CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of May 23, 2001, is by and
between DATRON SYSTEMS INCORPORATED, a Delaware corporation (the "Borrower")
and U.S. BANK NATIONAL ASSOCIATION, a national banking association (the
"Bank").
ARTICLE I DEFINITIONS
Section 1.1 Defined Terms. In addition to the terms
defined elsewhere in this Agreement, the terms defined in this Section 1.1
shall have the meanings ascribed to them in this Section 1.1 (and such
meanings shall be equally applicable to both the singular and plural form of
the terms defined, as the context may require). Definitions not specifically
defined in this Agreement shall have the meanings attributed to such terms in
the Uniform Commercial Code except for accounting terms used in this
Agreement (including, without limitation, in Sections 6.17, 6.18, and 6.19
below) where the definitions commonly used by GAAP shall apply, as provided
in Section 1.2 below.
"Adjusted Quick Ratio": cash and/or cash equivalents, plus
billed trade accounts receivable divided by the sum of Current Liabilities
plus open and outstanding letters of credit existing as of the end of each
fiscal quarter of Borrower. For the purposes of this calculation, any funded
loans outstanding under the Commitment shall be considered a Current
Liability despite the appropriate GAAP designation.
"Agreement": This Credit Agreement, as it may be amended,
modified, supplemented, restated or replaced from time to time.
"Authorized Person": Any officer or other employee of
Borrower listed on Exhibit A, as amended from time to time.
"Business Day": Any day (other than a Saturday, Sunday or
legal holiday in the State of California) on which national banks are
permitted to be open in San Diego, California.
"Capital Expenditure": Any amount debited to the fixed asset
account on the consolidated balance sheet of the Borrower in respect of
(a) the acquisition (including, without limitation, acquisition by entry into
a Capitalized Lease), construction, improvement, replacement or betterment of
land, buildings, machinery, equipment or of any other fixed assets or
leaseholds, and (b) to the extent related to and not included in (a) above,
materials, contract labor and direct labor (excluding expenditures properly
chargeable to repairs or maintenance in accordance with GAAP).
"Capitalized Lease": Any lease which is or should be
capitalized on the books of the lessee in accordance with GAAP.
"Cash Flow Available to Service Debt": As of the end of the
most recently concluded fiscal quarter of the Borrower, net income before
taxes and extraordinary items plus depreciation and amortization plus
interest expense less cash taxes paid less an amount equal to twenty percent
(20%) of Capital Expenditures for the immediately preceding four fiscal
quarters of the Borrower including the one just ended.
"Code": The Internal Revenue Code of 1986, as amended, or any
successor statute, together with regulations thereunder.
"Commitment": (i) $15,000,000.00, of which all $15,000,000.00
is available for Standby Letters of Credit, $1,000,000.00 is available for
Commercial Letters of Credit and $5,000,000.00 is available for the principal
amount of funded Loans; provided, however, that the sum of the aggregate of
the principal amount of all Loans outstanding hereunder and the aggregate
undrawn face amount of Letters of Credit issued and outstanding pursuant to
this Agreement shall never exceed $15,000,000.00 and, (ii) as the context may
require, the agreement of the Bank to make Loans and issue Letters of Credit
to the Borrower subject to the terms and conditions of this Agreement.
"Commitment Fees": Loan Fees and Letter of Credit Fees, or
any of them.
"Current Liabilities": As of the date of determination, the
aggregate amount of all current liabilities of Borrower and its Subsidiaries,
on a consolidated basis, that would, in accordance with GAAP, be classified
on a balance sheet as current liabilities.
"Default": Any event which, with the giving of notice to the
Borrower or lapse of time, or both, would constitute an Event of Default.
"ERISA": The Employee Retirement Income Security Act of 1974,
as amended, and any successor statute, together with regulations thereunder.
"ERISA Affiliate": Any trade or business (whether or not
incorporated) that is a member of a group of which the Borrower is a member
and which is treated as a single employer under Section 414 of the Code.
"Event of Default": Any event described in Section 7.1.
"Fixed Charge Coverage Ratio": As of the end of the most
recently concluded fiscal quarter of Borrower, the ratio of: (i) Cash Flow
Available to Service Debt; divided by (ii) the sum of aggregate current
maturity of long term debt, as of the end of the most recently concluded
fiscal quarter of Borrower, plus interest expense for the immediate preceding
four fiscal quarters, including the one just ended.
"Foreign Account Debtor": An account debtor of Borrower that
does not have its principal place of business in the United States.
"GAAP": Generally accepted accounting principals as in effect
from time to time in the United States, consistently applied.
"Guaranties": Guaranties in form and content satisfactory to
Bank pursuant to which each Guarantor guaranties the Loans and the Letter of
Credit Obligations.
"Guarantor": Each Subsidiary other than Datron Resources Inc.
"Indebtedness": Without duplication, all obligations,
contingent or otherwise, which in accordance with GAAP should be classified
upon the obligor's balance sheet as liabilities, but in any event including
the following (whether or not they should be classified as liabilities upon
such balance sheet): (a) obligations secured by any mortgage, pledge,
security interest, lien, charge or other encumbrance existing on property
owned or acquired subject thereto, whether or not the obligation secured
thereby shall have been assumed and whether or not the obligation secured is
the obligation of the owner or another party; (b) any obligation on account
of deposits or advances; (c) any obligation for the deferred purchase price
of any property or services, (d) any obligation as lessee under any
Capitalized Lease; (e) all guaranties, endorsements and other contingent
obligations in respect to Indebtedness of others; and (f) undertakings or
agreements to reimburse or indemnify issuers of letters of credit. For all
purposes of this Agreement, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer.
"Investment": The acquisition, purchase, making or holding of
any stock or other security, any loan, advance, contribution to capital,
extension of credit (except for trade and customer accounts receivable for
inventory sold or services rendered in the ordinary course of business and
payable in accordance with customary trade terms), any acquisitions of real
or personal property (other than real and personal property acquired in the
ordinary course of business) and any purchase or commitment or option to
purchase stock or other debt or equity securities of or any interest in
another Person or any integral part of any business or the assets comprising
such business or part thereof.
"Letter of Credit": Any Standby Letter of Credit or
Commercial Letter of Credit, as such terms are defined in Section 2.8.
"Letter of Credit Agreements": Shall have the meaning set
forth in Section 2.3.
"Letter of Credit Fee": Any Standby Letter of Credit Fee or
Commercial Letter of Credit Fee, as such terms are defined in Section 2.10
and Section 2.11, respectively.
"Letter of Credit Obligations": The aggregate amount of all
Letter of Credit Fees and of all possible drawings under all Letters of
Credit plus all amounts drawn under any Letter of Credit and not reimbursed
by the Borrower under the applicable Letter of Credit Agreement.
"Lien": Any security interest, mortgage, pledge, lien,
hypothecation, judgment lien or similar legal process, charge, encumbrance,
title retention agreement or analogous instrument or device (including,
without limitation, the interest of the lessors under Capitalized Leases and
the interest of a vendor under any conditional sale or other title retention
agreement).
"Loan Documents": This Agreement, the Note, the Guaranties,
the Security Agreements, each Letter of Credit Agreement and each other
instrument, document, guaranty, security agreement, mortgage, or other
agreement executed and delivered by the Borrower or any Guarantor or party
granting security interests in connection with this Agreement, the Loans, any
collateral for the Loans or any Letter of Credit.
"Material Adverse Effect": Any material adverse effect, or
the occurrence of any event or the existence of any condition that has or
could reasonably be expected to have a material adverse effect on (a) the
business or financial condition or performance of either the Borrower or of
the Borrower and the Subsidiaries taken as a whole, (b) the ability of
Borrower to repay any Loan when due or satisfy any repayment obligations
under any Letter of Credit Agreement when due, (c) the validity or
enforceability of any of the Loan Documents, any lien created or purported to
be created by any of the Loan Documents or the required priority of any such
lien, or (d) any material right or remedy of Bank under any of the Loan
Documents.
"PBGC": The Pension Benefit Guaranty Corporation, established
pursuant to Subtitle A of Title IV of ERISA, and any successor thereto or to
the functions thereof.
"Person": Any natural person, corporation, partnership, joint
venture, firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision or any other entity, whether
acting in an individual, fiduciary or other capacity.
"Plan": An employee benefit plan or other plan, maintained
for employees of the Borrower or of any ERISA Affiliate, and subject to
Title IV of ERISA or Section 412 of the Code.
"Prime Rate": The rate of interest from time to time publicly
announced by the Bank as its "prime rate." The Bank may lend to its
customers at rates that are at, above or below the Prime Rate. For purposes
of determining any interest rate which is based on the Prime Rate, such
interest rate shall change on the effective date of any change in the Prime
Rate.
"Quarterly Loss": Any fiscal quarter period where the
consolidated net income of the Borrower is zero (0) US Dollars ($0.00) or
less.
"Related Party": Any Person (other than a Subsidiary):
(a) which directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, the Borrower, (b) which
beneficially owns or holds 15% or more of the equity interest of the
Borrower; or (c) 15% or more of the equity interest of which is beneficially
owned or held by the Borrower or a Subsidiary. The term "control" means the
possession, directly or 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.
"Reportable Event": A reportable event as defined in
Section 4043 of ERISA and the regulations issued under such Section, with
respect to a Plan, excluding, however, such events as to which the PBGC by
regulation has waived the requirement of Section 4043(a) of ERISA that it be
notified within 30 days of the occurrence of such event, provided that a
failure to meet the minimum funding standard of Section 412 of the Code and
Section 302 of ERISA shall be a reportable event regardless of the issuance
of any such waivers in accordance with Section 412(d) of the Code.
"Security Agreements ": Security agreements in form and
content satisfactory to Bank pursuant to which Borrower and each Guarantor
other than Datron Trans World Communications International Ltd. grants to
Bank a security interest in all of its tangible and intangible personal
property, whether now owned or hereafter existing or arising.
"Subsidiary": Each of Datron Advanced Technologies Inc., a
California corporation, Datron World Communications Inc., a California
corporation, Datron Resources Inc., a California corporation ("Datron
Resources"), Datron Trans World Communications International Ltd., a U.S.
Virgin Islands corporation ("Datron Trans World"), and any person of which or
in which the Borrower and its other Subsidiaries own directly or indirectly
100% or more of: (a) the combined voting power of all classes of stock
having general voting power under ordinary circumstances to elect a majority
of the board of directors of such Person, if it is a corporation, (b) the
capital interest or profit interest of such Person, if it is a partnership,
joint venture or similar entity, or (c) the beneficial interest of such
Person, if it is a trust, association or other unincorporated organization.
"Tangible Net Worth": As of any date of determination, the
sum of the amounts set forth on the consolidated balance sheet of the
Borrower as the sum of the common stocks, preferred stock, additional paid-in
capital and retained earnings of the Borrower (excluding treasury stock),
less the book value of all assets of the Borrower and its Subsidiaries that
would be treated as intangibles under GAAP, including, without limitation,
all such items as goodwill, trademarks, trade names, service marks,
copyrights, patents, licenses, unamortized debt discount and unamortized
deferred charges but excluding deferred tax assets.
"Termination Date": The earliest of (a) August 1, 2002 or
(b) the date on which the Commitment is terminated pursuant to Section 7.2
hereof.
"Total Liabilities": As of the date of determination, the
aggregate amount of all liabilities of Borrower and its Subsidiaries, on a
consolidated basis, that would, in accordance with GAAP, be classified on a
balance sheet as liabilities.
Section 1.2 Accounting Terms and Calculations. Except as may
be expressly provided to the contrary herein, all accounting terms used
herein shall be interpreted and all accounting determinations hereunder
(including, without limitation, determination of compliance with financial
ratios and restrictions in Articles V and VI hereof) shall be made in
accordance with GAAP consistently applied. Any reference to "consolidated"
financial terms shall be deemed to refer to those financial terms as applied
to the Borrower and its Subsidiaries in accordance with GAAP.
Section 1.3 Computation of Time Periods. In this
Agreement, in the computation of a period of time from a specified date to a
later specified date, unless otherwise stated the word "from" means "from and
including" and the word "to" or "until" each means "to but excluding."
Section 1.4 Other Definitional Terms. The words
"hereof", "herein" and "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. References to Sections, Exhibits,
schedules and like references are to this Agreement unless otherwise
expressly provided.
ARTICLE II TERMS OF LENDING
Section 2.1 The Commitment. Subject to the terms and
conditions hereof and in reliance upon the warranties of the Borrower herein,
the Bank agrees to make working capital advances as loans (each, a "Loan"
and, collectively, the "Loans") to the Borrower and to issue Letters of
Credit for the account of Borrower, from time to time from the date hereof
until the Termination Date, during which period the Borrower may repay and
reborrow Loans in accordance with the provisions hereof, provided that the
aggregate unpaid principal amount of all outstanding Loans and the aggregate
undrawn face amounts of all outstanding Letters of Credit shall at all times
be subject to the maximum limits of the Commitment.
Section 2.2 Amount of Loans and Letters of Credit.
(a) Each request for a Loan or a Letter of
Credit shall specify the date and the amount of such Loan or Letter of Credit
which may be in any amount within the Commitment limits.
(b) Bank is authorized to make the Loans and
issue Letters of Credit under this Agreement based upon telephonic or other
instructions received from anyone purporting to be an Authorized Person, or
without instructions if pursuant to Section 2.6 below. Borrower agrees to
establish and maintain an account with Bank for the purpose of receiving the
proceeds of the Loans requested by Borrower and made by Bank hereunder.
Unless otherwise agreed by Bank and Borrower, any Loan requested by Borrower
and made by Bank hereunder shall be credited to Borrower's accounts with
Bank.
Bank shall maintain an account on its books in the name of Borrower
(the "Loan Account") on which Borrower will be charged with all Loans and
Letters of Credit Fees and reimbursement obligations, and any other payment
obligations of Borrower. In accordance with Section 2.6 and 2.13, the Loan
Account will be credited with all payments received by Bank from Borrower or
for Borrower's account. Bank shall render statements regarding the Loan
Account to Borrower, including principal, interest, fees, and including an
itemization of all charges and expenses constituting Bank Expenses owing, and
such statements shall be conclusively presumed to be correct and accurate and
constitute an account stated between Borrower and Bank unless, within 30 days
after receipt thereof by Borrower, Borrower shall deliver to Bank written
objection thereto describing the error or errors contained in any such
statements.
Section 2.3 The Note and the Letters of Credit. The
Loans shall be evidenced by a promissory note of the Borrower (the "Note"),
substantially in the form of Exhibit B hereto, in the maximum amount of Loans
available under the Commitment as originally in effect and dated as of the
date of this Agreement. The Bank shall enter in its records the amount of
each Loan and the payments made thereon and such records shall be deemed
conclusive evidence of the subject matter thereof, absent manifest error.
The Letters of Credit shall be documented with applications, agreements
(including, without limitation, reimbursement agreements) and other documents
deemed appropriate by the Bank (collectively, "Letter of Credit Agreements")
for the issuance of such Letters of Credit.
Section 2.4 Interest.
(a) Except as provided in (b) below, the unpaid
principal balance of each Loan shall bear interest at an annual rate equal to
the Prime Rate. The interest rate hereunder will be adjusted each time that
the Prime Rate changes.
(b) Any amount of any Loan not paid when due,
whether at the date scheduled therefor or earlier upon acceleration, shall
bear interest until paid in full at a rate per annum equal to the sum of the
Prime Rate plus three percent (3) %.
(c) Interest under Section 2.4(a) shall be
payable in arrears on the thirtieth (30th) day of each month, commencing on
the first such day after the date of any Loan, upon any permitted prepayment
(on the amount prepaid) and on the Termination Date. Interest under
Section 2.4(b) shall be payable on demand.
Section 2.5 Repayment of Principal and Letter of Credit
Draws. Principal of the Loans, together with all accrued and unpaid interest
thereon, shall be due and payable on the Termination Date. Amounts drawn on
Standby Letters of Credit shall be reimbursed by Borrower immediately upon
drawing and amounts drawn on Commercial Letters of Credit shall be paid when
due, as more specifically provided in the applicable Letter of Credit
Agreements.
Section 2.6 Payment. Borrower hereby authorizes Bank to
charge all principal and interest on Loans, and all Letter of Credit
Obligations, to the Loan Account using Bank's auto-debit system. Whenever
any payment to be made hereunder shall be stated to be due on a day which is
not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation
of any interest or fees. In the event that there are insufficient funds in
the Loan Account for payment of such amounts, Borrower hereby authorizes
Bank, at its option, without prior notice to Borrower, to charge all such
amounts to Borrower as a Loan, which amounts thereafter shall accrue interest
as a Loan. Any interest not paid when due shall be compounded and shall
thereafter accrue interest at the rate then applicable to Loans.
Section 2.7 Optional Prepayments. The Borrower may prepay
the Loans, in whole or in part, at any time, without premium or penalty
Section 2.8 Letters of Credit. The Bank shall issue
standby letters of credit ("Standby Letters of Credit") as security for
Borrower's reimbursement obligation under an existing standby letter of
credit issued by Comerica Bank in the approximate face amount of
$5,000,000.00 and as security for certain of Borrower's bid, performance and
payment obligations incurred in connection with Borrower's projects, and the
Bank shall issue commercial letters of credit ("Commercial Letters of
Credit") to support Borrower's purchases of raw materials and components
upon application of the Borrower, subject to (a) compliance by the Borrower
with all conditions precedent set forth in Article III hereof, (b) entry by
the Borrower into Letter of Credit Agreements deemed appropriate by the Bank
for the issuance of such Letters of Credit, (c) payment by the Borrower of
commissions, fees and interest as agreed upon between the Borrower and the
Bank with respect to each such Letter of Credit, (d) satisfaction of the Bank
with the form, substance and beneficiary of each such Letter of Credit, and
(e) the absence of any statutory or regulatory change or directive affecting
the issuance by the Bank of letters of credit. All Standby Letters of Credit
shall have expiration dates not to exceed six (6) months after the
Termination Date and terms not to exceed the greater of (i) eighteen (18)
months or (ii) a period of time from the date of issuance thereof to six (6)
months after the Termination Date. All Commercial Letters of Credit shall
have a maximum term of ninety (90) days and tenor not to exceed sight. If
any Letter of Credit shall be outstanding after the Termination Date, the
Borrower shall deliver cash collateral in the face amount of such Letter of
Credit, or other collateral satisfactory to Bank (which collateral may
include a letter of credit in a form and issued by a bank satisfactory to
Bank), to be held subject to Section 7.2.2 hereof. The aggregate undrawn
face amount of the Letters of Credit shall be subject to the Commitment.
Section 2.9 Loan Fees. The Borrower shall pay to the Bank
the following loan fees (the "Loan Fees"): (a) a fee in the amount of
$5,000.00 promptly upon the execution by both Borrower and Bank of this
Agreement and (b) in the event that the Termination Date is extended pursuant
to Section 2.15 hereof, an additional fee of $3,500.00 on the date that each
one-year extension of the Termination Date as contemplated by such section is
granted by Bank.
Section 2.10 Standby Letter of Credit Fees. The
Borrower shall pay to the Bank fees (each such fee, a "Standby Letter of
Credit Fee") in connection with the issuance of Standby Letters of Credit as
follows: (a) with respect to each Standby Letter of Credit with an undrawn
face amount of $200,000.00 or more or with a term of 90 days or greater,
Borrower shall pay a per annum fee of 1.125% calculated on the face amount of
each such Standby Letter of Credit from the date of issuance thereof through
the stated date of expiry, paid quarterly in advance with the first such
payment made on the date of issuance of each such Standby Letter of Credit;
and (b) with respect to each Standby Letter of Credit with an undrawn face
amount of less than $200,000.00 or with a term of less than 90 days, Borrower
shall pay an issuance fee of the greater of 1.125% of the face amount of each
such Standby Letter of Credit and $400.00, paid in advance on the date of
issuance of each such Standby Letter of Credit; and (c) with respect to all
Standby Letters of Credit, Borrower shall pay amendment, cancellation and
other administration fees in accordance with Bank's published rates. Each
Standby Letter of Credit Fee shall be fully earned when due and payable and
shall not be refundable under any circumstance.
Section 2.11 Commercial Letter of Credit Fees. The
Borrower shall pay to the Bank issuance, advising, amendment, payment,
cancellation and other administration fees (each such fee, a "Commercial
Letter of Credit Fee") in accordance with Bank's published rates. Each
Commercial Letter of Credit Fee shall be fully earned when due and payable
and shall not be refundable under any circumstance.
Section 2.12 Computation. Interest and Commitment Fees
shall be computed on the basis of actual days elapsed and a year of 360 days.
Section 2.13 Payments to Loan Account. Amounts deposited
by Borrower into the Loan Account shall be made in immediately available
funds and received no later than 11:00 a.m., California time, for credit on
that Business Day at the office of the Bank at 0000 Xx Xxxxx Xxxxxxx Xxxxx,
Xxxxx 000, Xx Xxxxx, Xxxxxxxxxx 00000. Funds received on any day after such
time shall be deemed to have been received on the next Business Day.
Section 2.15 Extension. If the Borrower, by written notice
given to the Bank at least 60 days but not more than 90 days prior to the
date that is one year prior to the Termination Date, requests in writing that
the Termination Date be extended for an additional period of one year and if
the Bank, in its sole and absolute discretion and based on such review of the
Borrower's financial performance and condition and such other factors as the
Bank considers relevant (which may include, without limitation, future loan
policies and other policies adopted by the Bank unrelated to the Borrower's
financial condition), consents in writing to such extension, then the
Termination Date shall be extended for an additional period, and the Borrower
may repeat its request within the same time limit and if the Bank consents
the Termination Date shall be further extended for an additional period, and
so on from time to time. In the case of any such extension, the "Termination
Date" shall be the last day of the period to which such extension has been
granted. The Bank shall be under no obligation or commitment to extend the
Termination Date, and no such obligation or commitment on the part of the
Bank should be inferred from the provisions of this Section.
ARTICLE III CONDITIONS PRECEDENT
Section 3.1 Conditions of Initial Loan or Letter of
Credit. The obligation of the Bank to make the initial Loan or issue the
initial Letter of Credit hereunder shall be subject to the satisfaction of
the conditions precedent, in addition to the applicable conditions precedent
set forth in Section 3.2 below, that: there shall not have occurred (i) an
event that could cause or have a Material Adverse Effect with respect to the
financial condition of Borrower or any of its Subsidiaries or any material
diminution in the value of the collateral to be subject to the Security
Agreements, as determined by Bank in its sole discretion by comparing
financial conditions and values shown on Borrower's financial statements
dated December 31, 2000 or (ii) any discovery by Bank of information that
Bank reasonably determines has a negative effect on the transactions
contemplated by this Agreement; and the Bank shall have received all of the
following, in form and substance satisfactory to the Bank, each duly executed
and certified or dated the date of the initial Loan or initial Letter of
Credit, as applicable, or such other date as is satisfactory to the Bank:
(a) This Agreement, the Note and, if applicable,
the Letter of Credit Agreements, executed by a duly authorized officer (or
officers) of the Borrower.
(b) Each Guaranty and each Security Agreement,
executed by a duly authorized officer (or officers) of the Borrower or the
applicable Guarantor, as appropriate.
(c) A copy of the corporate resolution of the
Borrower authorizing the execution, delivery and performance of the Loan
Documents, certified by the Secretary or an Assistant Secretary of the
Borrower and from each Guarantor, a copy of the corporate resolution of each
such Guarantor authorizing the execution, delivery and performance of a
Guaranty and a Security Agreement by such Guarantor, certified by the
Secretary or an Assistant Secretary of such Guarantor .
(d) An incumbency certificate showing the names
and titles, and bearing the signatures of, the officers of the Borrower
authorized to execute the Loan Documents and to request Loans or Letters of
Credit hereunder, certified by the Secretary or an Assistant Secretary of the
Borrower and from each Guarantor, an incumbency certificate showing the names
and titles, and bearing the signatures of, the officers of the Guarantor
authorized to execute a Guaranty and a Security Agreement.
(e) A copy of the Articles or Certificate of
Incorporation of the Borrower and of each Guarantor, with all amendments
thereto, certified by the appropriate governmental official of the
jurisdiction of its incorporation (which certified charter coduments have
been obtained by Bank as of the date of this Agreement).
(f) A Certificate of Good Standing for the
Borrower and for each Guarantor in the jurisdiction of each such entity's
incorporation, certified by the appropriate governmental officials (which
certificates have been received by Bank as of the date of this Agreement).
(i) An enforceable agreement by Datron Resources
not to incur debt or pledge any of its assets to any Person without the
prior written approval of Bank.
(j) Borrower's projections (including a pro
forma balance sheet, income statement, schedule of letter of credit
utilization and statement of cash flows) for Borrower's fiscal year ending
March 31, 2002 and Bank, in the exercise of its reasonable discretion, shall
have determined that such projections are satisfactory.
Section 3.2 Conditions Precedent to all Loans and
Letters of Credit. The obligation of the Bank to make any Loan hereunder
(including the initial Loan) or to issue any Letter of Credit (including the
initial Letter of Credit) shall be subject to the satisfaction of the
following conditions precedent:
(a) Before and after giving effect to such Loan
or such Letter of Credit, the representation and warranties contained in
Article IV shall be true and correct, as though made on the date of such
Loan.
(b) Before and after giving effect to such Loan
or such Letter of Credit, no Default or Event of Default shall have occurred
and be continuing.
(c) The Bank shall have received the Borrower's
request for such Loan or such Letter of Credit as required by Section 2.2.
ARTICLE IV REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement, to grant the
Commitment, to make the Loans and issue the Letters of Credit hereunder, the
Borrower represents and warrants to the Bank:
Section 4.1 Organization, Standing, Etc. The Borrower
and each of the Guarantors are corporations duly incorporated and validly
existing and in good standing under the laws of the jurisdiction of their
respective incorporation and have all requisite corporate power and authority
to carry on their respective businesses as now conducted and to enter into
and perform their obligations under the Loan Documents executed by them and
(in the instance of the Borrower) to issue the Note. The Borrower and each
of its Subsidiaries are duly qualified and in good standing as a foreign
corporation in each jurisdiction in which the character of the properties
owned, leased or operated by it or the business conducted by it makes such
qualification necessary.
Section 4.2 Authorization and Validity. The execution,
delivery and performance by the Borrower and each of the Guarantors of the
Loan Documents executed by them have been duly authorized by all necessary
corporate action by the Borrower or Guarantors, and the Loan Documents
constitute the legal, valid and binding obligations of the Borrower or
Guarantor that executed them, enforceable against the Borrower in accordance
with their respective terms, subject to limitations as to enforceability
which might result from bankruptcy, insolvency, moratorium and other similar
laws affecting creditors' rights generally and subject to limitations on the
availability of equitable remedies.
Section 4.3 No Conflict; No Default. The execution,
delivery and performance by the Borrower and each Guarantor of the Loan
Documents executed by them will not (a) violate any provision of any law,
statute, rule or regulation or any order, writ, judgment, injunction, decree,
determination or award of any court, governmental agency or arbitrator
presently in effect having applicability to the Borrower or Guarantors,
(b) violate or contravene any provisions of the Articles (or Certificate) of
Incorporation or by-laws of the Borrower or Guarantors, or (c) result in a
breach of or constitute a default under any indenture, loan or credit
agreement or any other agreement, lease or instrument to which the Borrower
or any Guarantor is a party or by which it or any of its properties may be
bound or result in the creation of any Lien on any asset of the Borrower or
any Subsidiary. Neither the Borrower nor any Subsidiary is in default under
or in violation of any such law, statute, rule or regulation, order, writ,
judgment, injunction, decree, determination or award or any such indenture,
loan or credit agreement or other agreement, lease or instrument in any case
in which the consequences of such default or violation could cause or have a
Material Adverse Effect. No Default or Event of Default has occurred and is
continuing.
Section 4.4 Government Consent. No order, consent,
approval, license, authorization or validation of, or filing, recording or
registration with, or exemption by, any governmental or public body or
authority is required on the part of the Borrower or any Guarantor to
authorize, or is required in connection with the execution, delivery and
performance of, or the legality, validity, binding effect or enforceability
of, the Loan Documents.
Section 4.5 Financial Statements and Condition. The
Borrower's audited consolidated financial statements as at March 31, 2000 and
its company-prepared consolidated financial statements as at December 31,
2000, as heretofore furnished to the Bank, have been prepared in accordance
with GAAP on a consistent basis and fairly present the financial condition of
the Borrower and its Subsidiaries as at such dates and the results of their
operations and changes in financial position for the respective periods then
ended. As of the dates of such financial statements, neither the Borrower
nor any Subsidiary had any material obligation, contingent liability,
liability for taxes or long-term lease obligation which is not reflected in
such financial statements or in the notes thereto. Since December 31, 2000,
no Material Adverse Effect has occurred.
Section 4.6 Litigation and Contingent Liabilities.
Except as described in Exhibit C, there are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or any Subsidiary or any of their properties before any court or
arbitrator, or any governmental department, board, agency or other
instrumentality which, if determined adversely to the Borrower or such
Subsidiary, could constitute a Material Adverse Effect. Except as described
in Exhibit D, neither the Borrower nor any Subsidiary has any contingent
liabilities which are material to the Borrower and the Subsidiaries as a
consolidated enterprise.
Section 4.7 Compliance. The Borrower and its
Subsidiaries are in material compliance with all statutes and governmental
rules and regulations applicable to them.
Section 4.8 Environmental, Health and Safety Laws.
There does not exist any violation by the Borrower or any Subsidiary of any
applicable federal, state or local law, rule or regulation or order of any
government, governmental department, board, agency or other instrumentality
relating to environmental, pollution, health or safety matters which will or
threatens to impose a material liability on the Borrower or a Subsidiary or
which would require a material expenditure by the Borrower or such Subsidiary
to cure. Neither the Borrower nor any Subsidiary has received any notice to
the effect that any part of its operations or properties is not in material
compliance with any such law, rule, regulation or order or notice that it or
its property is the subject of any governmental investigation evaluating
whether any remedial action is needed to respond to any release of any toxic
or hazardous waste or substance into the environment, the consequences of
which non-compliance or remedial action could cause or have a Material
Adverse Effect.
Section 4.9 ERISA. Each Plan complies with all material
applicable requirements of ERISA and the Code and with all material
applicable rulings and regulations issued under the provisions of ERISA and
the Code setting forth those requirements. No Reportable Event, other than a
Reportable Event for which the reporting requirements have been waived by
regulations of the PBGC, has occurred and is continuing with respect to any
Plan. All of the minimum funding standards applicable to such Plans have
been satisfied and there exists no event or condition which would permit the
institution of proceedings to terminate any Plan under Section 4042 of ERISA.
The current value of the Plans' benefits guaranteed under Title IV or ERISA
does not exceed the current value of the Plans' assets allocable to such
benefits.
Section 4.10 Regulation U. The Borrower is not engaged
in the business of extending credit for the purpose of purchasing or carrying
margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System) and no part of the proceeds of any Loan will be used
to purchase or carry margin stock or for any other purpose which would
violate any of the margin requirements of the Board of Governors of the
Federal Reserve System.
Section 4.11 Ownership of Property; Liens. Each of the
Borrower and the Subsidiaries has good and marketable title to its real
properties and good and sufficient title to its other properties, including
all properties and assets referred to as owned by the Borrower and its
Subsidiaries in the audited financial statement of the Borrower referred to
in Section 4.5 (other than property disposed of since the date of such
financial statement in the ordinary course of business). None of the
properties, revenues or assets of the Borrower or any of its Subsidiaries is
subject to a Lien, except for (a) Liens disclosed in the financial statements
referred to in Section 4.5, (b) Liens listed on Exhibit E, or (c) Liens
allowed under Section 6.12.
Section 4.12 Taxes. Each of the Borrower and the
Subsidiaries has filed all federal, state and local tax returns required to
be filed and has paid or made provision for the payment of all taxes due and
payable pursuant to such returns and pursuant to any assessments made against
it or any of its property and all other taxes, fees and other charges imposed
on it or any of its property by any governmental authority (other than taxes,
fees or charges the amount or validity of which is currently being contested
in good faith by appropriate proceedings and with respect to which reserves
in accordance with GAAP have been provided on the books of the Borrower). No
tax Liens have been filed and no material claims are being asserted with
respect to any such taxes, fees or charges. The charges, accruals and
reserves on the books of the Borrower in respect of taxes and other
governmental charges are adequate.
Section 4.13 Trademarks, Patents. Each of the Borrower
and the Subsidiaries possesses or has the right to use all of the patents,
trademarks, trade names, service marks and copyrights, and applications
therefor, and all technology, know-how, processes, methods and designs used
in or necessary for the conduct of its business, without known conflict with
the rights of others.
Section 4.14 Investment Company Act. Neither the
Borrower nor any Subsidiary is an "investment company" or a company
"controlled" by an investment company within the meaning of the Investment
Company Act of 1940, as amended.
Section 4.15 Public Utility Holding Company Act. Neither
the Borrower nor any Subsidiary is a "holding company" or a "subsidiary
company" of a holding company or an "affiliate" of a holding company or of a
subsidiary company of a holding company within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
Section 4.16 Subsidiaries. Exhibit F sets forth as of
the date of this Agreement a list of all Subsidiaries and the number and
percentage of the shares of each class of capital stock owned beneficially or
of record by the Borrower or any Subsidiary therein, and the jurisdiction of
incorporation of each Subsidiary.
Section 4.17 Partnerships and Joint Ventures. Exhibit G
sets forth as of the date of this Agreement a list of all partnerships or
joint ventures in which the Borrower or any Subsidiary is a partner (limited
or general) or joint venturer.
ARTICLE V AFFIRMATIVE COVENANTS
From the date of this Agreement and thereafter until the
Commitment is terminated or expires and the Loans and the Letter of Credit
Obligations and all other liabilities of the Borrower to the Bank hereunder
and under the Note have been paid in full, unless the Bank shall otherwise
expressly consent in writing, the Borrower will do, and will cause each
Subsidiary (except in the instance of Section 5.1) to do, all of the
following:
Section 5.1 Financial Statements and Reports. Furnish
to the Bank:
(a) As soon as available and in any event
within 90 days after the end of each fiscal year of the Borrower, a company-
prepared annual audit report of the Borrower and its Subsidiaries prepared on
a consolidating and consolidated basis and in conformity with GAAP,
consisting of at least statements of income, cash flow, changes in financial
position and stockholders' equity, and a consolidated balance sheet as at the
end of such year, setting forth in each case in comparative form
corresponding figures from the previous annual audit, certified without
qualification by independent certified public accountants of recognized
standing selected by the Borrower and acceptable to the Bank, together with
any management letters, management reports or other supplementary comments or
reports to the Borrower or its board of directors furnished by such
accountants.
(b) Together with the audited financial
statements required under Section 5.1(a), a separate schedule containing the
details of the consolidating financial statements used to prepare such
company-prepared financial statements.
(c) As soon as available and in any event within
30 days after the end of each month, a copy of the company-prepared
consolidated and consolidating financial statement of the Borrower and its
subsidiaries, signed by the Borrower's chief financial officer, consisting of
statements of income for the Borrower and the Subsidiaries for such month and
for the period from the beginning of such fiscal year to the end of such
period, and a consolidating and consolidated balance sheet of the Borrower as
at the end of such period. In addition, Borrower shall provide to Bank
within 30 days after the end of each fiscal quarter statements of cash flow
for (i) such fiscal quarter and (ii) the period beginning at the beginning of
Borrower's fiscal year through the end of such quarter.
(d) Together with the financial statements
furnished by the Borrower under Sections 5.1(a) and 5.1(c), a Compliance
Certificate signed by the chief financial officer of the Borrower in the form
of Exhibit H attached hereto and incorporated herein by this reference,
demonstrating in reasonable detail compliance (or noncompliance, as the case
may be) with each of the financial ratios and restrictions contained in
Article VI and stating that as at the date of each such financial statement
there did not exist any Default or Event of Default or, if such Default or
Event of Default existed, specifying the nature and period of existence
thereof and what action the Borrower proposes to take with respect thereto.
(e) Immediately upon becoming aware of any
Default or Event of Default, a notice describing the nature thereof and what
action the Borrower proposes to take with respect thereto.
(f) Immediately upon becoming aware of the
occurrence, with respect to any Plan, of any Reportable Event (other than a
Reportable Event for which the reporting requirements have been waived by
PBGC regulations) or any "prohibited transaction" (as defined in Section 4975
of the Code), a notice specifying the nature thereof and what action the
Borrower proposes to take with respect thereto, and, when received, copies of
any notice from PBGC of intention to terminate or have a trustee appointed
for any Plan.
(g) Promptly upon the mailing or filing thereof,
copies of all financial statements, reports and proxy statements mailed to
the Borrower's shareholders, and copies of all registration statements,
periodic reports (Quarterly Reports on Form 10-Q and Annual Reports on Form
10-K) and other documents filed with the Securities and Exchange Commission
(or any successor thereto) or any national securities exchange.
(h) If requested by Bank, on a quarterly basis
during the term of this Agreement, (i) a detailed aging of Borrower's
accounts receivable and (ii) a summary aging, by vendor, of Borrower's
accounts payable
(i) on a quarterly basis during the term of this
Agreement, the amount of open Foreign Accounts Receivable that are not
supported by credit insurance or letters of credit.
(j) Immediately upon becoming aware of the
occurrence thereof, notice of the institution of any litigation, arbitration
or governmental proceeding, or the rendering of a judgment or decision in
such litigation or proceeding, which could cause or have a Material Adverse
Effect, and the steps being taken by the Person(s) affected by such
proceeding.
(k) Immediately upon becoming aware of the
occurrence thereof, notice of any violation as to any environmental matter by
the Borrower or any Subsidiary and of the commencement of any judicial or
administrative proceeding relating to health, safety or environmental matters
(i) in which an adverse determination or result could result in the
revocation of or have a material adverse effect on any operating permits, air
emission permits, water discharge permits, hazardous waste permits or other
permits held by the Borrower or any Subsidiary which are material to the
operations of the Borrower or such Subsidiary, or (ii) which will or
threatens to impose a material liability on the Borrower or such Subsidiary
to any Person or which will require a material expenditure by the Borrower or
such Subsidiary to cure any alleged problem or violation.
(l) From time to time, such other information
regarding the business, operation and financial condition of the Borrower and
the Subsidiaries as the Bank may reasonably request.
Section 5.2 Corporate Existence. Subject to Section 6.1
in the instance of a Subsidiary, maintain its corporate existence in good
standing under the laws of its jurisdiction of incorporation and its
qualification to transact business in each jurisdiction in which the
character of the properties owned, leased or operated by it or the business
conducted by it makes such qualification necessary.
Section 5.3 Insurance. Maintain with financially sound
and reputable insurance companies such insurance as may be required by law
and such other insurance in such amounts and against such hazards as is
customary in the case of reputable corporations engaged in the same or
similar business and similarly situated.
Section 5.4 Payment of Taxes and Claims. File all tax
returns and reports which are required by law to be filed by it and pay
before they become delinquent all taxes, assessments and governmental charges
and levies imposed upon it or its property and all claims or demands of any
kind (including, without limitation, those of suppliers, mechanics, carriers,
warehouses, landlords and other like Persons) which, if unpaid, might result
in the creation of a Lien upon its property; provided that the foregoing
items need not be paid if they are being contested in good faith by
appropriate proceedings, and as long as the Borrower's or such Subsidiary's
title to its property is not materially adversely affected, its use of such
property in the ordinary course of its business is not materially interfered
with and adequate reserves with respect thereto have been set aside on the
Borrower's or such Subsidiary's books in accordance with GAAP.
Section 5.5 Inspection. Permit any Person designated by
the Bank to visit and inspect any of its properties, corporate books and
financial records, to examine and to make copies of its books of accounts and
other financial records, and to discuss the affairs, finances and accounts of
the Borrower and the Subsidiaries with, and to be advised as to the same by,
its officers at such reasonable times and intervals as the Bank may
designate. So long as no Event of Default exists, the expenses of the Bank
for such visits, inspections and examinations shall be at the expense of the
Bank, but any such visits, inspections, and examinations made while any Event
of Default is continuing shall be at the expense of the Borrower.
Section 5.6 Maintenance of Properties. Maintain its
properties used or useful in the conduct of its business in good condition,
repair and working order, and supplied with all necessary equipment, and make
all necessary repairs, renewals, replacements, betterments and improvements
thereto, all as may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all
times.
Section 5.7 Books and Records. Keep adequate and proper
records and books of account in which full and correct entries will be made
of its dealings, business and affairs.
Section 5.8 Compliance. Comply in all material respects
with all laws, rules, regulations, orders, writs, judgments, injunctions,
decrees or awards to which it may be subject.
Section 5.9 ERISA. Maintain each Plan in compliance
with all material applicable requirements of ERISA and of the Code and with
all material applicable rulings and regulations issued under the provisions
of ERISA and of the Code.
Section 5.10 Environmental Matters. Observe and comply
with all laws, rules, regulations and orders of any government or government
agency relating to health, safety, pollution, hazardous materials or other
environmental matters to the extent non-compliance could result in a material
liability or otherwise cause or have a Material Adverse Effect.
Section 5.11 Support for Foreign Account Debtors. Obtain
security for all accounts receivable from each Foreign Account Debtor where
the aggregate exposure to such account debtor is greater than $250,000.00 by
obtaining foreign credit insurance or a letter of credit from a credit
institution satisfactory to Bank in its sole discretion; provided, however,
that Borrower need not obtain such security if (a) Bank specifically waives
its right to require such security or (b) the Foreign Account Debtor is not
the resident of an undeveloped or emerging country (as determined by Bank in
its sole discretion) and has at least a three year relationship with Borrower
with no derogatory payment history.
Section 5.12 Banking Relationship. Borrower shall
establish and maintain a full depository and cash management relationship
with Bank within ninety (90) days after the execution of this Agreement by
Borrower and Bank and Borrower hereby agrees that in the event Borrower fails
to establish and maintain such relationships with Bank that (i) Bank may
increase the rate of interest otherwise charged on all Loans by one percent
(1%) and (ii) Bank may increase the per annum letter of credit fee otherwise
charged on all Letters of Credit by one percent (1%).
ARTICLE VI NEGATIVE COVENANTS
From the date of this Agreement and thereafter until the
Commitment is terminated or expires and the Loans and the Letter of Credit
Obligations and all other liabilities of the Borrower to the Bank hereunder
and under the Note have been paid in full, unless the Bank shall otherwise
expressly consent in writing, the Borrower will not, and will not permit any
Subsidiary to, do any of the following:
Section 6.1 Merger. Merge or consolidate or enter into any
analogous reorganization or transaction with any Person; provided, however,
any wholly-owned Subsidiary may be merged with or liquidated into the
Borrower (if the Borrower is the surviving corporation) or any other wholly-
owned Subsidiary.
Section 6.2 Sale of Assets. Sell, transfer, lease or
otherwise convey all or any substantial part of its assets except for sales
and leases of inventory in the ordinary course of business and except for
sales or other transfers by a wholly-owned Subsidiary to the Borrower or
another wholly-owned Subsidiary.
Section 6.3 Purchase of Assets. Purchase or lease or
otherwise acquire all or substantially all of the assets of any Person,
except for purchases or other transfers by the Borrower or a wholly-owned
Subsidiary from a wholly-owned Subsidiary.
Section 6.4 Plans. Permit any condition to exist in
connection with any Plan which might constitute grounds for the PBGC to
institute proceedings to have such Plan terminated or a trustee appointed to
administer such Plan, permit any Plan to terminate under any circumstances
which would cause the lien provided for in Section 4068 of ERISA to attach to
any property, revenue or asset of the Borrower or any Subsidiary.
Section 6.5 Change in Nature of Business. Make any
material change in the nature of the business of the Borrower or such
Subsidiary, as carried on at the date hereof.
Section 6.6 Subsidiaries, Partnerships, Joint Ventures
and Ownership of Stock. Do any of the following: (a) form or acquire any
corporation which would thereby become a Subsidiary; (b) form or enter into
any partnership as a limited or general partner or into any joint venture;
(c) permit any Subsidiary to purchase or otherwise acquire any shares of the
stock of the Borrower; or (d) take any action, or permit any Subsidiary to
take any action, which would result in a decrease in the Borrower's or any
Subsidiary's ownership interest in any Subsidiary (including, without
limitation, decrease in the percentage of the shares of any class of stock
owned).
Section 6.7 Other Agreements. Enter into any agreement,
bond, note or other instrument with or for the benefit of any Person other
than the Bank which would: (a) prohibit the Borrower or such Subsidiary from
granting, or otherwise limit the ability of the Borrower or such Subsidiary
to grant, to the Bank any Lien on any assets or properties of the Borrower or
such Subsidiary (except for the real property owned by Datron Resources); or
(b) be violated or breached by the Borrower's performance of its obligations
under the Loan Documents.
Section 6.8 Restricted Payments. Either: (a) purchase
or redeem or otherwise acquire for value any shares of the Borrower's or any
Subsidiary's stock (except for up to 5% of the Borrower's total outstanding
stock), declare or pay any dividends thereon (other than stock dividends and
dividends payable solely to the Borrower), make any distribution on, or
payment on account of the purchase, redemption, defeasance or other
acquisition or retirement for value of, any shares of the Borrower's or any
Subsidiary's stock or set aside any funds for any such purpose (other than
payment to, or on account of or for the benefit of, the Borrower only); or
(b) directly or indirectly make any payment on, or redeem, repurchase,
defease, or make any sinking fund payment on account of, or any other
provision for, or otherwise pay, acquire or retire for value, any
Indebtedness of the Borrower or any Subsidiary that is subordinated in right
of payment to the Loans (whether pursuant to its terms or by operation of
law), except for regularly-scheduled payments of interest and principal
(which shall not include payments contingently required upon occurrence of a
change of control or other event) that are not otherwise prohibited hereunder
or under the document or agreement stating the terms of such subordination.
Section 6.9 Capital Expenditures. Make Capital
Expenditures in an amount exceeding $1,800,000.00 on a consolidated basis in
any fiscal year, except for the purpose of expanding Borrower's business
lines and subject to the approval of Bank, which may be granted or withheld
in Bank's sole discretion.
Section 6.10 Investments. Acquire for value, make, have
or hold any Investments, except:
(a) Investments outstanding on the date hereof
(including, without limitation, investments in Subsidiaries on the date
hereof) and listed on Exhibit I;
(b) Travel advances to officers and employees in
the ordinary course of business;
(c) Investments in readily marketable direct
obligations of the United States of America having maturities of one year or
less from the date of acquisition;
(d) Certificates of deposit or bankers'
acceptances, each maturing within one year from the date of acquisition,
issued by any commercial bank organized under the laws of the United States
or any State thereof which has (i) combined capital, surplus and undivided
profits of at least $100,000,000, and (ii) a credit rating with respect to
its unsecured indebtedness from a nationally recognized rating service that
is satisfactory to the Bank;
(e) Commercial paper maturing within 270 days
from the date of issuance and with a Moody's P-1 or Standard & Poor's A-1
rating;
(f) Repurchase agreements relating to securities
issued or guaranteed as to principal and interest by the United States of
America;
(g) extensions of credit in the nature of
accounts receivable or notes receivable arising from the sale of goods and
services in the ordinary course of business; and
(h) share of stock, obligations or other
securities received in settlement of claims arising in the ordinary course of
business.
Section 6.11 Indebtedness. Incur, create, issue, assume
or suffer to exist any Indebtedness, except:
(a) Indebtedness under this Agreement;
(b) Current Liabilities incurred in the ordinary
course of business;
(c) Indebtedness in the approximate amount of
$3,000,000 owed by Datron Resources to Xxxxxxx National Life Insurance
Company existing on the date of this Agreement and which is secured by a
mortgage and related liens, and other indebtedness as may be disclosed on
Exhibit J hereto;
(d) Indebtedness that has been subordinated to
Bank's rights under this Agreement to the satisfaction of Bank, indebtedness
from Guarantors to Borrower or from Borrower to Guarantors, indebtedness
consented to by Bank and indebtedness secured by Liens permitted under
Section 6.12 hereof; and
(e) Indebtedness consisting of endorsements for
collection, deposit or negotiation and warranties of products or services, in
each case incurred in the ordinary course of business.
Section 6.12 Liens. Create, incur, assume or suffer to
exist any Lien with respect to any property, revenues or assets now owned or
hereafter arising or acquired, except:
(a) Liens in connection with the acquisition of
property after the date hereof by way of purchase money mortgage, conditional
sale or other title retention agreement, Capitalized Lease or other deferred
payment contract, and attaching only to the property being acquired if the
Indebtedness secured thereby does not exceed 100% (including, without
limitation, in the case of a Capitalized Lease) of the fair market value of
such property at the time of acquisition thereof nor $1,800,000.00 in the
aggregate for the Borrower and all Subsidiaries at any one time outstanding;
(b) Liens existing on the date of this Agreement
and disclosed on Exhibit E hereto;
(c) Deposits or pledges to secure payment of
workers' compensation, unemployment insurance, old age pensions or other
social security obligations, in the ordinary course of business of the
Borrower or a Subsidiary;
(d) Liens for taxes, fees, assessments and
governmental charges not delinquent or to the extent that payments therefor
shall not at the time be required to be made in accordance with the
provisions of Section 5.4;
(e) Liens of carriers, warehousemen, mechanics
and materialmen, and other like Liens arising in the ordinary course of
business, for sums not due or to the extent that payment therefor shall not
at the time be required to be made in accordance with the provisions of
Section 5.4; and
(f) Deposits to secure the performance of bids,
trade contracts, leases, statutory obligations and other obligations of a
like nature incurred in the ordinary course of business.
Section 6.13 Contingent Liabilities. Either:
(i) endorse, guarantee, contingently agree to purchase or to provide funds
for the payment of, or otherwise become contingently liable upon, any
obligation of any other Person, except by the endorsement of negotiable
instruments for deposit or collection (or similar transactions) in the
ordinary course of business, or (ii) agree to maintain the net worth or
working capital of, or provide funds to satisfy any other financial test
applicable to, any other Person.
Section 6.14 Unconditional Purchase Obligations. Enter
into or be a party to any contract for the purchase or lease of materials,
supplies or other property or services if such contract requires that payment
be made by it regardless of whether or not delivery is ever made of such
materials, supplies or other property or services.
Section 6.15 Transactions with Related Parties. Enter
into or be a party to any transaction or arrangement, including, without
limitation, the purchase, sale lease or exchange of property or the rendering
of any service, with any Related Party, except in the ordinary course of and
pursuant to the reasonable requirements of the Borrower's or the applicable
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 a Related Party.
Section 6.16 Use of Proceeds. Permit any proceeds of the
Loans to be used, either directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of "purchasing or carrying any margin
stock" within the meaning of Regulation U of the Federal Reserve Board, as
amended from time to time, and furnish to the Bank, upon its request, a
statement in conformity with the requirements of Federal Reserve Form U-1
referred to in Regulation U.
Section 6.17 Financial Ratios. Failure to maintain the
following financial ratio tests, as measured as of the end of each fiscal
quarter of Borrower, based on the Borrower's company prepared consolidated
financial statements, and at the end of each fiscal year end of Borrower,
based on the consolidated fiscal year end CPA audited financial statements:
(a) Minimum Adjusted Quick Ratio. An Adjusted Quick
Ratio of not less than .65:1.00.
(b) Maximum Total Liabilities plus Letters of Credit
to Consolidated Tangible Net Worth. A ratio of
its Total Liabilities plus un-drawn face amount of
letters of credit outstanding as of the date the
ratio is being tested to Tangible Net Worth of not
more than 2.00:1:00.
(c) Minimum Fixed Charge Coverage Ratio. A Fixed
Charge Coverage Ratio not less than 2.00:1.00.
Section 6.18 Two Consecutive Quarterly Losses. Permit
the occurrence of two consecutive fiscal quarters for which a Net Loss is
posted by the Borrower except for the period beginning on April 1, 2001 and
ending on September 30, 2001, for which two consecutive fiscal quarter Net
Loss periods can occur, so long as, the combined year-to-date Net Income as
of September 30, 2001 is greater than a minus $600,000.00.
Section 6.19 Operating and Net Income. Permit the
occurrence, as of the end of each fiscal year period, of net income before
giving effect to after tax gains from the sale of assets outside of the
normal course of business of zero US Dollars ($0.00) or less.
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default. The occurrence of any
one or more of the following events shall constitute an Event of Default:
(a) The Borrower shall fail to make when due,
whether by acceleration or otherwise, any payment of principal of or interest
on the Note or any fee or other amount required to be made to the Bank
pursuant to the Loan Documents and such failure to make a payment shall
continue for five (5) calendar days after notice thereof to the Borrower by
the Bank;
(b) Any representation or warranty made or
deemed to have been made by or on behalf of the Borrower or any Subsidiary in
the Loan Documents or by or on behalf of the Borrower or any Subsidiary in
any certificate, statement, report or other writing furnished by or on behalf
of the Borrower to the Bank pursuant to the Loan documents shall prove to
have been false or misleading in any material respect on the date as of which
the facts set forth are stated or certified or deemed to have been stated or
certified;
(c) The Borrower shall fail to comply with
Section 5.2 hereof or any Section of Article VI hereof;
(d) The Borrower shall fail to comply with any
agreement, covenant, condition, provision or term contained in the Loan
Documents (and such failure shall not constitute an Event of Default under
any of the other provisions of this Section 7.1) and such failure to comply
shall continue for ten (10) calendar days after notice thereof to the
Borrower by the Bank;
(e) The Borrower or any Subsidiary shall become
insolvent or shall generally not pay its debts as they mature or shall apply
for, shall consent to, or shall acquiesce in the appointment of a custodian,
trustee or receiver of the Borrower or such Subsidiary or for a substantial
part of the property thereof or, in the absence of such application, consent
or acquiescence, a custodian, trustee or receiver shall be appointed for the
Borrower or a Subsidiary or for a substantial part of the property thereof
and shall not be discharged within 45 days;
(f) Any bankruptcy, reorganization, debt
arrangement or other proceedings under any bankruptcy or insolvency law shall
be instituted by or against the Borrower or a Subsidiary, and, if instituted
against the Borrower or a Subsidiary, shall have been consented to or
acquiesced in by the Borrower or such Subsidiary, or shall remain undismissed
for 45 days, or an order for relief shall have been entered against the
Borrower or such Subsidiary, or the Borrower or any Subsidiary shall take any
corporate action to approve institution of, or acquiescence in, such a
proceeding;
(g) Any dissolution or liquidation proceeding
shall be instituted by or against the Borrower or a Subsidiary and, if
instituted against the Borrower or such Subsidiary, shall be consented to or
acquiesced in by the Borrower or such Subsidiary or shall remain for 45 days
undismissed, or the Borrower or any Subsidiary shall take any corporate
action to approve institution of, or acquiescence in, such a proceeding;
(h) A judgment or judgments for the payment of
money in excess of the sum of $50,000.00 in the aggregate shall be rendered
against the Borrower or a Subsidiary and the Borrower or such Subsidiary
shall not discharge the same or provide for its discharge in accordance with
its terms, or procure a stay of execution thereof, prior to any execution on
such judgments by such judgment creditor, within 30 days from the date of
entry thereof, and within said period of 30 days, or such longer period
during which execution of such judgment shall be stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal;
(i) The institution by the Borrower or any ERISA
Affiliate of steps to terminate any Plan if in order to effectuate such
termination, (i) the Borrower or any ERISA Affiliate would be required to
make a contribution to such Plan or would incur a liability or obligation to
such Plan, and (ii) immediately after giving effect to the payment or
satisfaction of such contribution, liability or obligation (if made or
undertaken by the Borrower or any Subsidiary) a Default or Event of Default
would exist and be continuing or in order to effectuate such termination, the
Borrower or any ERISA Affiliate would be required to make a contribution to
such Plan,, or the institution by the PBGC of steps to terminate any Plan;
(j) The maturity of any Indebtedness of the
Borrower (other than Indebtedness under this Agreement) or a Subsidiary shall
be accelerated, or the Borrower or a Subsidiary shall fail to pay any such
Indebtedness when due or, in the case of such Indebtedness payable on demand,
when demanded, or any event shall occur or condition shall exist and shall
continue for more than the period of grace, if any, applicable thereto and
shall have the effect of causing, or permitting (any required notice having
been given and grace period having expired) the holder of any such
Indebtedness or any trustee or other Person acting on behalf of such holder
to cause, such Indebtedness to become due prior to its stated maturity or to
realize upon any collateral given as security therefor; or
(k) The Bank shall have determined in good faith
(which determination shall be conclusive) that the prospect of payment or
performance by the Borrower of any of its obligations to the Bank, hereunder
or under any other instrument, document or agreement, is materially impaired.
(l) Any Person, or group of Persons acting in
concert, shall have acquired more than 25% of the shares of voting stock and
such Person or group of Persons (or other Persons to whom such Persons or
group of Persons may transfer such shares without the approval of Lender),
shall have maintained control of such percentage of the voting shares for
ninety (90) days or more.
Section 7.2 Remedies.
Section 7.2.1 Generally. If (a) any Event of
Default described in Sections 7.1(e), (f) or (g) shall occur with respect to
the Borrower, the Commitment shall automatically terminate and the
outstanding unpaid principal balance of the Note, the accrued interest
thereon and all other obligations of the Borrower to the Bank under the Loan
Documents shall automatically become immediately due and payable; or (b) any
other Event of Default shall occur and be continuing, then the Bank may take
any or all of the following actions: (i) declare the Commitment terminated,
whereupon the Commitment shall terminate, (ii) declare the outstanding unpaid
principal balance of the Note, the accrued and unpaid interest thereon and
all other obligations of the Borrower to the Bank under the Loan Documents to
be forthwith due and payable, whereupon the Note, all accrued and unpaid
interest thereon and all such obligations shall immediately become due and
payable, in each case without demand or notice of any kind, all of which are
hereby expressly waived, anything in this Agreement or in the Note to the
contrary notwithstanding, (iii) exercise all rights and remedies under any
other instrument, document or agreement between the Borrower and the Bank,
and (iv) enforce all rights and remedies under any applicable law.
Section 7.2.2 Letters of Credit. In
addition to the remedies described in the Section immediately preceding this
Section, if any Event of Default described in Section 7.1(e), (f) or (g)
shall have occurred, or if any other Event of Default shall have occurred and
the Bank shall have declared that the principal balance of the Note is due
and payable, the Borrower shall pay to the Bank an amount equal to all the
Letter of Credit Obligations. Such payment shall be in cash, other
immediately available funds or in the form of other collateral acceptable to
the Bank (including, without limitation, letters of credit in form and from
banks acceptable to Bank) and shall be pledged to the Bank (or in the case of
letters of credit, shall be for the benefit of Bank and with such presentment
conditions as are acceptable to Bank). Such collateral shall be held by the
Bank until the outstanding Letters of Credit are terminated without payment
or are paid and Letter of Credit Obligations with respect thereto are
payable. In the event the Borrower defaults in the payment of any Letter of
Credit Obligations, the proceeds of the collateral held by Bank shall be
applied to the payment thereof. The Borrower acknowledges and agrees that
the Bank would not have an adequate remedy at law for failure by the Borrower
to pay immediately to the Bank the amount provided under this Section, and
that the Bank shall have the right to require the Borrower to perform
specifically such undertaking whether or not any of the Letter of Credit
Obligations are due and payable. Upon the failure of the Borrower to make
any payment required under this Section, the Bank may proceed to use all
remedies available at law or equity to enforce the obligation of the Borrower
to pay or reimburse the Bank. The balance of any payment due under this
Section shall bear interest payable on demand until paid in full at a per
annum rate equal to the Prime Rate plus 3.00%.
ARTICLE VIII MISCELLANEOUS
Section 8.1 Waiver and Amendment. No failure on the
part of the Bank or the holder of the Note to exercise and no delay in
exercising any power or right hereunder or under any other Loan Document
shall operate as a waiver thereof; nor shall any single or partial exercise
of any power or right preclude any other or further exercise thereof or the
exercise of any other power or right. The remedies herein and in any other
instrument, document or agreement delivered or to be delivered to the Bank
hereunder or in connection herewith are cumulative and not exclusive of any
remedies provided by law. No notice to or demand on the Borrower not
required hereunder or under the Note shall in any event entitle the Borrower
to any other or further notice or demand in similar or other circumstances or
constitute a waiver of the right of the Bank or the holder of the Note to any
other or further action in any circumstances without notice or demand. No
amendment, modification or waiver of any provision of the Loan Documents or
consent to any departure by the Borrower therefrom shall be effective unless
the same shall be in writing and signed by the Bank, and then such amendment,
modifications, waiver or consent shall be effective only in the specific
instances and for the specific purpose for which given.
Section 8.2 Expenses and Indemnities. Whether or not
any Loan is made hereunder, the Borrower agrees to reimburse the Bank upon
demand for all reasonable expenses paid or incurred by the Bank (including
filing and recording costs and fees and expenses of legal counsel, who may be
employees of the Bank) in connection with the preparation, review, execution,
delivery, amendment, modification, interpretation, collection and enforcement
of the Loan Documents. The Borrower agrees to pay, and save the Bank
harmless from all liability for, any stamp or other taxes which may be
payable with respect to the execution or delivery of the Loan Documents. The
Borrower agrees to indemnify and hold the Bank harmless from any loss or
expense which may arise or be created by the acceptance of telephonic or
other instructions for making Loans or disbursing the proceeds thereof,
except that Borrower shall not indemnify Bank for Bank's own gross
negligence. The obligations of the Borrower under this Section 8.2 shall
survive any termination of this Agreement.
Section 8.3 Notices. Except when telephonic notice is
expressly authorized by this Agreement, any notice or other communication to
any party in connection with this Agreement shall be in writing and shall be
sent by manual delivery, telegram, telex, facsimile transmission, overnight
courier or United States mail (postage prepaid) addressed to such party at
the address specified on the signature page hereof, or at such other address
as such party shall have specified to the other party hereto in writing. All
periods of notice shall be measured from the date of delivery thereof if
manually delivered, from the date of sending thereof if sent by telegram,
telex or facsimile transmission, from the first Business Day after the date
of sending if sent by overnight courier, or from four days after the date of
mailing if mailed; provided, however, that any notice to the Bank under
Article II hereof shall be deemed to have been given only when received by
the Bank.
Section 8.4 Successors. This Agreement shall be binding
upon the Borrower and the Bank and their respective successors and assigns,
and shall inure to the benefit of the Borrower and the Bank and the
successors and assigns of the Bank. The Borrower shall not assign its rights
or duties hereunder without the written consent of the Bank.
Section 8.5 Participations and Information. The Bank
may sell participation interests in any or all of the Loans and in all or any
portion of the Commitment to any Person. The Bank may furnish any
information concerning the Borrower in the possession of the Bank from time
to time to participants and prospective participants and may furnish
information in response to credit inquiries consistent with general banking
practice.
Section 8.6 Severability. Any provision of the
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 hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 8.7 Captions. The captions or headings herein
and any table of contents hereto are for convenience only and in no way
define, limit or describe the scope or intent of any provision of this
Agreement.
Section 8.8 Entire Agreement. This Agreement, the
Note, the Security Agreements executed by Borrower and the Guarantors, the
Guaranties and any of the Letter of Credit Agreements in existence at the
time of the execution of this Agreement, embody the entire agreement and
understanding between the Borrower and the Bank with respect to the subject
matter hereof and thereof. This Agreement supersedes all prior agreements
and understandings relating to the subject matter hereof.
Section 8.9 Counterparts. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one
and the same instrument, and either of the parties hereto may execute this
Agreement by signing any such counterpart.
Section 8.10 Governing Law. THE VALIDITY, CONSTRUCTION
AND ENFORCEABILITY OF THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO CONFLICT
OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED
STATES APPLICABLE TO NATIONAL BANKS.
Section 8.11 Consent to Jurisdiction. AT THE OPTION OF
THE BANK, THIS AGREEMENT AND THE NOTE MAY BE ENFORCED IN ANY FEDERAL COURT OR
CALIFORNIA STATE COURT SITTING IN LOS ANGELES COUNTY, CALIFORNIA; AND THE
BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES
ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE
BORROWER COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT
OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP
CREATED BY THIS AGREEMENT, THE BANK AT ITS OPTION SHALL BE ENTITLED TO HAVE
THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED,
OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH
CASE DISMISSED WITHOUT PREJUDICE.
Section 8.12 Waiver of Jury Trial. THE BORROWER AND THE
BANK EACH WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS (a) UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR (b) ARISING FROM ANY BANKING RELATIONSHIP
EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above.
DATRON SYSTEMS INCORPORATED
By: XXXXX X. DERBY
XXXXX X. DERBY, President
By: XXXXXXX X. XXXXXXX
XXXXXXX X. XXXXXXX, Chief
Financial Officer
Datron Systems, Incorporated
0000 Xxxxxxxxxx Xxxxx
Xxxxx , XX 00000
Attention: Xxxxxxx X. Xxxxxxx,
Chief Financial Officer
U.S. BANK NATIONAL ASSOCIATION
By: XXXX XXXXXX
XXXX XXXXXX, Xx. Vice President
By: XXXXXXX X. XXXXXXXXX
XXXXXXX X. XXXXXXXXX, Vice President
U.S. Bank
0000 Xx Xxxxx Xxxxxxx Xxxxx, Xxxxx 000
Xx Xxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx, Vice President
