FOURTH MODIFICATION AGREEMENT
BY THIS FOURTH MODIFICATION AGREEMENT (the "Agreement"), made and
entered into as of the 24th day of October, 1996, XXXXX FARGO BANK, NATIONAL
ASSOCIATION, as successor in interest to FIRST INTERSTATE BANK OF ARIZONA, N.A.,
whose address is Xxxx Xxxxxx Xxx 00000, Xxxxxxx, Xxxxxxx 00000-0000, Corporate
Banking Division (hereinafter called "Lender"), and THREE-FIVE SYSTEMS, INC., a
Delaware corporation, whose address is 0000 Xxxxx Xxxxxx Xxxxx, Xxxxx, Xxxxxxx
00000-0000 (hereinafter called "Borrower"), in consideration of the mutual
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, hereby confirm and
agree as follows:
SECTION 1. RECITALS.
1.1 Borrower and Lender entered into a Loan Agreement dated July 11,
1994 (the "Loan Agreement"), which provided for a revolving line of credit by
Lender to Borrower in the subsequently amended amount of $15,000,000.00 (the
"RLC Commitment Amount") upon the terms and conditions contained therein (the
"RLC").
1.2 The RLC is evidenced by a Revolving Promissory Note dated December
21, 1995, executed by Borrower, payable to the order of Lender, in the principal
amount of $15,000,000.00 (the "RLC Note"). (Hereinafter the Loan Agreement and
the RLC Note are referred to as the "Loan Documents.")
1.3 Lender and Borrower have executed and delivered previously a
Modification Agreement dated as of June 28, 1995, a Second Modification
Agreement dated as of December 22, 1995 and a Third Modification Agreement dated
as of August 5, 1996 (collectively, the "Modifications") modifying the terms of
the Loan Documents. Hereinafter, "RLC Note" and "Loan Agreement" shall mean such
documents as modified in the Modifications.
1.4 Borrower and Lender desire to modify the Loan Documents as set
forth herein.
1.5 All undefined capitalized terms used herein shall have the meaning
given them in the Loan Agreement.
SECTION 2. RLC NOTE.
As of the date hereof, prior to the effect of the modifications
contained herein, the outstanding principal balance of the RLC Note is $0.
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SECTION 3. LOAN AGREEMENT.
3.1 The following definitions in Section 2.1 of the Loan Agreement are
amended to read as follows:
"Advance" means either an RLC Advance or a Term Advance.
"Convert," "Conversion" and "Converted" each refers to a
conversion of an Advance of one Type into an Advance of another Type.
"Eurodollar Reserve Percentage" for the Interest Period for
each LIBOR Rate Advance means the reserve percentage applicable two (2)
Business Days before the first day of such Interest Period under
regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum
reserve requirement (including, but not limited to, any emergency,
supplemental, or other marginal reserve requirement) for a member Bank
of the Federal Reserve System in San Francisco with respect to
liabilities or assets consisting of or including Eurocurrency
Liabilities (or with respect to any other category of liabilities which
includes deposits by reference to which the interest rate on LIBOR Rate
Advances is determined) having a term equal to such Interest Period.
"Financial Covenants" means those financial covenants
specified in Sections 7.8 through 7.13.
"Interest Period" means, for each LIBOR Rate Advance, the
period commencing on the date of such LIBOR Rate Advance or the date of
the Conversion of any Advance into such a LIBOR Rate Advance and ending
on the last day of the period selected by the Borrower pursuant to the
provisions herein and, thereafter, each subsequent period commencing on
the day after the last day of the immediately preceding Interest Period
and ending on the last day of the period selected by the Borrower
pursuant to the provisions herein. With respect to LIBOR Rate Advances,
the duration of each such Interest Period shall be (a) 30, 60, 90, or
180 days, or (b) as to the Term Loan after the Term Termination Date,
30, 60 or 90 days, as the Borrower may select; provided, however, that:
(i) Interest Periods commencing on the same date for
the same Type of Advances shall be of the same duration;
(ii) Whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall be extended to occur on
the next succeeding Business Day, provided that if such
extension would cause the last day of such Interest Period to
occur in the next following calendar
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month, the last day of such Interest Period shall occur on the
next preceding Business Day; and
(iii) No Interest Period with respect to any RLC
Advance shall extend beyond the RLC Maturity Date or with
respect to any Term Advance shall extend beyond the Term
Maturity Date.
"LIBOR Base Rate" means, for the Interest Period for each
LIBOR Rate Advance, an interest rate per annum equal to the rate of
interest per annum obtained by dividing (i) the rate of interest
determined by Lender, based on Telerate System reports or such other
source selected by Lender, to be the "London Interbank Offered Rate" at
which deposits in U.S. dollars are offered by major banks in London,
England, two (2) Business Days before the first day of such Interest
Period by (ii) a percentage equal to one hundred percent (100%) minus
the Eurodollar Reserve Percentage for the period equal to such Interest
Period.
3.2 Section 2.1 of the Loan Agreement is amended by the addition of the
following definitions:
"Fixed Rate" means an interest rate per annum equal to two and
one-half percent (2.5%) in excess of the Treasury Rate.
"LIBOR Rate Advance" means either a LIBOR Rate RLC Advance or
a LIBOR Rate Term Advance.
"LIBOR Rate Term Advance" means a Term Advance that bears
interest at the applicable Term LIBOR Rate.
"Loans," each a "Loan," means the RLC and the Term Loan.
"Notes," each a "Note," means the RLC Note and the Term Note.
"Notice of Term Advance": See Section 3A.3(b).
"Obligations" means all obligations of Borrower under this
Agreement, the Notes, the Security Agreement and any other documents
delivered by Borrower to Lender with respect to the Loans.
"Prime Rate Term Advance" means a Term Advance that bears
interest at the Prime Rate.
"Security Agreement": See Section 3A.9(a).
"Term Advance" means prior to the Term Termination Date an
advance by Lender to the Borrower under the Term Loan pursuant to
Section 3A.3 and includes a Prime Rate Term Advance or a LIBOR Rate
Term Advance (each of which shall be a "Type" of Term
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Advance), and after the Term Termination Date, it means the Term Loan.
"Term Commitment Amount" means $5,000,000.00.
"Term LIBOR Rate" means an interest rate per annum equal to
two and one-quarter percent (2.25%) in excess of the LIBOR Base Rate,
rounded upward, if necessary, to the nearest 1/16 of 1%.
"Term Loan" means that Loan evidenced by the Term Note made
pursuant to Section 3A.1 hereof by Lender to Borrower.
"Term Maturity Date" means October 24, 2000.
"Term Note" means that Promissory Note dated as of October 24,
1996 in the face amount equal to the Term Commitment Amount made by
Borrower payable to the order of Lender, evidencing the Term Loan, and
extensions, modifications and renewals thereof.
"Term Payment Date" means:
(a) As to each Prime Rate Term Advance, the last day
of each month;
(b) As to each LIBOR Rate Term Advance, the earlier
of the last day of the Interest Period or the ninetieth (90th)
day after the beginning of the Interest Period; and
(c) As to the Term Loan should it accrue interest at
the Fixed Rate, the Quarterly End Date.
"Term Termination Date" means October 24, 1997.
"Treasury Rate" means the yield in percent per annum as shown
for three (3) year United States Treasury constant maturities on the
Federal Reserve statistical release H.15 (519) for the most recent week
prior to the Term Termination Date.
3.3 The Loan Agreement is amended by the addition of the following
Article 3A:
ARTICLE 3A
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TERM LOAN
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Section 3A.1 Term Commitment Amount. Subject to the conditions
set forth herein, Lender, from time to time, shall make Term Advances
as Borrower may request, as provided below, provided that the
outstanding principal balance shall not exceed the Term Commitment
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Amount. Until the Term Termination Date, the Term Loan shall be a line
of credit, against which Term Advances may be made to Borrower,
provided that (i) Borrower is not in default under any provision of
this Agreement, and (ii) no Term Advance shall be made that would cause
the outstanding principal balance of the Term Loan to exceed the Term
Commitment Amount. The Term Loan is not a revolving line of credit and
once a Term Advance is disbursed and repaid, it may not be reborrowed
again. On and after the Term Termination Date, no further Term Advances
shall be made to Borrower under the Term Loan.
Section 3A.2 Term Note. The Term Loan shall be evidenced by
the Term Note, in the form approved by Lender, payable to the order of
Lender upon the terms and conditions therein contained.
Section 3A.3 Term Advances.
(a) Unless otherwise specifically approved in writing
by Lender, the proceeds of the Term Loan shall be used only to
purchase treasury stock or, so long as the aggregate amount of
Term Advances shall not exceed the aggregate amount of
Borrower's purchase of treasury stock, to reimburse Borrower
for prior purchases of treasury stock.
(b) Lender may from time to time make Term Advances
in such sums as Borrower shall request. Each such Term Advance
shall be in the minimum amount of $100,000.00.
(c) The Borrower shall give Lender written notice, or
telephonic notice confirmed immediately in writing, of the
request for any Term Advances under this Agreement, which
notice (the "Notice of Term Advance") shall be received by
Lender not later than 11:00 A.M. (Phoenix, Arizona local time)
on the same Business Day in the case of a Prime Rate Advance,
and in the case of a LIBOR Rate Term Advance not later than
2:00 p.m. (Phoenix, Arizona local time) on the second Business
Day before the date of the proposed Term Advance. Each such
Notice of Term Advance shall specify: (i) the date of the
proposed Term Advance, (ii) the amount of such Term Advance,
(iii) the Type of Term Advance, and (iv) in the case of a
LIBOR Rate Term Advance, the Interest Period. Each Notice of
Term Advance shall be irrevocable and binding on the
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Borrower. Anything herein to the contrary notwithstanding, no
LIBOR Rate Term Advance shall be less than $50,000.00.
(d) In the case of any Term Advance which the related
Notice of Term Advance specifies that it is to be a LIBOR Rate
Term Advance, the Borrower shall indemnify Lender on demand
for, from, and against any loss or expense incurred by Lender
as a result of any failure by Borrower to fulfill on or before
the date specified in such Notice of Term Advance for such
Term Advance the applicable conditions set forth in Section
4.2, including, without limitation, any loss, including, other
losses, costs, and expenses incurred by Lender by reason of
liquidation or reemployment of deposits or other funds
acquired by Lender to fund the LIBOR Rate Term Advance to be
made by Lender when such LIBOR Rate Term Advance, as a result
of such failure, is not made on such date.
Section 3A.4 Conversion of Term Advances.
(a) The Borrower may, upon written notice to and
received by the Lender (i) not later than 2:00 p.m. (Phoenix,
Arizona local time) on the second Business Day before the
requested Conversion, in the case of any Conversion of Prime
Rate Term Advances into LIBOR Rate Term Advances, and (ii) not
later than 11:00 A.M. (Phoenix, Arizona local time) on the
same Business Day as the Conversion, in the case of any
Conversion of LIBOR Rate Term Advances into Prime Rate Term
Advances, subject to the provisions of this Section 3A.4,
Convert any Term Advances of one Type into Term Advances of
another Type; provided, however, that any Conversion of LIBOR
Rate Term Advances made on other than the last day of said
Term Advances's Interest Period shall be made only on
condition that Borrower pays all amounts specified in
connection therewith in Section 3A.8(e). Each such notice of a
Conversion shall be irrevocable and binding on the Borrower.
Each such notice of a Conversion shall, within the
restrictions specified above, specify (w) the date of such
Conversion (x) the Term Advances to be Converted, (y) the Type
of Term Advances into which the Term Advances are to be
Converted,
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and (z) if such Conversion is into LIBOR Rate Term Advances,
the duration of the Interest Period for each such Term
Advance.
(b) If the Borrower should fail to give the Lender
any notice of Conversion upon the termination of the Interest
Period for a LIBOR Rate Term Advance, such Term Advance, upon
the termination of the Interest Period, shall automatically
become a Prime Rate Term Advance.
Section 3A.5 Term Loan Payments.
(a) Until the Term Termination Date, interest on the
Term Loan shall accrue on the principal balance of the Term
Loan from time to time outstanding under the Term Note as
follows:
(i) At the Prime Rate if it is a Prime Rate
Term Advance.
(ii) At the applicable Term LIBOR Rate if it
is a LIBOR Rate Term Advance.
(b) After the Term Termination Date, interest on the
Term Loan shall accrue as follows:
(i) At the Fixed Rate if Borrower shall have
elected by written notice to Lender by no later than
11:00 a.m. (Phoenix, Arizona local time) on the Term
Termination Date that interest should accrue at the
Fixed Rate, commencing the next day, at the Fixed
Rate. Borrower's right to elect that interest accrue
at the Fixed Rate shall terminate at 11:00 a.m.
(Phoenix, Arizona local time) on the Term Termination
Date.
(ii) Otherwise at either the Prime Rate or
the Term LIBOR Rate as Borrower shall elect from time
to time; provided that at any one time after the Term
Termination Date interest shall accrue on the entire
Term Loan at either the Prime Rate or the then
applicable Term LIBOR
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Rate based on a single Interest Period.
(c) All accrued interest shall be due and payable on
the Term Payment Date.
(d) Principal payments shall be made in equal amounts
on each Quarterly End Date commencing on the first Quarterly
End Date after the Term Termination Date, sufficient to fully
amortize the Term Loan balance outstanding on the Term
Termination Date on the Term Maturity Date.
(e) The entire outstanding principal balance of the
Term Note, all accrued and unpaid interest and all other sums
which may have become payable thereunder shall be due and
payable in full on the Term Maturity Date.
Section 3A.6 Term Loan Prepayments. Borrower shall have the
option to prepay the Term Loan, in full or in part at any time, subject
to payment of the following:
(a) With respect to any LIBOR Rate Term Advance, all
amounts specified in Section 3A.8(a).
(b) In the event the Term Loan is accruing interest
at the Fixed Rate, an amount equal to a prepayment premium
computed as follows:
1% of the outstanding principal balance if
the outstanding principal balance is less than
$50,000.00, and if the outstanding principal balance
is equal to or more than $50,000.00, an amount equal
to [the present value of the remaining cash flows
calculated with an interest rate assuming that a
Determination of Taxability had occurred discounted
at the Treasury Constant Yield (TCY) + 100 basis
points] - outstanding principal. The TCY is
calculated as the interpolated constant maturity
Treasury rate with a maturity matching the remaining
average term of the Term Note to the Term Maturity
Date. Rate data is obtained, at the time of
prepayment,
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from the most recent Federal Reserve statistical
release H.15 (519).
Section 3A.7 Term Loan Commitment Fee. Borrower agrees to pay
to Lender an upfront commitment fee equal to 30 basis points of the
Term Commitment Amount upon the closing of the Term Loan.
Section 3A.8 Additional Provisions for LIBOR Rate Term
Advances.
(a) Unavailability of Deposits or Inability to Ascertain the
Rates. Notwithstanding any other provision of this Agreement, if prior
to the commencement of any Interest Period, Lender shall determine (i)
that United States dollar deposits in the amount of any LIBOR Rate Term
Advance to be outstanding during such Interest Period are not readily
available to Lender in the London interbank market, or (ii) by reason
of circumstances affecting the London interbank market, adequate and
reasonable means do not exist for ascertaining the LIBOR Base Rate,
then Lender shall promptly give notice thereof to the Borrower and the
obligation of Lender to create, or effect by conversion any LIBOR Rate
Term Advance in such amount and for such Interest Period shall
terminate until United States dollar deposits in such amount and for
the Interest Period selected by the Borrower shall again be readily
available in the market and adequate and reasonable means exist for
ascertaining the LIBOR Base Rate.
(b) Increased Costs. (i) If, due to any Regulatory Change,
there shall be any increase in the cost to Lender of agreeing to make
or making, funding or maintaining LIBOR Rate Term Advances (including,
without limitation, any increase in any applicable reserve
requirement), then the Borrower shall from time to time, upon demand by
Lender, pay to Lender such amounts as Lender may reasonably determine
to be necessary to compensate Lender for any additional costs which it
reasonably determines are attributable to such Regulatory Change; (ii)
if Lender determines (in its reasonable discretion) that, as a result
of any Regulatory Change, the amount of capital required or expected to
be maintained by Lender is increased by or based upon the existence of
Lender's commitment to lend hereunder, then, upon demand by Lender, the
Borrower shall immediately pay to Lender such amounts as Lender may
reasonably determine to be necessary to compensate Lender for any
additional costs which it reasonably determines are attributable to the
maintenance by Lender of capital in respect of Lender's commitment to
lend hereunder; and (iii) Lender will
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notify the Borrower of any Regulatory Change that will entitle Lender
to compensate pursuant to this paragraph (b) as promptly as
practicable, but in any event within 90 days after Lender obtains
knowledge thereof; provided, however, that if Lender fails to give such
notice within 90 days after it obtains knowledge of such a Regulatory
Change, Lender shall, with respect to compensation payable in respect
of any costs resulting from such Regulatory Change, only be entitled to
payment for costs incurred from and after the date that Lender has
given such notice. Lender will furnish to Borrower a certificate
setting forth in reasonable detail the basis for the amount of each
request by Lender for compensation. Determination by Lender of the
amounts required by compensate Lender shall be made on a reasonable
basis. Lender shall be entitled to compensation in connection with any
Regulatory Change only for costs actually incurred by such Lender. Upon
receipt of notice of any such Regulatory Change from Lender, Borrower
shall have the option to prepay or Convert any Term Advances adversely
affected by any Regulatory Change within seven (7) days of receipt of
such notice, without the obligation to pay to Lender with respect to
such prepayment or Conversion any amount or amounts otherwise payable
to Lender by Borrower pursuant to Section 3A.8(e).
(c) Illegality. Notwithstanding any other provision of this
Agreement, if Lender shall notify the Borrower that as a result of a
Regulatory Change it is unlawful for Lender to perform its obligations
hereunder to make LIBOR Rate Term Advances or to fund or maintain LIBOR
Rate Term Advances hereunder (i) the obligation of Lender to make, or
to Convert Term Advances into, a LIBOR Rate Term Advances shall be
suspended until Lender shall notify Borrower that the circumstances
causing such suspension no longer exist and (ii) in the event such
Regulatory Change makes the maintenance of LIBOR Rate Term Advances
hereunder unlawful, the Borrower shall forthwith prepay in full all
LIBOR Rate Term Advances then outstanding, together with interest
accrued thereon and all amounts in connection with such prepayment
specified in Section 3A.8(e), unless the Borrower, within five (5)
Business Days of notice from Lender, Converts all LIBOR Rate Term
Advances then outstanding into Prime Rate Term Advances in accordance
with Section 3A.4 and pays all amounts in connection with such
prepayments specified in Section 3.8(e).
(d) Discretion of Lender as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, Lender
shall be entitled to fund and maintain
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its funding of all or any part of any Term Advance in any manner it
sees fit; provided, however, that for the purposes of this Agreement,
all determinations hereunder shall be made as if Lender had actually
funded and maintained each LIBOR Rate Term Advance during the Interest
Period therefor through the purchase of deposits having a maturity
corresponding to the last day of the Interest Period and bearing an
interest rate equal to the Term LIBOR Rate for such Interest Period.
(e) Funding Loss Indemnification. Borrower shall pay to Lender
such amount of amounts as shall be sufficient to compensate for any
losses (including without limitation loss of anticipated profit), costs
or expenses which Lender may reasonably incur as a result of payment or
Conversion of any LIBOR Rate Term Advance other than on the last
Business Day of the Interest Period for such Term Advance, whether due
to prepayment, Conversion, illegality (pursuant to Section 3A.8(c)
above), acceleration of the Term Maturity Date or for any other reason.
Section 3A.9 Security. So long as the Term Loan remains
outstanding Borrower agrees as follows:
(a) To secure its obligations with respect to the
Term Loan by granting to Lender a security interest in all of
Borrower's equipment located in the State of Arizona pursuant
to a security agreement (the "Security Agreement") delivered
by Borrower to Lender;
(b) Not to create or suffer to be created or to exist
any mortgages, pledges, security interests, encumbrances or
other liens on its real property located at 0000 Xxxxx Xxxxxx
Xxxxx, Xxxxxxx, Xxxxxxx at any time that in the aggregate
exceed $100,000.00; and
(c) To apply immediately all proceeds from the sale
of any treasury stock to the outstanding principal balance of
the Term Loan.
3.4 All references in Articles 5, 6, 7, 8, 9 and 10 of the Loan
Agreement:
(a) to "RLC Note" are hereby amended to read "Note"
or "Notes", as applicable;
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(b) to "RLC" are hereby amended to read "Loan" or
"Loans", as applicable; and
(c) to "RLC Advances" are hereby amended to read
"Advance" or "Advances", as applicable.
3.5 Section 7.2 of the Loan Agreement is hereby amended to read as
follows:
Section 7.2. Create or suffer to be created or to exist any
mortgages, pledges, security interests, encumbrances or other liens
that at any time in the aggregate exceed $100,000.00:
(a) on its real property; or
(b) on its accounts receivable.
3.6 Section 7.4 of the Loan Agreement is amended to read as follows:
Section 7.4 Declare or pay any cash dividend or purchase any
treasury stock greater than $10,000,000.00.
3.7 The first paragraph of Section 7.8 of the Loan Agreement is amended
to read as follows:
Section 7.8 Permit its Tangible Net Worth to be as of each
Quarterly End Date:
(a) less than $42,500,000 plus fifty percent (50%) of
the aggregate of Borrower's positive net income of each
quarterly period, beginning June 30, 1996, with no deduction
for any quarterly period net loss, plus (b) any additional
paid-in equity capital.
3.8 Section 7.10 of the Loan Agreement is amended by the addition of
the following:
Notwithstanding anything herein to the contrary, for purposes
of the calculation of "cash flow", the inventory reserve taken in the
third fiscal quarter of 1996 (the "1996 Adjustment") shall not be
considered in the calculation of net income for the relevant period.
3.9 Section 7.11 of the Loan Agreement is amended to read as follows:
Section 7.11 Permit its annual capital expenditures to exceed
the sum of $5,000,000.00.
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3.10 Article 7 of the Loan Agreement is amended by the addition of the
following Section 7.13:
Section 7.13 Permit, in fiscal year 1997 and thereafter, (i)
its annual operating net result to be negative, or (ii) its operating
net result to be negative for two or more consecutive quarterly fiscal
periods.
3.11 Section 8.1(h) of the Loan Agreement is amended to read as
follows:
(h) The occurrence of any default under (i) any Note
or any document or instrument given by Borrower in connection
with any other indebtedness of Borrower to Lender or any
affiliate thereof and the expiration of any grace period
provided therein, or (ii) any other indebtedness in excess of
$1,000,000 of Borrower to any other creditor and the
expiration of any grace period provided therein;
3.12 Exhibit "B" to the Loan Agreement is amended to read as attached
hereto.
SECTION 4. OTHER MODIFICATIONS, RATIFICATIONS AND AGREEMENTS.
4.1 All references to the Loan Agreement in the RLC Note are hereby
amended to refer to the Loan Agreement as hereby amended.
4.2 Borrower acknowledges that the indebtedness evidenced by the RLC
Note is just and owing, that the balance thereof is correctly shown in the
records of Lender as of the date hereof, and Borrower agrees to pay the
indebtedness evidenced by the RLC Note according to the terms thereof, as herein
modified.
4.3 Borrower hereby reaffirms to Lender each of the representations,
warranties, covenants and agreements of Borrower set forth in the RLC Note and
the Loan Agreement, with the same force and effect as if each were separately
stated herein and made as of the date hereof.
4.4 Borrower hereby ratifies, reaffirms, acknowledges, and agrees that
the RLC Note and the Loan Agreement, represent valid, enforceable and
collectible obligations of Borrower, and that there are no existing claims,
defenses, personal or otherwise, or rights of setoff whatsoever with respect to
any of these documents or instruments. In addition, Borrower hereby expressly
waives, releases and absolutely and forever discharges Lender and its present
and former shareholders, directors, officers, employees and agents, and their
separate and respective heirs, personal
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representatives, successors and assigns, from any and all liabilities, claims,
demands, damages, action and causes of action, whether known or unknown and
whether contingent or matured, that Borrower may now have, or has had prior to
the date hereof, or that may hereafter arise with respect to acts, omissions or
events occurring prior to the date hereof and, without limiting the generality
of the foregoing, from any and all liabilities, claims, demands, damages,
actions and causes of action, known or unknown, contingent or matured, arising
out of, or in any way connected with, the RLC. Borrower further acknowledges and
represents that no event has occurred and no condition exists that, after notice
or lapse of time, or both, would constitute a default under this Agreement, the
RLC Note or the Loan Agreement.
4.5 All terms, conditions and provisions of the RLC Note and the Loan
Agreement are continued in full force and effect and shall remain unaffected and
unchanged except as specifically amended hereby. The RLC Note and the Loan
Agreement, as amended hereby, are hereby ratified and reaffirmed by Borrower,
and Borrower specifically acknowledges the validity and enforceability thereof.
SECTION 5. GENERAL.
5.1 This Agreement in no way acts as a release or relinquishment of
those rights securing payment of the RLC. Such rights are hereby ratified,
confirmed, renewed and extended by Borrower in all respects.
5.2 The modifications contained herein shall not be binding upon Lender
until Lender shall have received all of the following:
(a) An original of this Agreement fully executed by the
Borrower.
(b) Such resolutions or authorizations and such other
documents as Lender may reasonably require relating to the existence
and good standing of the Borrower and the authority of any person
executing this Agreement or other documents on behalf of the Borrower.
(c) The Security Agreement fully executed by the Borrower.
(d) The Term Note fully executed by the Borrower.
(e) A UCC-1 Financing Statement fully executed by the
Borrower.
(f) A commitment fee with respect to the Term Loan in the
amount of $15,000.00.
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5.3 Borrower shall execute and deliver such additional documents and do
such other acts as Lender may reasonably require to fully implement the intent
of this Agreement.
5.4 Borrower shall pay all costs and expenses, including, but not
limited to, reasonable attorneys' fees incurred by Lender in connection
herewith, whether or not all of the conditions described in Paragraph 5.2 above
are satisfied. Lender, at its option, but without any obligation to do so, may
advance funds to pay any such costs and expenses that are the obligation of the
Borrower, and all such funds advanced shall bear interest at the highest rate
provided in the RLC Note and shall be due and payable upon demand.
5.5 Notwithstanding anything to the contrary contained herein or in any
other instrument executed by Borrower or Lender, or in any other action or
conduct undertaken by Borrower or Lender on or before the date hereof, the
agreements, covenants and provisions contained herein shall constitute the only
evidence of Lender's consent to modify the terms and provisions of the RLC Note
or the Loan Agreement. Accordingly, no express or implied consent to any further
modifications involving any of the matters set forth in this Agreement or
otherwise shall be inferred or implied by Lender's execution of this Agreement.
Further, Lender's execution of this Agreement shall not constitute a waiver
(either express or implied) of the requirement that any further modification of
the RLC or of the RLC Note or the Loan Agreement, shall require the express
written approval of Lender; no such approval (either express or implied) has
been given as of the date hereof.
5.6 Time is hereby declared to be of the essence hereof of the RLC, of
the RLC Note and of the Loan Agreement, and Lender requires, and Borrower agrees
to, strict performance of each and every covenant, condition, provision and
agreement hereof, of the RLC Note and the Loan Agreement.
5.7 This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their heirs, personal representatives,
successors and assigns.
5.8 This Agreement is made for the sole protection and benefit of the
parties hereto, and no other person or entity shall have any right of action
hereon.
5.9 This Agreement shall be governed by and construed according to the
laws of the State of Arizona.
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IN WITNESS WHEREOF, these presents are executed as of the date
indicated above.
XXXXX FARGO BANK, NATIONAL
ASSOCIATION, as successor in
interest to FIRST
INTERSTATE BANK OF ARIZONA, N.A.
By:_____________________________________
Name:___________________________________
Its:____________________________________
LENDER
THREE-FIVE SYSTEMS, INC., a Delaware
corporation
By:_____________________________________
Name:___________________________________
Its:____________________________________
BORROWER
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