BUSINESS LOAN AGREEMENT
Borrower: Covol Technologies, Inc.
0000 Xxxxx Xxxxxxxx Xxxx
Xxxx, XX 00000
Lender: Zions First National Bank
Head Ofiice/Commercial Banking
#0 Xxxxx Xxxx Xxxxxx
X.X.Xxx 25822
Xxxx Xxxx Xxxx, XX 00000
--------------------------------------------------------------------------------
THIS BUSINESS LOAN AGREEMENT between COVOL TECHNOLOGIES, INC.
("Borrower") and ZIONS FIRST NATIONAL BANK ("Lender") is made and executed on
the following terms and conditions. Borrower has received prior commercial loans
from Lender or has applied to Lender for a commercial loan or loans and other
financial accommodations, including those which may be described on any exhibit
or schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement individually as the "Loan"
and collectively as the "Loans." Borrower understands and agrees that: (a) in
granting, renewing, or extending any Loan, Lender is relying upon Borrower's
representations, warranties, and agreements, as set forth in this Agreement; (b)
the granting, renewing, or extending of any Loan by Lender at all times shall be
subject to Lender's sole judgment and discretion; and (c) all such Loans shall
be and shall remain subject to the following terms and conditions of this
Agreement.
TERM. This Agreement shall be effective as of May 31, 2000, and shall continue
thereafter until all Indebtedness of Borrower to Lender has been performed in
full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement" means this Business Loan Agreement, as this
Business Loan Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Business Loan
Agreement from time to time.
Borrower. The word "Borrower" means COVOL TECHNOLOGIES, INC.. The word
"Borrower" also includes, as applicable, all subsidiaries and affiliates of
Borrower as provided below in the paragraph titled "Subsidiaries and
Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
Collateral. The word "Collateral" means and includes without limitation all
property and assets
granted as collateral security for a Loan, whether real or personal
property, whether granted directly or indirectly, whether granted now or in
the future, and whether granted in the form of a security interest,
mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel
trust, factor's lien, equipment trust, conditional sale, trust receipt,
lien, charge, lien or title retention contract, lease or consignment
intended as a security device, or any other security or lien interest
whatsoever, whether created by law, contract, or otherwise.
ERISA. The word "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "EVENTS OF DEFAULT."
Grantor. The word "Grantor" means and includes without limitation each and
all of the persons or entities granting a Security Interest in any
Collateral for the Indebtedness, including without limitation all Borrowers
granting such a Security Interest.
Indebtedness. The word "Indebtedness" means and includes without limitation
all Loans, together with all other obligations, debts and liabilities of
Borrower to Lender, or any one or more of them, as well as all claims by
Lender against Borrower, or any one or more of them; whether now or
hereafter existing, voluntary or involuntary, due or not due, absolute or
contingent, liquidated or unliquidated; whether Borrower may be liable
individually or jointly with others; whether Borrower may be obligated as a
guarantor, surety, or otherwise; whether recovery upon such Indebtedness may
be or hereafter may become barred by any statute of limitations; and whether
such Indebtedness may be or hereafter may become otherwise unenforceable.
Lender. The word "Lender" means ZIONS FIRST NATIONAL BANK, its successors
and assigns.
Loan. The word "Loan" or "Loans" means and includes without limitation any
and all commercial loans and financial accommodations from Lender to
Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to this
Agreement from time to time.
Note. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing note
or notes therefor.
Permitted Liens. The words "Permitted Liens" mean: (a) liens and security
interests securing Indebtedness owed by Borrower to Lender; (b) liens for
taxes, assessments, or similar charges either not yet due or being contested
in good faith; (c) liens of materialmen, mechanics, warehousemen, or
carriers, or other like liens arising in the ordinary course of business and
securing obligations which are not yet delinquent; (d) purchase money liens
or purchase money security interests upon or in any property acquired or
held by Borrower in the ordinary course of business to secure indebtedness
outstanding on the date of this Agreement or permitted to be incurred under
the paragraph of this Agreement titled "Indebtedness and Liens"; (e) liens
and security interests which are in existence, as of the date of this
Agreement, including, but not limited to the security interest of OZ Master
Fund, Ltd., which will be eliminated upon disbursement of the $4,000,000.00
Zions Bank loan; and (f) those liens and security interests which in the
aggregate constitute an immaterial and insignificant monetary amount with
respect to the net value of Borrower's assets.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
Security Agreement. The words "Security Agreement" mean and include without
limitation any agreements, promises, covenants, arrangements, understandings
or other agreements, whether created by law, contract, or otherwise,
evidencing, governing, representing, or creating a Security Interest.
Security Interest. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien or title retention contract, lease or consignment intended as
a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
XXXX. The word "XXXX" means the Superfund Amendments and Reauthorization Act
of 1986 as now or hereafter amended.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions set
forth in this Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender in form satisfactory to
Lender the following documents for the Loan: (a) the Note, (b) Security
Agreements granting to Lender security interests in the Collateral, (c)
Financing Statements perfecting Lender's Security Interests; (d) evidence of
insurance as required below; and (e) any other documents required under this
Agreement or by Lender or its counsel.
Borrower's Authorization. Borrower shall have provided in form and substance
satisfactory to Lender properly certified resolutions, duly authorizing the
execution and delivery of this Agreement, the Note and the Related
Documents, and such other authorizations and other documents and instruments
as Lender or its counsel, in their sole discretion, may require.
Payment of Fees and Expenses. Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in
this Agreement or any Related Document.
Representations and Warranties. The representations and warranties set forth
in this Agreement, in the Related Documents, and in any document or
certificate delivered to Lender under this Agreement are true and correct.
No Event of Default. There shall not exist at the time of any advance a
condition which would constitute an Event of Default under this Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
Organization. Borrower is a corporation which is duly organized, validly
existing, and in good
standing under the laws of the State of Delaware and is validly existing and
in good standing in all states in which Borrower is doing business. Borrower
has the full power and authority to own its properties and to transact the
businesses in which it is presently engaged or presently proposes to engage.
Borrower also is duly qualified as a foreign corporation and is in good
standing in all states in which the failure to so qualify would have a
material adverse effect on its businesses or financial condition.
Authorization. The execution, delivery, and performance of this Agreement
and all Related Documents by Borrower, to the extent to be executed,
delivered or performed by Borrower, have been duly authorized by all
necessary action by Borrower; do not require the consent or approval of any
other person, regulatory authority or governmental body; and do not conflict
with, result in a violation of, or constitute a default under (a) any
provision of its articles of incorporation or organization, or bylaws, or
any agreement or other instrument binding upon Borrower or (b) any law,
governmental regulation, court decree, or order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms.
Collateral. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender and as
accepted by Lender, and except for property tax liens for taxes not
presently due and payable, Borrower owns and has good title to all of
Lender's collateral free and clear of all Security Interests, except
permitted liens, and has not executed any security documents or financing
statements relating to such collateral. All of Borrower's properties are
titled in Borrower's legal name, and Borrower has not used, or filed a
financing statement under, any other name for at least the last three (3)
years.
Hazardous Substances. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA," "XXXX," the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or
other applicable state or Federal laws, rules, or regulations adopted
pursuant to any of the foregoing. Except for acid conditioner or as
disclosed to and acknowledged by Lender in writing, Borrower represents and
warrants that: (a) During the period of Borrower's ownership of the
properties, there has been no use, generation, manufacture, storage,
treatment, disposal, release or threatened release of any hazardous waste or
substance by any person on, under, about or from any of the properties. (b)
Borrower has no knowledge of, or reason to believe that there has been (i)
any use, generation, manufacture, storage, treatment, disposal, release, or
threatened release of any hazardous waste or substance on, under, about or
from the properties by any prior owners or occupants of any of the
properties, or (ii) any actual or threatened litigation or claims of any
kind by any person relating to such matters. (c) Neither Borrower nor any
tenant, contractor, agent or other authorized user of any of the properties
shall use, generate, manufacture, store, treat, dispose of, or release any
hazardous waste or substance on, under, about or from any of the properties;
and any such activity shall be conducted in compliance with all applicable
federal, state, and local laws, regulations, and ordinances, including
without limitation those laws, regulations and ordinances
described above. Borrower authorizes Lender and its agents to enter upon the
properties to make such inspections and tests as Lender may deem appropriate
to determine compliance of the properties with this section of the
Agreement. Any inspections or tests made by Lender shall be at Borrower's
expense and for Lender's purposes only and shall not be construed to create
any responsibility or liability on the part of Lender to Borrower or to any
other person. The representations and warranties contained herein are based
on Borrower's due diligence in investigating the properties for hazardous
waste and hazardous substances. Borrower hereby (a) releases and waives any
future claims against Lender for indemnity or contribution in the event
Borrower becomes liable for cleanup or other costs under any such laws, and
(b) agrees to indemnify and hold harmless Lender against any and all claims,
losses, liabilities, damages, penalties, and expenses which Lender may
directly or indirectly sustain or suffer resulting from a breach of this
section of the Agreement or as a consequence of any use, generation,
manufacture, storage, disposal, release or threatened release of a hazardous
waste or substance on the properties. The provisions of this section of the
Agreement, including the obligation to indemnify, shall survive the payment
of the Indebtedness and the termination or expiration of this Agreement and
shall not be affected by Lender's acquisition of any interest in any of the
properties, whether by foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which may
materially adversely affect Borrower's financial condition or properties,
other than litigation, claims, or other events, if any, that have been
disclosed to and acknowledged by Lender in writing.
Taxes. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith in
the ordinary course of business and for which adequate reserves have been
provided.
Lien Priority. Except for permitted liens or otherwise previously disclosed
to Lender in writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security Interests
on or affecting any of the Collateral directly or indirectly securing
repayment of Borrower's Loan and Note, that would be prior or that may in
any way be superior to Lender's Security Interests and rights in and to such
Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements directly
or indirectly securing repayment of Borrower's Loan and Note and all of the
Related Documents are binding upon Borrower as well as upon Borrower's
successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which Borrower may
have any liability complies in all material respects with all applicable
requirements of law and regulations, and (i) no Reportable Event nor
Prohibited Transaction (as defined in ERISA) has occurred with respect to
any such plan, (ii) Borrower has not withdrawn from any such plan or
initiated steps to do so, (iii) no steps have been taken to terminate any
such plan, and (iv) there are no unfunded liabilities other than those
previously disclosed to Lender in writing.
Location of Borrower's Offices and Records. Borrower's place of business, or
Borrower's Chief
executive office, if Borrower has more than one place of business, is
located at 0000 XXXXX XXXXXXXX XXXX, XXXX, XX 00000. Unless Borrower has
designated otherwise in writing this location is also the office or offices
where Borrower keeps its records concerning the Collateral.
Information. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender will
be, true and accurate in every material respect on the date as of which such
information is dated or certified; and none of such information is or will
be incomplete by omitting to state any material fact necessary to make such
information not misleading.
Survival of Representations and Warranties. Borrower understands and agrees
that Lender, without independent investigation, is relying upon the above
representations and warranties in making the above referenced Loan to
Borrower. Borrower further agrees that the foregoing representations and
warranties shall be continuing in nature and shall remain in full force and
effect until such time as Borrower's Indebtedness shall be paid in full, or
until this Agreement shall be terminated in the manner provided above,
whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings or
similar actions affecting Borrower or any Guarantor which could materially
affect the financial condition of Borrower or the financial condition of any
Guarantor.
Financial Records. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis, and
permit Lender to examine and audit Borrower's books and records at all
reasonable times.
Financial Statements. Furnish Lender with, as soon as available, but in no
event later than ninety (90) days after the end of each fiscal year,
Borrower's balance sheet and income statement for the year ended, audited by
a certified public accountant satisfactory to Lender. All financial reports
required to be provided under this Agreement shall be prepared in accordance
with generally accepted accounting principles, applied on a consistent
basis, and certified by Borrower as being true and correct.
Additional Information. Furnish such additional information and statements,
lists of assets and liabilities, agings of receivables and payables,
inventory schedules, budgets, forecasts, tax returns, and other reports with
respect to Borrower's financial condition and business operations as Lender
may request from time to time.
Insurance. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
insurance companies reasonably acceptable to Lender. Borrower, upon request
of Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at
least ten (10) days' prior written notice.
Insurance Reports. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the
following: (a) the name of the insurer; (b) the risks insured; (c) the
amount of the policy; (d) the properties insured; (e) the then current
property values on the basis of which insurance has been obtained, and the
manner of determining those values; and (f) the expiration date of the
policy.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness
and obligations, including without limitation all assessments, taxes,
governmental charges, levies and liens, of every kind and nature, imposed
upon Borrower or its properties, income, or profits, prior to the date on
which penalties would attach, and all lawful claims that, if unpaid, might
become a lien or charge upon any of Borrower's properties, income, or
profits. Provided however, Borrower will not be required to pay and
discharge any such assessment, tax, charge, xxxx, xxxx or claim so long as
(a) the legality of the same shall be contested in good faith by appropriate
proceedings, and (b) Borrower shall have established on its books adequate
reserves with respect to such contested assessment, tax, charge, levy, lien,
or claim in accordance with generally accepted accounting practices.
Borrower, upon demand of Lender, will furnish to Lender evidence of payment
of the assessments, taxes, charges, levies, liens and claims and will
authorize the appropriate governmental official to deliver to Lender at any
time a written statement of any assessments, taxes, charges, levies, liens
and claims against Borrower's properties, income, or profits.
Performance. Perform and comply with all terms, conditions, and provisions
set forth in this Agreement and in the Related Documents in a timely manner,
and promptly notify Lender if Borrower learns of the occurrence of any event
which constitutes an Event of Default under this Agreement or under any of
the Related Documents.
Operations. Maintain executive and management personnel with substantially
the same qualifications and experience as the present executive and
management personnel; provide written notice to Lender of any change in
executive and management personnel; conduct its business affairs in a
reasonable and prudent manner and in compliance with all applicable federal,
state and municipal laws, ordinances, rules and regulations respecting its
properties, charters, businesses and operations, including without
limitation, compliance with the Americans With Disabilities Act and with all
minimum funding standards and other requirements of ERISA and other laws
applicable to Borrower's employee benefit plans.
Inspection. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records
and to make copies and memoranda of Borrower's books, accounts, and records.
If Borrower now or at any time hereafter maintains any records (including
without limitation computer generated records and computer software programs
for the generation of such records) in the possession of a third party,
Borrower, upon request of Lender, shall notify such party to permit Lender
free access to such records at all reasonable times and to provide Lender
with copies of any records it may request, all at Borrower's expense.
Compliance Certificate. Unless waived in writing by Lender, provide Lender
QUARTERLY, WITHIN 45 DAYS OF EACH QUARTER END and at the time of each
disbursement of Loan proceeds with a certificate executed by Borrower's
chief financial officer, or other officer or person acceptable to Lender,
certifying that the representations and warranties set forth in this
Agreement are true and correct as of the date of the certificate and further
certifying that, as of the date of the certificate, no Event of Default
exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all respects
with all environmental protection federal, state and local laws, statutes,
regulations and ordinances; not cause or permit to exist, as a result of an
intentional or unintentional action or omission on its part or on the part
of any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment, unless
such environmental activity is pursuant to and in compliance with the
conditions of a permit issued by the appropriate federal, state or local
governmental authorities; shall furnish to Lender promptly and in any event
within thirty (30) days after receipt thereof a copy of any notice, summons,
lien, citation, directive, letter or other communication from any
governmental agency or instrumentality concerning any intentional or
unintentional action or omission on Borrower's part in connection with any
environmental activity whether or not there is damage to the environment
and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing statements,
instruments, documents and other agreements as Lender or its attorneys may
reasonably request to evidence and secure with the Lender's collateral the
Loans and to perfect all Security Interests in the Lender's collateral.
RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law,
rule, regulation or guideline, or the interpretation or application of any
thereof by any court or administrative or governmental authority (including any
request or policy not having the force of law) shall impose, modify or make
applicable any taxes (except U.S. federal, state or local income or franchise
taxes imposed on Lender), reserve requirements, capital adequacy requirements or
other obligations which would (a) increase the cost to Lender for extending or
maintaining the credit facilities to which this Agreement relates, (b) reduce
the amounts payable to Lender under this Agreement or the Related Documents, or
(c) reduce the rate of return on Lender's capital as a consequence of Lender's
obligations with respect to the credit facilities to which this Agreement
relates, then Borrower agrees to pay Lender such additional amounts as will
compensate Lender therefor, within ten (10) days after Lender's written demand
for such payment, which demand shall be accompanied by an explanation of such
imposition or charge and a calculation in reasonable detail of the additional
amounts payable by Borrower, which explanation and calculations shall be
conclusive in the absence of manifest error.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
Indebtedness and Liens. (a) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this
Agreement, create, incur or assume indebtedness for borrowed money in excess
of $250,000.00, including capital leases, (b) except as allowed as a
Permitted Lien, sell, transfer, mortgage, assign, pledge, lease, grant a
security interest in, or encumber any of Lender's collateral, or (c) sell
with recourse any of Borrower's accounts, except to Lender.
Continuity of Operations. (a) Engage in any business activities
substantially different than those in which Borrower is presently engaged
without Lender's approval, which will not be unreasonably withheld, (b)
cease operations, liquidate, merge, transfer, acquire or consolidate with
any other entity, change ownership, change its name, dissolve or transfer or
sell Collateral out of the ordinary course of business or (c) pay any
dividends on Borrower's stock (other than dividends payable in its stock),
provided, however that notwithstanding the foregoing, but only so long as no
Event of Default has occurred and is continuing or would result from the
payment of dividends, if Borrower is a "Subchapter S Corporation" (as
defined in the Internal Revenue Code of 1986, as amended), Borrower may pay
cash dividends on its stock to its shareholders from time to time in amounts
necessary to enable the shareholders to pay income taxes and make estimated
income tax
payments to satisfy their liabilities under federal and state law which
arise solely from their status as Shareholders of a Subchapter S Corporation
because of their ownership of shares of stock of Borrower, or (d) purchase
or retire any of Borrower's outstanding shares in excess of $200,000.00 or
alter or amend Borrower's capital structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money or
assets in the aggregate of more than $250,000.00, (b) purchase, create or
acquire any interest in any other enterprise or entity, or (c) incur any
obligation as surety or guarantor other than in the ordinary course of
business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender; or (e) Lender in good xxxxx xxxxx itself insecure, even
though no Event of Default shall have occurred.
WAIVER OF CLAIMS. BORROWER (I) REPRESENTS THAT THEY HAVE NO DEFENSES TO OR
SETOFFS AGAINST ANY INDEBTEDNESS OR OTHER OBLIGATIONS OWING TO LENDER OR ITS
AFFILIATES (THE "OBLIGATIONS") NOR CLAIMS AGAINST LENDER OR ITS AFFILIATES FOR
ANY MATTER WHATSOEVER, RELATED OR UNRELATED TO THE OBLIGATIONS, AND (II)
RELEASES LENDER AND ITS AFFILIATES FROM ALL CLAIMS, CAUSES OF ACTION, AND COSTS,
IN LAW OR EQUITY, EXISITING AS OF THE DATE OF THIS AGREEMENT, WHICH BORROWER HAS
OR MAY HAVE BY REASON OF ANY MATTER OF ANY CONCEIVABLE KIND OR CHARACTER
WHATSOEVER, RELATED OR UNRELATED TO THE OBLIGATIONS, INCLUDING THE SUBJECT
MATTER OF THIS AGREEMENT. THIS PROVISION SHALL NOT APPLY TO CLAIMS FOR
PERFORMANCE OF EXPRESS CONTRACTUAL OBLIGATIONS OWING TO BORROWER BY LENDER OR
ITS AFFILIATES.
QUARTERLY 10-Q. BORROWER SHALL PROVIDE LENDER WITH COPIES OF THEIR QUARTERLY
10-Q REPORTS WITHIN 45 DAYS OF EACH QUARTER END.
SYNTHETIC FUEL PRODUCTION REPORTS. BORROWER SHALL PROVIDE LENDER WITH MONTHLY
SYNTHETIC FUEL PRODUCTION REPORTS WITHIN 15 DAYS OF EACH MONTH END.
EARNINGS. BORROWER SHALL MAINTAIN AN OPERATING EARNINGS BEFORE INTEREST TAXES
DEPRECIATION AND AMORTIZATION OF NOT LESS THAN $2,000,000.00 PER QUARTER,
BEGINNING WITH THE REPORTED JUNE 30, 2000 10-Q FINANCIAL STATEMENT.
ROYALTY REVENUES. BORROWER SHALL MAINTAIN ROYALTY REVENUES FROM LICENSEES OF NOT
LESS THAN $850,000.00 PER MONTH.
RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in,
and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including without limitation
all accounts held jointly with someone else and all accounts Borrower may open
in the future,
excluding however all XXX and Xxxxx accounts, and all trust accounts for which
the grant of a security interest would be prohibited by law. Borrower authorizes
Lender, to the extent permitted by applicable law, to charge or setoff all sums
owing on the Indebtedness against any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Borrower to make any payment when due on
the Loans.
Other Defaults. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition contained
in this Agreement or in any of the Related Documents, or failure of Borrower
to comply with or to perform any other term, obligation, covenant or
condition contained in any other agreement between Lender and Borrower.
Default in Favor of Third Parties. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's or any
Grantor's ability to repay the Loans or perform their respective obligations
under this Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under this
Agreement or the Related Documents is false or misleading in any material
respect at the time made or furnished, or becomes false or misleading at any
time thereafter.
Defective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any Security
Agreement to create a valid and perfected Security Interest) at any time and
for any reason.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any creditor
of any Grantor against any collateral securing the Indebtedness, or by any
governmental agency. This includes a garnishment, attachment, or levy on or
of any of Borrower's deposit accounts with Lender. However, this Event of
Default shall not apply if there is a good faith dispute by Borrower or
Grantor, as the case may be, as to the validity or reasonableness of the
claim which is the basis of the creditor or forfeiture proceeding, and if
Borrower or Grantor gives Lender written notice of the creditor or
forfeiture proceeding and furnishes reserves or a surety bond for the
creditor or forfeiture proceeding satisfactory to Lender.
Change In Ownership. Any person or entity acquires ownership of twenty-five
percent (25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
Right to Cure. If any default, other than a Default on Indebtedness, is
curable and if Borrower or Grantor, as the case may be, has not been given a
notice of a similar default within the preceding twelve (12) months, it may
be cured (and no Event of Default will have occurred) if Borrower or
Grantor, as the case may be, after receiving written notice from Lender
demanding cure of such default: (a) cures the default within thirty (30)
days; or (b) if the cure requires more than thirty (30) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be
sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate and, at Lender's option, all
Indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that in the case of an Event of Default of the type
described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender's rights
and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform an obligation of Borrower or of any Grantor shall not affect Lender's
right to declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Agreement. No alteration of or amendment to this Agreement
shall be effective unless given in writing and signed by the party or
parties sought to be charged or bound by the alteration or amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted by
Lender in the State of Utah. If there is a lawsuit, Borrower agrees upon
Lender's request to submit to the jurisdiction of the courts of SALT LAKE
County, the State of Utah. Subject to the provisions on arbitration, this
Agreement shall be governed by and construed in accordance with the laws of
the State of Utah.
ARBITRATION DISCLOSURES:
1.
ARBITRATION IS FINAL AND BINDING ON THE PARTIES AND SUBJECT TO ONLY
VERY LIMITED REVIEW BY A COURT.
2.
IN ARBITRATION THE PARTIES ARE WAIVING THEIR RIGHT TO LITIGATE IN
COURT, INCLUDING THEIR RIGHT TO A JURY TRIAL.
3.
DISCOVERY IN ARBITRATION IS MORE LIMITED THAN DISCOVERY IN COURT.
4.
ARBITRATORS ARE NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL
REASONING IN THEIR AWARDS. THE RIGHT TO APPEAL OR TO SEEK MODIFICATION OF
ARBITRATORS' RULINGS IS VERY LIMITED.
5.
A PANEL OF ARBITRATORS MIGHT INCLUDE AN ARBITRATOR WHO IS OR WAS
AFFILIATED WITH THE BANKING INDUSTRY.
6.
IF YOU HAVE QUESTIONS ABOUT ARBITRATION, CONSULT YOUR ATTORNEY OR THE
AMERICAN ARBITRATION ASSOCIATION.
(a) Any claim or controversy ("Dispute") between or among the parties and
their assigns, including but not limited to Disputes arising out of or
relating to this agreement, this arbitration provision ("arbitration
clause"), or any related agreements or instruments relating hereto or
delivered in connection herewith ("Related Documents"), and including but
not limited to a Dispute based on or arising from an alleged tort, shall at
the request of any party be resolved by binding arbitration in accordance
with the applicable arbitration rules of the American Arbitration
Association (the "Administrator"). The provisions of this arbitration clause
shall survive any termination, amendment, or expiration of this agreement or
Related Documents. The provisions of this arbitration clause shall supersede
any prior arbitration agreement between or among the parties. If any
provision of this arbitration clause should be determined to be
unenforceable, all other provisions of this arbitration clause shall remain
in full force and effect.
(b) The arbitration proceedings shall be conducted in Salt Lake City, Utah,
at a place to be determined by the Administrator. The Administrator and the
arbitrator(s) shall have the authority to the extent practicable to take any
action to require the arbitration proceeding to be completed and the
arbitrator(s)' award issued within one hundred fifty (150) days of the
filing of the Dispute with the Administrator. The arbitrator(s) shall have
the authority to impose sanctions on any party that fails to comply with
time periods imposed by the Administrator or the arbitrator(s), including
the sanction of summarily dismissing any Dispute or defense with prejudice.
The arbitrator(s) shall have the authority to resolve any Dispute regarding
the terms of this agreement, this arbitration clause or Related Documents,
including any claim or controversy regarding the arbitrability of any
Dispute. All limitations periods applicable to any Dispute or defense,
whether by statute or agreement, shall apply to any arbitration proceeding
hereunder and the arbitrator(s) shall have the authority to decide whether
any Dispute or defense is barred by a limitations period and, if so, to
summarily enter an award dismissing any Dispute or defense on that basis.
The doctrines of compulsory counterclaim, res judicata, and collateral
estoppel shall apply to any arbitration proceeding hereunder so that a party
must state as a counterclaim in the arbitration proceeding any claim or
controversy which arises out of the transaction or occurrence that is the
subject matter of the Dispute. The arbitrator(s) may in the arbitrator(s)'
discretion and at the request of any party: (1) consolidate in a single
arbitration proceeding any other claim or controversy involving another
party that is substantially related to the Dispute where that other party is
bound by an arbitration clause with the Lender, such as borrowers,
guarantors, sureties, and owners of collateral; (2) consolidate in a single
arbitration proceeding any other claim or controversy that is substantially
similar to the Dispute; and (3) administer multiple arbitration claims or
controversies as class actions in accordance with the provisions of Rule 23
of the Federal Rules of Civil Procedure.
(c) The arbitrator(s) shall be selected in accordance with the rules of the
Administrator from panels maintained by the Administrator. A single
arbitrator shall have expertise in the subject matter of the Dispute. Where
three arbitrators conduct an arbitration proceeding, the Dispute shall be
decided by a majority vote of the three arbitrators, at least one of whom
must have
expertise in the subject matter of the Dispute and at least one of whom must
be a practicing attorney. The arbitrator(s) shall award to the prevailing
party recovery of all costs and fees (including attorneys' fees and costs,
arbitration administration fees and costs, and arbitrator(s)' fees). The
arbitrator(s), either during the pendency of the arbitration proceeding or
as part of the arbitration award, also may grant provisional or ancillary
remedies, including but not limited to an award of injunctive relief,
foreclosure, sequestration, attachment, replevin, garnishment, or the
appointment of a receiver.
(d) Judgment upon an arbitration award may be entered in any court having
jurisdiction, subject to the following limitation: the arbitration award is
binding upon the parties only if the amount does not exceed Four Million
Dollars ($4,000,000.00); if the award exceeds that limit, either party may
demand the right to a court trial. Such a demand must be filed with the
Administrator within thirty (30) days following the date of the arbitration
award; if such a demand is not made within that time period, the amount of
the arbitration award shall be binding. The computation of the total amount
of an arbitration award shall include amounts awarded for attorneys' fees
and costs, arbitration administration fees and costs, and arbitrator(s)'
fees.
(e) No provision of this arbitration clause, nor the exercise of any rights
hereunder, shall limit the right of any party to: (1) judicially or
non-judicially foreclose against any real or personal property collateral or
other security; (2) exercise self-help remedies, including but not limited
to repossession and setoff rights; or (3) obtain from a court having
jurisdiction thereover any provisional or ancillary remedies, including but
not limited to injunctive relief, foreclosure, sequestration, attachment,
replevin, garnishment, or the appointment of a receiver. Such rights can be
exercised at any time, before or during initiation of an arbitration
proceeding, except to the extent such action is contrary to the arbitration
award. The exercise of such rights shall not constitute a waiver of the
right to submit any Dispute to arbitration, and any claim or controversy
related to the exercise of such rights shall be a Dispute to be resolved
under the provisions of this arbitration clause. Any party may initiate
arbitration with the Administrator; however, if any party initiates
litigation and another party disputes any allegation in that litigation, the
disputing party--upon the request of the initiating party--must file a
demand for arbitration with the Administrator and pay the Administrator's
filing fee. The parties may serve by mail a notice of an initial motion for
an order of arbitration.
(f) Notwithstanding the applicability of any other law to this agreement,
the arbitration clause, or Related Documents between or among the parties,
the Federal Arbitration Act, 9 U.S.C. Section 1 et seq., shall apply to the
construction and interpretation of this arbitration clause.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender's sale or
transfer, whether now or later, of one or more participation interests in the
Loans to one or more purchasers, whether related or unrelated to Lender,
provided that Lender must obtain Borrower's prior written approver so long as no
default is outstanding, which approval shall not be unreasonably withheld.
Lender may provide, without any limitation whatsoever, to any one or more
purchasers, or potential purchasers, any information or knowledge Lender may
have about Borrower or about any other matter relating to the Loan, and Borrower
hereby waives any rights to privacy it may have with respect to such matters.
Borrower additionally waives any and all notices of sale of participation
interests, as well as all notices of any repurchase of such participation
interests. Borrower also agrees that the purchasers of any such participation
interests will be considered as the absolute owners of such interests in the
Loans and will have all the rights granted under the participation agreement or
agreements governing the sale of such participation interests. Borrower further
waives all rights of offset or counterclaim that it may have now or later
against Lender or against any purchaser of such a participation interest and
unconditionally agrees that either Lender or such
purchaser may enforce Borrower's obligation under the Loans irrespective of the
failure or insolvency of any holder of any interest in the Loans. Borrower
further agrees that the purchaser of any such participation interests may
enforce its interests irrespective of any personal claims or defenses that
Borrower may have against Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of Lender's expenses,
including without limitation reasonable attorneys' fees, incurred in connection
with the preparation, execution, enforcement, modification and collection of
this Agreement or in connection with the Loans made pursuant to this Agreement.
Lender may pay someone else to help collect the Loans and to enforce this
Agreement, and Borrower will pay that amount. This includes, subject to any
limits under applicable law, Lender's reasonable attorneys' fees and Lender's
legal expenses, whether or not there is a lawsuit, including reasonable
attorneys' fees for bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Borrower also will pay any court costs, in
addition to all other sums provided by law.
Notices. All notices required to be given under this Agreement shall be given in
writing, may be sent by telefacsimile (unless otherwise required by law), and
shall be effective when actually delivered or when deposited with a nationally
recognized overnight courier or deposited in the United States mail, first
class, postage prepaid, addressed to the party to whom the notice is to be given
at the address shown above. Any party may change its address for notices under
this Agreement by giving formal written notice to the other parties, specifying
that the purpose of the notice is to change the party's address. To the extent
permitted by applicable law, if there is more than one Borrower, notice to any
Borrower will constitute notice to all Borrowers. For notice purposes, Borrower
will keep Lender informed at all times of Borrower's current address(es).
Severability. If a court of competent jurisdiction finds any provision of this
Agreement to be invalid or unenforceable as to any person or circumstance, such
finding shall not render that provision invalid or unenforceable as to any other
persons or circumstances. If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability or validity;
however, if the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects shall remain
valid and enforceable.
Subsidiaries and Affiliates of Borrower. To the extent the context of any
covenant of this Agreement makes it appropriate, the word "Borrower" as used
herein shall include all subsidiaries and affiliates of Borrower.
Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to make any Loan or other financial
accommodation to any subsidiary or affiliate of Borrower.
Successors and Assigns. All covenants and agreements contained by or on behalf
of Borrower shall bind its successors and assigns and shall inure to the benefit
of Lender, its successors and assigns. Borrower shall not, however, have the
right to assign its rights under this Agreement or any interest therein, without
the prior written consent of Lender.
Survival. All warranties, representations, and covenants made by Borrower in
this Agreement or in any certificate or other instrument delivered by Borrower
to Lender under this Agreement shall be considered to have been relied upon by
Lender and will survive the making of the Loan and delivery to Lender of the
Related Documents, regardless of any investigation made by Lender or on Lender's
behalf.
Time Is of the Essence. Time is of the essence in the performance of this
Agreement.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No delay
or omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Borrower, or between Lender and any Grantor, shall constitute a
waiver of any of Lender's rights or of any obligations of Borrower or of any
Grantor as to any future transactions. Whenever the consent of Lender is
required under this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent in subsequent instances where
such consent is required, and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
FINAL AGREEMENT. Borrower understands that this Agreement and the related loan
documents are the final expression of the agreement between Lender and Borrower
and may not be contradicted by evidence of any alleged oral agreement.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF MAY
31, 2000.
BORROWER:
COVOL TECHNOLOGIES, INC.
By: /s/ Xxxx X. Xxxxxx
-----------------------------
XXXX X. XXXXXX, CHAIRMAN & CEO
LENDER:
ZIONS FIRST NATIONAL BANK
By: /s/ Xxxxx X. Xxxxx
------------------------
Authorized Officer
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