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EXHIBIT 10.20
Credit Agreement, dated December 12, 1996, between Registrant and Bank of
America.
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[LOGO]
BANK OF AMERICA BUSINESS LOAN AGREEMENT
NATIONAL TRUST AND SAVINGS ASSOCIATION
This Agreement dated as of December 12, 1996, is between Bank of America
National Trust and Savings Association (the "Bank") and Special Devices,
Incorporated, a Delaware corporation. (the "Borrower").
1. FACILITY NO. 1: LINE OF CREDIT AMOUNT AND TERMS
1.1 LINE OF CREDIT AMOUNT.
(a) During the availability period described below, the Bank will provide
a One of credit ("Facility No. 1") to the Borrower. The amount of the
line of credit (the "Facility No. 1 Commitment") is Ten Million
Dollars ($10,000,000).
(b) This is a revolving line of credit with a within line facility for
letters of credit. During the availability period, the Borrower may
repay principal amounts and reborrow them.
(c) The Borrower agrees not to permit the outstanding principal balance of
the line of credit plus the outstanding amounts of any letters of
credit, including amounts drawn on letters of credit and not yet
reimbursed, to exceed the Facility No. 1 Commitment.
1.2 AVAILABILITY PERIOD. The line of credit is available between the date
of this Agreement and May 1, 1998 (the "Facility No. 1 Expiration Date") unless
the Borrower is in default.
1.3 INTEREST RATE.
(a) Unless the Borrower elects an optional interest rate as described
below, the interest rate is the Bank's Reference Rate minus one-
quarter (-0.25) percentage point.
(b) The Reference Rate is the rate of interest publicly announced from
time to time by the Bank in San Francisco, California, as its
Reference Rate. The Reference Rate is set by the Bank based on
various factors, including the Bank's costs and desired return,
general economic conditions and other factors, and is used as a
reference point for pricing some loans. The Bank may price loans to
its customers at, above, or below the Reference Rate. Any change in
the Reference Rate shall take effect at the opening of business on the
day specified in the public announcement of a change in the Bank's
Reference Rate.
1.4 REPAYMENT TERMS.
(a) The Borrower will pay interest on December 1, 1996, and then monthly
thereafter until payment in full of any principal outstanding under
this line of credit.
(b) The Borrower will repay in full all principal and any unpaid interest
or other charges outstanding under this line of credit no later than
the Facility No. 1 Expiration Date.
(c) Any amount bearing interest at an optional interest rate (as described
below) may be repaid at the end of the applicable interest period,
which shall be no later than the Expiration Date.
1.5 OPTIONAL INTEREST RATES. Instead of the interest rate based on the
Bank's Reference Rate, the Borrower may elect to have all or portions of
Facility No. 1 (during the availability period) bear interest at the rate(s)
described below during an interest period agreed to by the Bank and the
Borrower. Each interest rate is a rate per year. Interest will be paid on the
last day of each Interest period, and on the last day each month during the
interest period. At the end of any interest period, the interest rate will
revert to the rate based on the Reference Rate, unless the Borrower has
designated another optional interest rate for the portion.
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1.6 FIXED RATE. The Borrower may elect to have all or portions of the
principal balance of Facility No. 1 bear interest at the Fixed Rate, subject to
the following requirements:
(a) The "Fixed Rate" means the fixed interest rate the Bank and the
Borrower agree will apply to the portion during the applicable
interest period.
(b) The interest period during which the Fixed Rate will be in effect will
be one year or less.
(c) Each Fixed Rate portion will be for an amount not less than the
following:
(i) for interest periods of 14 days or longer, Five Hundred
Thousand Dollars ($500,000).
(ii) for interest periods of 1 to 3 days, Five Million Dollars
($5,000,000).
(iii) for interest periods of between 4 days and 13 days, an amount
which, when multiplied by the number of days in the applicable
interest period, is not less than fifteen million (15,000,000)
dollar-days.
(d) The Borrower may not elect a Fixed Rate with respect to any portion of
the principal balance of the line of credit which is scheduled to be
repaid before the last day of the applicable interest period.
(e) Any portion of the principal balance of Facility No. 1 already bearing
interest at the Fixed Rate will not be converted to a different rate
during its interest period.
(f) Each prepayment of a Fixed Rate portion, whether voluntary, by reason
of acceleration or otherwise, will be accompanied by the amount of
accrued interest on the amount prepaid, and a prepayment fee equal to
the amount (if any) by which
(i) the additional interest which would have been payable
on the amount prepaid had it not been paid until the
last day of the interest period, exceeds
(ii) the interest which would have been recoverable by the
Bank by placing the amount prepaid on deposit in the
certificate of deposit market for a period starting
on the date on which it was prepaid and ending on the
last day of the interest period for such portion.
1.7 LIBOR RATE. The Borrower may elect to have all or portions of the
principal balance of Facility No. 1 bear interest at the LIBOR Rate plus
three-quarter (0.75) percentage point.
Designation of a LIBOR Rate portion is subject to the following requirements:
(a) The interest period during which the LIBOR Rate will be in effect will
be one, or two weeks, or one, two, three, four, five, six, seven,
eight nine, ten or eleven months. The first day of the interest
period must be a day other than a Saturday or a Sunday on which the
Bank is open for business in California, New York and London and
dealing in offshore dollars (a "LIBOR Banking Day"). The last day of
the interest period and the actual number of days during the interest
period will be determined by the Bank using the practices of the
London inter-bank market.
(b) Each LIBOR Rate portion will be for an amount not less than Five
Hundred Thousand Dollars ($500,000) for interest periods of one month
or longer. For shorter maturities, each LIBOR Rate portion will be
for an amount which, when multiplied by the number of days in the
applicable interest period, is not less than fifteen million
(15,000,000) dollar-days.
(c) The "LIBOR Rate" means the interest rate determined by the following
formula, rounded upward to the nearest 1/100 of one percent. (All
amounts in the calculation will be determined by the Bank as of the
first day of the interest period.)
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LIBOR Rate = London Inter-Bank Offered Rate
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(1.00 - Reserve Percentage)
Where,
(i) "London Inter-Bank Offered Rate" means the interest rate at
which the Bank's London Branch, London, Great Britain, would
offer U.S. dollar deposits for the applicable interest period
to other major banks in the London inter-bank market at
approximately 11:00 a.m. London time two (2) London Banking
Days before the commencement of the interest period. A
"London Banking Day" is a day on which the Bank's London
Branch is open for business and dealing in offshore dollars.
(ii) "Reserve Percentage" means the total of the maximum reserve
percentages for determining the reserves to be maintained by
member banks of the Federal Reserve System for Eurocurrency
Liabilities, as defined in Federal Reserve Board Regulation D,
rounded upward to the nearest 1/100 of one percent. The
percentage will be expressed as a decimal, and will include,
but not be limited to, marginal, emergency, supplemental,
special, and other reserve percentages.
(d) The Borrower shall irrevocably request a LIBOR Rate portion no later
than 12:00 noon San Francisco time on the LIBOR Banking Day preceding
the day on which the London Inter-Bank Offered Rate will be set, as
specified above.
(e) The Borrower may not elect a LIBOR Rate with respect to any principal
amount which is scheduled to be repaid before the last day of the
applicable interest period.
(f) Any portion of the principal balance already bearing interest at the
LIBOR Rate will not be converted to a different rate during its
interest period.
(g) Each prepayment of a LIBOR Rate portion, whether voluntary, by reason
of acceleration or otherwise, will be accompanied by the amount of
accrued interest on the amount prepaid and a prepayment fee as
described below. A "prepayment" is a payment of an amount on a date
earlier than the scheduled payment date for such amount as required by
this Agreement The prepayment fee shall be equal to the amount (if
any) by which:
(i) the additional interest which would have been payable during
the interest period on the amount prepaid had it not been
prepaid, exceeds
(ii) the interest which would have been recoverable by the Bank by
placing the amount prepaid on deposit in the domestic
certificate of deposit market, the eurodollar deposit market,
or other appropriate money market selected by the Bank, for a
period starting on the date on which it was prepaid and ending
on the last day of the interest period for such portion (or
the scheduled payment date for the amount prepaid, if
earlier).
(h) The Bank will have no obligation to accept an election for a LIBOR
Rate portion if any of the following described events has occurred and
is continuing:
(i) Dollar deposits in the principal amount, and for periods equal
to the interest period, of a LIBOR Rate portion are not
available in the London inter-bank market; or
(ii) the LIBOR Rate does not accurately reflect the cost of a LIBOR
Rate portion.
1.8 LETTERS OF CREDIT. This line of credit may be used for financing:
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(i) commercial letters of credit with a maximum maturity of 180
days but not to extend more than 180 days beyond the Facility
No. 1 Expiration Date. Each commercial letter of credit will
require drafts payable at sight.
(ii) standby letters of credit with a maximum maturity of 1 year
but not to extend more than 1 year beyond the Facility No. 1
Expiration Date.
(iii) The amount of the letters of credit outstanding at any one
time, (including amounts drawn on letters of credit and not
yet reimbursed), may not exceed Five Hundred Thousand Dollars
($500,000) for,commercial letters of credit and Six Million
Dollars ($6,000,000) for standby letters of credit.
The Borrower agrees:
(a) any sum drawn under a letter of credit may, at the option of the Bank,
be added to the principal amount outstanding under this Agreement.
The amount will bear interest and be due as described elsewhere in
this Agreement.
(b) if there is an event of default under this Agreement, upon demand by
the Bank, to immediately prepay and make the Bank whole for any
outstanding letters of credit.
(c) the issuance of any letter of credit and any amendment to a letter of
credit is subject to the Bank's written approval and must be in form
and content satisfactory to the Bank and in favor of a beneficiary
acceptable to the Bank.
(d) to sign the Bank's form Application and Agreement for Commercial
Letter of Credit or Application and Agreement for Standby Letter of
Credit.
(e) to pay any issuance and/or other fees that the Bank notifies the
Borrower will be charged for issuing and processing letters of credit
for the Borrower.
(f) to allow the Bank to automatically charge its checking account for
applicable fees, discounts, and other charges.
(g) to pay the Bank a non-refundable fee equal to the greater of 1.25% per
annum of the outstanding undrawn amount of each standby letter of
credit or a minimum of Five Hundred Dollars ($500), payable quarterly
in advance, calculated on the basis of the face amount outstanding on
the day the fee is calculated.
2. FACILITY NO. 2: LINE OF CREDIT AMOUNT AND TERMS
2.1 LINE OF CREDIT AMOUNT.
(a) Until May 1, 1998 (the "Facility No. 2 Expiration Date"), the Bank
will provide a line of credit ("Facility No. 2") to the Borrower. The
amount of the line of credit (the "Facility No. 2 Commitment") is
Twelve Million Dollars ($12,000,000).
(b) This is a revolving line of credit under which the Borrower may obtain
advances ("Advances") and term loans ("Term Loans") at any time up to
the Facility No. 2 Expiration Date. Until that date, Advances may be
repaid (either from the Borrower's own funds or from the proceeds of a
Term Loan) and reborrowed, subject to all of the terms and conditions
of this Agreement.
(c) Term Loans are subject to all of the following conditions:
(i) Term Loans may be used only to repay any portion of the
outstanding principal balance of Advances, to repay all of
such outstanding principal balance on the Facility No. 2
Expiration Date, or for other purposes permitted under
Paragraph 8.1 of this Agreement;
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(ii) Each Term Loan will be repaid in sixty (60) successive equal
monthly installments, starting on the first day of the month
following the month in which Term Loan was made. Amounts
repaid may not be reborrowed:
(iii) Each Term Loan will be in a minimum amount of One Million
Dollars ($1,000,000), except for a Term Loan made on the
Facility No. 2 Expiration Date, which may be in a lesser
amount equal to the then-outstanding principal balance of all
Advances;
(iv) No more than four (4) Term Loans may be outstanding at any one
time; and
(v) No Term Loan may be obtained after the Facility No. 2
Expiration Date.
(d) The Borrower agrees not to permit the outstanding principal balance of
all Advances and all Term Loans to exceed the Facility No. 2
Commitment at any time.
2.2 INTEREST RATE. Unless the Borrower elects an optional interest rate
as described below, the interest rate is the Bank's Reference Rate minus
one-quarter (-0.25) percentage point.
2.3 REPAYMENT TERMS.
(a) The Borrower will pay interest on December 1, 1996, and then monthly
thereafter until payment in full of any principal outstanding under
this line of credit.
(b) The Borrower will repay the principal amount of all Advances
outstanding on the Facility No. 2 Expiration Date on that date. At
the Borrower's option, such repayment may be made out of the proceeds
of a Term Loan made on that date. On May 1, 2003, the Borrower will
repay the remaining principal balance of Facility No. 2 plus any
interest then due.
(c) Any amount bearing interest at an optional interest rate (as described
below) may be repaid at the end of the applicable interest period.
2.4 Optional Interest Rates. Instead of the interest rate based on the
Bank's Reference Rate, the Borrower may elect to have all or portions of
Facility No. 2 bear interest at the rates described below during an interest
period agreed to by the Bank and the Borrower. Each interest rate is a rate
per year. Interest will be paid on the last day of each interest period, and
on the first day of each month during the interest period. At the end of any
interest period, the interest rate will revert to the rate based on the
Reference Rate, unless the Borrower has designated another optional interest
rate for the portion.
2.5 Fixed Rate. The Borrower may elect to have all or portions of the
principal balance of Advances under Facility No. 2 bear interest at the Fixed
Rate, subject to the following requirements:
(a) The "Fixed Rate" means the fixed interest rate the Bank and the
Borrower agree will apply to the portion during the applicable
interest period.
(b) The interest period during which the Fixed Rate will be in effect will
be no shorter than 14 days and no longer than one year. Each interest
period must end no later than the Facility No. 2 Expiration Date.
(c) Each Fixed Rate portion will be for an amount not less than Five
Hundred Thousand Dollars ($500,000).
(d) Any portion of the principal balance of Facility No. 2 already bearing
interest at the Fixed Rate will not be converted to a different rate
during its interest period.
(e) Each prepayment of a Fixed Rate portion, whether voluntary, by reason
of acceleration or otherwise, will be accompanied by the amount of
accrued interest on the amount prepaid, and a prepayment fee equal to
the amount (if any) by which
(i) the additional interest which would have been payable on the
amount prepaid had it not been paid until the last day of the
interest period, exceeds
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(ii) the interest which would have been recoverable by the Bank by
placing the amount prepaid on deposit in the certificate of
deposit market for a period starting on the date on which it
was prepaid and ending on the last day of the interest period
for such portion.
2.6 LIBOR Rate. The Borrower may elect to have all or portions of the
principal balance of Advances under Facility No. 2 bear interest at the LIBOR
Rate plus three-quarter (0.75) percentage point.
Designation of a LIBOR Rate portion is subject to the following requirements:
(a) The interest period during which the LIBOR Rate will be in effect will
be one, or two weeks, or one, two, three, four, five, or six months.
The first day of the interest period must be a day other than a
Saturday or a Sunday on which the Bank is open for business in
California, New York and London and dealing in offshore dollars (a
"LIBOR Banking Day"). The last day of the interest period and the
actual number of days during the interest period will be determined by
the Bank using the practices of the London interbank market. In any
event, each interest period must end no later than the Facility No. 2
Expiration Date.
(b) Each LIBOR Rate portion will be for an amount not less than Five
Hundred Thousand Dollars ($500,000).
(c) The "LIBOR Rate" means the interest rate determined by the following
formula, rounded upward to the nearest 1/100 of one percent. (All
amounts in the calculation will be determined by the Bank as of the
first day of the interest period.)
LIBOR Rate = London Inter-Bank Offered Rate
------------------------------
(1.00 - Reserve Percentage)
Where,
(i) "London Inter-Bank Offered Rate" means the interest rate at
which the Bank's London Branch, London Great Britain, would
offer U.S. dollar deposits for the applicable interest period
to other major banks in the London inter-bank market at
approximately 11:00 a.m. London time two (2) London Banking
Days before the commencement of the interest period. A "London
Banking Day" is a day on which the Bank's London Branch is
open for business and dealing in offshore dollars.
(ii) "Reserve Percentage" means the total of the maximum reserve
percentages for determining the reserves to be maintained by
member banks of the Federal Reserve System for Eurocurrency
Liabilities, as defined in Federal Reserve Board Regulation D,
rounded upward to the nearest 1/100 of one percent. The
percentage will be expressed as a decimal, and will include,
but not be limited to, marginal, emergency, supplemental,
special, and other reserve percentages.
(d) The Borrower shall irrevocably request a LIBOR Rate portion no later
than 12:00 noon San Francisco time on the LIBOR Banking Day preceding
the day on which the London Inter-Bank Offered Rate will be set, as
specified above.
(e) Any portion of the principal balance of Facility No. 2 already bearing
interest at the LIBOR Rate will not be converted to a different rate
during its interest period.
(f) Each prepayment of a LIBOR Rate portion, whether voluntary, by reason
of acceleration or otherwise, will be accompanied by the amount of
accrued interest on the amount prepaid and a prepayment fee as
described below. A "prepayment" is a payment of an amount on a date
earlier than the scheduled payment date for such amount as required by
this Agreement The prepayment fee shall be equal to the amount (if
any) by which:
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(i) the additional interest which would have been payable during
the interest period on the amount prepaid had it not been
prepaid, exceeds
(ii) the interest which would have been recoverable by the Bank by
placing the amount prepaid on deposit in the domestic
certificate of deposit market, the eurodollar deposit market,
or other appropriate money market selected by the Bank, for a
period starting on the date on which it was prepaid and ending
on the last day of the interest period for such portion (or
the scheduled payment date for the amount prepaid, if
earlier).
(g) The Bank will have no obligation to accept an election for a LIBOR
Rate portion if any of the following described events has occurred and
is continuing:
(i) Dollar deposits in the principal amount, and for periods equal
to the interest period, of a LIBOR Rate portion are not
available in the London inter-bank market; or
(ii) the LIBOR Rate does not accurately reflect the cost of a
LIBOR Rate portion.
2.7 LONG TERM RATE. The Borrower may elect to have all or portions of the
Term Loans under Facility No. 2 bear interest at the Long Term Rate, subject to
the following requirements:
(a) The interest period during which the Long Term Rate will be in effect
will be one year or more.
(b) The "Long Term Rate" means the fixed interest rate the Bank and the
Borrower agree will apply to the portion during the applicable
interest period.
(c) Each Long Term Rate portion will be for an amount not less than One
Hundred Thousand Dollars ($100,000).
(d) Any portion of the principal balance of the Facility No. 2 already
bearing interest at the Long Term Rate will not be converted to a
different rate during its interest period.
(e) The Borrower may prepay any Long Term Rate portion in whole or in part
in the minimum amount of One Hundred Thousand Dollars ($100,000). The
Borrower will give the Bank irrevocable written notice of the
Borrower's intention to make the prepayment, specifying the date and
amount of the prepayment. The notice must be received by the Bank at
least 5 banking days in advance of the prepayment. All prepayments of
principal on the Long Term Rate portion will be applied on the most
remote principal installment or installments then unpaid.
(f) Each prepayment of a Long Term Rate portion, whether voluntary, by
reason of acceleration or otherwise, will be accompanied by payment of
all accrued interest on the amount of the prepayment and the
prepayment fee described below.
(g) The prepayment fee will be the sum of fees calculated separately for
each Prepaid Installment as follows:
(i) The Bank will first determine the amount of interest which
would have accrued each month for the Prepaid Installment had
it remained outstanding until the applicable Original Payment
Date, using the Long Term Rate;
(ii) The Bank will then subtract from each monthly interest amount
determined in (i), above, the amount of interest which would
accrue for that Prepaid Installment if it were reinvested from
the date of prepayment through the Original Payment Date,
using the following rate:
(A) If the Original Payment Date is more than 5 years
after the date of prepayment: the Treasury Rate plus
one-quarter of one percentage point:
(B) If the Original Payment Date is 5 years or less after
the date of prepayment: the Money Market Rate.
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(iii) If (i) minus (ii) for the Prepaid Installment is greater than
zero, the Bank will discount the monthly differences to the
date of prepayment by the rate used in (ii) above. The sum of
the discounted monthly differences is the prepayment fee for
that Prepaid Installment.
(h) The following definitions will apply to the calculation of the
prepayment fee:
"Money Market" means the domestic certificate of deposit market, the
eurodollar deposit market or other appropriate money market selected
by the Bank.
"Money Market Rate" means the fixed interest rate per annum which the
Bank determines could be obtained by reinvesting a specified Prepaid
Installment in the Money Market from the date of prepayment through
the Original Payment Date.
"Original Payment Dates" means the dates on which principal of the
Long Term Rate portion would have been paid if there had been no
prepayment If a portion of the principal would have been paid later
than the end of the interest period in effect at the time of
prepayment, then the Original Payment Date for that portion will be
the last day of the interest period.
"Prepaid Installment" means the amount of the prepaid principal of the
Long Term Rate portion which would have been paid on a single Original
Payment Date.
"Treasury Rate" means the interest rate yield for U.S. Government
Treasury Securities which the Bank determines could be obtained by
reinvesting a specified Prepaid Installment in such securities from
the date of prepayment through the Original Payment Date.
(i) The Bank may adjust the Treasury Rate and Money Market Rate to reflect
the compounding, accrual basis, or other costs of the Long Term Rate
portion. Each of the rates is the Bank's estimate only and the Bank
is under no obligation to actually reinvest any prepayment. The rates
will be based on information from either the Telerate or Reuters
information services, The Wall Street Journal, or other information
sources the Bank deems appropriate.
3. EXPENSES
(a) The Borrower agrees to immediately repay the Bank for reasonable
expenses relating to this Agreement that include, but are not limited
to, filing, recording and search fees, appraisal fees, and
documentation fees.
(b) The Borrower agrees to reimburse the Bank for any reasonable expenses
it incurs in the preparation of this Agreement and any agreement or
instrument required by this Agreement. Expenses include, but are not
limited to, reasonable attorneys' fees, including any allocated costs
of the Bank's in-house counsel.
(c) The Borrower agrees to reimburse the Bank for the reasonable cost of
periodic audits and appraisals of the personal property collateral
securing this Agreement, at such intervals as the Bank may reasonably
require. The audits and appraisals may be performed by employees of
the Bank or by independent appraisers.
4. COLLATERAL
4.1 PERSONAL PROPERTY. The Borrower's obligations to the Bank under this
Agreement will be secured by personal property the Borrower now owns or will
own in the future as listed below. The collateral is further defined in
security agreement(s) executed by the Borrower. In addition, all personal
property collateral securing this Agreement shall also secure all other present
and future obligations of the Borrower to the Bank (excluding any consumer
credit covered by the federal Truth in Lending law, unless the Borrower has
otherwise agreed in writing). All personal property collateral securing any
other present or future obligations of the Borrower to the Bank shall also
secure this Agreement.
(a) Machinery, equipment, and fixtures.
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(b) Inventory.
(c) Receivables.
5. DISBURSEMENTS, PAYMENTS AND COSTS
5.1 REQUESTS FOR CREDIT. Each request for an extension of credit will be
made in writing in a manner acceptable to the Bank, or by another
means acceptable to the Bank.
5.2 DISBURSEMENTS AND PAYMENTS. Each disbursement by the Bank and each
payment by the Borrower will be:
(a) made at the Bank's branch (or other location) selected by the Bank
from time to time;
(b) made for the account of the Bank's branch selected by the Bank from
time to time;
(c) made in immediately available funds, or such other type of funds
selected by the Bank;
(d) evidenced by records kept by the Bank. In addition, the Bank may, at
its discretion, require the Borrower to sign one or more promissory
notes.
5.3 TELEPHONE AUTHORIZATION.
(a) The Bank may honor telephone instructions for advances or repayments
or for the designation of optional interest rates given by any one of
the individuals authorized to sign loan agreements on behalf of the
Borrower, or any other individual designated by any one of such
authorized signers.
(b) Advances will be deposited in and repayments will be withdrawn from
the Borrower's account number 14656-01160, or such other of the
Borrower's accounts with the Bank as designated in writing by the
Borrower.
(c) The Borrower indemnifies and excuses the Bank (including its officers,
employees, and agents) from all liability, loss, and costs in
connection with any act resulting from telephone instructions it
reasonably believes are made by any individual authorized by the
Borrower to give such instructions. This indemnity and excuse will
survive this Agreement.
5.4 DIRECT DEBIT (PRE-BILLING).
(a) The Borrower agrees that the Bank will debit the Borrower's deposit
account number 14656-01160, or such other of the Borrower's accounts
with the Bank as designated in writing by the Borrower (the
"Designated Account) on the date each payment of principal and
interest and any fees from the Borrower becomes due (the "Due Date).
If the Due Date is not a banking day, the Designated Account Will be
debited on the next banking day.
(b) Approximately 10 days prior to each Due Date, the Bank will mail to
the Borrower a statement of the amounts that will be due on that Due
Date (the "Billed Amount"). The calculation will be made on the
assumption that no new extensions of credit or payments will be made
between the date of the billing statement and the Due Date, and that
there will be no changes in the applicable interest rate.
(c) The Bank will debit the Designated Account for the Billed Amount,
regardless of the actual amount due on that date (the "Accrued
Amount").
If the Billed Amount debited to the Designated Account differs from the
Accrued Amount, the discrepancy will be treated as follows:
(i) If the Billed Amount is less than the Accrued Amount, the
Billed Amount for the following Due Date will be increased by
the amount of the discrepancy. The Borrower will not be in
default by reason of any such discrepancy.
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(ii) If the Billed Amount is more than the Accrued Amount, the
Billed Amount for the following Due Date will be decreased by
the amount of the discrepancy.
Regardless of any such discrepancy, interest will continue to accrue
based on the actual amount of principal outstanding without
compounding. The Bank will not pay the Borrower interest on any
overpayment.
(d) The Borrower will maintain sufficient funds in the Designated Account
to cover each debit. If there are insufficient funds in the Designated
Account on the date the Bank enters any debit authorized by this
Agreement, the debit will be reversed.
5.5 BANKING DAYS. Unless otherwise provided in this Agreement, a banking
day is a day other than a Saturday or a Sunday on which the Bank is open for
business in California. For amounts bearing interest at a LIBOR Rate, a
banking day is a day other than a Saturday or a Sunday on which the Bank is
open for business in California, New York and London and dealing in offshore
dollars. All payments and disbursements which would be due on a day which is
not a banking day will be due on the next banking day. All payments received
on a day which is not a banking day will be applied to the credit on the next
banking day.
5.6 TAXES. The Borrower will not deduct any taxes from any payments it
makes to the Bank. If any government authority imposes any taxes on any
payments made by the Borrower, the Borrower will pay the taxes and will also
pay to the Bank, at the time interest is paid, any additional amount which the
Bank specifies as necessary to preserve the after-tax yield the Bank would have
received if such taxes had not been imposed. Upon request by the Bank, the
Borrower will confirm that it has paid the taxes by giving the Bank official tax
receipts (or notarized copies) within 30 days after the due date. However, the
Borrower will not pay the Bank's net income taxes.
5.7 ADDITIONAL COSTS. The Borrower will pay the Bank, on demand, for the
Banks costs or losses arising from any statute or regulation, or any request or
requirement of a regulatory agency which is applicable to all national banks or
a class of all national banks and which arises after the date of this
Agreement. The costs and losses will be allocated to the loan in a manner
determined by the Bank, using any reasonable method. The costs include the
following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's assets and commitments
for credit.
5.8 INTEREST CALCULATION. Except as otherwise stated in this Agreement,
all interest and fees, if any, will be computed on the basis of a 360-day year
and the actual number of days elapsed. This results in more interest or a
higher fee than if a 365-day year is used.
5.9 INTEREST ON LATE PAYMENTS. At the Bank's sole option in each
instance, any amount not paid when due under this Agreement (including
interest) shall bear interest from the due date at the Bank's Reference Rate
plus two (2.0) percentage points. This may result in compounding of interest.
5.10 DEFAULT RATE. Upon the occurrence and during the continuation of any
default under this Agreement, advances under this Agreement will at the option
of the Bank bear interest at a rate per annum equal to Bank's Reference Rate
plus two (2.0) percentage points.
6. CONDITIONS
The Bank must receive the following items, in form and content acceptable to
the Bank, before it is required to extend any credit to the Borrower under this
Agreement:
6.1 AUTHORIZATIONS. Evidence that the execution, delivery and performance
by the Borrower of this Agreement and any instrument or agreement required
under this Agreement have been duly authorized.
6.9 SECURITY AGREEMENTS. Signed original security agreements,
assignments, financing statements and fixture filings (together with collateral
in which the Bank requires a possessory security interest), and deeds of trust
which the Bank requires.
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12
6.3 EVIDENCE OF PRIORITY. Evidence that security interests and liens in
favor of the Bank are valid, enforceable, and prior to all others' rights and
interests, except those the Bank consents to in writing.
6.4 INSURANCE. Evidence of insurance coverage, as required in the
"Covenants" section of this Agreement.
6.5 OTHER ITEMS. Any other items that the Bank reasonably requires.
7. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, the Borrower makes the following
representations and warranties which survive until the Bank is repaid in full.
Each request for an extension of credit constitutes a renewed representation.
7.1 ORGANIZATION OF BORROWER. The Borrower is a corporation duly formed
and existing under the laws of the state where organized.
7.2 AUTHORIZATION. This Agreement, and any instrument or agreement
required hereunder, are within the Borrower's powers, have been duly
authorized, and do not conflict with any of its organizational papers.
7.3 ENFORCEABLE AGREEMENT. This Agreement is a legal, valid and binding
agreement of the Borrower, enforceable against the Borrower in accordance with
its terms, and any instrument or agreement required hereunder, when executed
and delivered, will be similarly legal, valid, binding and enforceable.
7.4 GOOD STANDING. In each state in which the Borrower does business, it
is properly licensed, in good standing, and, where required, in compliance with
fictitious name statutes except where such failure would not have a material
adverse effect upon the Borrower.
7.5 NO CONFLICTS. This Agreement does not conflict with any law,
agreement, or obligation by which the Borrower is bound.
7.6 FINANCIAL INFORMATION. All financial and other related information
that has been or will be supplied to the Bank, is:
(a) sufficiently complete to give the Bank accurate knowledge of the
Borrower's financial condition.
(b) in form and content reasonably required by the Bank.
(c) in compliance with all government regulations that apply.
7.7 LAWSUITS. There is no lawsuit, tax claim or other dispute pending or
threatened against the Borrower, which, if lost, would materially impair the
Borrower's financial condition or ability to repay the loan, except as have
been disclosed in writing to the Bank.
7.8 COLLATERAL. All collateral required in this Agreement is owned by the
grantor of the security interest free of any title defects or any liens or
interests of others except for liens permitted by Paragraph 8.10(c) and other
liens to which the Bank has consented in writing.
7.9 PERMITS, FRANCHISES. The Borrower possesses all permits, memberships,
franchises, contracts and licenses required and all trademark rights, trade
name rights, patent rights and fictitious name rights necessary to enable it to
conduct the business in which it is now engaged.
7.10 OTHER OBLIGATIONS. The Borrower is not in default on any obligation
for borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.
7.11 INCOME TAX RETURNS. the Borrower has no knowledge of any pending
assessments or adjustments of its income tax for any year.
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13
7.12 NO EVENT OF DEFAULT. There is no event which is, or with notice or
lapse of time or both would be, a default under this Agreement.
7.13 LOCATION OF BORROWER. The Borrower's place of business (or, if the
Borrower has more than one place of business, its chief executive office) is
located at the address listed under the Borrower's signature on this Agreement.
8. COVENANTS
The Borrower agrees, so long as credit is available under this Agreement and
until the Bank is repaid in full:
8.1 USE OF PROCEEDS. To use the proceeds of (i) Facility No. 1 only for
working capital and to facilitate the issuance of commercial and standby
letters of credit; and (ii) Facility No. 2 to finance the acquisition of
capital assets, and real estate construction and/or refinancing existing term
debt.
8.2 FINANCIAL INFORMATION. To provide the following financial information
and statements and such additional information as requested by the Bank from
time to time:
(a) Within 120 days after the date of filing with the Securities and
Exchange Commission, copies of the Borrower's Form 10-K Annual Report
containing the Borrower's audited financial statements with opinion
acceptable to the Bank.
(b) Copies of the Borrower's Form 10-Q Quarterly Report within 60 days
after the date of filing with the Securities and Exchange Commission.
8.3 QUICK RATIO. To maintain a ratio of quick assets to current
liabilities of at least 1.15:1.0. This ratio shall be measured quarterly.
"Quick assets" means cash, short-term cash investments, net trade receivables
and marketable securities not classified as long-term Investments. Current
liabilities to include the principal amount outstanding under Facility No. 1
but exclude understandings under the line portion of Facility No. 2.
8.4 TANGIBLE NET WORTH. To maintain on a quarterly basis, tangible net
worth equal to at least the sum of the following.
(a) Sixty Two Million Dollars ($62,000,000); plus
(b) 50% of net income after income taxes (without subtracting losses)
earned in fiscal year 1997, and each fiscal year thereafter,
"Tangible net worth" means the gross book value of the Borrower's assets
(excluding goodwill, patents, trademarks, trade names, organization expense,
treasury stock, unamortized debt discount and expense, deferred research and
development costs, deferred marketing expenses, and other like intangibles, and
monies due from affiliates, officers, directors or shareholders of the
Borrower) less total liabilities, including but not limited to accrued and
deferred income taxes, and any reserves against assets.
8.5 TOTAL LIABILITIES TO TANGIBLE NET WORTH RATIO. To maintain a ratio of
total liabilities to tangible net worth not exceeding 0.50:1.0. This ratio
shall be measured quarterly. "Total liabilities" means the sum of current
liabilities plus long term liabilities.
8.6 DEBT COVERAGE RATIO. To maintain a Debt Coverage Ratio of at least
1.75:1.0. This ratio shall be measured quarterly.
"Debt Coverage Ratio" means the ratio of: (i) the sum of, net profit after
taxes, plus interest expense, plus depreciation and amortization, less
dividends; to (ii) the sum of the current portion of long-term debt plus
interest expense. This ratio will be calculated at the end of each fiscal
quarter, using fiscal year-to-date results on an annualized basis. The current
portion of long term debt will be measured as of the last day of the current
quarter and will exclude Facility No. 2 except for portions of any Term Loan due
within one year.
8.7 PROFITABILITY. To maintain a positive net income after taxes and
extraordinary items for each annual accounting period.
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14
8.8 LIMITATION ON LOSSES. Not incur a net loss after taxes and before
extraordinary items in any two (2) consecutive quarterly accounting periods.
8.9 OTHER DEBTS. Not to have outstanding or incur any direct or
contingent debts (other than those to the Bank), or become liable for the debts
of others without the Bank's written consent. This does not prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of
business.
(c) Obtaining surety bonds in the usual course of business.
(d) Additional purchase money debt for business purposes which do not
exceed a total principal amount of Five Million Dollars ($5,000,000)
outstanding at any one time.
8.10 OTHER LIENS. Not to create, assume, or allow any security interest or
lien (including judicial liens) on property the Borrower now or later owns,
except:
(a) Deeds of trust and security agreements in favor of the Bank.
(b) Liens for taxes not yet due.
(c) Liens outstanding on the date of this Agreement disclosed in writing
to the Bank.
(d) Additional Purchase money security interests in property acquired
after the date of this Agreement if the total principal amount of
debts secured by such liens does not exceed Five Million Dollars
($5,000,000) at any one time.
(e) Statutory liens of landlords and liens of carriers, warehousemen,
mechanics, materialmen, bankers and other liens imposed by law and
created in the ordinary course of business.
(f) Liens incurred and deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and
other types of social security benefits.
(g) Liens existing on assets of any person at the time such person is
acquired in a transaction permitted under Paragraph 8.22(c), provided
such lien was not created in contemplation of such acquisition and
such lien does not encumber any assets other than the assets subject
to such lien at the time of such acquisition.
(h) Other liens incidental to the conduct of the business or the ownership
of the assets of the Borrower that (i) were not Incurred in
connection with borrowed money, (ii) do not in the aggregate
materially detract from the value of the assets subject thereto or
materially impair the use thereof in the operation of such business
and (iii) do not secure obligations aggregating in excess of
$100,000.
8.11 CAPITAL EXPENDITURES. Not to spend or incur obligations for more than
Fifteen Million Dollars ($15,000,000) in each fiscal year ending 1996 and
1997, and not more than Seven Million Five Hundred Thousand Dollars
($7,500,000) In any single fiscal year thereafter to acquire fixed or capital
assets.
8.12 OUT OF DEBT PERIOD (FACILITY NO. 1). To repay any advances in full,
and not to draw any additional advances on its Facility No.1, for a period of
at least 30 consecutive days in each line-year. "Line-year" means the period
between the date of this Agreement and May 1, 1997, and each subsequent
one-year period (if any). For the purposes of this paragraph, "advances does
not include undrawn amounts of outstanding letters of credit.
8.13 NOTICES TO BANK. To promptly notify the Bank in writing of:
(a) any lawsuit over One Million Dollars ($1,000,000) against the
Borrower.
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15
(b) any substantial dispute between the Borrower and any government
authority.
(c) any failure to comply with this Agreement.
(d) any material adverse change in the Borrowers financial condition or
operations.
(e) any change in the Borrower's name, legal structure, place of business,
or chief executive office if the Borrower has more than one place of
business.
8.14 BOOKS AND RECORDS. To maintain adequate books and records.
8.15 AUDITS. To allow the Bank and its agents to inspect the Borrower's
properties and examine, audit and make copies of books and records at any
reasonable time. If any of the Borrower's properties, books or records are in
the possession of a third party, the Borrower authorizes that third party to
permit the Bank or its agents to have access to perform inspections or audits
and to respond to the Bank's requests for information concerning such
properties, books and records.
8.16 COMPLIANCE WITH LAWS. To comply with the laws (including any
fictitious name statute), regulations and orders of any government body with
authority over the Borrower's business except where such failure to comply
would not have a material adverse effect upon the Borrower.
8.17 PRESERVATION OF RIGHTS. To maintain and preserve all rights,
privileges, and franchises the Borrower now has that are necessary or useful
for the conduct of its business.
8.18 MAINTENANCE OF PROPERTIES. To make any repairs, renewals or
replacements necessary to keep the Borrower's properties in good working
condition.
8.19 PERFECTION OF LIENS. To help the Bank perfect and protect its
security interests and liens as the Bank may reasonably request, and reimburse
it for related costs it incurs to protect its security interests and liens.
8.20 COOPERATION. To take any action reasonably requested by the Bank to
carry out the intent of this Agreement.
8.21 INSURANCE.
(a) INSURANCE COVERING COLLATERAL. To maintain all risk property damage
insurance policies covering the tangible property comprising the
collateral. Each insurance policy must be in an amount acceptable to
the Bank. The insurance must be issued by an insurance company
acceptable to the Bank and must include a lender's loss payable
endorsement in favor of the Bank in a form acceptable to the Bank.
(b) GENERAL BUSINESS INSURANCE. To maintain insurance as is usual for the
business it is in.
(c) EVIDENCE OF INSURANCE. Upon the request of the Bank, to deliver to
the Bank a copy of each insurance policy, or, if permitted by the
Bank, a certificate of insurance listing all insurance in force.
8.22 ADDITIONAL NEGATIVE COVENANTS. Not to, without the Bank's written
consent:
(a) engage in any business activities substantially different from the
Borrower's present business except for incidental activities
reasonably related thereto.
(b) liquidate or dissolve the Borrower's business.
(c) enter into any consolidation, merger, pool, joint venture,
syndication, or other combination; or acquire or purchase a business
or its assets for a consideration, including assumption of debt, in
excess of Five Million Dollars ($5,000,000) in the aggregate; provided
that Borrower may consummate acquisitions in an aggregate amount not
exceeding Five Million Dollars ($5,000,000) only so long as such
acquisition would not otherwise constitute a breach of any term or
covenant of this Agreement; and, provided, further, that Borrower
shall not purchase or otherwise acquire any shares in any corporation
or
- 14 -
16
association or any interest in any other business entity or enter into
any merger or consolidation if (i) the Borrower is not the surviving
entity, or (ii) the Borrower has knowledge of facts or circumstances
that such purchase or acquisition is likely to be hostile or
unfriendly.
(d) lease, or dispose of all or a substantial part of the Borrower's
business or the Borrower's assets.
(e) sell or otherwise dispose of any assets for less than fair market
value, or enter into any sale and leaseback agreement covering any of
its fixed or capital assets.
9. HAZARDOUS WASTE INDEMNIFICATION
The Borrower will indemnify and hold harmless the Bank from any loss or
liability directly or indirectly arising out of the use, generation.
manufacture, production, storage, release, threatened release, discharge,
disposal or presence of a hazardous substance. This indemnity will apply
whether the hazardous substance is on, under or about the Borrower's property
or operations or property leased to the Borrower. The indemnity includes but
is not limited to attorneys' fees (including the reasonable estimate of the
allocated cost of in-house counsel and staff). The indemnity extends to the
Bank, its parent, subsidiaries and all of their directors, officers, employees,
agents, successors, attorneys and assigns. "Hazardous substances" means any
substance, material or waste that is or becomes designated or regulated as
"toxic," "hazardous," "pollutants or contaminant" or a similar designation or
regulation under any federal, state or local law (whether under common law,
statute, regulation or otherwise) or judicial or administrative interpretation
of such, including without limitation petroleum or natural gas. This indemnity
will survive repayment of the Borrower's obligations to the Bank.
10. DEFAULT
If any of the following events occur, the Bank may do one or more of the
following: declare the Borrower in default, stop making any additional credit
available to the Borrower, and require the Borrower to repay its entire debt
immediately and without prior notice. If an event of default occurs under the
paragraph entitled "Bankruptcy," below, with respect to the Borrower, then the
entire debt outstanding under this Agreement will automatically be due
immediately.
10.1 FAILURE TO PAY. The Borrower fails to make a payment under this
Agreement when due.
10.2 LIEN PRIORITY. The Bank fails to have an enforceable first lien
(except for any prior liens to which the Bank has consented in writing
including any liens permitted under Paragraph 8.10(c) on or security interest
in any property given as security for this loan.
10.3 FALSE INFORMATION. The Borrower has given the Bank false or
misleading Information or representations that are false or misleading in any
material respect.
10.4 BANKRUPTCY. The Borrower files a bankruptcy petition, a bankruptcy
petition is filed against the Borrower, or the Borrower makes a general
assignment for the benefit of creditors.
10.5 RECEIVERS. A receiver or similar official is appointed for the
Borrower's business, or the business is terminated.
10.6 LAWSUITS. Any lawsuit or lawsuits are filed on behalf of one or more
trade creditors against the Borrower in an aggregate amount of Seven Million
Dollars ($7,000.000) or more in excess of any insurance coverage.
10.7 JUDGMENTS. Any judgments or arbitration awards are entered against
the Borrower, or the Borrower enters into any settlement agreements with
respect to any litigation or arbitration, in an aggregate amount of Two Million
Dollars ($2,000,000) or more in excess of any insurance coverage and such
judgment or award is not discharged or stayed within 30 days.
10.8 TRW CONTRACT. The Borrower's contract with TRW Inc relating to
automotive airbags reduces for any reason TRW Inc's total requirement for the
airbag components that TRW Inc purchases from the Borrower by
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17
an amount that represents, on an annualized basis at the time of reduction, 20%
or more of the Borrowers total revenues.
10.9 GOVERNMENT ACTION. Any government authority takes action that
materially adversely affects the Borrower's financial condition or ability to
repay.
10.10 MATERIAL ADVERSE CHANGE. A material adverse change occurs in the
Borrower's financial condition, properties, or ability to repay the loan.
10.11 CROSS-DEFAULT. Any default occurs under any agreement in connection
with any credit the Borrower has obtained from anyone else or which the
Borrower has guaranteed.
10.12 DEFAULT UNDER RELATED DOCUMENTS. Any security agreement or other
document required by this Agreement is violated or no longer in effect.
10.13 OTHER BANK AGREEMENTS. The Borrower fails to perform any obligation
under any other agreement the Borrower has with the Bank or any affiliate of
the Bank within 30 days of notice of such failure.
10.14 OTHER BREACH UNDER AGREEMENT. The Borrower fails to perform any
obligation under, any term of this Agreement not specifically referred to in
this Article. If, in the Bank's opinion, the breach is capable of being
remedied, the breach will not be considered an event of default under this
Agreement for a period of thirty (30) days after the date on which the Bank
gives written notice of the breach to the Borrower; provided, however, that the
Bank will not be obligated to extend any additional credit to the Borrower
during that period.
11. ENFORCING THIS AGREEMENT; MISCELLANEOUS
11.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.
11.2 CALIFORNIA LAW. This Agreement is governed by California law.
11.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on the Borrower's
and the Bank's successors and assignees. The Borrower agrees that it may not
assign this Agreement without the Bank's prior consent. The Bank may sell
participations in or assign this loan, and may exchange financial information
about the Borrower with actual or potential participants or assignees. If a
participation is sold or the loan is assigned, the purchaser will have the
right of set-off against the Borrower.
11.4 ARBITRATION.
(a) This paragraph concerns the resolution of any controversies or claims
between the Borrower and the Bank, including but not limited to those
that arise from:
(i) This Agreement (including any renewals, extensions or
modifications of this Agreement);
(ii) Any document, agreement or procedure related to or delivered
in connection with this Agreement;
(iii) Any violation of this Agreement; or
(iv) Any claims for damages resulting from any business conducted
between the Borrower and the Bank, including claims for injury
to persons, property or business interests (torts).
(b) At the request of the Borrower or the Bank, any such controversies or
claims will be settled by arbitration in accordance with the United
States Arbitration Act. The United States Arbitration Act will apply
even though this Agreement provides that it is governed by California
law.
(c) Arbitration proceedings will be administered by the American
Arbitration Association and will be subject to its commercial rules of
arbitration.
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18
(d) For purposes of the application of the statute of limitations, the
filing of an arbitration pursuant to this paragraph is the equivalent
of the filing of a lawsuit, and any claim or controversy which may be
arbitrated under this paragraph is subject to any applicable statute
of limitations. The arbitrators will have the authority to decide
whether any such claim or controversy is barred by the statute of
limitations and, if so, to dismiss the arbitration on that basis.
(e) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be
submitted to any authorized court of law to be confirmed and enforced.
(g) The procedure described above will not apply if the controversy or
claim, at the time of the proposed submission to arbitration, arises
from or relates to an obligation to the Bank secured by real property
located in California. In this case, both the Borrower and the Bank
must consent to submission of the claim or controversy to arbitration.
If both parties do not consent to arbitration, the controversy or
claim will be settled as follows:
(i) The Borrower and the Bank will designate a referee (or a panel
of referees) selected under the auspices of the American
Arbitration Association in the same manner as arbitrators are
selected in Association-sponsored proceedings;
(ii) The designated referee (or the panel of referees) will be
appointed by a court as provided in California Code of Civil
Procedure Section 638 and the following related sections;
(iii) The referee (or the presiding referee of the panel) will be an
active attorney or a retired judge; and
(iv) The award that results from the decision of the referee (or
the panel will be entered as a judgment in the court that
appointed the referee, in accordance with the provisions of
California Code of Civil Procedure Sections 644 and 645.
(h) This provision does not limit the right of the Borrower or the Bank
to:
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal property
collateral; or
(iii) act in a court of law, before, during or after the arbitration
proceeding to obtain:
(A) an interim remedy; and/or
(B) additional or supplementary remedies.
(i) The pursuit of or a successful action for interim, additional or
supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of the Borrower or the Bank,
including the suing party, to submit the controversy or claim to
arbitration if the other party contests the lawsuit. However, if the
controversy or claim arises from or relates to an obligation to the
Bank which is secured by real property located in California at the
time of the proposed submission to arbitration, this right is limited
according to the provision above requiring the consent of both the
Borrower and the Bank to seek resolution through arbitration.
(j) If the Bank forecloses against any real property securing this
Agreement, the Bank has the option to exercise the power of sale under
the deed of trust or mortgage. or to proceed by judicial foreclosure.
11.5 SEVERABILITY; WAIVERS. If any part of this Agreement is not
enforceable, the rest of the Agreement may be enforced. The Bank retains all
rights, even if it makes a loan after default. If the Bank waives a default,
it may enforce a later default. Any consent or waiver under this Agreement
must be in writing.
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19
11.6 ADMINISTRATION COSTS. The Borrower shall pay the Bank for all
reasonable costs incurred by the Bank in connection with administering this
Agreement.
11.7 ATTORNEYS' FEES. The Borrower shall reimburse the Bank for any
reasonable costs and attorneys' fees incurred by the Bank in connection with
the enforcement or preservation of any rights or remedies under this Agreement
and any other documents executed in connection with this Agreement, and
including any amendment, waiver, "workout" or restructuring under this
Agreement. In the event of a lawsuit or arbitration proceeding, the prevailing
party is entitled to recover costs and reasonable attorneys' fees incurred in
connection with the lawsuit or arbitration proceeding, as determined by the
court or arbitrator. As used in this paragraph, "attorneys' fees" includes the
allocated costs of in-house counsel.
11.8 ONE AGREEMENT. This Agreement and any related security or other
agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements between the
Bank and the Borrower concerning this credit; and
(b) replace any prior oral or written agreements between the Bank and the
Borrower concerning this credit, and
(c) are intended by the Bank and the Borrower as the final, complete and
exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.
11.9 NOTICES. All notices required under this Agreement shall be
personally delivered or sent by first class mail, postage prepaid, to the
addresses on the signature page of this Agreement, or to such other addresses
as the Bank and the Borrower may specify from time to time in writing.
11.10 HEADINGS. Article and paragraph headings are for reference only and
shall not affect the interpretation or meaning of any provisions of this
Agreement.
11.11 COUNTERPARTS. This Agreement may be executed in as many counterparts
as necessary or convenient, and by the different parties on separate
counterparts each of which, when so executed, shall be deemed an original but
all such counterparts shall constitute but one and the same agreement.
This Agreement is executed as of the date stated at the top of the first page.
[LOGO]
BANK OF AMERICA SPECIAL DEVICES, INCORPORATED, A
NATIONAL TRUST AND SAVINGS ASSOCIATION DELAWARE CORPORATION
X /s/ XXXX XXXXXX X /s/ XXXXXX X. TREINAN
----------------------------- ----------------------------
By: Xxxx Xxxxxx By: Xxxxxx X. Treinan
Title: Vice President Title: Chief Executive Officer/
President
ADDRESS WHERE NOTICES TO THE ADDRESS WHERE NOTICES TO THE
BANK ARE TO BE SENT: BORROWER ARE TO BE SENT:
0000 Xxxxxx Xxxxxx 00000 X. Xxxxxxxxx Xxxxxx
Xxxxxxxx Xxxxx, XX 00000 Xxxxxxx, XX 00000
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20
[LOGO] SECURITY AGREEMENT
BANK OF AMERICA (RECEIVABLES, INVENTORY AND EQUIPMENT)
1. THE SECURITY. The undersigned Special Devices, Incorporated
(Borrower") hereby assigns and grants to Bank of America National Trust and
Savings Association ("Bank") a security interest in the following described
property ("Collateral"):
A. All of the following, whether now owned or hereafter acquired by
Borrower accounts, contract rights, chattel paper, instruments,
deposit accounts and general intangibles.
B. All inventory now owned or hereafter acquired by Borrower.
C. All machinery, furniture, fixtures and other equipment of every type
now owned or hereafter acquired by Borrower (including, but not
limited to, the equipment described in the attached Equipment
Description, if any).
D. All negotiable and nonnegotiable documents of title now owned or
hereafter acquired by Borrower covering any of the above-described
property.
E. All rights under contracts of insurance now owned or hereafter
acquired by Borrower covering any of the above-described property.
F. All proceeds, product, rents and profits now owned or hereafter
acquired by Borrower of any of the above-described property.
G. All books and records now owned or hereafter acquired by Borrower
pertaining to any of the above-described property, including but not
limited to any computer-readable memory and any computer hardware or
software necessary to process such memory ("Books and Records").
2. THE INDEBTEDNESS. The Collateral secures and will secure all
indebtedness of Borrower to Bank. For the purposes of this Agreement
"Indebtedness" means all loans and advances made by Bank to Borrower and all
other obligations and liabilities of Borrower to Bank, whether now existing or
hereafter incurred or created, whether voluntary or involuntary, whether due or
not due, whether absolute or contingent, or whether incurred directly or
acquired by Bank by assignment or otherwise. Unless Borrower shall have
otherwise agreed in writing, Indebtedness, for the purposes of this Agreement,
shall not include "consumer credit" subject to the disclosure requirements of
the Federal Truth in Lending Act or any regulations promulgated thereunder.
3. BORROWER'S COVENANTS. Borrower covenants and warrants that unless
compliance is waived by Bank in writing:
A. Borrower will properly preserve the Collateral; defend the Collateral
against any adverse claims and demands; and keep accurate Books and
Records.
B. Borrower has notified Bank in writing of, and will notify Bank in
writing prior to any change in, the locations of
(i) Borrower's place of business or Borrower's chief executive
office if Borrower has more than one place of business, and
(ii) any Collateral, including the Books and Records.
C. Borrower will notify Bank in writing prior to any change in Borrower's
name, identity or business structure.
D. Borrower will maintain and keep in force insurance covering Collateral
designated by Bank against fire and extended coverages. Such
insurance shall require losses to be paid on a replacement cost basis,
be issued by insurance companies acceptable to Bank and include a loss
payable endorsement in favor of Bank in a form acceptable to Bank.
E. Except for liens permitted under the Business Loan Agreement between
Borrower and Bank (e.g., permitted purchase money liens) Borrower has
not granted and will not grant any security interest in any of the
Collateral except to Bank, and will keep the Collateral free of all
liens, claims, security interests and encumbrances of any kind or
nature except the security interest of Bank.
F. Borrower will not sell, lease, agree to sell or lease, or otherwise
dispose of, or remove from Borrower's place of business (i) any
inventory except in the ordinary course of business as heretofore
conducted by Borrower, or (ii) any other Collateral except with the
prior written consent of Bank and except for obsolete or worn-out
equipment.
G. Borrower will promptly notify Bank in writing of any event which
materially and adversely affects the value of the Collateral, the
ability of Borrower or Bank to dispose of the Collateral, or the
rights and remedies of Bank in relation thereto, including, but not
limited to, the levy of any legal process against any Collateral and
the adoption of any marketing order, arrangement or procedure
affecting the Collateral, whether governmental or otherwise.
H. If any Collateral is or becomes the subject of any registration
certificate or negotiable document of title, including any warehouse
receipt or xxxx of lading, Borrower shall immediately deliver such
document to Bank.
I. Borrower will not attach any Collateral to any real property or
fixture in a manner which might cause such Collateral to become a part
thereof unless Borrower first obtains the written consent of any
owner, holder of any lien on the real property or fixture, or other
person having an interest in such property to the removal by Bank of
the Collateral from such real property or fixture. Such written
consent shall be in form and substance acceptable to Bank and shall
provide that Bank has no liability to such owner, holder of any lien,
or any other person.
J. Until Bank exercises its rights to make collection, Borrower will
diligently collect all Collateral.
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4. ADDITIONAL OPTIONAL REQUIREMENTS. Borrower agrees that Bank may at
its option at any time, whether or not Borrower is in default:
A. Require Borrower to deliver to Bank (i) copies of or extracts from.
the Books and Records, and (ii) information on any contracts or other
matters affecting the Collateral.
B. Examine the Collateral, including the Books and Records, and make
copies of or extracts from the Books and Records, and for such
purposes enter at any reasonable time upon the property where any
Collateral or any Books and Records are located.
C. Require Borrower to deliver to Bank any instruments or chattel paper.
5. DEFAULTS. Any one or more of the following shall be a default
hereunder:
A. Borrower fails to pay any Indebtedness when due.
B. Borrower breaches any term, provision, warranty or representation
under this Agreement, or under any other obligation of Borrower to
Bank and such breach remains uncured thirty (30) days after notice
(subject to any grace period applicable thereto).
C. Any custodian, receiver or trustee is appointed to take possession,
custody or control of all or a substantial portion of the property of
Borrower or of any guarantor of any Indebtedness.
D. Borrower or any guarantor of any Indebtedness becomes insolvent, or is
generally not paying or admits in writing its inability to pay its
debts as they become due, fails in business, makes a general
assignment for the benefit of creditors, dies or commences any case,
proceeding or other action under any bankruptcy or other law for the
relief of, or relating to, debtors.
E. Any case, proceeding or other action is commenced against Borrower or
any guarantor of any Indebtedness under any bankruptcy or other law
for the relief of, or relating to, debtors.
F. Any involuntary lien of any kind or character attaches to any
Collateral except for liens permitted under the Business Loan
Agreement between Borrower and Bank.
G. Any financial statements, certificates, schedules or other information
now or hereafter furnished by Borrower to Bank proves false or
incorrect in any material respect
6. BANK'S REMEDIES AFTER DEFAULT. In the event of any default Bank may
do any one or more of the following
A. Declare any Indebtedness immediately due and payable, without notice
or demand.
B. Enforce the security interest given hereunder pursuant to the Uniform
Commercial Code and any other applicable law.
C. Enforce the security interest of Bank in any deposit account of
Borrower maintained with Bank by applying such account to the
Indebtedness.
D. Require Borrower to assemble the Collateral, including the Books and
Records, and make them available to Bank at a place designated by
Bank.
E. Enter upon the property where any Collateral, including any Books and
Records, are located and take possession of such Collateral and such
Books and Records, and use such property (including any buildings and
facilities) and any of Borrower's equipment, if Bank deems such use
necessary or advisable in order to take possession of, hold, preserve,
process, assemble, prepare for sale or lease, market for sale or
lease, sell or lease, or otherwise dispose of, any Collateral.
X. Xxxxx extensions and compromise or settle claims with respect to the
Collateral for less than face value, all without prior notice to
Borrower.
G. Use or transfer any of Borrower's rights and interests in any
Intellectual Property now owned or hereafter acquired by Borrower, if
Bank deems such use or transfer necessary or advisable in order to
take possession of, hold, preserve, process, assemble, prepare for
sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral. Borrower agrees that any such use or
transfer shall be without any additional consideration to Borrower.
As used in this paragraph, "Intellectual Property" includes, but is
not limited to, all trade secrets, computer software, service marks,
trademarks, trade names, trade styles, copyrights, patents,
applications for any of the foregoing, customer lists, working
drawings, instructional manuals, and rights in processes for technical
manufacturing, packaging and labelling, in which Borrower has any
right or interest, whether by ownership, license, contract or
otherwise.
H. Have a receiver appointed by any court of competent jurisdiction to
take possession of the Collateral.
I. Take such measures as Bank may deem necessary or advisable to take
possession of, hold, preserve, process, assemble, insure, prepare for
sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral, and Borrower hereby irrevocably
constitutes and appoints Bank as Borrower's attorney-in-fact to
perform all acts and execute all documents in connection therewith.
J. Require Borrower to segregate all collections and proceeds of the
Collateral so that they are capable of identification and deliver
daily such collections and proceeds to Bank in kind.
K. Require Borrower to obtain Bank's prior written consent to any sale,
lease, agreement to sell or lease, or other disposition of any
inventory.
L. Notify any account debtors, any buyers of the Collateral, or any other
persons of Bank's interest in the Collateral.
M. Require Borrower to direct all account debtors to forward all payments
and proceeds of the Collateral to a post office box under Bank's
exclusive control.
N. Demand and collect any payments and proceeds of the Collateral. In
connection therewith Borrower irrevocably authorizes Bank to endorse
or sign Borrower's name on all checks, drafts, collections, receipts
and other
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documents, and to take possession of and open the mail addressed to
Borrower and remove therefrom any payments and proceeds of the
Collateral (delivering to Borrower the remaining portions of such
mail).
7. MISCELLANEOUS.
A. Any waiver, express or implied, of any provision hereunder and any
delay or failure by Bank to enforce any provision shall not preclude
Bank from enforcing any such provision thereafter.
B. Borrower shall, at the request of Bank, execute such other agreements,
documents, instruments, or financing statements in connection with
this Agreement as Bank may reasonably deem necessary.
C. All notes, security agreements, subordination agreements and other
documents executed by Borrower or furnished to Bank in connection with
this Agreement must be in form and substance satisfactory to Bank.
D. This Agreement shall be governed by and construed according to the
laws of the State of California, to the jurisdiction of which the
parties hereto submit.
E. All rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies otherwise provided by law. Any
single or partial exercise of any right or remedy shall not preclude
the further exercise thereof or the exercise of any other right or
remedy.
F. All terms not defined herein are used as set forth in the Uniform
Commercial Code.
G. In the event of any action by Bank to enforce this Agreement or to
protect the security interest of Bank in the Collateral, or to take
possession of, hold, preserve, process. assemble, insure, prepare for
sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral, Borrower agrees to pay immediately the
costs and expenses thereof, together with reasonable attorneys' fees
and allocated costs for in-house legal services.
H. Any Borrower who is married agrees that such Borrower's separate
property shall be liable for payment of the Indebtedness if such
Borrower is personally liable for the Indebtedness.
Date: December 12, 0000
XXXX XX XXXXXXX BORROWER
NATIONAL TRUST AND SAVINGS ASSOCIATION Special Devices, Incorporated
X /s/ XXXX XXXXXX X /s/ XXXXXX X. TREINAN
----------------------------- ----------------------------
By: Xxxx Xxxxxx, Vice President By: Xxxxxx X. Treinan
Chief Executive Officer/President
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