonds, debentures, notes, or other similar
instruments; (3) obligations for the deferred purchase price of property or
services (including trade obligations); (4) obligations as lessee under Capital
Leases; (5) current liabilities in respect of unfunded vested benefits under
Plans covered by ERISA; (6) obligations under letters of credit; (7) obligations
under acceptance facilities; and (8) all guaranties, endorsements (other than
for collection or deposit in the ordinary course of business), and other
contingent obligations to purchase, to provide funds for payment, to supply
funds to invest in any Person or entity, or otherwise to assure a creditor
against loss; and, (9) obligations secured by any Liens, whether or not the
obligations have been assumed.
"Default" means any of the events specified in this Agreement under
"Events of Default; Remedies", whether or not any requirement for the giving
of notice, the lapse of time, or both, or any other condition, has been
satisfied.
"Eligible Accounts Receivable" means an Account owing to Borrower, as
determined by Bank in its sole and absolute discretion, which has arisen from
the delivery and/or shipment of
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products previously made and/or from services rendered for which an invoice has
been issued by Borrower to its customer ("Customer") and (a) which amount is not
subject to any offset, counterclaim or defense asserted by the Customer, (b)
which amount is subject to a perfected security interest in favor of Bank and is
not subject to any other security interest, lien, claim or encumbrance, and (c)
which amount has not remained unpaid for more than 89 days after the date of the
related invoice, (d) where not more than fifteen percent (15%) of the total
amount owing from a Customer accounting for 5% or more of the total amount owing
to Borrower has remained unpaid for more than 89 days after the date of the
related invoice(s), excepting amounts due from Allergan, Mentor, Alaris and
Paradigm, (e) amounts due from Allergan, Mentor, Alaris and Paradigm which have
not remained unpaid for more than 30 days after the due date of the related
invoice and do not exceed 25% of the total accounts owing to Borrower, (f) which
amount is not an uninsured amount owing from a customer located in a foreign
country, (g) which amount is not owing from the United States of America or any
agency, department or subdivision thereof, unless a properly executed assignment
of claims has been received by Bank, (h) which amount is not the subject of any
threatened or actual litigation, (I) which amount is not owing from a Customer
who is also a supplier or creditor of the Borrower, (j) which amount is not
owing from a Subsidiary, Affiliate, officer or employee of the Borrower or an
intercompany transaction, (k) which amounts are not cash, C.O.D. accounts or
deposit payments for future products, and (i) which amounts are not consignment
accounts, manufacturer representative accounts, buy/sell accounts, or xxxx and
hold accounts.
"Eligible Inventory" means the Inventory (valued at the lower of cost
or market) of Borrower as determined by Bank in its sole and absolute
discretion, to be (a) in good condition and salable in the ordinary course of
Borrower's business, (b) owned by Borrower free and clear of any mortgages,
liens, security interests, claims, encumbrances or rights of others, excepting
only the security interest in favor of Bank, subject to a perfected security
interest in favor of bank, (d) not subject to any consignment to any Customer
and (e) not acquired by Borrower in or as part of a bulk transfer of sale or
assets unless Borrower has complied with all applicable bulk sales or bulk
transfer laws.
"Event of Default" means any of the events specified in this Agreement
under "Events of Default; Remedies," provided that any requirement for the
giving of notice, the lapse of time, or both, or any other condition, has been
satisfied.
"GAAP" means generally accepted accounting principles in the
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United States.
"Guarantors" mean ZEVEX INTERNATIONAL, INC.
"Guaranty" means the Guaranty to be delivered by the Guarantors under
the terms of this Agreement.
"Inventory" means "inventory" as defined in the Uniform Commercial
Code, adopted in the State of Utah.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction to evidence any
of the foregoing).
"Line of Credit Limit" means One Million Dollars ($1,000,000).
"Loan Document" means this Agreement, any Security Agreement, Guaranty,
or hypothecation or other document executed in connection with this Agreement.
"Loan Index Rate" means the rate per annum charged and announced by
Bank One, Columbus, NA, or its successors, from time to time as its "prime
rate", which rate is not intended to be the lowest rate of interest charged by
the Bank to its borrowers. The Loan Index Rate will change on each day that the
"prime rate" changes.
"Loan Interest Rate" means a variable interest rate which shall at all
times during the term of this Agreement be equal to the total of the Loan Index
Rate plus the applicable Margin as defined herein.
"Margin" means the percentage points added to the Loan Index Rate to
determine the Loan Interest Rate pursuant to this Agreement. The Margin is set
forth above the signatures to this Agreement.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority, or other entity of whatever nature.
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"Security Agreement" means the Security Agreement to be delivered by
the Borrower under the terms of this Agreement.
"Subsidiary" means, as to the Borrower, a other corporation of which
shares of stock having ordinary voting power (other than stock having such power
only by reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation are at the time owned,
or the management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by the Borrower.
B. Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles consistent with those applied in the preparation of the financial
statements and all financial data submitted pursuant to this Agreement shall be
prepared in accordance with such principles.
3. CREDIT LIMIT.
A. Notwithstanding the Line of Credit Limit, Bank shall not be
required to Advance to Borrower at any one time under the provisions of this
Agreement an amount in excess of the Line of Credit Limit or the Borrowing Base,
whichever is less. The Borrowing Base shall be equal to the sum of (i) 75% x
Eligible Accounts Receivable; plus (ii) 25% x Eligible Inventory, not to exceed
$500,000.00.
4. TERMS OF LINE OF CREDIT.
A. Bank agrees to lend and Advance to Borrower from the date
hereof amounts which do not exceed the Line of Credit Limit or the Borrowing
Base, whichever is less. Borrower agrees to repay all Advances pursuant to
this Agreement in accordance with the terms described herein. The Line of
Credit Limit is the maximum amount Bank may be required to Advance to Borrower
under this Agreement.
B. It is understood that the amount available to Borrower will
vary in accordance with Advances to Borrower and payments by Borrower.
C. All funds available to Borrower under this Line of Credit will
be Advanced pursuant to the sweep provisions described in this Agreement and
Bank shall not have the right to deny any such Advance unless this Agreement
has been terminated.
D. Borrower, above the signatures to this Agreement, shall
designate demand deposit operating accounts ("Operating Accounts")
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maintained at Bank and the minimum balance to be maintained in each. The
Borrower will designate which Operating Account or Consolidation Account will
be used for depositing advances under this Line of Credit.
E. Borrower authorizes Bank during each Business Day to transfer
Borrower's funds among and between the designated Operating Account, a
Consolidation Account established by Bank, if applicable, an Investment
Management Account (established by separate agreement) and this Line of Credit,
without any further written or oral authorization from Borrower, in accordance
with the following procedures:
(1) Each regular banking day, Bank will withdraw all collected
funds (as defined by Bank's existing funds availability policy) in the
Operating Accounts and deposit the same in the Consolidation Account (if
used), or in the Operating Account used for disbursement purposes if no
Consolidation Account is designated. All funds so consolidated shall be
applied in the following priority:
(i) First: Bank shall pay all checks and charges drawn
or incurred on Borrower's designated Operating Accounts,
including checks drawn for the purpose of accessing funds
available under this Line of Credit and further including wire
transfers, cash advances and charges pre-authorized by Borrower.
(ii) Second: Bank shall deposit into each Operating
Account the minimum balance described above the signatures to
this Agreement.
(iii) Third: Any excess funds shall be applied to the
outstanding principal due on this Line of Credit.
(iv) Fourth: Any remaining funds shall be deposited to
Borrower's Investment Management Account to be invested in
accordance with the terms of the agreement establishing the
Investment Management Account. All interest earned on the
Investment Management Account shall inure to the benefit of the
Borrower.
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F. If sufficient collected funds are not available in the
Consolidation Account or Operating Account to provide for the requirements of
the first and second priorities described above, then funds sufficient to pay
the checks and charges and any overdrafts and to maintain the minimum balances
required, if any, shall be advanced first from the available balance in
Borrower's Investment Management Account and second from the Line of Credit. If
sufficient collected funds are still not available, Bank shall not be required
to satisfy the first and second priorities described above.
G. Every transaction contemplated herein is complete and binding
upon all parties hereto at such time as the Bank records the transaction on its
records.
H. The parties authorized to act for Borrower under this Agreement
shall be those parties specifically described herein as Authorized Agents or as
may be authorized to transact business or issue checks or other pre-authorized
charges on the Borrower's Operating Accounts or the Investment Management
Account.
I. All principal payments on this Line of Credit shall be made at
Borrower's discretion through appropriate deposits to one or more of the
Operating Accounts.
J. Bank, in its sole discretion, may make the transfers described
herein based upon the deposit of uncollected funds and any such transfers or
disbursements shall be reversed at the time of the receipt of any returned item.
K. Loan Interest Rate. Borrower shall pay to Bank interest on the
outstanding principal balance of all Advances obtained under the Line of Credit.
The interest rate shall be the Loan Interest Rate. The Loan Interest Rate may
change from time to time and the interest payable on the outstanding principal
balance will fluctuate with changes in the Loan Interest Rate. Interest shall be
computed daily on the basis of a 360 day year and charged on the number of
actual days Advances are outstanding.
L. Interest Payments. Bank will xxxx Borrower each month for
interest due for the preceding month on total outstanding Advances from the Line
of Credit. Interest will be due in arrears and the interest due must be paid to
Bank on the due date shown on each billing statement. If payment is not received
within ten (10) Business Days after the due date shown on the billing statement,
Borrower authorizes Bank to charge the Line of Credit for the amount of the
interest due for the preceding month so long as such charge does not cause the
outstanding principal balance to exceed
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the Line of Credit Limit or the Borrowing Base, whichever is less. Bank, in
failing to render an interest statement, does not waive its right to receive or
collect interest payments.
M. Principal Payments. Until Bank declares a termination of the
Line of Credit following the occurrence and during the continuance of an Event
of Default, or otherwise notifies Borrower in writing, Borrower may make
payments on the principal balance of Advances outstanding on the Line of Credit
in amounts and at such times as Borrower, in its sole discretion, determines.
There shall be no pre-payment penalty. Principal payments may be paid directly
to Bank or pursuant to one or more deposits made to the Operating Account.
N. Compliance with Borrowing Base. If at any time during the term
of this Agreement, the Borrower obtains knowledge that the total principal
amount of all Advances outstanding exceeds the Line of Credit Limit or the
Borrowing Base whichever is less, the Borrower shall immediately reduce the
principal amount of the Advances outstanding at that time by an amount equal to
such excess.
O. Origination Fee. At the time of closing this Agreement,
Borrower shall pay to Bank a loan origination fee of $500.00. All other fees
and costs of documenting this Agreement, including attorney's fees, will be
paid for by Borrower at the time of closing.
P. Other Fees. Borrower shall pay to Bank a reasonable fee,
including outside attorneys' fees, to amend the Loan Agreement or any of the
Loan Documents. A reasonable fee may also be charged for Bank's review of any
request by the Borrower to modify or waive any restrictive covenants. A fee
charged to modify or waive a restrictive covenant does not imply that Bank
consented to the modification or waiver, but is only to reimburse Bank for its
time and effort in reviewing the request by Borrower. Bank shall issue a
statement for these fees. If the fees are not paid by the 15th day of the
following month, Borrower directs Bank to add the amount to the principal
balance of the Loan. Failing to render a statement does not waive the right to
receive or collect these fees.
Q. Initial Disbursement. The initial disbursement shall be used to
payoff the principal balance and terminate Borrower's existing line of credit
with Bank.
5. COLLATERAL.
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A. The Collateral for all Advances made to Borrower under the Line
of Credit and all accrued interest, costs and fees shall be all of the
Borrower's Inventory and all rights to payment of money including but not
limited to Accounts, contract rights, chattel paper, instruments, general
intangibles, choses in action, furniture, fixtures and equipment now owned or
hereafter acquired and as further described in a Security Agreement or other
lien instrument executed at any time prior to or in connection with this
Agreement. In enforcing the terms of any Security Agreement, following
Borrower's default, Bank shall not be required to liquidate the Collateral in
any particular order. The Collateral is provided in consideration of the
availability of funds under this Agreement, and no security interest shall be
released or be deemed released until this Agreement has been terminated and all
amounts Advanced have been paid in full. No junior Lien on any of Bank's
Collateral shall affect the priority of any Advance made to Borrower under this
Agreement.
B. Borrower agrees that any and all Collateral given to secure
Borrower's obligations and indebtedness under this Agreement shall also secure
any and all liabilities and obligations of Borrower to Bank existing now or in
the future (including that certain Reimbursement Agreement in the initial amount
of $2,024,658 dated on or about October 1, 1996, whether for the payment of
money or otherwise, whether absolute or contingent, whether as principal,
endorser, guarantor, or otherwise, whether originally due to Bank or to a third
Person and assigned endorsed to Bank and whether several, joint, or joint and
several, all as they may be amended, modified, extended, renewed, restated, or
supplemented from time to
6. TERMINATION.
A. Termination by Borrower. Borrower may terminate this Agreement
at any time by furnishing Bank with a written notice that this Agreement is
terminated and coincidentally therewith paying all Advances, including
interest, fees and charges, outstanding under the Line of Credit.
B. Termination by Bank. In the event of Borrower's Default, and
following notice and failure by Borrower to cure as required herein, Bank may
terminate its obligation to make further Advances under this Agreement.
Borrower's default is not waived by any action of Bank other than by a written
waiver of Default.
7. MATURITY.
Notwithstanding any provision herein to the contrary, all outstanding
Advances together with accrued and unpaid interest,
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fees and charges shall mature and be due and payable in full May 31, 1998.
8. PLEDGE.
Borrower does hereby pledge to Bank and grant to Bank a security
interest, perfected by possession, on all of Borrower's accounts, credits,
assets or things of value that from time to time are in the possession and/or
control of Bank. In the event of Default, as defined herein, and Borrower's
failure to cure the Default, Bank may exercise its rights under the pledge and
apply the pledged property to the outstanding balance of Advances due to Bank.
9. CONDITIONS PRECEDENT.
A. Condition Precedent to the Loan. The obligation of Bank to make
the Line of Credit Loan to Borrower is subject to the condition precedent that
the Bank shall have received on or before the date of such Line of Credit each
of the following, in form and substance satisfactory to Bank and its counsel:
(I) Agreement. This Line of Credit Agreement duly executed
by the Borrower.
(ii) Security Agreement. A Security Agreement, duly executed
by the Borrower, together with acknowledged copies of Financing
Statements (UCC-1) duly filed under the Uniform Commercial Code of all
jurisdictions necessary or, in the opinion of the Bank, desirable to
perfect the security interest created by the Security Agreement.
(iii) Evidence of all corporate action by the Borrower.
Certified (as of the date of this Agreement) copies of all corporate
action taken by the borrower, including resolutions of its Board of
Directors, authorizing the execution, delivery, and performance of this
Agreement and each other document to be delivered pursuant to this
Agreement.
(iv) Evidence of all corporate action by the Guarantor.
Certified (as of the date of this Agreement) copies of all corporate
action taken by the Guarantor, including resolutions of its Board of
Directors, authorizing the execution, delivery, and performance of the
Guaranty and each other document to be delivered pursuant to the
Guaranty.
(v) Guaranty. The Guaranty duly executed by the Guarantor.
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(vi) Additional Documentation. The Bank shall have received
such other approvals, opinions, or documents as the Bank may reasonably
request.
10. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Bank that:
A. Incorporation, Good Standing and Due Qualification. The
Borrower and each of its Subsidiaries is a corporation duly incorporated,
validly existing, and in good standing under the laws of the jurisdiction of
its incorporation; has the corporate power and authority to own its assets and
to transact the business in which it is now engaged or proposed to be engaged
in; and is duly qualified as a foreign corporation and in good standing under
the laws of each other jurisdiction in which such qualification is required.
B. Corporate Power and Authority. The execution, delivery, and
performance by the Borrower of this Agreement have been duly authorized by all
necessary action and do not and will not (1) require any consent or approval of
the stockholders of Borrower; (2) contravene Borrower's charter or bylaws;
(3) violate any provision of any law, rule, regulation (including, without
limitation, Regulations U and X of the Board of Governors of the Federal
Reserve System), order, writ, judgment, injunction, decree, determination or
award presently in effect having applicability to Borrower; (4) result in a
breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease, or instrument to which Borrower is a
party or by which it or its properties may be bound or affected; (5) result in,
or require, the creation or imposition of any Lien, upon or with respect to any
of the properties now owned or hereafter acquired by Borrower; and (6) cause
Borrower to be in default under any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination, or award or any such indenture,
agreement, lease, or instrument.
C. Legally Enforceable Agreement. This Agreement is, and each of
the other Loan Documents when delivered under this Agreement will be, legal,
valid and binding obligations of the Borrower enforceable against the Borrower
in accordance with their respective terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency, and other
similar laws affecting creditors' rights generally.
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D. Financial Statements. The balance sheet of the Borrower and its
Subsidiaries as of December 31, 1996, and the related statements of income and
retained earnings of the Borrower and its Subsidiaries for the fiscal year then
ended, copies of which have been furnished to the Bank, are complete and
correct and fairly present the financial condition of the Borrower and its
Subsidiaries as at such dates and the results of the operations of the Borrower
and its Subsidiaries for the periods covered by such statements, all in
accordance with GAAP consistently applied (subject to year-end adjustments in
the case of the interim financial statements), and since June 30, 1997, there
has been no material adverse change in the condition (financial or otherwise),
business, or operations of the Borrower or any Subsidiary. Except as stated
above, there are no liabilities of the Borrower or any Subsidiary, fixed or
contingent, which are material but are not reflected in the financial
statements or in the notes thereto, other than liabilities arising in the
ordinary course of business. No information, exhibit, or report furnished by
the Borrower to the Bank in connection with the negotiation of this Agreement
contained any material misstatement of fact or omitted to state a material fact
or any fact necessary to make the statement contained therein not materially
misleading.
E. Other Agreements. Neither the Borrower, nor any Subsidiary, is
a party to any indenture, loan, or credit agreement, or to any lease or other
agreement or instrument, or subject to any charter or corporate restriction
which could have a material adverse effect on the business, properties, assets,
operations or conditions, financial or otherwise, of the Borrower or any
Subsidiary, or the ability of the Borrower to carry out its obligations under
this Agreement. Neither the Borrower nor any Subsidiary is in default in any
respect in the performance, observance, or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument
material to its business to which it is a party.
F. Litigation. There is no pending or threatened action or
proceeding against or affecting the Borrower or any of its Subsidiaries before
any court, governmental agency, or arbitrator, which may, in any one case or in
the aggregate, materially adversely affect the financial condition, operations,
properties, or business of the Borrower to perform its obligations under this
Agreement.
G. No Defaults on Outstanding Judgments or Orders. The Borrower and
its Subsidiaries have satisfied all judgments, and neither the Borrower nor any
Subsidiary is in default with respect to any judgment, writ, injunction,
decree, rule, or regulation of
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any court, arbitrator, or federal, state, municipal, or other governmental
authority, commission, board, bureau, agency, or instrumentality, domestic or
foreign.
H. Ownership and Liens. The Borrower and each Subsidiary have
title to, or valid leasehold interests in, all of their properties and assets,
real and personal, including the properties and assets and leasehold interest
reflected in the financial statements referred to herein (other than any
properties or assets disposed of in the ordinary course of business), and none
of the properties and assets owned by the Borrower or any Subsidiary and none
of their leasehold interests is subject to any Lien, except such as may be
permitted pursuant to this Agreement.
I. Operation of Business. The Borrower and its Subsidiaries
possess all licenses, permits, franchises, patents, copyrights, trademarks, and
trade names, or rights thereto, to conduct their respective businesses
substantially as now conducted and as presently proposed to be conducted, and
the Borrower and its Subsidiaries are not in violation of any valid rights of
others with respect to any of the foregoing.
J. Taxes. The Borrower and each of its Subsidiaries have filed
all tax returns (federal, state and local) required to be filed and have paid
all taxes, assessments, and governmental charges and levies thereon to be due,
including interest and penalties.
11. AFFIRMATIVE COVENANTS.
So long as this Agreement shall remain in effect, the Borrower will:
A. Maintenance of Existence. Preserve and maintain, and cause each
Subsidiary to preserve and maintain, its corporate existence and good standing
in the jurisdiction of its incorporation, and qualify and remain qualified, and
cause each Subsidiary to qualify and remain qualified, as a foreign corporation
in each jurisdiction in which such qualification is required.
B. Maintenance of Records. Keep, and cause each Subsidiary to
keep, adequate records and books of account, in which complete entries will be
made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Borrower and its Subsidiaries.
C. Maintenance of Properties. Maintain, keep, and preserve,
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and cause each Subsidiary to maintain, keep, and preserve, all of its properties
(tangible and intangible) necessary or useful in the proper conduct of its
business in good working order and condition, ordinary wear and tear excepted.
D. Conduct of Business. Continue, and cause each Subsidiary to
continue, to engage in an efficient and economical manner in a business of the
same general type as now conducted by it on the date of this Agreement.
E. Maintenance of Insurance. Maintain, and cause each Subsidiary to
maintain, insurance with financially sound and reputable insurance companies or
associations in such amounts and covering such risks as are usually carried by
companies engaged in the same or a similar business and similarly situated,
which insurance may provide for reasonable deductibility from coverage thereof.
F. Compliance with Laws. Comply, and cause each Subsidiary to comply,
in all respects with all applicable laws, rules, regulations, and orders, such
compliance to include, without limitation, paying before the same become
delinquent all taxes, assessments, and governmental charges imposed upon it or
upon its property.
G. Right of Inspection. At any reasonable time and from time to time,
permit the Bank or any agent or representative thereof to examine and make
copies of and abstracts from the records and books of account of, and visit the
properties of, the Borrower and any Subsidiary, and to discuss the affairs,
finances, and accounts of the Borrower and any Subsidiary with any of their
respective officers and directors and the Borrower's independent accountants.
H. Reporting Requirement. Furnish to the Bank:
(1) Quarterly financial statements. As soon as available
and in any event within 60 days after the end of each of the first three
quarters of each fiscal year of the Borrower, consolidated balance
sheets of the Borrower and Guarantor as of the end of such quarter,
statements of income and retained earnings of the Borrower and Guarantor
for the period commencing at the end of the previous fiscal year and
ending with the end of such quarter, all in reasonable detail and all
prepared in accordance with GAAP consistently applied (subject to
year-end adjustments);
(2) Annual financial statements. As soon as available and
in any event within 120 days after the end of each fiscal
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year of the Borrower, audited consolidated balance sheets of the
Borrower and Guarantor as of the end of such fiscal year and statements
of income and retained earnings of the Borrower and Guarantor for such
fiscal year and statements of cash flows of the Borrower and Guarantor
for such fiscal year, all in reasonable detail and stating in
comparative form the respective figures for the corresponding date and
period in the prior fiscal year and all prepared in accordance with GAAP
consistently applied and as to the consolidated statements accompanied
by an opinion thereon acceptable to the Bank by certified public
accountants selected by the Borrower and acceptable to the Bank.
(3) Notice of litigation. Promptly after the commencement
thereof, notice of all actions, suits, and proceedings before any court
or governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting the borrower or any
Subsidiary which, if determined adversely to the Borrower or such
Subsidiary, could have a material adverse effect on the financial
condition, properties, or operations of the Borrower or such Subsidiary;
(4) Other Reporting Requirements. Borrower will furnish to
Bank within ten (10) days after the end of each month: (1) current lists
of all accounts receivable showing the name of the account debtor, the
amount and age of the account, and, at Bank's request, addresses of the
account debtors, (2) current lists of all trade accounts payable showing
the name of the trade creditor, the age of the payable, and, at Bank's
request, the addresses of the trade creditors, (3) a current Inventory
summary report, and (4) a Borrowing Base Certificate in a form approved
by Bank. Bank shall have the right to verify the validity, amount, or
any other matter relating to any account.
(5) Notice of Default and Events of Default. As soon as
possible and in any event within fifteen (15) days after the occurrence
of each Default or Event of Default, a written notice setting forth the
details of such Default or Event of Default and the action which is
proposed to be taken by the Borrower with respect thereto;
(6) General information. Such other information respecting the
condition or operations, financial or otherwise, of the Borrower or any
Subsidiary as the Bank may from time to time reasonably request;
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I. Environment. Be and remain, and cause each Subsidiary to be and
remain, in compliance with the provisions of all federal, state, and local
environmental, health, and safety laws, codes and ordinances, and all rules and
regulations issued thereunder, notify the Bank immediately of any notice of a
hazardous discharge or environmental complaint received from any governmental
agency or any other party; notify the Bank immediately of any hazardous
discharge from or affecting its premises; immediately contain and remove the
same, in compliance with all applicable laws; promptly pay any fine or penalty
assessed in connection therewith; permit the Bank to inspect the premises, to
conduct tests thereon, and to inspect all books, correspondence, and records
pertaining thereto; and at the Bank's request, and at the Borrower's expense,
provide a report of a qualified environmental engineer, satisfactory in scope,
form, and content to the Bank, and such other and further assurances reasonably
satisfactory to the Bank that the condition has been corrected.
J. Banking Relationship. Bank shall be the Borrower's sole Bank of
account for all receipts and disbursements in connection with the Borrower's
business.
12. NEGATIVE COVENANTS.
So long as any Advance shall remain unpaid or the Bank shall have any
Commitment under this Agreement, the Borrower will not:
A. Liens. Create, incur, assume, or suffer to exist, or permit any
Subsidiary to create, incur, assume, or suffer to exist, any Lien upon or with
respect to any of its properties, now owned or hereafter acquired, except:
(1) Liens in favor of the Bank;
(2) Liens for taxes and assessments or other governmental
charges or levies if not yet due and payable or, if due and payable, if
they are being contested in good faith by appropriate proceedings and
for which appropriate reserves are maintained;
(3) Liens imposed by law, such as mechanics', materialmen's,
landlord's, warehousemen's, and carriers' Liens, and other similar
Liens, securing obligations incurred in the ordinary course of business
which are not past due for more than ninety (90) days or which are being
contested in good faith in appropriate proceedings and for which
appropriate reserves have been established;
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(4) Liens under workers' compensation, unemployment insurance,
Social Security, or similar legislation;
(5) Liens, deposits, or pledges to secure the performance of bids,
tenders, contracts (other than contracts for the payment of money), leases
(permitted under the terms of this Agreement), public or statutory obligations,
surety, stay, appeal, indemnity, performance, or other similar bonds, or other
similar obligations arising in the ordinary course of business;
(6) Liens existing as of the date of this Agreement.
(7) Judgment and other similar Liens arising in connection with
Court proceedings, provided the execution or other enforcement of such Liens is
effectively stayed and the claims secured thereby are being actively contested
in good faith and by appropriate proceedings;
(8) Easements, rights-of-way, restrictions, and other similar
encumbrances which, in the aggregate, do not materially interfere with the
occupation, use, and enjoyment by the Borrower or any Subsidiary of the property
or assets encumbered thereby in the normal course of its business or materially
impair the value of the property subject thereto;
(9) Liens securing obligations of a Subsidiary to the Borrower or
another Subsidiary; and,
B. Debt. Create, incur, assume, or suffer to exist, or permit any
Subsidiary to create, incur, assume, or suffer to exist, any Debt, except:
(1) Debt of the Borrower to Bank;
(2) Debt as of the date of this Agreement as shown on the financial
statement dated June 30, 1997.
(3) Debt of the Borrower subordinated on terms satisfactory to the
Bank to the Borrower's obligations under this Agreement;
(4) Debt of the Borrower to any Subsidiary or of any Subsidiary to
the Borrower or another Subsidiary;
(5) Accounts payable to trade creditors for goods or services which
are acquired in the ordinary course of Borrower's and Subsidiaries business.
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C. Mergers, Etc. Wind up, liquidate or dissolve itself,
reorganize, merge or consolidate with or into, or convey, sell, assign,
transfer, lease, or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to any Person, or acquire all or substantially all
of the assets or the business of any Person, or permit any Subsidiary to do so,
except that (1) any Subsidiary may merge into or transfer assets to the
Borrower and (2) any Subsidiary may merge into or consolidate with or transfer
assets to any other Subsidiary.
D. Leases. Create, incur, assume, or suffer to exist, or permit
any Subsidiary to create, incur, assume, or suffer to exist, any obligation as
lessee for the rental or hire of any real or personal property, except: (1)
leases existing on the date of this Agreement and any extensions or renewals
thereof; (2) leases which do not in the aggregate require the Borrower and its
Subsidiaries on a consolidated basis to make payments (including taxes,
insurance, maintenance, and similar expenses which the Borrower or any
Subsidiary is required to pay under the terms of any lease) in any fiscal year
of the Borrower in excess of $25,000.00; and, (4) leases between the Borrower
and any Subsidiary or between any Subsidiaries.
E. Sale and Leaseback. Sell, transfer, or otherwise dispose of, or
permit any Subsidiary to sell, transfer, or otherwise dispose of, any real or
personal property to any Person and thereafter directly or indirectly lease
back the same or similar property.
F. Dividends. Declare or pay any dividends; or purchase, redeem,
retire, or otherwise acquire for value any of its capital stock now or
hereafter outstanding; or make any distribution of assets to its stockholders
as such whether in cash, assets, or obligations of the Borrower; or allocate or
otherwise set apart any sum for the payment of any dividend or distribution on,
or for the purchase, redemption, or retirement of any shares of its capital
stock; or make any other distribution by reduction of capital or otherwise in
respect of any shares of its capital stock; or permit any of its Subsidiaries
to purchase or otherwise acquire for value any stock of the Borrower or another
Subsidiary, except that the Borrower (1) may declare and deliver dividends and
make distributions payable solely in common stock of the Borrower and (2) may
purchase or otherwise acquire shares of its capital stock by exchange for or
out of the proceeds received from a substantially concurrent issue of new
shares of its capital stock.
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G. Sale of Assets. Sell, lease, assign, transfer, or otherwise
dispose of, or permit any Subsidiary to sell, lease, assign, transfer or
otherwise dispose of, any of its now owned or hereafter acquired assets
(including, without limitation, shares of stock and indebtedness of
Subsidiaries, receivables, and leasehold interests), except: (1) inventory
disposed of in the ordinary course of business; (2) the sale or other
disposition of assets no longer used or useful in the conduct of its business;
and (3) that any Subsidiary may sell, lease, assign, or otherwise transfer its
assets to the Borrower.
H. Guaranties, Etc. Assume, guaranty, endorse, or otherwise be or
become directly or contingently responsible or liable, or permit any Subsidiary
to assume, guaranty, endorse, or otherwise be or become directly or
contingently responsible or liable (including, but not limited to, an agreement
to purchase any obligation, stock, assets, goods, or services, or an agreement
to maintain or cause such Person to maintain a minimum working capital or net
work, or otherwise to assure the creditors of any Person against loss) for
obligations of any Person, except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business.
I. Transactions With Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate, or permit any Subsidiary to
enter into any transaction, including, without limitation, the purchase, sale,
or exchange of property or the rendering of any service, with any Affiliate,
except in the ordinary course of and pursuant to the reasonable requirements of
the Borrower's or such Subsidiary's business and upon fair and reasonable
terms no less favorable to the Borrower or such Subsidiary than would obtain
in a comparable arm's length transaction with a Person not an Affiliate.
13. FINANCIAL COVENANTS.
So long as Advances under the Line of Credit shall remain unpaid or the
Bank shall have any commitment under this Agreement:
A. Debt Coverage. The Borrower will maintain on a consolidated
basis as of the end of each fiscal year a ratio of (earnings + interest expense
+ depreciation + amortization) to (interest expense + current maturity of long
term debt + capital lease payments) of not less than 1.4 to 1.0.
B. Net Worth. At each date as set forth below the Borrower will
achieve and maintain a consolidated tangible net worth of not
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less than:
Date Tangible Net Worth
---- ------------------
December 31, 1997 $3,500,000
December 31, 1998 $4,000,000
C. Debt to Worth. The Borrower shall maintain at all times ratio
of consolidated Debt to consolidated tangible net worth of not less than
1.25:1.0.
D. Working Capital. The Borrower shall maintain at all times an
excess of consolidated current assets over consolidated current liabilities of
not less than $750,000.00.
14. EVENTS OF DEFAULT; REMEDIES.
If one or more of the following events shall occur ("Events of Default"
or an "Event of Default"):
A. Borrower shall default in the due and punctual payment of
principal or interest on the Line of Credit or any other of its obligations due
to Bank or any part thereof, when the same become due and payable, whether at
maturity or otherwise; or
B. Borrower shall fail to pay any other of its debts or fail to
perform or observe any other of the terms, provisions, covenants, restrictions,
agreements or obligations to be performed by it under this Agreement, or under
agreements or instruments given under this Agreement; or
C. Any representation or warranty made in writing by or on behalf
of Borrower or Guarantor herein or pursuant hereto or otherwise in any report,
certificate or other instrument furnished in connection with this Agreement
shall prove to have been inaccurate or incomplete in any material respect on
the date which it was made; or
D. Borrower or Guarantor shall be adjudicated bankrupt or
insolvent, or generally not pay its debts as they become due, or make an
assignment for the benefit of creditors; or Borrower shall apply for or consent
to the appointment of a custodian, receiver, trustee, or similar officer for it
or for all or substantially all of its property.
E. Guarantor shall fail to perform or observe any of the terms,
provisions, covenants, restrictions, agreements or obligations to be performed
by it under the Guaranty or take any
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action to repudiate the Guaranty.
THEN, Bank, upon the occurrence of any Event(s) of Default, may terminate
this Agreement and, in addition, without presentment, demand, protest, or notice
of any kind, all of which are hereby expressly waived by Borrower:
(a) declare the unpaid principal balance, and all interest thereon
and all other amounts payable under this Agreement immediately due and
payable.
(b) immediately, without expiration of any further period of grace,
enforce payment of all obligations of Borrower to Bank under this Agreement
and under agreements executed in connection herewith and may exercise any
and all other remedies granted to Bank at law, in equity or otherwise.
(c) exercise all of Bank's rights under the terms of any security
agreement, assignment, trust deed, pledge or other lien document executed
in connection herewith.
E. Borrower agrees that after the exercise by Bank of the remedies
specified above and both before and after judgment, the obligations due
hereunder shall accrue interest until paid at the rate of eighteen percent (18%)
per annum.
F. After default, Borrower agrees to pay all reasonable expenses and fees
including reasonable attorney's fees and court costs incurred in the collection
of the obligations and/or incurred in any bankruptcy or insolvency proceedings
or in any arbitration proceedings.
15. MISCELLANEOUS.
A. Amendments, Etc. No amendment, modification, termination, or waiver
of any provision of any Loan Document to which the Borrower is a party, nor
consent to any departure by the Borrower from any Loan Document to which it is
a party, shall in any event be effective unless the same shall be in writing
and signed by the Bank, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
B. Notices, Etc. All notices and other communications provided for under
this Agreement and under the other Loan Documents to which the Borrower is a
party shall be in writing (including telegraphic, telex, and facsimile
transmissions) and mailed or transmitted or delivered, if to the Borrower, at
its address shown above the signatures to this Agreement, and if to the
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Bank, at its address shown above the signatures to this Agreement; or, as to
each party, at such other address as shall be designated by such party in a
written notice to the other party complying as to delivery with the terms of
this Section. Except as otherwise provided in this Agreement, all such notices
and communications shall be effective when deposited in the mails or delivered
to the telegraph company, or sent, answer back received, respectively,
addressed as aforesaid.
C. No Waiver. No failure or delay on the part of the Bank in exercising any
right, power, or remedy hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right, power, or remedy preclude any
other or further exercise thereof or the exercise of any other right, power, or
remedy hereunder. The rights and remedies provided herein are cumulative, and
are not exclusive of any other rights, powers, privileges, or remedies, now or
hereafter existing, at law or in equity or otherwise.
D. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the Borrower and the Bank and their respective successors and
assigns, except that the Borrower may not assign or transfer any of its rights
under this Agreement or document to which the Borrower is a party without the
prior written consent of the Bank.
E. Costs, Expenses and Taxes. The Borrower agrees to pay on demand all
costs and expenses incurred by the Bank in connection with the preparation,
execution, delivery, filing, and administration of this Agreement, and of any
amendment, modification, or supplement to this Agreement, including, without
limitation, the fees and out-of-pocket expenses of counsel for the Bank incurred
in connection with advising the Bank as to its rights and responsibilities
hereunder. The Borrower also agrees to pay all such costs and expenses,
including courts costs, incurred in connection with enforcement of this
Agreement, or any amendment, modification, or supplement thereto, whether by
negotiation, legal proceedings, or otherwise.
F. Integration. This Agreement contains the entire agreement between the
parties relating to the subject matter hereof and supersedes all oral statements
and prior writings with respect thereto.
G. Indemnity. The Borrower hereby agrees to defend, indemnify, and hold the
Bank harmless from and against any and all claims, damages, judgments,
penalties, costs and expenses
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(including attorney fees and court costs now or hereafter arising from the
aforesaid enforcement of this clause) arising directly or indirectly from the
activities of the Borrower and its Subsidiaries, its predecessors in interest,
or third parties with whom it has a contractual relationship, or arising
directly or indirectly from the violation of any environmental protection,
health, or safety law, whether such claims are asserted by any governmental
agency or other person. This indemnity shall survive termination of this
Agreement.
H. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Utah.
I. Severability of Provisions. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of such Loan Document or affecting the
validity or enforceability of such provision in any other jurisdiction.
J. Jury Trial Wavier. THE BANK AND THE BORROWER HEREBY WAIVE TRIAL BY JURY
IN ANY ACTION, PROCEEDING, CLAIM, OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT,
AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR
THE LOAN DOCUMENTS. NO OFFICER OF THE BANK HAS AUTHORITY TO WAIVE, CONDITION, OR
MODIFY THIS PROVISION.
The Agents authorized to act for Borrower under this Agreement are:
NAME SIGNATURE
---- ---------
Xxxx X. Xxxxxxxxxxx /s/ XXXX X. XXXXXXXXXXX
------------------------ -----------------------------
Xxxxxxx X. XxXxxxxx /s/ XXXXXXX X. XXXXXXXX
------------------------ -----------------------------
The additional percentage points ("Margin") to be added to the Loan
Index Rate are 1.0 percentage points. The initial Loan Interest Rate payable on
Advances made under the Line of Credit is 9.5% per annum.
All Advances on the Line of Credit shall be deposited into
Consolidation Account No. 1260-4637.
The Borrower's Operating Accounts and the minimum deposits to be
maintained in each are follows:
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Operating Account Number Minimum Balance
------------------------ ---------------
1135-7769 -0-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by authority duly given as of this 29th day of September, 1997.
BANK: BORROWER:
BANK ONE, UTAH, NA ZEVEX, INC.
By: By: /s/ XXXXXXX X. XXXXXXXX
------------------------------ -------------------------------
XXXXX X. XXXXXXX XXXXXXX X. XXXXXXXX
Title: SR. VICE PRESIDENT Its: CFO
Address: Address:
00 Xxxx Xxxxxxxx, Xxxxx 000 0000 Xxxxxxxxx Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000 Xxxx Xxxx Xxxx, Xxxx 00000
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SECURITY AGREEMENT - ACCOUNTS RECEIVABLE AND INVENTORY
For value received, the undersigned hereinafter called "Borrower" hereby
assigns and grants to Bank One, Utah, NA, the secured party hereunder and
hereafter called "Bank", a security interest in the personal property hereafter
described and hereinafter called "Collateral" and agrees and acknowledges that
Bank has and shall continue to have a security interest in said Collateral
whether the same is now owned, whether acquired from the proceeds of loans by
the Bank, hereafter acquired and in the proceeds from said Collateral for the
purpose of securing the payment of any and all indebtednesses and liabilities
whatsoever of Borrower to Bank whether direct, indirect, absolute or
contingent, due or to become due, whether now existing or hereafter arising and
howsoever evidenced or acquired and whether several, joint or joint and
several. It is understood that this agreement is for the purpose of supporting
a continuing and varying credit relationship between Bank and Borrower and that
the amounts of indebtedness may vary from time to time and may be indicated by
the Borrower's loan accounts, promissory notes, receipts and other evidences
of indebtedness.
COLLATERAL:
1. All rights to payment of money now owned or hereafter acquired
by the Borrower whether due or to become due and whether or not
earned by performance and including but not limited to accounts,
contract rights, chattel paper, instruments, general intangibles
and choses in action, all of which are hereinafter called
"Receivables".
2. All inventory now owned or hereafter acquired by Borrower and
whether or not held for sale or lease or to be furnished under
contracts of service, including without limitation, all goods in
process, raw materials, parts, components, demonstrators, and
things held for sale, resale or manufacture.
3. All proceeds of Receivables and inventory.
4. All rights to insurance and the proceeds thereof covering any of
the above property.
5. In addition to the foregoing, the Collateral includes the
following specifically described property:
All furniture, fixtures and equipment of whatever type or kind, wherever
located, now owned or hereafter acquired.
BORROWER'S REPRESENTATIONS AND WARRANTIES:
1. That Borrower is the owner of all existing Collateral free of
any claim whatsoever except the claim of the Bank and that as to
all Collateral to be acquired after the date hereof Borrower
will be the owner of said Collateral and that the ownership of
the Borrower is free of any claim whatsoever except the claim of
the Bank and Borrower will defend the Collateral and title
thereto.
2. That all Receivables have arisen from actual bona fide
transactions of Borrower and have been duly and regularly
entered to the books and accounts of the Borrower and are not
and will not be proceeds of any encumbered inventory. That all
inventory encumbrances will be completely discharged prior to
sale of the inventory.
3. Borrower will not sell or otherwise dispose of any inventory
except in the ordinary course of business and will not dispose
of any other Collateral without first obtaining written approval
of Bank.
4. Borrower will promptly notify Bank in writing of any event which
affects the value of the Collateral, the ability of the Borrower
or Bank to dispose of the collateral or the rights and remedies
of the Bank in relation thereto including but not limited to the
levy of any legal process against the Collateral and the
adoption of any marketing order, arrangement or procedure
affecting the Collateral whether governmental or otherwise.
5. If any Collateral becomes subject of any negotiable document of
title including any warehouse receipt or xxxx of lading,
Borrower shall duly assign, endorse and deliver such document to
Bank.
6. Borrower will diligently collect all Receivables and keep
accurate books and records of the Receivables and collections
thereof and deposit all receipts therefrom in Borrower's
operating checking account at Bank or at Bank's request in a
separate account at Bank which account is only subject to
withdrawal by Bank. Borrower will withdraw from its operating
checking account only for routing, ordinary and necessary
business expenses.
MAINTENANCE
Borrower agrees:
1. To use, maintain and register (if required) the Collateral in
accordance with law and maintain Collateral and all books in
current condition.
2. To pay and keep Collateral free from all liens, taxes or other
encumbrances.
3. At the option of the Bank and at any time requested by the Bank,
to segregate all Collateral and collections and proceeds
therefrom so that they are capable of identification and
delivery daily such collections and proceeds to Bank in kind and
to deliver any other Collateral to locations designated by Bank.
4. To periodically deliver to Bank records, schedules and reports
which show the status and condition of the Collateral, its
location and such other contracts or other matters which affect
the Collateral.
5. To allow Bank to verify the Collateral and inspect the books and
records of the Borrower and make copies or extracts therefrom.
6. To deliver to Bank any evidences of Receivables including but
not limited to instruments or chattel paper.
7. At Bank's request to notify any account debtors, any buyers of
Collateral or any other persons of Bank's interest in the
Collateral and proceeds thereof and Borrower specifically
authorizes Bank, at its option, to notify all debtors of
Borrower and direct them to pay amounts due to Borrower directly
to Bank.
8. To demand and collect any Receivables and any proceeds of the
Collateral and in furtherance of such purpose Borrower
irrevocably authorizes Bank to endorse or sign Borrower's name
on all collections, receipts or other documents and take
possession of and open the mail addressed to Borrower and remove
therefrom payments of Receivables and proceeds of Collateral.
RIGHT TO PROTECT COLLATERAL:
If Borrower fails to perform any duty herein required or pay any expense
which the Borrower is hereunder required to pay, Bank may make expenditures for
such purposes and the amounts so expended shall become immediately due and
payable by Borrower to Bank or at election of Bank may be added to the unpaid
balance of debt together with a loan finance charge, as permitted by the Utah
Uniform Commercial and Consumer Credit Codes, and such amounts are secured
hereby.
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26
DEFAULT:
Borrower shall be in default if any of the following events occur:
1. Borrower fails to pay any indebtedness to Bank when due;
2. Borrower fails to timely perform any other obligation to Bank;
3. If any statement, representation or warranty of the Borrower to Bank
or to Bank's Assignee, regardless of when made, is determined to be
untrue as of the date made;
4. Borrower becomes insolvent or unable to pay debts as they mature or
makes an assignment for the benefit of creditors or any proceeding
is instituted by or against Borrower alleging that Borrower is
insolvent or unable to pay debts as they mature;
5. Entry of any judgment against Borrower;
6. Death of Borrower who is a natural person or of any partner of
Borrower which is a partnership;
7. Dissolution, merger or consolidation or transfer of a substantial
part of the property of Borrower which is a corporation or a
partnership;
8. The issuing of an attachment or garnishment or the filing of a lien
against any property of Borrower;
9. The assignment by Borrower of any equity in the Collateral without
the written consent of the Bank;
10. The Collateral is lost, stolen or materially damaged;
11. Bank shall deem itself insecure for any reason.
REMEDIES:
Upon and after the occurrence of any default, the Bank may without
notice to Borrower, declare immediately due and payable all amounts secured
hereby and shall have the remedies of a secured party under the Utah Uniform
Commercial Code or other applicable law, and:
1. Bank shall have the right to enter upon any premises where the
Collateral may be and take possession thereof to sell the Collateral
in accordance with law and after deducting all expenses for
maintaining, repairing and/or selling the Collateral and all
attorney's fees, legal or other expenses of collection, sale and
delivery, to apply the residue of the proceeds of such sale or sales
to pay (or to hold as a reserve against) all obligations owing to
Bank and secured by the Collateral.
2. Bank shall have the right immediately and without sale of Collateral
or further action by it, to set off against Borrower's obligations,
whether or not due, all money or other liabilities owed by Bank or
Bank's Assignee in any capacity to Borrower, and such charge as is
made or entered on the books of Bank or Bank's Assignee subsequent
to a default shall be deemed to have been exercised immediately upon
occurrence of such default.
3. Bank may, without notice to or demand on the Borrower, demand,
collect, receipt for, settle, compromise, adjust, use, xxx for,
foreclose or realize upon Collateral as the Bank may determine,
whether or not obligations or Collateral are then due and for the
purpose of realizing the Bank's rights therein, the Bank may
receive, open and dispose of mail addressed to the Borrower and
endorse notes, checks, drafts, money orders, documents of title or
other evidences of payment, shipment or storage or any form of
Collateral on behalf of and in the name of the Borrower. The powers
conferred on the Bank by this Section are solely to protect the
interest of the Bank and shall not impose any duties on the Bank to
exercise any powers.
NOTICES:
Notice of sale or other disposition of the Collateral or any other
notice required or desired, unless otherwise provided, in connection with this
agreement shall be deemed reasonable and sufficient if mailed to Borrower at
Borrower's address stated in this agreement, postage prepaid, at least five (5)
days prior to the sale or disposition of the Collateral or five (5) days prior
to the date a response to the notice is required, except that payments must be
made as specified in demand for payment. Notice to Bank is deemed sufficient
one (1) day after the same has been delivered to Bank and, if Borrower has
knowledge of the Assignment of this instrument, to Bank's Assignee.
GENERAL:
All costs and expenses of Bank in retaking, holding, preparing for sale
and selling or otherwise realizing upon the Collateral in the event of default
by Borrower, including court costs and reasonable attorney's fees and legal
expenses, shall constitute additional indebtedness of the Borrower secured
hereby which Borrower promises to pay on demand.
This agreement may not be altered or amended except by a writing signed
by the Borrower, accepted by Bank and attached hereto. Any provision found to
be invalid shall not invalidate the remainder hereof. Waiver of any default or
failure to exercise any option shall not constitute a waiver of any other or
subsequent default or right. If this instrument is signed by more than one
Borrower, the obligations of Borrowers shall be joint and several. THE RIGHTS
OR PRIVILEGES GRANTED BANK (INCLUDING, WITHOUT LIMITATION, ALL REMEDIES AND
RIGHTS OF SET OFF) ARE ALSO GRANTED TO BANK'S ASSIGNEE. All words herein shall
be construed to be of such gender and number as the circumstances require and
the references to Borrower is joint and endorsers agree that the payments and
performances hereunder may from time to time be extended and/or modified and/or
renewed. Bank shall have the right to inspect the Collateral at any reasonable
time and place. Bank shall have the right to date this instrument and fill in
any blanks. Bank is appointed the agent of Borrower for the limited purpose of
signing a Financing Statement or other required instruments. This instrument
shall be binding upon the heirs, personal representatives, successors and
assigns of the Borrower and shall inure to the benefit of the Bank, its
successors and assigns.
INSURANCE:
Borrower represents that he has and will maintain insurance and
fidelity bonds that cover the Collateral to its full insurable value and hereby
assigns to Bank such portion of any proceeds thereof as may result from a
casualty, loss of Collateral or loss or embezzlement of the proceeds and
appoints Bank Borrower's agent to make claim for and receipt for insurance
proceeds. If Borrower does not have such insurance or bonds, then Borrower, at
his own expense agrees to obtain the same. Proceeds from policies shall be
payable to Bank as its interest may appear and all policies shall provide for
ten (10) days minimum written cancellation notice to Bank. Certificates
attesting the coverage shall be deposited with Bank. Proceeds may be applied by
Bank toward payment of any obligation of Borrower whether or not due and in
such order of application as Bank may determine.
Borrower acknowledges receipt of a complete and legible copy of this
Agreement and executes this Agreement as of this 29th day of September, 1997,
and if executed by a corporation, an association or partnership by officers
thereof thereunto authorized in accordance with duly and regularly adopted
existing authority and resolution of the governing body of such organization.
BANK ONE, UTAH, NA BORROWER:
ZEVEX, INC.
By By /s/ XXXXXXX X. XXXXXXXX
----------------------------- ---------------------------------
Xxxxxxx X. XxXxxxxx
Its Its CFO
---------------------------- --------------------------------
0000 Xxxxxxxx Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
--------------------------------
Address
27
CONTINUING GUARANTY
TO: BANK ONE, UTAH, NA
1. For valuable consideration, the undersigned (hereinafter called
"Guarantor") jointly and severally with Borrower and any other guarantor(s),
unconditionally guarantees payment and promises to pay to BANK ONE, UTAH,
NATIONAL ASSOCIATION (hereinafter called "Bank"), or order, on demand, in
lawful money of the United States, any and all indebtedness of _________________
ZEVEX, INC.
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(hereinafter called "Borrower") to Bank. The word "Indebtedness" is used herein
in its most comprehensive sense and includes any and all advances, debts,
obligations, interest, and liabilities of Borrower, and any and all contracts,
letters of credit or commitments of Bank made for the benefit or at the request
of Guarantor or Borrower, or any one or more of them, heretofore, now or
hereafter made, incurred or created, whether voluntary or involuntary, and
however arising whether due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined, and whether Borrower may be liable
individually or jointly with others, or whether recovery upon such indebtedness
may be, or hereafter becomes, barred by any statute of limitations, or whether
such indebtedness may be, or hereafter becomes, otherwise unenforceable.
2. The liability of Guarantor for Borrower's Indebtedness shall not
exceed at any one time the total of the guaranteed principal sum of
THREE MILLION TWENTY FOUR THOUSAND SIX HUNDRED FIFTY EIGHT DOLLARS AND NO/100
--------------------------------------------------------------------------------
($3,024,658.00) Dollars plus all accrued and accruing interest upon such
guaranteed principal sum to the same extent such interest is contracted and
agreed by Borrower, plus all of Bank's costs, expenses and attorney's fees
incurred in connection with or relating to the collection or enforcement of
this Guaranty. This Guaranty shall bind and obligate the undersigned, his
heirs, devisees, personal representatives, successors and assigns, with
Borrower, jointly and severally, for the payment of the Indebtedness precisely
as if the same had been contracted and was due and owing by him in person. The
obligations hereunder are joint and several and independent of the
obligations of Borrower or any other Guarantor and a separate action or actions
may be brought and prosecuted against Guarantor whether action is brought
against Borrower or whether Borrower be joined in any such action or actions;
and Guarantor waives the benefit of any statute of limitations or any other
statute affecting his ability hereunder or the enforcement thereof. Guarantor
further waives any action against the Borrower or Guarantor required by any
statute. Guarantor submits himself to the jurisdiction of the District Court of
Salt Lake County, State of Utah, and agrees that the laws of the State of Utah
shall govern this agreement.
3. Guarantor authorizes Bank, without notice or demand and without
affecting his liability hereunder, to (a) renew, compromise, extend, revise,
accelerate or otherwise change the time for payment of, or otherwise change
the terms of, the Indebtedness or any part thereof, including increase or
decrease of the rate of interest thereon, before and after any revocation of
this Guaranty; (b) take and hold security for the payment of this Guaranty or
the Indebtedness guaranteed; (c) exchange, enforce, waive and release any such
security; (d) take additional security; (e) apply such security and direct the
order or manner of sale thereof as Bank, in its discretion, may determine; and
(f) release or substitute any one or more of the endorsers or guarantors or
acquire additional guarantors. Bank may, without notice, assign this Guaranty
in whole or in part.
4. Guarantor waives any right to require Bank to (a) proceed against
Borrower or other guarantors; (b) proceed against or exhaust any security held
from Borrower or Guarantor; or (c) pursue any other remedy in Bank's power
whatsoever. Guarantor waives any defense arising by reason of any disability
or other defense of Borrower or by reason of the cessation, from any cause
whatsoever, of the liability of Borrower. Until all Indebtedness of Borrower to
Bank shall have been paid in full, even though such Indebtedness is in excess
of Guarantor's liability hereunder, Guarantor shall have no right of subrogation
unless Bank, at its option, so elects, and Guarantor hereby waives any right to
enforce any remedy which Bank now has, or may hereafter have, against
Borrower, and hereby waives any benefit of, and any right to participate in,
any security now or hereafter held by Bank. Guarantor waives all presentments,
demands for performance, notices of non-performance, protests, notices of
protest, notices of dishonor and notices of acceptance of this Guaranty and of
the existence, creation, or incurring of new or additional Indebtedness.
5. Guarantor also hereby waives any claim, right or remedy which such
Guarantor may now have or hereafter acquire against Borrower that arises
hereunder and/or from the performance by any Guarantor hereunder including,
without limitation, and claim, remedy or right of subrogation, reimbursement,
exoneration, contribution, indemnification, or participation in any claim,
right or remedy of Bank against the Borrower or any security which Bank now has
or hereafter acquires, whether or not such claim, right or remedy arises in
equity, under contract, by statute, under common law or otherwise.
6. If any payment received by the Bank from the Borrower in respect of
the indebtedness is subsequently recovered from or repaid by the Bank as the
result of any bankruptcy, dissolution, reorganization, arrangement, or
liquidation proceedings (or proceedings similar thereto), the Guarantor's
payment obligation hereunder shall be reinstated and shall continue to be
effective as though such payment had not been made. The provisions of this
Section shall survive termination of this Guaranty.
7. This Guaranty is continuing in nature and no written revocation
hereof received by Bank shall affect in any manner rights arising under this
Guaranty with respect to (a) liabilities which shall have been created,
contracted, assumed or incurred prior to actual receipt by the Bank of written
notice of such revocation; (b) liabilities which shall have been created,
contracted, assumed or incurred after actual receipt by Bank of such written
notice pursuant to any contract, letter of credit or commitment entered into
by the Bank prior to receipt of such notice, or (c) any of the aforementioned
liabilities arising out of or in any way related to the Indebtedness, which
shall have been renewed, modified, extended, consolidated, amended or revised
after revocation of this Guaranty, any or all of which actions are contemplated
and hereby permitted by Guarantor, and this Guaranty shall continue in full
force and effect, and Bank shall have the rights herein provided for, as if no
such revocation had
28
occurred. The sole effect of revocation hereof shall be to exclude from this
Guaranty liabilities and Indebtedness thereafter arising which are unconnected
with liabilities and Indebtedness theretofore arising and existing. Any such
revocation of this Guaranty at any time by one or more other guarantors shall
not affect the liability hereunder of Guarantor as to any Indebtedness of the
Borrower, but this Guaranty shall in all respects remain in force and effect as
to such Indebtedness and transactions. The death of any Guarantor shall not
operate as a revocation of liability hereunder of the estate of any such
Guarantor until actual receipt by Bank of written notice of the death of such
Guarantor. Any such revocation by written notice of death shall have the same
effect as any other written revocation hereunder. Guarantor waives notice of
revocation given by any other Guarantor or Guarantors. Any payment by Guarantor
shall not reduce his maximum obligation hereunder, unless written notice to
that effect be actually received by Bank at, or prior to, the time of such
payment. Revocation of this Guaranty shall not in any way affect the rights,
duties, obligations or liabilities of either Bank or Guarantor hereunder with
respect to transactions occurring or Indebtedness incurred prior to the
effectiveness of such revocation.
8. In addition to all liens upon, and the right of set-off against, the
monies, securities or other property of Guarantor given to Bank by law, Bank
shall have a lien upon, and a right of set-off against, to the extent permitted
by law, all monies, securities and other property of Guarantor now or hereafter
in the possession of or on deposit with Bank, whether held for safekeeping or
otherwise; and every such lien and right of set-off may be exercised without
demand upon, or notice to, Guarantor. No lien or right of set-off shall be
deemed to have been waived by any act or conduct on the part of Bank, or by any
neglect to exercise such right of set-off, or to enforce such lien, or by any
delay in so doing, and every right of set-off and lien shall continue in full
force and effect until such right of set-off or lien is specifically waived or
released by an instrument in writing executed by Bank.
9. Guarantor agrees to pay upon demand all of Bank's costs and expenses,
including reasonable attorneys' fees and legal expenses, incurred in
connection with the enforcement of this Guaranty. Costs and expenses include
Bank's reasonable attorneys' fees and legal expenses whether or not the
attorney is a salaried employee of Bank and whether or not there is a lawsuit,
including reasonable attorneys' fees and legal expenses for bankruptcy or
insolvency proceedings, appeals, and any anticipated post-judgment collection
services. Guarantor also shall pay all court costs and such additional fees as
may be directed by the court.
10. Guarantor represents and warrants to Bank that (a) no representations
or agreements of any kind have been made to Guarantor which would limit or
qualify in any way the terms of this Guaranty; (b) this Guaranty is executed at
Borrower's request and not at the request of Bank; (c) Bank has made no
representation to Guarantor as to the creditworthiness of Borrower; and, (d)
upon Bank's request, Guarantor will provide to Bank financial and credit
information in a form acceptable to Bank.
11. This Guaranty is exclusive and cumulative as to amounts and shall not
serve to revoke or alter any Guaranty previously delivered to Bank nor (unless
otherwise specifically provided in writing at the date and execution thereof) be
revoked by any Guaranty subsequently delivered to Bank. This Guaranty does not
in any manner whatsoever limit the amount of any borrowing heretofore or
hereafter made under any other financing agreement between Bank and Borrower.
12. Bank shall not be deemed to have waived any rights under this
Guaranty unless such waiver is given in writing and signed by Bank. No delay or
omission on the part of Bank in exercising any right shall operate as a waiver
of such right or any other right. A waiver by Bank of a provision of this
Guaranty shall not prejudice or constitute a waiver of Bank's right otherwise
to demand strict compliance with any other provision of this Guaranty. No prior
waiver by Bank, nor any course of dealing between Bank and Guarantor, shall
constitute a waiver of any of Bank's rights or of any of Guarantor's
obligations as to any future transactions. Whenever the consent of Bank is
required under this Guaranty, the granting of such consent by Bank in any
instance shall not constitute continuing consent to subsequent instances where
such consent is required and in all cases such consent may be granted or
withheld at the sole discretion of Bank.
13. In all cases where there is but a single Guarantor, all words used
herein in the plural shall be deemed to have been used in the singular where
the context and construction so require; and when there is more than one
Borrower named herein, the word "Borrower" shall mean all and any one or more
of them; and any reference to "his" shall also include "her" or "its" where
appropriate.
14. This Agreement is a final expression of the agreement between the
Guarantor and Bank and this written agreement may not be contradicted by
evidence of any alleged oral agreement.
15. Guarantor authorizes all financial institutions and credit reporting
agencies to furnish Bank opinions and credit information on or affecting
Guarantor, and Guarantor authorizes Bank to report opinions and credit
information affecting Guarantor to all credit reporting agencies or other
financial institutions.
IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guaranty
this 29th day of September, 1997.
ZEVEX INTERNATIONAL, INC.
-------------------------------
Guarantor (Type Name)
BY /s/ XXXXXXX X. XxXXXXXX
------------------------------
Xxxxxxx X. XxXxxxxx, Sec/Treas.
0000 Xxxxxxxxx Xx.
------------------------------
Xxxx Xxxx Xxxx, Xxxx 00000
------------------------------
Address
29
ARBITRATION AGREEMENT
A. Binding Arbitration. The undersigned hereby agree that all
controversies and claims of any nature arising directly or indirectly out of any
and all loan transactions between or among them and any related agreements,
instruments or documents, and including but not limited to a claim based on or
arising from an alleged tort, shall at the written request of any party be
arbitrated pursuant to the applicable Commercial Arbitration Rules of the
American Arbitration Association ("AAA"). The arbitration shall occur in Salt
Lake City, Utah. Judgment upon any award rendered by the arbitrator(s) may be
entered in any court having jurisdiction. The Federal Arbitration Act shall
apply to the construction and interpretation of this arbitration agreement.
B. Arbitration Panel. A single arbitrator shall have the power to
render a maximum award of one hundred thousand dollars ($100,000). A single
arbitrator shall be knowledgeable in the subject matter of the dispute. When any
party files a claim in excess of this amount, the arbitration decision shall be
made by the majority vote of three (3) arbitrators selected as provided herein.
No arbitrator shall have the power to restrain any act of any party.
If arbitration hereunder is required to be before a three (3) person
panel of neutral arbitrators, the panel shall consist of one (1) person from
each of the following categories:
(1) An attorney who has practiced in the area of commercial
law for at least ten (10) years or a retired judge at the State or
Federal District Court or Appellate Court level;
(2) A person with at least ten (10) years experience in
commercial lending; and,
(3) A person with at least ten (10) years experience in
the borrower's industry.
The AAA shall submit a list of persons meeting the criteria outlined above for
each category of arbitrator, and the parties shall select one (1) person from
each category in the manner established by the AAA.
The arbitrator(s) shall award costs and expenses of the arbitration
proceeding in accordance with the provisions of the loan agreement, promissory
note and/or other loan documents relating to the credit which is the subject of
the arbitrated claim or dispute.
30
C. Provisional Remedies, Self-Help and Foreclosure. No provision
of paragraph A shall limit the right of any party to exercise self help
remedies, to foreclose against any real or personal property collateral, or to
obtain any provisions or ancillary remedies (including but not limited to
injunctive relief or the appointment of a receiver) from a court of competent
jurisdiction. At Bank's option, it may enforce its rights under a mortgage by
judicial foreclosure, and under a deed of trust either by exercise of power of
sale or by judicial foreclosure. The institution and maintenance of any remedy
permitted above shall not constitute a waiver of the right to submit any
controversy or claim to arbitration. The statute of limitations, estoppel,
waiver, laches, and similar doctrines which would otherwise be applicable in an
action brought by a party shall be applicable in any arbitration proceeding.
Agreed to this 29th day of September, 1997.
BANK: BORROWER:
BANK ONE, UTAH, NA ZEVEX, INC.
BY: /s/ XXXXX X. XXXXXXX BY: /s/ XXXXXXX X. XXXXXXXX
----------------------------- -----------------------------
Xxxxx X. Xxxxxxx, Xxxxxxx X. XxXxxxxx
ITS: Sr. Vice President ITS: CFO
GUARANTOR:
ZEVEX INTERNATIONAL, INC.,
a Nevada corporation
BY: /s/ XXXXXXX X. XXXXXXXX
----------------------------
ITS: CFO
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