CREDIT AGREEMENT by and between SOUTHWALL TECHNOLOGIES INC., a Delaware corporation and WELLS FARGO HSBC TRADE BANK, N.A. Dated as of
Exhibit
99.4
by and
between
SOUTHWALL
TECHNOLOGIES INC., a Delaware corporation
and
XXXXX
FARGO HSBC TRADE BANK, N.A.
Dated as
of
___________________________,
2005
Exhibit A
- Addendum to Credit Agreement
Exhibit B
- Revolving
Credit Facility
Supplement-1
Exhibit B
- Revolving Credit Facility Supplement-2
Exhibit C
- Collateral/Credit Support Document
Exhibit D
- Borrowing Base Certificate
|
XXXXX
FARGO HSBC TRADE BANK |
SOUTHWALL
TECHNOLOGIES INC., a Delaware corporation ("Borrower”), organized under
the laws of the State of Delaware whose chief executive office is located at the
address specified after its signature to this Agreement (“Borrower’s Address”)
and XXXXX FARGO HSBC TRADE BANK, N.A. (“Trade Bank”), whose
address is specified after its signature to this Agreement, have entered into
this CREDIT AGREEMENT as of ___________________________, 2005
("Effective Date"). All references to this "Agreement" include those covenants
included in the Addendum to Agreement ("Addendum") attached as Exhibit A
hereto.
I.
CREDIT
FACILITIES
1.1 The
Facilities. Subject
to the terms and conditions of this Agreement, Trade Bank will make available to
Borrower each of those credit facilities ("Facilities") for which a Facility
Supplement ("Supplement") is attached as Exhibit B hereto. Additional terms
for each individual Facility (and each subfacility thereof ("Subfacility")) are
set forth in the Supplement for that Facility. Each Facility will be available
from the Closing Date until the Facility Termination Date for that Facility.
Collateral and credit support required for each Facility are set forth in
Exhibit C hereto. Definitions for those capitalized terms not otherwise defined
are contained in Article 8 below.
1.2 The
aggregate outstanding amount of all Credit Extensions may at no time
exceed (i)
Three Million Dollars ($3,000,000) for Revolving Credit Facility 1, and (ii) the
lesser of (a) Three
Million Dollars ($3,000,000) for
Revolving Facility 2 or (b) the Borrowing Base in effect from time to
time
("Overall Credit Limit"). The aggregate outstanding amount of all Credit
Extensions outstanding at any time under any
Facility may not
exceed that amount specified as the "Credit Limit" in the Supplement for
that
Facility,
and the aggregate outstanding amount of all Credit Extensions outstanding at any
time under each Subfacility (or any subcategory thereof) may not exceed that
amount specified as the "Credit Sublimit" in the Supplement for the relevant
Facility.
An amount equal to 100% of each unfunded Credit Extension shall be used in
calculating the outstanding amount of Credit Extensions under this
Agreement.
1.3 Overadvance. All
Credit Extensions made hereunder shall be added to and deemed part of the
Obligations when made. If, at any time and for any reason, the aggregate
outstanding amount of all Credit Extensions made pursuant to this Agreement
exceeds the dollar limitation in Section 1.2
or the Borrowing Base, then
Borrower shall immediately pay to Trade Bank on demand, in cash, the amount of
such excess.
1.4 Repayment;
Interest and Fees. Each
funded Credit Extension shall be repaid by Borrower, and shall bear interest
from the date of disbursement at those per annum rates and such interest shall
be paid, at the times specified in the
applicable
Supplement, Note or Facility Document. With
respect to each Facility, Borrower
agrees to pay
to Trade Bank the fees specified in the
related
Supplement as well as those fees specified in the relevant Facility Document(s).
Interest and fees will be calculated on the basis of a 360 day
year, actual days elapsed. Any overdue payments of principal (and interest to
the extent permitted by law) shall bear interest at a per annum floating rate
equal to the Prime Rate plus 5%.
1.5 Prepayments. Credit
Extensions under any Facility may only be prepaid in accordance with the terms
of the
related
Supplement. At the time of any prepayment (including, but not limited to, any
prepayment which is a result of the occurrence of an Event of Default and an
acceleration of the Obligations) Borrower will pay to Trade Bank all interest
accrued on the amount so prepaid to the date of such prepayment and all costs,
expenses and fees specified in the Loan Documents.
II.
REPRESENTATIONS
AND WARRANTIES
Borrower
represents and
warrants to Trade
Bank that the following representations and warranties are true and
correct:
2.1 Legal
Status.
Borrower is duly organized and existing and in good standing under the laws of
the jurisdiction indicated in this Agreement, and is qualified or licensed to do
business in all jurisdictions in which such qualification or licensing is
required and in which the failure to so qualify or to be so licensed could have
a material adverse affect on Borrower.
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1
2.2 Authorization
and Validity. The
execution, delivery and performance of this Agreement, and all other Loan
Documents to which Borrower is a party, have been duly and validly authorized,
executed and delivered by Borrower and constitute legal, valid and binding
agreements of Borrower, and are enforceable against Borrower in accordance with
their respective terms.
2.3 Borrower's
Name. The name
of Borrower set forth at the end of this Agreement is its correct name. If
Borrower is conducting business under a fictitious business name, Borrower is in
compliance with all laws relating to the conduct of such business under such
name.
2.4 Financial
Condition and Statements. All
financial statements of Borrower delivered to Trade Bank have been prepared in
conformity with GAAP, and completely and accurately reflect the financial
condition of Borrower (and any consolidated Subsidiaries) at the times and for
the periods stated in such financial statements. Neither Borrower nor any
Subsidiary has any material contingent liability not reflected in the aforesaid
financial statement. Since the date of the financial statements delivered to
Trade Bank for the last fiscal period of Borrower to end before the Effective
Date, there has been no material adverse change in the financial condition,
business or prospects of Borrower. Borrower
is solvent.
2.5 Litigation. Except
as disclosed in writing to Trade Bank prior to the Effective Date, there is no
action, claim, suit, litigation, proceeding or investigation pending or (to best
of Borrower’s knowledge) threatened by or against or affecting Borrower or any
Subsidiary in any court or before any governmental authority, administrator or
agency which may result in (a) any material adverse change in the financial
condition or business of Borrower’s, or (b) any material impairment of the
ability of Borrower to carry on its business in substantially the same manner as
it is now being conducted.
2.6 No
Violation. The
execution, delivery, and performance by Borrower of each of the Loan Documents
do not violate any provision of any law or regulation, or contravene any
provision of the Articles
of Incorporation or By-Laws of
Borrower, or result in a breach of or constitute a default under any contract,
obligation, indenture, or other instrument to which Borrower is a party or by
which Borrower may be bound.
2.7 Income
Tax Returns.
Borrower
has no
knowledge of any pending assessments or adjustments of its income tax payable
with respect to any year.
2.8 No
Subordination. There
is no agreement, indenture, contract, or instrument to which Borrower is a party
or by which Borrower may be bound that requires the subordination in right of
payment of any of Borrower's obligations subject to this Agreement to any other
obligation of Borrower.
2.9 ERISA.
Borrower is in compliance in all material respects with all applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended or
recodified from time to time ("ERISA"); Borrower
has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event, as defined in ERISA, has occurred and is continuing with
respect to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under GAAP.
2.10 Other
Obligations. Except
as disclosed in writing to Trade Bank prior to the Effective Date, neither
Borrower nor any Subsidiary are in default of any obligation for borrowed money,
any purchase money obligation or any material lease, commitment, contract,
instrument or obligation.
2.11 No
Defaults. No
Event of Default, and event which with the giving of notice or the passage of
time or both would constitute an Event of Default, has occurred and is
continuing.
2.12 Information
Provided to Trade Bank. The
information provided to the Trade Bank concerning Borrower's business is true
and correct.
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2
2.13 Environmental
Matters. Except
as disclosed by Borrower to Trade Bank in writing prior to the Effective Date,
Borrower (as well as any Subsidiary) is each in compliance in all material
respects with all applicable Federal or state environmental, hazardous waste,
health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any Borrower's or any Subsidiary's operations
and/or properties, including without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, the Federal Toxic Substances Control Act and the California Health and
Safety Code, as any of the same may be amended, modified or supplemented from
time to time. None of the operations of Borrower or of any Subsidiary is the
subject of any Federal or state investigation evaluating whether any remedial
action involving a material expenditure is needed to respond to a release of any
toxic or hazardous waste or substance into the environment.
III.
CONDITIONS
TO EXTENDING FACILITIES
3.1 Conditions
to Initial Credit Extension. The
obligation of Trade Bank to make the first Credit Extension is subject to the
fulfillment to Trade Bank's satisfaction of the following
conditions:
|
(a) |
Approval
of Trade Bank Counsel.
All legal matters relating to making the
Facility
available to Borrower must be satisfactory to counsel for Trade
Bank. |
|
(b) |
Documentation.
Trade Bank must have received, in form and substance satisfactory to Trade
Bank, the following documents and instruments duly executed and in full
force and effect: |
|
(1) |
a
corporate borrowing resolution and incumbency certificate if Borrower is a
corporation, a partnership or joint venture borrowing certificate if
Borrower is a partnership or joint venture, and a limited liability
company borrowing certificate if Borrower is a limited liability
company; |
|
(2) |
the
Facility Documents for
the
Facility, including, but not limited to, note(s) ("Notes") for
the Revolving Credit Facility,
Trade Bank's standard Commercial Letter of Credit Agreement or Standby
Letter of Credit Agreement for any letter of credit
Facility; |
|
(3) |
those
guarantees, security agreements, deeds of trust, subordination agreements,
intercreditor agreements, factoring agreements, tax service contracts, and
other Collateral Documents required by Trade Bank to evidence the
collateral/credit support specified in the
Supplement; |
|
(4) |
if
an audit or inspection of any books, records or property is specified in
the Supplement for
the
Facility, an audit or inspection report from Xxxxx Fargo or another
auditor or inspector acceptable to Trade Bank reflecting values and
property conditions satisfactory to Trade Bank;
and |
|
(5) |
if
insurance is required in the Addendum, the insurance policies specified in
the Addendum (or other satisfactory proof thereof) from insurers
acceptable to Trade Bank. |
3.2 Conditions
to Making Each Credit Extension. The
obligation of Trade Bank to make each Credit Extension is subject to the
fulfillment to Trade Bank's satisfaction of the following
conditions:
|
(a) |
Representations
and Warranties.
The representations and warranties contained in this Agreement, the
Facility Documents and the Collateral Documents will be true and correct
on and as of the date of the Credit Extension with the same effect as
though such representations and warranties had been made on and as of such
date; |
|
(b) |
Documentation.
Trade Bank must have received, in form and substance satisfactory to Trade
Bank, the following documents and instruments duly executed and in full
force and effect: |
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3
|
(1) |
if
the Credit Extension is the issuance of a Commercial Letter of Credit,
Trade Bank's standard Application For Commercial Letter of Credit or
standard Application and Agreement For Commercial Letter of Credit;
|
|
(2) |
if
the Credit Extension is the issuance of a Standby Letter of Credit, Trade
Bank's standard Application For Standby Letter of Credit or standard
Application and Agreement For Standby Letter of
Credit; |
|
(3) |
if
a Borrowing Base Certificate is required for the Credit Extension, a
Borrowing Base Certificate demonstrating compliance with the requirements
for such Credit Extension. |
|
(c) |
Fees.
Trade Bank must have received any fees required by the Loan Documents to
be paid at the time such Credit Extension is
made. |
IV.
AFFIRMATIVE
COVENANTS
Borrower
covenants that so
long as Trade Bank remains committed to make Credit Extensions to Borrower, and
until payment of all Obligations and Credit Extensions, Borrower will comply
with each of the following covenants: (For purposes of this Article IV, and
Article V below, reference to "Borrower" may also extend to Borrower's
subsidiaries, if so specified in the Addendum.)
4.1 Punctual
Payments.
Punctually pay all principal, interest, fees and other Obligations due under
this Agreement or under any Loan Document at the time and place and in the
manner specified herein or therein.
4.2 Notification
to Trade Bank.
Promptly, but in no event more than 5 calendar days after the occurrence of each
such event, provide written notice in reasonable detail of each of the
following:
|
(a) |
Occurrence
of a Default.
The occurrence of any Event of Default or any event which with the giving
of notice or the passage of time or both would constitute an Event of
Default; |
|
(b) |
Borrower's
Trade Names; Place of Business.
Any change of Borrower's (or any Subsidiary's) name, trade name or place
of business, or chief executive officer; |
|
(c) |
Litigation.
Any action, claim, proceeding, litigation or investigation threatened or
instituted by or against or affecting Borrower (or any Subsidiary) in any
court or before any government authority, administrator or agency which
may materially and adversely affect Borrower's (or any Subsidiary's)
financial condition or business or Borrower's ability to carry on its
business in substantially the same manner as it is now being
conducted; |
|
(d) |
Uninsured
or Partially Uninsured Loss.
Any uninsured or partially uninsured loss through liability or property
damage or through fire, theft or any other cause affecting Borrower's (or
any Subsidiary's) property in excess of the aggregate amount required
hereunder; |
|
(e) |
Reports
Made to Insurance Companies.
Copies of all material reports made to insurance companies;
and |
|
(f) |
ERISA.
The occurrence and nature of any Reportable Event or Prohibited
Transaction, each as defined in ERISA, or any funding deficiency with
respect to any Plan. |
4.3 Books
and Records.
Maintain at Borrower's address
books and records in accordance with GAAP, and permit any representative of
Trade Bank, at any reasonable time, to inspect, audit and examine such books and
records, to make copies of them, and to inspect the properties of
Borrower.
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4.4 Tax
Returns and Payments. Timely
file all tax returns and reports required by foreign, federal, state and local
law, and timely pay all foreign, federal, state and local taxes, assessments,
deposits and contributions owed by Borrower. Borrower may, however, defer
payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly instituted and diligently conducted, (ii) notifies Trade Bank in
writing of the commencement of, and any material development in, the
proceedings, (iii) posts bonds or takes any other steps required to keep
the contested taxes from becoming a lien upon any of the Collateral, and
(iv) makes provision, to Trade Bank's satisfaction, for eventual payment of
such taxes in the event Borrower is obligated to make such payment.
4.5 Compliance
with Laws. Comply
in all material respects with the provisions of all foreign, federal, state and
local laws and regulations relating to Borrower, including, but not limited to,
those relating to Borrower's ownership of real or personal property, the conduct
and licensing of Borrower's business, and health and environmental
matters.
4.6 Taxes
and Other Liabilities. Pay and
discharge when due any and all indebtedness, obligations, assessments and taxes,
both real and personal, including without limitation federal and state income
taxes and state and local property taxes and assessments, except (a) such
as Borrower may in good faith contest or as to which a bona fide dispute may
arise, and (b) for which Borrower has made provision, to Trade Bank's
satisfaction, for eventual payment thereof in the event that Borrower is
obligated to make such payment.
4.7 Insurance.
Maintain and keep in force insurance of the types and in amounts customarily
carried in lines of business similar to that of Borrower, including, but not
limited to, fire, extended coverage, public liability, flood, property damage
and workers' compensation, with all such insurance to be in amounts satisfactory
to Trade Bank and to be carried with companies approved by Trade Bank before
such companies are retained, and deliver to Trade Bank from time to time at
Trade Bank's request schedules setting forth all insurance then in effect. All
insurance policies shall name Trade Bank as an additional loss payee, and shall
contain a lenders loss payee endorsement in form reasonably acceptable to Trade
Bank. (Upon receipt of the proceeds of any such insurance, Trade Bank shall
apply such proceeds in reduction of the outstanding funded Credit Extensions and
shall hold any remaining proceeds as collateral for the outstanding unfunded
Credit Extensions, as Trade Bank shall determine in its sole discretion, except
that, provided no Event of Default has occurred, Trade Bank shall release to
Borrower insurance proceeds with respect to equipment totaling less than
$100,000, which shall be utilized by Borrower for the replacement of the
equipment with respect to which the insurance proceeds were paid, if Trade Bank
receives reasonable assurance that the insurance proceeds so released will be so
used.) If Borrower fails to provide or pay for any insurance, Trade Bank may,
but is not obligated to, obtain the insurance at Borrower's
expense.
4.8 Further
Assurances. At
Trade Bank's request and in form and substance satisfactory to Trade Bank,
execute all documents and take all such actions at Borrower's expense
as Trade Bank may deem reasonably necessary or useful to perfect and maintain
Trade Bank's perfected security interest in the Collateral and in order to fully
consummate all of the transactions contemplated by the Loan
Documents.
V.
NEGATIVE
COVENANTS
Borrower
covenants that so
long as Trade Bank remains committed to make any Credit Extensions to Borrower
and until all Obligations and Credit Extensions have been paid, Borrower will
not:
5.1 Merge
or Consolidation, Transfer of Assets. Merge
into or consolidate with any other entity; make any substantial change in the
nature of Borrower's business as conducted as of the date hereof; acquire all or
substantially all of the assets of any other entity with the exception that
Borrower may acquire all or substantially all of the assets of any other entity
up to an amount of $3,000,000; sell, lease, transfer or otherwise dispose of all
or a substantial or material portion of Borrower's assets except in the ordinary
course of its business.
5.2 Use
of Proceeds.
Borrower will not use the proceeds of any Credit Extension except for the
purposes, if any, specified for such Credit Extension in the Supplement covering
the Facility under which such Credit Extension is made.
5.3 Liens.
Mortgage, pledge, grant or permit to exist a security interest in, or lien upon,
all or any portion of Borrower's assets now owned or hereafter acquired, except
any of the foregoing in favor of Trade Bank or which is existing as of, and
disclosed to Trade Bank in writing prior to, the date hereof.
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5
5.4 Acquisitions
of Assets.
Borrower will not acquire any assets or enter into any other transaction outside
the ordinary course of Borrower's business with the exception that Borrower may
acquire all or substantially all of the assets of any other entity up to an
amount of $3,000,000.
5.5 Loans
and Investments.
Borrower will not make any loans or advances to, or investments in, any person
or entity except for accounts receivable created in the ordinary course of
Borrower's business.
5.6 Indebtedness
For Borrowed Money.
Borrower will not incur more than $13,500,000 indebtedness for borrowed money,
except to Trade Bank and except for indebtedness subordinated to the Obligations
by an instrument or agreement in form acceptable to Trade Bank.
5.7 Guarantees.
Borrower will not guarantee or otherwise become liable with respect to the
obligations of any other person or entity, except for endorsement of instruments
for deposit into Borrower's account in the ordinary course of Borrower's
business.
5.8 Dividends
and Distributions of Capital of C Corporation. If
Borrower is a corporation, Borrower will not pay or declare any dividends or
make any distribution of capital on Borrower's stock (except for dividends
payable solely in stock of Borrower), nor redeem, retire, purchase or otherwise
acquire, directly or indirectly, any shares of any class of Borrower's stock now
or hereafter outstanding, with the exception that the Borrower may declare
dividends on any preferred class of Borrower’s stock up to an aggregate amount
of $600,000 on a per annum basis.
5.9 Investments
in, or Acquisitions of, Subsidiaries.
Borrower will not make any investments in, or form or acquire, any subsidiaries
with the exception that Borrower may without restriction make investments in,
and transfer assets to and from, its German subsidiary, Southwall Europe
GmbH.
5.10 Capital
Expenditures.
Borrower shall not make any capital expenditures in any fiscal year in an
aggregate amount in excess of $1,500,000.
VI.
EVENTS
OF DEFAULT AND REMEDIES
6.1 Events
of Default. The
occurrence of any of the following shall constitute an "Event of
Default":
|
(a) |
Failure
to Make Payments When Due.
Borrower's
failure to pay principal, interest, fees or other amounts when due under
any Loan Document. |
|
(b) |
Failure
to Perform Obligations.
Any failure by Borrower to comply with any covenant or obligation in this
Agreement or in any Loan Document (other than those referred to in
subsection (a)above), and such default shall continue for a period of
twenty calendar days from the earlier of (i) Borrower's failure to
notify Trade Bank of such Event of Default pursuant to Section 4.2(a)
above, or (ii) Trade Bank's notice to Borrower of such Event of
Default. |
|
(c) |
Untrue
or Misleading Warranty or Statement.
Any warranty, representation, financial statement, report or certificate
made or delivered by Borrower under any Loan Document is untrue or
misleading in any material respect when made or delivered.
|
|
(d) |
Defaults
Under Other Loan Documents.
Any "Event of Default" occurs under any other Loan Document; any Guaranty
is no longer in full force and effect (or any claim thereof made by
Guarantor) or any failure of a Guarantor to comply with the provisions
thereof; or any breach of the provisions of any Subordination Agreement or
Intercreditor Agreement by any party other than the Trade
Bank. |
|
(e) |
Defaults
Under Other Agreements or Instruments.
Any default in the payment or performance of any obligation, or the
occurrence of any event of default, under the terms of any other agreement
or instrument pursuant to which Borrower, any Subsidiary or any Guarantor
or general partner of Borrower has incurred any debt or other material
liability to any person or entity. |
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6
|
(f) |
Concealing
or Transferring Property.
Borrower conceals, removes or transfers any part of its property with
intent to hinder, delay or defraud its creditors, or makes or suffers any
transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law.
|
|
(g) |
Judgments
and Levies Against Borrower.
The filing of a notice of judgment lien against Borrower, or the recording
of any abstract of judgment against Borrower, in any county in which
Borrower has an interest in real property, or the service of a notice of
levy and/or of a writ of attachment or execution, or other like process,
against the assets of Borrower, or the entry of a judgment against
Borrower. |
|
(h) |
Event
or Condition Impairing Payment or Performance.
Any event occurs or condition arises which Trade Bank in good faith
believes impairs or is substantially likely to impair the prospect of
payment or performance by Borrower of the Obligations, including, but not
limited to any material adverse change in Borrower's financial condition,
business or prospects. |
|
(i) |
Voluntary
Insolvency.
Borrower, any Subsidiary or any Guarantor (i) becomes insolvent,
(ii) suffers or consents to or applies for the appointment of a
receiver, trustee, custodian or liquidator of itself or any of its
property, (iii) generally fails to pay its debts as they become due,
(iv) makes a general assignment for the benefit of creditors, or
(v) files a voluntary petition in bankruptcy, or seeks
reorganization, in order to effect a plan or other arrangement with
creditors or any other relief under the Bankruptcy Reform Act, Title 11 of
the United States Code, as amended or recodified from time to time
("Bankruptcy Code"), or under any state or Federal law granting relief to
debtors, whether now or hereafter in
effect. |
|
(j) |
Involuntary
Insolvency.
Any involuntary petition or proceeding pursuant to the Bankruptcy Code or
any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors is filed or commenced against
Borrower, any Subsidiary or Guarantor, or an order for relief is entered
against it by any court of competent jurisdiction under the Bankruptcy
Code or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors. |
6.2 Remedies. Upon
the occurrence of any Event of Default, or at any time thereafter, Trade Bank,
at its option, and without notice or demand of any kind (all of which are hereby
expressly waived by Borrower), may do any one or more of the following:
(a) terminate Trade Bank's obligation to make Credit Extensions or to make
available to Borrower the
Facility or other
financial accommodations; (b) accelerate and declare all or any part of the
Obligations to be immediately due, payable, and performable, notwithstanding any
deferred or installment payments allowed by any instrument evidencing or
relating to any Credit Extension; and/or (c) exercise all its rights,
powers and remedies available under the Loan Documents, or accorded by law,
including, but not limited to, the right to resort to any or all Collateral or
other security for any of the Obligations and to exercise any or all of the
rights of a beneficiary or secured party pursuant to applicable law.
Notwithstanding the provisions in the foregoing sentence, if any Event of
Default set out in subsections (i) and (j) of Section 6.1 above shall
occur, then all the remedies specified in the preceding sentence shall
automatically take effect without notice or demand of any kind (all of which are
hereby expressly waived by Borrower) with respect to any and all Obligations.
All rights, powers and remedies of Trade Bank may be exercised at any time by
Trade Bank and from time to time after the occurrence of an Event of Default,
are cumulative and not exclusive, and shall be in addition to any other rights,
powers or remedies provided by law or equity.
VII.
GENERAL
PROVISIONS
7.1 Notices. All
notices to be given under this Agreement shall be in writing and shall be given
personally or by regular first-class mail, by certified mail return receipt
requested, by a private delivery service which obtains a signed receipt, or by
facsimile transmission addressed to Trade Bank or Borrower at the address
indicated after their signature to this Agreement, or at any other address
designated in writing by one party to the other party. Trade Bank is hereby
authorized by Borrower to act on such instructions or notices sent by facsimile
transmission or telecommunications device which Trade Bank believes come from
Borrower. All notices shall be deemed to have been given upon delivery, in the
case of notices personally delivered or delivered by private delivery service,
upon the expiration of 3 calendar days following the deposit of the notices in
the United States mail, in the case of notices deposited in the United States
mail with postage prepaid, or upon receipt, in the case of notices sent by
facsimile transmission.
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7.2 Waivers. No
delay or failure of Trade Bank in exercising any right, power or remedy under
any of the Loan Documents shall affect or operate as a waiver of such right,
power or remedy; nor shall any single or partial exercise of any such right,
power or remedy preclude, waive or otherwise affect any other or further
exercise thereof or the exercise of any other right, power or remedy. Any
waiver, consent or approval by Trade Bank under any of the Loan Documents must
be in writing and shall be effective only to the extent set out in such
writing.
7.3 Benefit
of Agreement. The
provisions of the Loan Documents shall be binding upon and inure to the benefit
of the respective successors, assigns, heirs, executors, administrators,
beneficiaries and legal representatives of Borrower and Trade Bank; provided,
however, that Borrower may not assign or transfer any of
its rights
under any Loan Document without the prior written consent of Trade Bank, and any
prohibited assignment shall be void. No consent by Trade Bank to any assignment
shall release Borrower from
its
liability for the Obligations unless such release is specifically given by Trade
Bank to Borrower in writing. Trade Bank reserves the right to sell, assign,
transfer, negotiate or grant participations in all or any part of, or any
interest in, Trade Bank's rights and benefits under each of the Loan Documents.
In connection therewith, Trade Bank may disclose any information relating to
the
Facility,
Borrower or its business, or any Guarantor or its business.
7.4 Joint
and Several Liability. If
Borrower consists of more than one person or entity, the liability of each of
them shall be joint and several, and the compromise of any claim with, or the
release of, any one such Borrower shall not constitute a compromise with, or a
release of, any other such Borrower.
7.5 No
Third Party Beneficiaries. This
Agreement is made and entered into for the sole protection and benefit of
Borrower and Trade Bank and their respective permitted successors and assigns,
and no other person or entity shall be a third party beneficiary of, or have any
direct or indirect cause of action or claim in connection with, any of the Loan
Documents to which it is not a party.
7.6 Governing
Law and Jurisdiction. This
Agreement shall, unless provided differently in any Loan Document, be governed
by, and be construed in accordance with, the internal laws of the State of
California, except to the extent Trade Bank has greater rights or remedies under
federal law whether as a national bank or otherwise. Borrower and Trade Bank
(a) agree that all actions and proceedings relating directly or indirectly
to this Agreement shall be litigated in courts located within California;
(b) consent to the jurisdiction of any such court and consent to service of
process in any such action or proceeding by personal delivery or any other
method permitted by law; and (c) waive any and all rights Borrower may have
to object to the jurisdiction of any such court or to transfer or change the
venue of any such action or proceeding.
7.7 Mutual
Waiver of Jury Trial.
Borrower and Trade Bank each hereby waive the right to trial by jury in any
action or proceeding based upon, arising out of, or in any way relating to,
(a) any Loan Document, (b) any other present or future agreement,
instrument or document between Trade Bank and Borrower, or (c) any conduct,
act or omission of Trade Bank or Borrower or any of their directors, officers,
employees, agents, attorneys or any other persons or entities affiliated with
Trade Bank or Borrower, which waiver will apply in all of the mentioned cases
whether the case is a contract or tort case or any other case. Borrower
represents and
warrants that no
officer, representative or agent of Trade Bank has represented, expressly or
otherwise, that Trade Bank would not seek to enforce this waiver of jury
trial.
7.8 Severability. Should
any provision of any Loan Document be prohibited by, or invalid under applicable
law, or held by any court of competent jurisdiction to be void or unenforceable,
such defect shall not affect, the validity of the other provisions of the Loan
Documents.
7.9 Entire
Agreement; Amendments. This
Agreement and the other Loan Documents are the final, entire and complete
agreement between Borrower and Trade Bank concerning the Credit Extensions and
the
Facility;
supersede all prior and contemporaneous negotiations and oral representations
and agreements. There are no oral understandings, representations or agreements
between the parties concerning the Credit Extensions or the
Facility which
are not set forth in the Loan Documents. This Agreement and the Supplement may
not be waived, amended or superseded except in a writing executed by Borrower
and Trade Bank.
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8
7.10 Collection
of Payments. Unless
otherwise specified in any Loan Document, other than this Agreement or any Note,
all principal, interest and any fees due to Trade Bank by Borrower under this
Agreement, the Addendum, any Supplement, any Facility Document, any Collateral
Document or any Note, will be paid by Trade Bank having Xxxxx Fargo debit any
of
Borrower’s
accounts with Xxxxx Fargo and forwarding such amount debited to Trade Bank,
without presentment, protest, demand for reimbursement or payment, notice of
dishonor or any other notice whatsoever, all of which are hereby expressly
waived by Borrower. Such debit will be made at the time principal, interest or
any fee is due to Trade Bank pursuant to this Agreement, the Addendum, any
Supplement, any Facility Document, any Collateral Document or any
Note.
7.11 Costs,
Expenses and Attorneys' Fees.
Borrower will reimburse Trade Bank for all costs and expenses, including, but
not limited to, reasonable attorneys' fees and expenses (which counsel may be
Trade Bank or Xxxxx Fargo employees), expended or incurred by Trade Bank in the
preparation and negotiation of this Agreement, the Notes, the Collateral
Documents, the Addendum, and the Facility Documents, in amending this Agreement,
the Collateral Documents, the Notes, the Addendum, or the Facility Documents, in
collecting any sum which becomes due Trade Bank on the Notes, under this
Agreement, the Collateral Documents, the Addendum, the Supplement, or any of the
Facility Documents, in the protection, perfection, preservation and enforcement
of any and all rights of Trade Bank in connection with this Agreement, the
Notes, any of the Collateral Documents, the Supplement, any of the Addendum, or
any of the Facility Documents, including, without limitation, the fees and costs
incurred in any out-of-court work out or a bankruptcy or reorganization
proceeding.
VIII.
DEFINITIONS
8.1 "Accounts
Receivable" means
all presently existing and hereafter arising "Rights to Payment" (as that term
is defined in the "Continuing Security Agreement - Rights to Payment and
Inventory" executed by Borrower in favor of Trade Bank) which arise from the
sale, lease or other disposition of Inventory, or from performance of contracts
for service, manufacture, construction or repair, together with all goods
returned by Borrower's customers in connection with any of the
foregoing.
8.2 "Agreement" means
this Agreement and the Addendum attached hereto, as corrected or modified from
time to time by Trade Bank and Borrower.
8.3 "Banking
Day" means
each day except Saturday, Sunday and a day specified as a holiday by federal or
California statute.
8.4 "Borrowing
Base"
means an
amount equal to eighty percent
(80%) of
Borrower’s Eligible
Accounts Receivable. All of
the foregoing shall be determined by Trade Bank upon receipt and review of all
collateral reports required hereunder and such other documents and collateral
information as Trade Bank may from time to time require. Borrower
acknowledges that
said Borrowing Base was established by Trade Bank with the understanding that,
among other items, the aggregate of all returns, rebates, discounts, credits,
and allowances for the immediately preceding three (3) months at all times shall
be less than five percent (5%) of Borrower's gross
sales for said period. If such dilution of Borrower's accounts
for the immediately preceding three (3) months at any time exceeds five percent
(5%) of Borrower's gross
sales for said period, or if there at any time exists any other matters, events,
conditions or contingencies which Trade Bank reasonably believes may affect
payment of any portion of Borrower's
accounts, Trade Bank, in its sole discretion, may reduce the foregoing advance
rate against Borrower's Eligible
Accounts Receivable to a percentage appropriate to reflect such additional
dilution and/or establish reserves against Borrower's Eligible
Accounts Receivable.
8.5 "Closing
Date" means
the date on which the first Credit Extension is made.
8.6 "Collateral" means
all property securing the Obligations.
8.7 "Collateral
Documents" means
those security agreement(s), deed(s) of trust, guarantee(s), subordination
agreement(s), intercreditor agreement(s), and other credit support documents and
instruments required by the Trade Bank to effect the collateral and credit
support requirements set forth in the Supplement with respect to the
Facility.
8.8 "Credit" means
any discount, allowance, credit, rebate, or adjustment granted by Borrower with
respect to an Account Receivable.
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8.9 "Credit
Extension" means
each extension of credit under the
Facility (whether
funded or unfunded), including, but not limited to, (a) the issuance of
sight or usance commercial letters of credit or commercial letters of credit
supported by back-up letters of credit, (b) the issuance of standby letters
of credit, (c) the issuance of shipping guarantees, (d) the making of
revolving credit working capital loans, (e) the making of loans against
imports for letters of credit, (f) the making of clean import loans outside
letters of credit, (g) the making of advances against export orders,
(h) the making of advances against export letters of credit, (i) the
making of advances against outgoing collections, (j) the making of term
loans, and (k) the entry into foreign exchange contracts.
8.10 "Credit
Limit" means,
with respect to the any Facility, the amount specified under the column labeled
"Credit Limit" in the Supplement for that related Facility.
8.11 "Dollars" and
"$" means
United States dollars.
8.12 "Eligible
Accounts Receivable"
means
those Accounts Receivable which have been created in the ordinary course of
Borrower's business
and upon which Borrower's right to
receive payment is absolute and not contingent upon the fulfillment of any
conditions whatsoever, and shall not include:
|
(a) |
any
account which is
past due ninety (90) days after the invoice date with respect to Accounts
Receivable with payment terms of net thirty (30) or net sixty (60)
calendar days from invoice date; and thirty (30) days after the due date
with respect to Accounts Receivable with payment terms of net ninety (90)
calendar days from invoice date; |
|
(b) |
any
account for which there are any right of setoff, defense or discount
(except regular discounts allowed in the ordinary course of business to
promote prompt payment) or for which any defense or counterclaim has been
asserted; |
|
(c) |
any
account which represents an obligation of any state or municipal
government or of the United States government or any political subdivision
thereof; |
|
(d) |
any
account which represents an obligation of an account debtor located in a
foreign country not covered by credit
insurance; |
|
(e) |
any
account which arises from the sale or lease to or performance of services
for, or represents an obligation of, an employee, affiliate, partner,
parent or subsidiary of Borrower. |
|
(f) |
that
portion of any account which represents interim or progress xxxxxxxx or
retention rights on the part of the account
debtor; |
|
(g) |
any
account which represents an obligation of any account debtor when twenty
percent (20%) or more of Borrower's
accounts from such account debtor is not eligible pursuant to (a)
above; |
|
(h) |
that
portion of any account from an account debtor which represents the amount
by which Borrower's
total accounts receivable from said account debtor exceeds twenty-five
percent (25%) of Borrower's
total accounts receivable; |
|
(i) |
any
account deemed ineligible by Trade Bank when Trade Bank, in its sole
discretion, deems the creditworthiness or financial condition of the
account debtor, or the industry in which the account debtor is engaged, to
be unsatisfactory. |
8.13 "Eligible
Inventory" means
all Inventory of Borrower comprised of finished goods (other than Inventory
deemed ineligible in Trade Bank's sole discretion), that have been in
Borrower’s stock
for not more
than twelve (12) calendar
months, valued at the lower of cost or fair market value on a first in first out
basis in accordance with GAAP, that is subject to no liens other than liens in
favor of Trade Bank, and is located at Borrower’s
warehouses in the United States.
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10
8.14 "Facility
Documents" means,
with respect to
the
Facility, those documents specified in the Supplement for
the
Facility, and any other documents customarily required by Trade Bank
for
said
Facility.
8.15 "Facility
Termination Date" means,
with respect to any Facility, the date specified in the Supplement for that
Facility after which no further Credit Extensions will be made under that
Facility.
8.16 "GAAP" means
generally accepted accounting principles, which are applicable to the
circumstances, as of the date of determination, set out in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and in the statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the accounting
profession.
8.17 "Inventory"
has the
meaning assigned to such term in the “Continuing Security Agreement - Rights to
Payment and Inventory” executed by Borrower in favor of Trade Bank.
8.18 "Loan
Documents" means
this Agreement, the Addendum, the Supplement, the Facility Documents and the
Collateral Documents.
8.19 "Note" has the
meaning specified in Section 3.1(b)(2) above.
8.20 "Obligations" means
(a) the obligation of Borrower to pay principal, interest and fees on all
funded Credit Extensions and fees on all unfunded Credit Extensions, and
(b) the obligation of Borrower to pay and perform when due all other
indebtedness, liabilities, obligations and covenants required under the Loan
Documents.
8.21 "Person" means
and includes natural persons, corporations, limited partnerships, general
partnerships, joint stock companies, joint ventures, associations, companies,
trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
8.22 "Prime
Rate" means
the rate most recently announced by Xxxxx Fargo at its principal office in San
Francisco, California as its "Prime Rate", with the understanding that the Prime
Rate is one of Xxxxx Fargo's base rates and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto, and is evidenced by the recording thereof after its announcement in
such internal publication or publications as Xxxxx Fargo may designate. Any
change in an interest rate resulting from a change in the Prime Rate shall
become effective as of 12:01 a.m. of the Banking Day on which each change in the
Prime Rate is announced by Xxxxx Fargo.
8.23 "Subsidiary" means
(i) any corporation at least the majority of whose securities having ordinary
voting power for the election of directors (other than securities having such
power only by reason of the happening of a contingency) are at the time owned by
Borrower and/or one or more Subsidiaries, and (ii) any joint venture or
partnership in which Borrower and/or one or more Subsidiaries has a majority
interest.
8.24 "Xxxxx
Fargo" means
Xxxxx Fargo Bank, N.A.
IX.
ARBITRATION
9.1 Arbitration. The
parties hereto agree, upon demand by any party, to submit to binding arbitration
all claims, disputes and controversies between or among them (and their
respective employees, officers, directors, attorneys, and other agents), whether
in tort, contract or otherwise arising out of or relating to in any way (i) the
loan and related loan and security documents which are the subject of this
Agreement and its negotiation, execution, collateralization, administration,
repayment, modification, extension, substitution, formation, inducement,
enforcement, default or termination; or (ii) requests for additional
credit.
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11
9.2 Governing
Rules. Any
arbitration proceeding will (i) proceed in a location in California selected by
the American Arbitration Association (“AAA”); (ii) be governed by the Federal
Arbitration Act (Title 9 of the United States Code), notwithstanding any
conflicting choice of law provision in any of the documents between the parties;
and (iii) be conducted by the AAA, or such other administrator as the parties
shall mutually agree upon, in accordance with the AAA’s commercial dispute
resolution procedures, unless the claim or counterclaim is at least
$1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which
case the arbitration shall be conducted in accordance with the AAA’s optional
procedures for large, complex commercial disputes (the commercial dispute
resolution procedures or the optional procedures for large, complex commercial
disputes to be referred to, as applicable, as the “Rules”). If there is any
inconsistency between the terms hereof and the Rules, the terms and procedures
set forth herein shall control. Any party who fails or refuses to submit to
arbitration following a demand by any other party shall bear all costs and
expenses incurred by such other party in compelling arbitration of any dispute.
Nothing contained herein shall be deemed to be a waiver by any party that is a
bank of the protections afforded to it under 12 U.S.C. §91 or any similar
applicable state law.
9.3 No
Waiver of Provisional Remedies, Self-Help and
Foreclosure. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this
paragraph.
9.4 Arbitrator
Qualifications and Powers. Any
arbitration proceeding in which the amount in controversy is $5,000,000.00 or
less will be decided by a single arbitrator selected according to the Rules, and
who shall not render an award of greater than $5,000,000.00. Any dispute in
which the amount in controversy exceeds $5,000,000.00 shall be decided by
majority vote of a panel of three arbitrators; provided however, that all three
arbitrators must actively participate in all hearings and deliberations. The
arbitrator will be a neutral attorney licensed in the State of California or a
neutral retired judge of the state or federal judiciary of California, in either
case with a minimum of ten years experience in the substantive law applicable to
the subject matter of the dispute to be arbitrated. The arbitrator will
determine whether or not an issue is arbitratable and will give effect to the
statutes of limitation in determining any claim. In any arbitration proceeding
the arbitrator will decide (by documents only or with a hearing at the
arbitrator's discretion) any pre-hearing motions which are similar to motions to
dismiss for failure to state a claim or motions for summary adjudication. The
arbitrator shall resolve all disputes in accordance with the substantive law of
California and may grant any remedy or relief that a court of such state could
order or grant within the scope hereof and such ancillary relief as is necessary
to make effective any award. The arbitrator shall also have the power to award
recovery of all costs and fees, to impose sanctions and to take such other
action as the arbitrator deems necessary to the same extent a judge could
pursuant to the Federal Rules of Civil Procedure, the California Rules of Civil
Procedure or other applicable law. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction. The institution and
maintenance of an action for judicial relief or pursuit of a provisional or
ancillary remedy shall not constitute a waiver of the right of any party,
including the plaintiff, to submit the controversy or claim to arbitration if
any other party contests such action for judicial relief.
9.5 Discovery. In any
arbitration proceeding discovery will be permitted in accordance with the Rules.
All discovery shall be expressly limited to matters directly relevant to the
dispute being arbitrated and must be completed no later than 20 days before the
hearing date and within 180 days of the filing of the dispute with the AAA. Any
requests for an extension of the discovery periods, or any discovery disputes,
will be subject to final determination by the arbitrator upon a showing that the
request for discovery is essential for the party's presentation and that no
alternative means for obtaining information is available.
9.6 Class
Proceedings and Consolidations. The
resolution of any dispute arising pursuant to the terms of this Agreement shall
be determined by a separate arbitration proceeding and such dispute shall not be
consolidated with other disputes or included in any class
proceeding.
9.7 Payment
Of Arbitration Costs And Fees. The
arbitrator shall award all costs and expenses of the arbitration
proceeding.
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12
9.8 Real
Property Collateral; Judicial Reference.
Notwithstanding anything herein to the contrary, no dispute shall be submitted
to arbitration if the dispute concerns indebtedness secured directly or
indirectly, in whole or in part, by any real property unless (i) the holder of
the mortgage, lien or security interest specifically elects in writing to
proceed with the arbitration, or (ii) all parties to the arbitration waive any
rights or benefits that might accrue to them by virtue of the single action rule
statute of California, thereby agreeing that all indebtedness and obligations of
the parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such dispute is not submitted to arbitration, the dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA’s selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and
645.
9.9 Miscellaneous. To the
maximum extent practicable, the AAA, the arbitrators and the parties shall take
all action required to conclude any arbitration proceeding within 180 days of
the filing of the dispute with the AAA. No arbitrator or other party to an
arbitration proceeding may disclose the existence, content or results thereof,
except for disclosures of information by a party required in the ordinary course
of its business or by applicable law or regulation. If more than one agreement
for arbitration by or between the parties potentially applies to a dispute, the
arbitration provision most directly related to the documents between the parties
or the subject matter of the dispute shall control. This Agreement may be
amended or modified only in writing signed by each party hereto. If any
provision of this Agreement shall be held to be prohibited by or invalid under
applicable law such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or any remaining provisions of this Agreement. This arbitration provision shall
survive termination, amendment or expiration of any of the documents or any
relationship between the parties.
Borrower
and Trade Bank have caused this Agreement to be executed by their duly
authorized officers or representatives on the date first written
above.
“BORROWER”
SOUTHWALL
TECHNOLOGIES INC.
By:
___________________________
Title:
__________________________
Borrower’s
Address:
0000 Xxxx
Xxxxxxxx Xxxx
Xxxx
Xxxx, XX 00000
“LENDER”
|
XXXXX
FARGO HSBC TRADE BANK, | |
|
NATIONAL
ASSOCIATION | |
|
By: |
_______________________________________ |
|
Xxxxxxxx
Xxxxx | |
|
Vice
President | |
Lender’s
Address:
Xxx Xxxxx
Xxxxxx, 00xx
Xxxxx
Xxx
Xxxxxxxxx, XX 00000
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