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Exhibit 10.14
REIMBURSEMENT AGREEMENT
This Reimbursement Agreement (the "Agreement") is made and entered into
as of April 1, 1999 and is effective as of April 1, 1999, by and between BANK
ONE, ARIZONA, NA (the "Bank") and HYPERCOM CORPORATION, a Delaware corporation
(the "Borrower").
RECITALS
A. The Borrower has requested that CAPITAL ONE FUNDING
CORPORATION, a Delaware corporation (the "Lender"), make a loan to the Borrower
in the original principal amount of $10,238,000.00 (the "Loan") for the purpose
of permanent financing for the hereinafter defined Project;
B. The Lender has agreed to make the Loan provided that it is
able to obtain the funds necessary to make the Loan by placing with investors
through the Underwriter, floating rate option notes (the "Floating Rate Option
Notes"), which Floating Rate Option Notes shall be secured by an unconditional,
irrevocable, direct pay letter of credit (the "Letter of Credit") issued by Bank
One, NA (the "LC Bank");
C. As a condition to the issuance of the Letter of Credit, the LC
Bank has required that the Bank reimburse the LC Bank in the full amount of any
draws upon the Letter of Credit;
D. In consideration of the Bank's agreement to reimburse the LC
Bank for any draws upon the Letter of Credit, the Bank and the Borrower desire
to enter into this Agreement pursuant to which the Borrower agrees to observe
certain covenants and conditions and to reimburse the Bank for any amounts paid
by the Bank to the LC Bank as a result of a draw upon the Letter of Credit.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Bank to enter into a certain Affiliate Reimbursement Agreement, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. The following terms, as used herein, have the
following meaning unless the context otherwise requires. Capitalized terms used
but not otherwise defined herein or in Exhibit C attached hereto shall have the
meaning provided in the Letter of Credit.
"Affiliate Reimbursement Agreement" means the Affiliate Reimbursement
Agreement by and between the Bank and the LC Bank, as the same may from time to
time be amended, supplemented or extended, including all exhibits thereto and
any other documents executed and delivered as a part thereof, pursuant to which
the Bank is obligated to reimburse the LC Bank for any draws on the Letter of
Credit attributable to the Borrower.
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"Agency Agreement" means that Agency Agreement by and among the Bank,
the Borrower and the Trustee dated as of April 1, 1999, as the same may from
time to time be amended, modified, extended, revised or restated.
"Agreement" means this Reimbursement Agreement, as the same may from
time to time be amended, modified, extended, revised or restated, including all
exhibits hereto and any other documents executed and delivered as a part hereof.
"Annual Fee" has the meaning set forth in Section 2.02 hereof.
"Appraisal" means a current appraisal of the Project by an appraiser
acceptable to Bank in its sole and absolute discretion, reviewed and approved by
Bank in its sole and absolute discretion.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal or
state law for the relief of debtors.
"Borrower Account" has the meaning set forth in Section 2.03(c) hereof.
"Borrower Note" means the Promissory Note effective April 1, 1999,
executed and delivered by the Borrower to the Lender in the original principal
amount of the Loan as the same may from time to time be amended, modified,
extended, revised or restated.
"Business Day" means a day of the year, other than (i) a Saturday,
Sunday or legal holiday on which banking institutions in the State of Ohio are
authorized or required by law to close or (ii) a day on which The New York Stock
Exchange is closed.
"Code" means the Internal Revenue Code of 1986, as amended, and
references to the Code and Sections of the Code shall include relevant
regulations and proposed regulations thereunder and any successor provisions to
such Sections, regulations or proposed regulations.
"Collateral" means the property subject to the Security Documents.
"Date of Issuance" means the date on which the Letter of Credit is
issued and becomes effective.
"Deed of Trust" means that Deed of Trust, Assignment of Leases and
Rents, Security Agreement, and Financing Statement dated December 8, 1993 and
recorded on December 17, 1993 in the records of Maricopa County, Arizona
Recorder at Recording Number 00-0000000 as amended from time to time and further
amended as of the Effective Date.
"Default Rate of Interest" means a rate per annum equal to the sum of
the Interest Rate plus 3.0% (computed on the basis of a year of 360 days and the
actual number of days elapsed).
"Depository" means any security depository that is a clearing agency
under federal law operating and maintaining, with participants or otherwise, a
book entry system to record ownership
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of book entry interest in the Floating Rate Option Notes, and to effect
transfers of book entry interest in the Floating Rate Option Notes in book entry
form, and includes and means The Depository Trust Company, New York, New York.
"Dollars" and the sign "$" mean freely transferable money of the United
States of America.
"Drawing" means any Principal Drawing, Remarketing Drawing or Interest
Drawing.
"Effective Date" means the date upon which interest starts to accrue
under the Borrower Note.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" means any of the events specified in Article VI of
this Agreement, provided that any requirement for the giving of notice or for
the lapse of time has been satisfied in connection with such event.
"Expiration Date" means the date on which the Trustee's right to draw
under the Letter of Credit with respect to the Borrower expires and is the date
set forth in Section 2.01(d) of this Agreement.
"Financial Covenants" means the Financial Covenants described in
Exhibit C.
"Five Year Rate" means the fixed rate of interest per annum determined
by the Remarketing Agent and in effect for the period commencing on the
Effective Date or a Rate Adjustment Date, as applicable, and ending on (but not
including) the first Business Day of the month which is sixty months after such
Effective Date or Rate Adjustment Date.
"Fixed Rate" means the fixed rate of interest per annum determined by
the Remarketing Agent and in effect for the period commencing on the Effective
Date or a Rate Adjustment Date, as applicable, and ending on (but not including)
the final maturity date of the Borrower Note.
"Floating Rate Option Notes" has the meaning set forth in paragraph B
of the Recitals.
"GAAP" means generally accepted accounting principles consistently
applied.
"Guarantors" means HYPERCOM (ARIZONA), INC., an Arizona corporation,
HYPERCOM LATINO AMERICA, INC., an Arizona corporation, and HYPERCOM
MANUFACTURING RESOURCES, INC., an Arizona corporation, jointly and severally.
"Guaranty" means collectively those Unconditional Guarantees of Payment
dated as of April 1, 1999, given and executed and delivered by the Guarantors
for the benefit of the Bank as the same may from time to time be amended,
modified, extended, revised or restated.
"Holder" or "Holders" means the holder or holders of the Floating Rate
Option Notes.
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"Interest Drawing" has the meaning set forth in the Letter of Credit.
"Interest Rate" means a rate per annum equal to the sum of the Prime
Rate plus 1.0% (computed on the basis of a year of 360 days and the actual
number of days elapsed).
"Interest Rate Option" means the Weekly Rate, the One Year Rate, the
Three Year Rate, the Five Year Rate, the Seven Year Rate, the Ten Year Rate or
the Fixed Rate. The foregoing Rates are sometimes collectively referred to as
the "Interest Rate Options."
"LC Bank" has the meaning set forth in paragraph B of the Recitals.
"Lender" has the meaning set forth in paragraph A of the Recitals.
"Letter of Credit" means a direct pay irrevocable letter of credit,
issued by the LC Bank as of the date hereof to the Trustee as agent for the
Holders, as the same may from time to time be amended, modified, replaced,
reinstated, reconfirmed, reissued or extended.
"Loan" has the meaning set forth in paragraph A of the Recitals.
"LTV Requirement" means eighty percent (80.0%).
"Master Agreement" means the ISDA Master Agreement by and between the
Bank and the Borrower (and any schedules or confirmations thereunder entered
into by the parties at any time), which is necessary for the Borrower to make an
interest rate swap.
"Maximum Loan Amount" means an amount not to exceed$10,429,963.00.
"Maximum Rate" means the maximum interest rate per annum at which the
Floating Rate Option Notes may bear interest, which is 15% per annum.
"Note Payment Date" has the meaning set forth in Section 2.03(c)
hereof.
"One Year Rate" means the fixed rate of interest per annum determined
by the Remarketing Agent and in effect for the period commencing on the
Effective Date or a Rate Adjustment Date, as applicable, and ending on (but not
including) the first Business Day of the month which is twelve months after such
Effective Date or Rate Adjustment Date.
"Payment Deficiency" has the meaning set forth in Section 2.03(c)
hereof.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or trustee thereof or any other
entity, fiduciary or organization, including a government or political
subdivision thereof.
"Pledged Notes" means the Pledged Notes as defined in Section 2.06
hereof.
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"Prime Rate" means such rate of interest as publicly announced from
time to time by the Bank as its prime rate, which may not be the Bank's lowest
rate of interest charged to borrowers, such rate changing automatically and
immediately from time to time effective as of the effective date of each such
announced change.
"Principal Drawing" has the meaning set forth in the Letter of Credit.
"Project" means the Real Property, any improvements located thereon and
any personal property located thereat.
"Rate Adjustment Date" means the date on which an interest rate,
determined on the related Rate Determination Date, applicable to the Borrower
Note becomes effective. In the case of the Weekly Rate, a Rate Adjustment Date
shall occur on each Thursday or on such other day as may be necessary as
provided in the last sentence of the first paragraph of Section 2.07(d) of this
Agreement. Each Rate Election Date shall also be a Rate Adjustment Date.
"Rate Determination Date" means the day on which the Remarketing Agent
determines the Weekly Rate, the One Year Rate, the Three Year Rate, the Five
Year Rate, the Seven Year Rate, the Ten Year Rate and the Fixed Rate, as
applicable, for any Rate Period. In the case of the Weekly Rate, the Rate
Determination Date for a Rate Period shall be the first Business Day next
preceding the Rate Adjustment Date or such other day as may be necessary as
provided in the last sentence of the first paragraph of Section 2.07(d) of this
Agreement. In the case of the One Year Rate, the Three Year Rate, the Five Year
Rate, the Seven Year Rate, the Ten Year Rate and the Fixed Rate, the Rate
Determination Date for a Rate Period shall be a Business Day selected by the
Remarketing Agent and occurring not earlier than 15 days and not later than two
days prior to the Rate Adjustment Date.
"Rate Election" means (i) the Borrower's right to select from time to
time one or more of the Interest Rate Options as the interest rate applicable to
the Borrower Note and (ii) in the absence of the exercise of the right referred
to in clause (i) of this definition, the automatic conversion of the Interest
Rate Option applicable to the Borrower Note to the Weekly Rate.
"Rate Election Date" means the date on which a Rate Election becomes
effective. In the case of a Rate Election from the Weekly Rate, the Rate
Election Date may be the first Business Day of any month. In the case of a Rate
Election from the One Year Rate, the Three Year Rate, the Five Year Rate, the
Seven Year Rate or the Ten Year Rate, the Rate Election Date must be the date
upon which the final interest payment is due and payable for that Rate Period.
"Rate Period" means the period commencing with the Rate Election Date
during which a particular Interest Rate Option as determined on a particular
Rate Determination Date is effective. In the case of the Weekly Rate, with the
exception (i) if applicable, of the initial Rate Period, (ii) of a Rate Period
whose last day is a Rate Election Date or (iii) of a Rate Period whose last day
is occasioned by the circumstances described in the last sentence of the first
paragraph of Section 2.07(d) of this Agreement, each Rate Period shall commence
on a Thursday and end on the following Wednesday or the maturity date of the
Borrower Note, whichever shall first occur (the "Weekly Rate Period"). In the
case of the One Year Rate, the Three Year Rate, the Five Year Rate,
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the Seven Year Rate and the Ten Year Rate, with the exception, if applicable, of
the initial Rate Period, each Rate Period shall commence on the Rate Election
Date establishing any such Interest Rate Option and shall continue for the
number of months (i.e. 12, 36, 60, 84 and 120) applicable to such Interest Rate
Option and shall end on (but such Rate Period will not include) the next Rate
Election Date or the maturity date of the Borrower Note, whichever shall first
occur. In the case of the Fixed Rate, the Rate Period shall begin on the
Effective Date or a Rate Election Date, as applicable, and shall end on (but
such Rate Period shall not include) the maturity date of the Borrower Note.
"Real Property" means the real property located at 0000 Xxxx Xxxxxxxx
Xxxx, Xxxxxxx, Xxxxxxx 00000-0000, which is subject to and legally described in
the Deed of Trust granted by the Borrower to the Bank to secure repayment of the
Borrower Note.
"Remarketing Agent" means, initially, Banc One Capital Markets, Inc.
and its successors and assigns, and any other person appointed and acting as
remarketing agent under the Remarketing Agreement.
"Remarketing Agreement" means the Master Remarketing Agreement dated as
of March 1, 1998 between the Lender and the Remarketing Agent, relating to the
remarketing of the Floating Rate Option Notes, as such agreement may be amended
as permitted therein.
"Remarketing Drawing" has the definition set forth in the Letter of
Credit.
"Security Documents" means the following documents which have been
executed by the Borrower or Guarantors and delivered to the Bank as security for
the Borrower's obligations hereunder: the Borrower Note, the Master Agreement,
the Deed of Trust and any and all other present or future obligations,
agreements, or indebtedness between the Borrower and the Bank.
"Seven Year Rate" means the fixed rate of interest per annum determined
by the Remarketing Agent and in effect for the period commencing on the
Effective Date or a Rate Adjustment Date, as applicable, and ending on (but not
including) the first Business Day of the month which is eighty-four months after
such Effective Date or Rate Adjustment Date.
"Stated Amount" means the unpaid principal balance of the Borrower Note
from time to time plus 45 days of interest thereon calculated at the rate of 15%
per annum, based on 360 days. The Stated Amount is originally $10,429,963.00
being $10,238,000.00 of principal and $191,963.00 of interest.
"Systems" has the meaning as defined in Section 4.01(r) hereof.
"Ten Year Rate" means the fixed rate of interest per annum determined
by the Remarketing Agent and in effect for the period commencing on the
Effective Date or a Rate Adjustment Date, as applicable, and ending on (but not
including) the first Business Day of the month which is one hundred twenty
months after such Effective Date or Rate Adjustment Date.
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"Three Year Rate" means the fixed rate of interest per annum determined
by the Remarketing Agent and in effect for the period commencing on the
Effective Date or a Rate Adjustment Date, as applicable, and ending on (but not
including) the first Business Day of the month which is thirty-six months after
such Effective Date or Rate Adjustment Date.
"Trust Agreement" means the Master Trust Indenture dated as of March 1,
1998 between the Lender and the Trustee pursuant to which the Trust will be
created and the Floating Rate Option Notes will be issued, as amended as
permitted therein.
"Trustee" means, initially, Bank One Trust Company, NA and its
successors and assigns, and any other Person appointed and acting as trustee
under the Trust Agreement.
"UCC Financing Statements" means the Uniform Commercial Code Financing
Statement given by the Borrower to the Bank from time to time, as reasonably
required by the Bank.
"Underwriter" means Bank One Capital Markets, Inc.
"Weekly Rate" means the rate of interest per annum determined by the
Remarketing Agent and generally in effect for a period of one week, subject to
adjustment as provided in Section 2.07 of this Agreement. The Weekly Rate shall
be the minimum rate of interest which, in the opinion of the Remarketing Agent,
would be necessary to sell the Floating Rate Option Notes on the Rate Adjustment
Date in a secondary market sale at the principal amount thereof plus accrued
interest.
"Year 2000 Compliant" has the meaning as defined in Section 4.01(r)
hereof.
ARTICLE II
AMOUNT AND TERMS OF LETTER OF CREDIT
Section 2.01 The Letter of Credit.
(a) The LC Bank has agreed, upon the terms and conditions
set forth herein, to issue and deliver the Letter of Credit in the Stated Amount
to the Trustee as agent for the Holders under the Trust Agreement and under the
Remarketing Agreement.
(b) The Letter of Credit may be transferred to a
successor or substitute Trustee in accordance with the provisions set forth in
the Letter of Credit.
(c) The Stated Amount shall be reduced and reinstated in
accordance with the provisions of the Letter of Credit.
(d) The Letter of Credit shall expire on April 6, 2006,
unless sooner terminated in accordance with the terms and conditions contained
in the Letter of Credit. The LC Bank shall not be required to enter into any
extension or to otherwise amend, modify or supplement the Letter of Credit;
provided, however, the LC Bank may, in its sole and absolute discretion, extend
the Expiration Date upon the request of the Borrower made to the Bank on or
before 90 days prior to
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the Expiration Date and with the written consent of the Bank. Each extension
period if agreed to by the Bank and the LC Bank shall be for a minimum period of
one year unless sooner terminated in accordance with the terms and conditions of
the Letter of Credit. Without limitation of the absolute discretion of the Bank
whether to extend the Expiration Date, any such extension shall be conditioned
upon no Event of Default existing at the time thereof and the receipt by the
Bank of an update of the initial Appraisal and may be subject to such amendments
or modifications to this Agreement and/or any of the Security Documents as are
required by the Bank and/or the LC Bank in their sole discretion. In addition,
any extension, if granted, shall be subject to payment by the Borrower of an
extension fee together with all out-of-pocket expenses, including legal fees, of
the Bank and the LC Bank.
Section 2.02 Fees.
(a) The Borrower shall pay to the Bank on the date of
execution of this Agreement and on the date of issuance of any additional Letter
of Credit by the LC Bank, an Issuance Fee of $150.00. The Borrower shall also
pay a fee of $35.00 to the Trustee in accordance with the Agency Agreement for
each draw upon the Letter of Credit. In addition, if a substitute Trustee is
appointed at any time and the Letter of Credit is transferred to such substitute
Trustee, the Borrower shall pay to the Bank the LC Bank's customary Letter of
Credit transfer fee.
(b) The Borrower shall pay to the Bank on the date of
execution of this Agreement an origination fee equal to $104,300.00.
(c) The Borrower shall also pay to the Bank on the Date
of Issuance an annual letter of credit fee (the "Annual Fee") equal to 1.50% of
the Stated Amount prorated for the period from the Effective Date through June
30, 1999. Thereafter, and as long as the Letter of Credit is in effect, the
Borrower shall pay to the Bank in advance on each October 1 (for the period of
October 1 to and including December 31), January 1 (for the period of January 1
to and including March 31), April 1 (for the period of April 1 to and including
June 30), and July 1 (for the period from July 1 to and including September 30),
commencing on July 1, 1999, an Annual Fee equal to the quotient of (i) 1.50% of
the Stated Amount, calculated as of each October 1, January 1, April 1 and July
1, respectively, times the number of days in the applicable calendar quarter and
(ii) 360.
The Borrower hereby acknowledges and agrees that if any change
in any law or regulation or in the interpretation thereof by any court or
administrative or governmental authority charged with the administration
thereof, or in GAAP, shall either (i) impose, modify or deem applicable any
reserve, special deposit or similar requirement against letters of credit issued
by, or assets held by, or deposits in or for the account of, the LC Bank, or
(ii) impose on the LC Bank any other condition relating, directly or indirectly,
to the Letter of Credit, and the result of any event referred to in the
preceding clause (i) or (ii) shall be to increase the cost to the LC Bank of
issuing or maintaining the Letter of Credit (which increase in cost shall be
determined by the LC Bank's reasonable allocation of the aggregate of such cost
increase resulting from such event), then the LC Bank shall present to the Bank
a certificate stating the amount of the LC Bank's increased costs reasonably
allocable to the Letter of Credit, and the Borrower shall immediately pay to the
Bank, from time to time as specified by the LC Bank in such certificate, such
additional amounts as shall
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be sufficient to compensate for such increased cost. A copy of such certificate
shall be presented to the Borrower by the Bank, and any such additional amount
to be paid to the Bank shall be immediately due and payable to the Bank by the
Borrower. The certificate referred to hereinabove shall be conclusive as to the
amount thereof.
(d) In addition to the foregoing, the Borrower shall pay
to the Lender the fees set forth in paragraph 3 of the Borrower Note.
(e) The Borrower shall also pay all reasonable fees and
expenses incurred by the Bank, the Lender, the LC Bank or the Borrower in
connection with this Agreement, the Loan or the issuance of the Floating Rate
Option Notes, whether or not the Loan closes, including without limitation, the
Bank's counsel fees, the Lender's counsel fees, the LC Bank's counsel fees,
placement fees, the Lender's acceptance fee, trustee fees, trustee's counsel
fees, rating agency fees, and private placement memorandum and Floating Rate
Option Notes printing costs. In addition, the Borrower shall pay such additional
fees and expenses, including title insurance premiums, appraisal fees, survey
costs, environmental reports costs, and other fees and expenses as are incurred
in connection with any security for the Loan.
(f) All payments of fees to be made by the Borrower to
the Bank shall be made in immediately available funds. With respect to the
payment of the Annual Fee, the Bank shall notify the Borrower of the amount of
such payment not less than 10 days prior to the date upon which such payment is
due but failure to provide such notice shall not affect the Borrower's
obligations to make the payment when due.
Section 2.03 Reimbursement and Other Payments.
(a) Principal or Interest Drawing. In the event of any
Principal Drawing or Interest Drawing, the Borrower shall immediately pay to the
Bank or cause the Trustee to pay to the Bank the amount paid by the Bank to duly
honor such Drawing, and failure to so immediately reimburse the Bank shall
constitute an Event of Default under this Agreement. Without limitation of the
preceding sentence, if such amount has not been previously paid under the
Borrower Note and is outstanding, such amount shall constitute a loan to and
indebtedness of the Borrower to the Bank. If the Borrower does not reimburse the
Bank for such drawing on the same day of the Drawing or if the Borrower shall
otherwise fail to reimburse the Bank under this Section 2.03(a) as a result of a
Principal Drawing as honored or an Interest Drawing as honored, such
unreimbursed amount shall bear interest until payment in full of such amount,
and the Borrower shall be obligated to pay interest to the Bank, payable on
demand, or, if demand is not made, monthly in arrears on the last day of each
month following such Principal Drawing or Interest Drawing on any and all such
amounts remaining unpaid at the Default Rate of Interest. Accrual of such
interest and the acceptance of payment of such interest by the Bank thereof on
any one or more occasions shall not constitute a waiver of the Event of Default
occurring upon the failure of the Borrower to immediately reimburse the Bank for
the amount of the Drawing(s) that accrued such interest.
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(b) Remarketing Drawing. In the event of any Remarketing
Drawing, the amount of such Remarketing Drawing as honored shall constitute a
loan to and indebtedness of the Borrower to the Bank upon the following terms:
(i) The amount of any Remarketing Drawing as
honored relating to interest under the Borrower Note shall be
immediately due and payable by the Borrower to the Bank and if such
amount is not immediately paid to the Bank, such amount shall bear
interest at the Interest Rate from and after the date such amount
becomes payable hereunder. Such interest shall be payable upon demand
of the Bank, or, if demand is not made, monthly in arrears on the last
day of each month.
(ii) The amount of any Remarketing Drawing
representing the principal amount of any Floating Rate Option Notes not
remarketed shall be repaid as provided below. At any time that any
Remarketing Drawing is outstanding on any loan payment date set forth
in Schedule 1 of the Borrower Note, the Bank shall apply any payment of
principal on the Borrower Note in an amount equal to the principal
amount of Pledged Notes to be redeemed on such date as a repayment of
the Remarketing Drawing. The unpaid balance of the Remarketing Drawing
shall bear interest at the Interest Rate, which interest shall be paid
to the Bank monthly in arrears on the first Business Day of each month
commencing the month following the month in which the Remarketing
Drawing occurs. Any payments on or of the purchase price for the
Pledged Notes shall be applied as a payment of the outstanding amount
of the Remarketing Drawing.
(c) Monthly Payments. Notwithstanding the Borrower Note
to the contrary, the Borrower has agreed to make monthly principal and monthly
interest payments to the Bank. All of such payments shall be made (i) with
respect to interest payments, not later than the Business Day prior to the day
on which interest payments are due and payable under the Borrower Note and (ii)
with respect to principal payments, each such principal payment shall be made
not later than the Business Day prior to the dates set forth in Exhibit A
attached hereto and made a part hereof. The amount of the interest payments
shall be the amount payable under the Borrower Note, and the amount of each
principal payment is set forth on Exhibit A attached hereto. Such payments when
made by the Borrower shall be deposited by the Bank into a segregated account
(the "Borrower Account"). The Trustee shall make withdrawals from the Borrower
Account in order to reimburse the LC Bank for any draws upon the Letter of
Credit and to pay to Trustee its fees all in accordance with the Agency
Agreement. All payments of principal and interest by the Borrower into the
Borrower Account shall be applied as a credit against the amount of the Borrower
Note. If as of any date provided for in the Borrower Note for a payment of
principal or interest (a "Note Payment Date") there are insufficient funds in
the Borrower Account in order for the Trustee to reimburse the LC Bank for
principal and interest draws upon the Letter of Credit due on a Note Payment
Date, the difference between the amount in the Borrower Account and the amount
due as reimbursement to the LC Bank for such principal and interest draws (the
"Payment Deficiency") shall be immediately due and payable by the Borrower to
the Bank and if such amount is not immediately paid to the Bank, the same shall
constitute an Event of Default under this Agreement and, without limitation of
the foregoing, such amount shall bear interest at the Default Rate of Interest
from and after the
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Note Payment Date such amount becomes payable hereunder. Interest on the Payment
Deficiency shall be payable upon demand of the Bank, or, if demand is not made,
monthly in arrears as the last day of each month. If any payment due under this
paragraph is not made within 10 calendar days of its due date, a late fee equal
to 5.0% of such payment or $25, whichever is greater, up to a maximum of $1,500
for each such late payment shall be immediately due and payable to the Bank from
the Borrower. The collection of principal, interest and/or late fees by the Bank
on any one or more occasions shall not constitute a waiver of the Event of
Default arising upon failure by the Borrower to make payment to the Bank when
due of the amounts with respect to which such principal, interest and late
charges accrue.
(d) Interest Rate Changes. Any change in the Default Rate
of Interest or the Interest Rate resulting from a change in the Prime Rate shall
be effective on the effective date of the change in the Prime Rate. The Default
Rate of Interest shall be computed on the basis of the actual number of days
elapsed over a year of 360 days.
(e) Fees and Expenses. The Borrower hereby agrees to pay
to the Bank upon demand therefor sums equal to any and all amounts paid to the
LC Bank by the Bank for reasonable charges and expenses (including reasonable
attorneys' fees) attributable to the Borrower which the LC Bank may pay or incur
relative to the transfer, drawing upon, change in terms, maintenance, renewal,
extension or cancellation of the Letter of Credit or to any payment by the LC
Bank thereunder. The Borrower hereby agrees to pay to the Bank on demand sums
equal to any and all amounts which the Bank has paid or incurred (including
reasonable attorneys' fees) relative to the Bank's curing of any Event of
Default resulting from the acts or omissions of the Borrower under this
Agreement or under the Security Documents.
(f) Final Payment. The Borrower hereby absolutely,
unconditionally and irrevocably agrees to pay all amounts due to the Bank
pursuant to the provisions of this Agreement, the Borrower Note and the Security
Documents, including without limitation, amounts payable pursuant to Sections
2.02 and 2.03 hereof, on the Expiration Date, or at such earlier time as may be
provided for herein.
(g) Discharge of Obligations Upon Payment Under the
Borrower Note. Payments made under the Borrower Note shall discharge the
Borrower's obligations under this Agreement to the extent of such payments.
(h) Application of Payments. Unless otherwise agreed to,
in writing, or otherwise required by applicable law, payments will be applied
first to accrued, unpaid interest, then to principal, and any remaining amount
to any unpaid collection costs, late charges and other charges, provided,
however, upon an Event of Default, the Bank reserves the right to apply payments
among principal, interest, late charges, collection costs and other charges at
its discretion. All prepayments shall be applied to the indebtedness owing
hereunder in such order and manner as the Bank may from time to time determine
in its sole discretion.
Section 2.04 Payment on Non-Business Days. Whenever any payment to be
made hereunder shall be stated to be due on a day which is not a Business Day,
such payment may be
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made on the preceding Business Day, but in no event shall be made later than the
next succeeding Business Day with interest (if such payment accrues interest)
continuing to accrue thereon until such payment is made.
Section 2.05 Security Documents. As security for all of the Borrower's
obligations to the Bank under this Agreement, the Borrower Note and the Master
Agreement, and any and all other obligations, agreements, or indebtedness
between the Borrower and the Bank, the Borrower shall execute and deliver and
cause the Guarantors to execute and deliver on the date hereof the Security
Documents required to be executed and delivered as one of the conditions
precedent to the obligation of the LC Bank to issue the Letter of Credit.
Section 2.06 Pledge of Remarketing Notes.
(a) As security for the payment and performance of all
obligations of the Borrower to the Bank hereunder and under the Borrower Note
and the Security Documents, the Borrower hereby agrees that upon the making of a
Remarketing Drawing with respect to the Loan, the Trustee shall cause to be
registered with the Depository in the name of Lender, as pledgor, and in the
name of the Bank, as pledgee, and transferred from the Depository account of
Lender to a separate Depository account of the Trustee, as custodian, the
Floating Rate Option Notes free and clear of all other liens and encumbrances in
an aggregate principal amount equal to the amount of such Remarketing Drawing
with respect to the Loan, less (i) any portion of such Remarketing Drawing
representing interest on the Floating Rate Option Notes so purchased, and (ii)
the amount the Bank is reimbursed by 2:00 p.m. Phoenix, Arizona time on the date
of such Remarketing Drawing (the "Pledged Notes"), and the Borrower hereby
consents to the grant to the Bank of a security interest in the Pledged Notes
and in the proceeds thereof. Pledged Notes registered with the Depository in the
name of the Lender shall be for the benefit of the Borrower as pledgor and the
Bank as pledgee. If a Depository is not used, the Borrower agrees that the
Remarketing Agent shall deliver such Pledged Notes to Trustee and the Trustee
shall register such Pledged Notes in the name of Lender for the benefit of the
Borrower, as pledgor and in the name of the Bank as pledgee with Lender's
endorsement of the Pledged Notes to the order of the Bank, and deliver such
Pledged Notes to the Bank or its designated custodian.
(b) The Borrower further agrees to the Trustee entering
into its registration books as the address to which payments of interest with
respect to Pledged Notes are to be sent, the Bank's address for notices pursuant
to Section 7.04 hereof as in effect from time to time.
(c) If the Borrower shall become entitled to receive or
shall receive any Pledged Notes, any payment of interest with respect to the
Pledged Notes from the Trustee, or any and all other proceeds thereof, it shall
accept any such items as the Bank's agent, shall hold them in trust for the
Bank, and shall deliver them forthwith to the Bank in the exact form received,
with the Borrower's endorsement to the order of the Bank when necessary, to be
held by the Bank, subject to the terms hereof, as security for the payment and
performance of all obligations of the Borrower hereunder, the Borrower Note and
under the Security Documents, except that the Bank shall credit all payments and
proceeds received by the Bank directly against the Borrower's obligations under
Sections 2.02 and 2.03 of this Agreement.
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(d) All principal and interest paid on the Pledged Notes
shall be retained by the Bank (or if received by the Borrower shall be forthwith
delivered by it to the Bank in the original form received) and applied by the
Bank to the payment of amounts due the Bank from the Borrower hereunder, the
Borrower Note and under the Security Documents.
(e) If the Borrower makes or causes to be made to the
Bank a prepayment or payment of a Remarketing Drawing pursuant to Section 2.03
hereof, or the Remarketing Agent resells Pledged Notes on behalf of the
Borrower, the Bank agrees to release from the lien of this Agreement and to
instruct the Trustee by telephone (confirmed in writing) to cause the
appropriate transfer of Pledged Notes on the books of the Depository (or, if a
Depository is not used, to deliver to the Borrower or the Remarketing Agent, as
the case may be, Pledged Notes endorsed in blank without recourse) in an
aggregate principal amount equal to the amount of such prepayment or payment
with respect to principal so made, or the principal amount of the Pledged Notes
so resold to the extent that the proceeds of such resale are delivered to the
Bank. Any such payment or prepayment of the Remarketing Drawing shall constitute
a payment or prepayment of the Borrower Note for all purposes hereof and of the
Borrower Note.
(f) In addition to the rights and remedies granted to the
Bank in this Agreement, the Bank shall have all of the rights and remedies of a
secured party under the applicable Uniform Commercial Code and such other rights
and remedies as are granted to a secured party in similar situations to the
extent of the security interest granted under paragraph (a) above. In addition,
if Pledged Notes are issued in "book entry form", the Bank shall be a
"Registered Pledgee" as defined by, and having the rights designated by Article
VIII and Article IX of the New York and, if applicable, the Arizona Uniform
Commercial Code.
(g) The Borrower shall be liable for the deficiency if
the proceeds of any sale or other disposition of the Pledged Notes by the Bank
are insufficient to pay all amounts to which the Bank is entitled, including
principal and interest as provided herein, and the reasonable fees and expenses
of any outside attorneys employed by the Bank to collect such deficiency.
Section 2.07 Interest Rate Determination Under the Borrower Note.
Following execution and delivery of the Borrower Note to Lender, the following
provisions shall apply to the determination of the interest rate under the
Borrower Note:
(a) Interest Rate Options. The Borrower Note may bear
interest at one or more Interest Rate Options selected by the Borrower as
hereinafter provided. Once an Interest Rate Option is selected, it may be
changed only in accordance with the provisions of Section2.07(c), below.
(b) Selection of Initial Interest Rate Option. The entire
principal balance of the Borrower Note shall initially bear interest at the
Weekly Rate, and, until another Interest Rate Option is timely and properly
selected, shall thereafter bear interest at the Weekly Rate pursuant to
Section2.07(c), below.
(c) Changes in Interest Rate Option Selected. The
Borrower may change the Interest Rate Option initially selected with respect to
all or part of the Borrower Note by making one
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or more Rate Elections in accordance with the provisions of this Section2.07(c).
During any Rate Period when the Borrower Note or a portion thereof bears
interest at the Weekly Rate or on the last day of any Rate Period when the
Borrower Note bears interest at the One Year Rate, the Three Year Rate, the Five
Year Rate, the Seven Year Rate or the Ten Year Rate, the Borrower shall have the
right to make a Rate Election to any Interest Rate Option. However, the Fixed
Rate once selected may not be changed. The Borrower may select more than one
Interest Rate Option and designate the principal amount of the Floating Rate
Option Notes to be effected by each such Interest Rate Option; provided,
however, that if the Borrower selects more than one Interest Rate Option, the
Borrower must designate at least $1,000,000 in principal amount of Floating Rate
Option Notes for each Interest Rate Option selected. The Borrower may make a
Rate Election by giving written notice to the Bank, the Lender, the Trustee, the
LC Bank and the Remarketing Agent. Such notice shall (i) state the Borrower's
intention to make a Rate Election (specifying the applicable Interest Rate
Option selected, which shall be an Interest Rate Option permitted hereunder),
(ii) specify the Rate Election Date, and (iii) designate the portion of the
Borrower Note, if less than all, to which such Interest Rate Option shall apply
(as such the "Notice of Rate Election"); provided, however, that no Rate
Election to a One Year Rate, a Three Year Rate, a Five Year Rate, a Seven Year
Rate, a Ten Year Rate or a Fixed Rate shall be permitted unless, after giving
effect to such Rate Election, the unexpired term of the Letter of Credit will
exceed the term of the proposed Rate Period by at least five days determined as
of the proposed Rate Election Date. The Notice of Rate Election shall be given
at least 45 days prior to the Rate Election Date. If the Borrower Note or any
portion thereof bears interest at the One Year Rate, the Three Year Rate, the
Five Year Rate, the Seven Year Rate or the Ten Year Rate and the Borrower
declines or fails to make a Rate Election at the end of such Rate Period with
respect to any such portion, a Rate Election shall nevertheless be deemed to
have been made with respect thereto and the Borrower Note or such portion
thereof, as applicable, shall, from and after the end of the expiring Rate
Period until another Rate Election is made by the Borrower and becomes
effective, bear interest at the Weekly Rate. In addition, if the Borrower Note
bears interest at the Weekly Rate, a continuation of the Weekly Rate into the
next Rate Period shall not constitute a Rate Election, and neither the Trustee,
the Lender nor the Borrower shall be required to take any action, or give notice
or consent, in order to effect the continuation of the Weekly Rate applicable to
the Borrower Note. If the Remarketing Agent shall not have determined a Weekly
Rate for any Weekly Period, the Weekly Rate shall be the same as the Weekly Rate
for the immediately preceding Weekly Period. Assuming compliance with the
procedures set forth herein and in Section 2.07(d) hereof, the Interest Rate
Option selected by a Rate Election shall become effective on the Rate Election
Date and shall stay continuously in effect until (i) in the case of the Weekly
Rate, the Borrower makes another Rate Election, (ii) in the case of the One Year
Rate, the Three Year Rate, the Five Year Rate, the Seven Year Rate or the Ten
Year Rate, the conclusion of the Rate Period or (iii) in the case of the Fixed
Rate, the Borrower Note is paid in full.
A Rate Election which results in a continuation of the same
Interest Rate Option from the immediately preceding Rate Period shall permit the
optional tender of the Floating Rate Option Notes which correspond to the
principal amount of the Borrower Note which bears that Interest Rate Option on
the Borrower Note. Fixed Rate notes are not subject to optional redemption. A
Rate Election from one Interest Rate Option to another shall require a mandatory
tender of the Floating Rate Option Notes which correspond to the principal
amount of the Borrower Note which bears that Interest Rate Option on the
Borrower Note. A tender of Floating Rate Option Notes will cause a
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Remarketing Drawing in the event of the failed remarketing of any of the
Floating Rate Option Notes tendered as a result of the Rate Election.
(d) Determination of Interest Rate. For all Rate Periods
after the initial Rate Period, the interest rate (i.e. the Weekly Rate, the One
Year Rate, the Three Year Rate, the Five Year Rate, the Seven Year Rate, the Ten
Year Rate or the Fixed Rate, as applicable) shall be determined in the following
manner. At or before 5:00 p.m., Columbus, Ohio time, on each Rate Determination
Date, the Remarketing Agent shall determine the applicable interest rate which
the Floating Rate Option Notes shall bear during the next Rate Period. Such
interest rate shall be that interest rate which, in the sole and exclusive
judgment of the Remarketing Agent (having due regard for the length of the Rate
Period, tender options (if any) available to the Holders of the Floating Rate
Option Notes during the Rate Period, prevailing financial conditions and the
yields at which comparable securities are then being sold), would equal (but not
exceed) the interest rate necessary to enable the Remarketing Agent to sell the
Floating Rate Option Notes (exclusive of accrued interest, if any) on the Rate
Adjustment Date at a price equal to one hundred percent (100%) of the principal
amount thereof. The interest rate so determined shall be effective on the next
Rate Adjustment Date, or if the Rate Determination Date and the Rate Adjustment
Date are the same day, then on such day. If Floating Rate Option Notes bearing
interest at the Weekly Rate are tendered during a Rate Period, then the Weekly
Rate may be increased (but not decreased) if, in the sole and exclusive judgment
of the Remarketing Agent, such an increase in the Weekly Rate is necessary to
enable the Remarketing Agent to remarket such Floating Rate Option Notes
(exclusive of accrued interest, if any) at a price equal to one hundred percent
(100%) of the principal amount thereof.
On each Rate Determination Date for the Weekly Rate and on any
date on which the Weekly Rate is increased pursuant to the last sentence of the
preceding paragraph, the Remarketing Agent shall give the Trustee telephonic
notice, promptly confirmed in writing, of the Weekly Rate determined by the
Remarketing Agent on such date; provided, however, that such notice need not be
given unless the Weekly Rate so determined is different from the Weekly Rate for
the preceding Rate Period. The Trustee shall, promptly after having been
informed of the Weekly Rate, notify the Borrower of the Weekly Rate. In the case
of the One Year Rate, the Three Year Rate, the Five Year Rate, the Seven Year
Rate, the Ten Year Rate or the Fixed Rate, the Remarketing Agent shall, by not
later than the Business Day following the Rate Determination Date, notify the
Trustee of the One Year Rate, the Three Year Rate, the Five Year Rate, the Seven
Year Rate, the Ten Year Rate or the Fixed Rate, as applicable, determined by the
Remarketing Agent. The Trustee shall, within one Business Day after having been
so informed, notify the Borrower of the One Year Rate, the Three Year Rate, the
Five Year Rate, the Seven Year Rate, the Ten Year Rate or the Fixed Rate, as
applicable, as determined by the Remarketing Agent.
(e) Calculation of Interest. During any Rate Period when
the Borrower Note bears interest at the Weekly Rate, interest on the Borrower
Note shall be computed on the basis of a 365-day year (366 days during any
period containing a February 29) for the actual number of days elapsed during
such Rate Period. During any Rate Period when the Borrower Note bears interest
at the One Year Rate, the Three Year Rate, the Five Year Rate, the Seven Year
Rate, the Ten Year Rate or the Fixed Rate, interest on the Borrower Note shall
be computed on the basis of a 360-day year, consisting of twelve 30-day months.
In no event shall any Weekly Rate, any One Year Rate,
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any Three Year Rate, any Five Year Rate, any Seven Year Rate, any Ten Year Rate
or any Fixed Rate exceed the Maximum Rate. All determinations of any Weekly
Rate, any One Year Rate, any Three Year Rate, any Five Year Rate, any Seven Year
Rate, any Ten Year Rate or any Fixed Rate shall be rounded to the nearest
one-hundredth of one percent (0.01%) and shall be conclusive and binding upon
the Borrower.
Section 2.08 Rate of Interest. Borrower expressly agrees to an
effective rate of interest that is the rate stated in this Article II plus any
additional rate of interest resulting from any other charges in the nature of
interest paid or to be paid in connection with this Agreement and the Borrower
Note.
ARTICLE III
CONDITIONS OF ISSUANCE
Section 3.01 Conditions Precedent to this Agreement. The obligation of
the Bank to enter into this Agreement is subject to the condition precedent that
the Bank shall have received on or before the date hereof all such documents,
instruments, approvals (and, if requested by the Bank, certified duplicates of
executed copies thereof) or opinions addressed to the Bank as the Bank may
request and payment of all fees and costs required to be paid hereunder,
including, without limitation, the following, each dated such date, in form and
substance satisfactory to the Bank:
(a) If the Borrower is a corporation, a certificate of
the Secretary or Assistant Secretary of the Borrower, or if the Borrower is a
partnership, a certificate of the managing general partner certifying the
accuracy and completeness of copies of the resolutions or actions by unanimous
written consent of the board of directors or partners, as the case may be, of
the Borrower authorizing or ratifying the execution, delivery and performance of
this Agreement, the Borrower Note and the Security Documents.
(b) If the Borrower is a corporation, a certificate of
the Secretary or Assistant Secretary of the Borrower, or if the Borrower is a
partnership, a certificate of the managing general partner certifying the names
and true signatures of the officers or other representatives of the Borrower
authorized to sign this Agreement, the Borrower Note and the Security Documents.
(c) If the Borrower is a corporation, certified copies of
the articles of incorporation, code of regulations and certificate of good
standing of the corporation, or if the Borrower is a partnership, certified
copies of the above corporation documents for any corporate general partner and
the recorded certificate of partnership for the Borrower.
(d) Opinion of counsel for the Borrower and the
Guarantors, addressed to the Bank and to other applicable parties, in
substantially the form of Exhibit B hereto.
(e) Executed copies of this Agreement, the Borrower Note,
the Guaranty, an amendment to the Deed of Trust, and all other Security
Documents and other documents required to be delivered as a condition to
issuance of the Floating Rate Option Notes and Letter of Credit.
(f) Fees specified in Section 2.02 hereof.
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(g) An Environmental Indemnity Agreement, executed by
Borrower and the Guarantors.
(h) If requested by the Bank, current as-built survey of
the Real Property by a licensed surveyor acceptable to the Bank describing the
boundaries of the Real Property and showing the location of the improvements
upon the Real Property and all means of ingress and egress, rights-of-way,
easements (each of which shall be identified by docket and page or recording
number where recorded) and all other customary and relevant information pursuant
to ALTA standards and any title company requirements. All surveys shall be
certified to the Bank and the title company issuing the Title Policy.
(i) An ALTA extended coverage mortgagee's title insurance
policy [ALTA Loan Policy - 1970 (Rev. 10-17-70)] or similar policy acceptable to
the Bank (the "Title Policy"), with such endorsements as the Bank may require,
issued by a title insurance company satisfactory to the Bank in the amount of
the Loan insuring the lien of the Deed of Trust to be a first and prior lien
upon the Real Property as security for the Loan, subject only to such exceptions
as the Bank may expressly approve in writing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 Representations and Warranties of the Borrower. The
Borrower hereby represents and warrants to the Bank as follows:
(a) The Borrower has not incurred any material
accumulated funding deficiency as defined in ERISA and the regulations
promulgated thereunder and no Reportable Event has occurred with respect to any
Pension Plan involving the Borrower. Neither has the Pension Benefit Guaranty
Corporation asserted that the Borrower has incurred any material liability in
connection with any such pension plan nor has any lien attached nor any Person
threatened to attach a lien on any property of the Borrower as a result of the
Borrower's failure to comply with ERISA or regulations promulgated thereunder.
(b) Except as previously disclosed to the Bank in
writing, the Borrower has filed all Federal, state and local tax returns
required to be filed and has paid all taxes shown to be due on such returns, and
has made provision for all liabilities not so paid or accrued under returns not
yet due. Except as previously disclosed to the Bank in writing, the Borrower has
no knowledge of any pending assessments or adjustments to its taxes payable with
respect to any year.
(c) The Borrower's obligations under this Agreement, the
Borrower Note, the Master Agreement and the applicable Security Documents are
not subordinate in any manner to any other obligation of the Borrower.
(d) There is no claim, action, temporary restraining
order, injunction, suit, proceeding, inquiry or investigation, at law or in
equity, before or by any judicial or administrative court, governmental agency,
public board or body, pending or, to the best of the Borrower's
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knowledge, threatened against or affecting, or involving the properties or
businesses, or any securities of, the Borrower nor, to the best of the
Borrower's knowledge, is there any basis therefore, (i) contesting the existence
or powers of the Borrower or the authority of its directors, officers, managers,
members or partners, as the case may be, or (ii) wherein an unfavorable
decision, ruling or finding would in any way adversely affect the Borrower's
ability to carry out its obligations under this Agreement, the Borrower Note,
the Master Agreement or the Security Documents.
(e) The transactions contemplated by this Agreement,
including the grant by the Borrower to the Bank of a security interest in the
Pledged Notes pursuant to Section 2.06 hereof, and the transactions contemplated
by the Borrower Note, the Master Agreement, or the Security Documents have not
been entered into by the Borrower in contemplation of the Borrower's insolvency
nor have such transactions been entered into with the intent to hinder, delay or
defraud the equity holders or the creditors of the Borrower.
(f) The Borrower is not regularly engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System).
(g) Neither this Agreement, the Borrower Note nor any of
the other Security Documents, nor any certificate or other document furnished to
the Bank by or on behalf of the Borrower pursuant to any Security Document
contains, or will contain, as of its date, any untrue statement of a material
fact or omits to state or will omit to state, as of its date, a material fact
necessary in order to make the statements contained herein and therein not
misleading. There are no facts known to the Borrower which, individually or in
the aggregate, materially adversely affect or involve any substantial
possibility of materially adversely affecting the condition, business or affairs
of the Borrower or its respective properties and assets considered as an
entirety which have not been disclosed herein or in written materials previously
delivered to the Bank.
(h) The Borrower owns good and marketable title to all
collateral pledged as security for the Loan as identified in the Security
Documents free and clear of all liens and encumbrances, except as disclosed in
writing to the Bank.
(i) The Borrower is a corporation, duly formed, validly
existing and in good standing under the laws of Delaware, has the corporate
power to own its properties and assets, to carry on the businesses in which it
is engaged, and to execute and perform this Agreement, the Borrower Note and all
applicable Security Documents and other documents in connection therewith to be
executed by it, and is duly qualified to do business in all jurisdictions where
such qualification is necessary or advisable.
(j) The execution, delivery and performance by the
Borrower of this Agreement, the Borrower Note and the execution and delivery of
all applicable Security Documents and other documents in connection therewith to
which the Borrower is a party, have been duly authorized by all requisite action
of the Borrower and will not violate any provisions of law or of the articles of
incorporation, regulations or bylaws of the Borrower, or any amendments thereto;
will not be in conflict with, result in a breach of, or constitute a default
under, any agreement to which the
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Borrower is a party or any order, writ, injunction or decree of any court or
governmental instrumentality; and will not result in the creation or imposition
of any lien, charge or encumbrance upon any property of the Borrower other than
as created by the Security Documents.
(k) No registration with, notice to, consent or approval
of any third party, including any governmental agency of any kind, is required
for the due execution and delivery of, or for the enforceability of, this
Agreement, the Security Agreements or other documents in connection therewith.
The person or persons executing and delivering this Agreement, the Borrower
Note, the Security Documents or other documents in connection therewith on
behalf of the Borrower have been duly authorized to do so, and this Agreement,
the Borrower Note and the Security Agreements are legally binding upon the
Borrower and are enforceable in accordance with their terms.
(l) No litigation or proceeding involving the Borrower,
material to the business operations or financial condition of the Borrower, is
pending or threatened in any court or before any administrative agency, federal,
state or local.
(m) The Borrower's financial statements for the period
ending December 31, 1998, heretofore furnished to the Bank, are true and
complete, have been prepared in accordance with generally accepted accounting
principles consistent with the respective prior fiscal periods of the Borrower,
omit no material contingent liabilities of any kind that are not disclosed or
otherwise reflected therein, and fairly present the Borrower's financial
condition as of the date thereof and the results of their operations for the
period then ended. Since the date thereof, there has been no material adverse
change in the Borrower's financial condition, properties or businesses which has
not been disclosed in writing by the Borrower to the Bank. The Borrower has no
reason to believe that the fair market values of the Real Property subject to
the Appraisal are less than the fair market value thereof determined by the
Appraisal.
(n) The Borrower has obtained all governmental,
administrative and other licenses, permits and other authorizations required by
law to be obtained or made in order to permit the operation of the Borrower's
operations, including the Project, and as are necessary to the carrying on of
its businesses, except for any such authorizations or filings which are not
currently so required and which, in the reasonable judgment of the Borrower, can
be obtained or made without difficulty prior to the time so required. The
Borrower is in material compliance with all laws and regulations, including
without limitation all environmental, occupational safety and health, and
workers' compensation laws and regulations, applicable to the Project and its
other businesses where failure to comply would have a material adverse effect on
the business or financial condition of the Borrower. The Borrower has not
received any notice from, or has any knowledge of any notice received by any
other person from, any governmental or public body, agency or instrumentality
alleging that the operation of the Project is not in compliance with regulations
affecting its operations and licenses.
(o) The Borrower possesses all trademarks, trademark
rights, patents, patent rights, licenses, permits, trade names, trade name
rights, copyrights and approvals which are required to conduct its business as
now conducted without conflicting with the rights of others.
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(p) The Borrower is not a party to or bound by any
agreement, contract, instrument or understanding or commitment of any kind or
subject to any corporate or other restriction, the performance or observance of
which by the Borrower now or, as far as the Borrower can reasonably foresee,
will have a material adverse effect, financial or otherwise, upon the assets or
business of the Borrower taken as a whole. The Borrower, nor any other person or
party to a contract or agreement material to the financial condition or
operations of the Borrower taken as a whole, is in default under any such
contract or agreement, and to the knowledge of the Borrower, no event has
occurred which, but for the giving of notice or the passage of time, or both,
would constitute a default thereunder.
(q) No portion of any advance or loan made hereunder
shall be used directly or indirectly to purchase ineligible securities, as
defined by applicable regulations of the Federal Reserve Board, underwritten by
any affiliate of Banc One Corporation during the underwriting period for 30 days
thereafter.
(r) For purposes of these representations and warranties,
"Systems" means all devices, systems, machinery, information technology,
computer software and hardware, and other date sensitive technology (jointly and
severally the "Systems") under the control of or owned by the Borrower, and
"Year 2000 Compliant" means that such Systems are designed to be used prior to,
during and after the Gregorian calendar year 2000 A.D. and will operate during
each such time period without error relating to date data, specifically
including any error relating to, or the product of, date data which represents
or references different centuries or more than one century.
(s) The Borrower's internal Information Systems
department has been conducting an analysis of the Systems within the Borrower,
from desktop software to the software used within the PBX system. There have
been a few softwares identified that are not capable of making the transition
from the year 1999 to year 2000. In some cases, upgrading the software has
already been initiated. In those cases where there is no feasibility of
upgrading the software, alternative systems have been analyzed, with a
transition program already under review. The Borrower does not believe that cost
of making the transition to different applications, nor the cost of upgrading
the existing applications, will be significant and material. Because of the
additional functionality that can be obtained by making such transition, the
Borrower believes that cost saving incurred by the increased productivity and
ability to generate internal reports will exceed the actual costs expended.
(t) The Borrower does develop and distributes computer
hardware and software, and has thoroughly reviewed such systems. Because of the
interaction between the Borrower's hardware/software with other manufacturer's
hardware/software, the Borrower refrains from warranting Year 2000 compliance.
In order to make the Borrower's POS terminal customers aware of potential issues
with the transition from 1999 to 2000, the Borrower has, at its own expense,
provided over ten thousand test cards to enable the Borrower's customers to
fully test the ability of the Borrower's products, when interacting with other
vendors software/ hardware, to ascertain whether or not a Year 2000 compliance
issue is present. The Borrower's IEN/NAC products do not utilize an internal
"clock," and there are no Year 2000 compliance issues with such products.
Workstation software products may have a Year 2000 compliance issue because of
the operating system and database program utilized by the Borrower's customers,
but not because of the
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applications developed and distributed by the Borrower. Nevertheless, the
Borrower makes no warranty regarding Year 2000 compliance and believes it is the
customer's ultimate responsibility to verify whether or not there is a Year 2000
compliance issue.
(u) The fair market value of all real and personal
property, if any, pledged to the Bank as collateral to secure the obligations
contemplated in this Agreement is not and shall not be less than currently
anticipated or subject to substantial deterioration in value because of the
failure of such collateral to be Year 2000 Compliant.
ARTICLE V
COVENANTS OF THE BORROWER
Section 5.01 Financial Statements.
(a) The Borrower shall furnish to the Bank as soon as
practicable after the end of each calendar quarter, and in any event within 60
days thereafter, consolidated operating statements and financial statements of
the Borrower. All of such statements shall be prepared in accordance with GAAP
or consistent with Securities and Exchange Commission filing requirements and
shall be certified by the Borrower as being true, complete and correct in all
material respects. On each occasion on which the Borrower is required to furnish
an operating statement or financial statements to the Bank pursuant to this
Section 5.01(a), the Borrower shall also furnish to the Bank a certificate of
the Borrower (i) stating that the Borrower has reviewed the provisions of this
Agreement and, after reasonable investigation, has no knowledge of the
occurrence of any event or condition which either constitutes or with the lapse
of time or giving of notice or both would constitute an Event of Default, or if
the Borrower has such knowledge, specifying such event or condition and what
action the Borrower has taken, is taking or proposes to take with respect
thereto, and (ii) setting forth the calculation of the Financial Covenants as of
the date of the most recent financial statements accompanying such certificate.
The Borrower shall also furnish promptly to the Bank such other information
respecting the business, properties, condition or operations, financial or
otherwise, of the Borrower and the Guarantors as the Bank may reasonably
request.
(b) As soon as available and in any event within one
hundred twenty (120) days after the last day of each fiscal year, the Borrower
shall furnish to the Bank a copy of the Borrower's audited consolidated
financial statements, certified by independent certified public accountants,
including consolidated balance sheets and statements of financial condition as
of the end of such fiscal year, and related consolidated statements of income
and cash flows, a reconciliation of retained earnings and changes in financial
condition for the fiscal year then ended, setting forth in comparative form the
corresponding figures as of the end of or for the previous fiscal year, all in
reasonable detail and all in conformity with GAAP.
Section 5.02 Deliver Notice. Forthwith upon learning of any of the
following, the Borrower shall deliver written notice thereof to the Bank,
describing the same and the steps being taken by the Borrower with respect
thereto:
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(a) The occurrence of an Event of Default or an event or
circumstance which would constitute an Event of Default, but for the requirement
that notice be given or time elapse or both;
(b) Any action, suit or proceeding, by it or against it
at law or in equity, or before any governmental instrumentality or agency, or
any of the same which may be threatened, and which, if adversely determined,
would materially impair the right or ability of the Borrower to carry on its
business or would materially impair the right or ability of the Borrower to
perform its obligations under this Agreement and the Security Documents, or
would materially and adversely affect its business, operations, properties,
assets or condition;
(c) Any change in the name, address, identity or
structure of the Borrower; or
(d) Any uninsured or partially uninsured loss through
fire, theft, liability or property damage which may have an adverse material
effect on the Borrower's financial condition or operations.
Section 5.03 Keep Books. The Borrower shall keep true and proper books
of records and accounts in which full and correct entries are made of all
business transactions, and reflect in its financial statements adequate accruals
and appropriations to reserves, all in accordance with GAAP.
Section 5.04 Inspection of Books. The Borrower shall allow, during
reasonable business hours, the Bank or its representatives, access to the
financial books and records of the Borrower.
Section 5.05 Amendment of any Other Document. The Borrower shall not
enter into any agreement containing any provision which would be violated or
breached by the performance of its obligations hereunder or under any Security
Document or under any instrument or document delivered or to be delivered by it
hereunder or in connection herewith.
Section 5.06 Affirmative and Negative Covenants. Unless the prior
written consent of the Bank is first received, the Borrower shall comply with
all of the affirmative and negative covenants contained on Exhibit C hereto,
which are hereby incorporated herein by reference.
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01 Events of Default. The occurrence of any of the following
events shall be an "Event of Default" hereunder:
(a) The Borrower shall fail to pay when due any amount
payable pursuant to Sections 2.02 or 2.03 hereof; or
(b) The Borrower shall fail to pay when due, and such
failure to pay shall continue for ten (10) Business Days after notice thereof to
the Borrower by the Bank, any amount,
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other than pursuant to Sections 2.02 or 2.03 hereof, payable by the Borrower to
the Bank hereunder, the Borrower Note or under any of the Security Documents; or
(c) The Borrower shall fail to perform or observe any of
the terms, covenants or agreements to be performed or observed by the Borrower
as set forth in this Agreement (other than the failures described in subsections
(a) and (b) of this Section 6.01), the Borrower Note or any of the Security
Documents, and any such failure shall continue for thirty (30) days; or
(d) The Borrower or any Guarantor shall be in default
under the Borrower Note or any of the Security Documents; or
(e) Any representation or warranty made by the Borrower
or any Guarantor (or any of its officers or shareholders or partners) herein or
in any of the Security Documents or in any other document delivered in
connection with this Agreement shall prove to have been incorrect in any
material respect when made; or
(f) The Borrower or any Guarantor pursuant to or within
the meaning of any Bankruptcy Law:
(i) commences a voluntary case;
(ii) consents to the entry of an order for relief
against it in an involuntary case;
(iii) makes a general assignment for the benefit
of its creditors; or
(iv) admits in writing that it is unable to pay
its debts as the same become due; or
(g) A court of competent jurisdiction enters an order or
decree under any Bankruptcy law that:
(i) is for relief against the Borrower or the
Guarantor in an involuntary case; or
(ii) orders the liquidation of the Borrower or
the Guarantor, and the order or decree remains unstayed and in effect
for 60 days; or
(h) The Borrower or any Guarantor shall be in default
beyond any applicable cure or grace period under any other agreement, obligation
or instrument between the Borrower or any of the Guarantors and the Bank, or any
other creditor; or
(i) The Borrower shall be in default beyond any
applicable cure or grace period under the Master Agreement.
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(j) The liquidation, termination or dissolution of
Borrower unless the entity surviving such transaction or receiving Borrower's
assets expressly assumes in writing the liabilities of Borrower under this
Agreement, the Borrower Note and the Security Documents.
(k) Any levy or execution upon, or judicial seizure of,
any portion of any collateral or security for the Loan.
(l) Any attachment or garnishment of, or the existence or
filing of any lien or encumbrance, other than any lien or encumbrance permitted
by the Deed of Trust, against any portion of any collateral or security for the
Loan, that is not removed or released within thirty (30) days after its
creation.
(m) The institution of any legal action or proceedings to
enforce any lien or encumbrance upon any portion of any collateral or security
for the Loan, that is not dismissed within thirty (30) days after its
institution.
(n) The occurrence of a GAAP adverse change in the
financial condition of Borrower that, under GAAP, is deemed material, or if the
Bank in good faith shall believe that the prospect of payment or performance of
the Loan is impaired.
Section 6.02 Remedies Upon an Event of Default. If any Event of Default
shall have occurred and be continuing and shall not have been specifically
waived pursuant to Section 7.03 hereof, the Bank may do any one or more of the
following:
(a) Notify the Trustee to draw so much of the Letter of
Credit as is necessary to repay the Floating Rate Option Notes which relate to
the Loan and all accrued interest thereon in full;
(b) Declare the principal of all amounts owing under this
Agreement (or the Borrower Note prior to the assignment of the Borrower Note to
Lender) and the Security Documents (including any amounts drawn under the Letter
of Credit as the result of a notice from the Bank to the Trustee as provided in
subparagraph (a) above) and all other indebtedness of the Borrower to the Bank,
together with interest thereon, to be forthwith due and payable, regardless of
any other specified maturity or due date, without notice of default, presentment
or demand for payment, protest or notice of nonpayment or dishonor, or other
notices or demands of any kind or character, and without the necessity of prior
recourse to any security;
(c) Exercise any and all of its rights under the Security
Documents, or otherwise as a secured creditor, including, without limitation,
foreclosing on any security, and exercising any other rights with respect to
security whether under the Security Documents or any other agreement or as
provided by law, all in such order and in such manner as the Bank in its sole
discretion may determine; and
(d) Declare that the Default Rate of Interest shall apply
to the remaining unpaid balance of the Loan until such Event of Default is
cured.
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ARTICLE VII
MISCELLANEOUS
Section 7.01 Payments and Computations. The Borrower shall make each of
its payments due under this Agreement not later than 12:30 p.m. (Phoenix,
Arizona time) on the date when due in lawful money of the United States of
America to the Bank at its address referred to in Section 7.04 hereof in
immediately available funds. The Borrower hereby authorizes the Bank, if and to
the extent payment is not made when due hereunder, to charge from time to time
against the Borrower Account any amount so due. Except as otherwise specifically
provided in this Agreement, computations of interest and fees hereunder shall be
made by the Bank on the basis of a year of 360 days and the actual number of
days (including the first day but excluding the last day) elapsed.
Section 7.02 Obligations Absolute. The obligations of the Borrower
under this Agreement shall be absolute, unconditional and irrevocable, and all
amounts payable by the Borrower hereunder shall be paid strictly in accordance
with the terms of this Agreement under all circumstances, including without
limitation, the following circumstances:
(a) any lack of validity or enforceability of the Letter
of Credit; or
(b) any amendment, waiver of or consent to departure from
any or all of the provisions of this Agreement, the Borrower Note or any or all
of the Security Documents given pursuant to Section 7.03 hereof; or
(c) the existence of any claim, set-off, defense or other
right which the Borrower may have at any time against any Holder, the Trustee,
the LC Bank, any beneficiary or any transferee of the Letter of Credit, or any
Person for whom the Trustee, any such beneficiary or any such transferee may be
acting, the Bank or any other Person, whether in connection with this Agreement,
the transactions contemplated herein or in the other documents or any unrelated
transaction; or
(d) in the absence of gross negligence or willful
misconduct by the Bank or the LC Bank or its officers or employees, any
statement or any other document presented hereunder or with respect to or under
the Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect whatsoever; or
(e) payment by the LC Bank to the Trustee under the
Letter of Credit against presentation of a draft or certificate which does not
comply with the terms of the Letter of Credit; or
(f) any nonapplication or misapplication by the Trustee
of the proceeds of any drawing on the Letter of Credit.
Section 7.03 Amendments; Waivers. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by the Borrower
therefrom, shall in any event be effective
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unless the same shall be in writing and signed by the Bank, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
Section 7.04 Notices. Except as otherwise provided herein, whenever
notice is required to be given pursuant to the provisions hereof, such notice
shall be in writing (including facsimile transmission) and shall be given as
follows:
(a) if to the Borrower: Hypercom Corporation
0000 Xxxx Xxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
(b) if to the LC Bank: Bank One, NA
Six Xxxxxxx Xxxxx Xxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxxxx Xxxxxx
(c) if to the Bank: Bank One, Arizona, NA
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Commercial Banking, AZ1-1178
(d) if to the Trustee: Bank One Trust Company, NA
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000-0000
Attn: Xxxxx X. Xxxx
or to such other address as any Person listed in this Section may hereafter
specify for the purpose by written notice to each other Person listed in this
Section. Each such notice shall be effective and conclusively deemed received
(i) if given by facsimile transmission, when such facsimile is transmitted and
the original copy of such notice is deposited in the U.S. mail, first class
postage prepaid, addressed as aforesaid, (ii) if given by certified or
registered U.S. mail, when confirmation of delivery is received or when notice
of refusal to accept delivery is received, or (iii) if hand delivered, when
delivered at the address specified in this Section.
Section 7.05 No Waiver; Remedies. No failure on the part of the Bank to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof, unless as permitted under Section 7.03 hereof, nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 7.06 Accounting Terms. All accounting terms not specifically
defined herein or in Exhibit C hereto shall be construed in accordance with
GAAP.
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Section 7.07 Computations. Where the character or amount of any asset,
liability or item of income or expense is required to be determined, or any
consolidation or other accounting computation is required to be made, for the
purpose of this Agreement, such determination or calculation shall, to the
extent applicable and except as otherwise specified in this Agreement, be made
in accordance with GAAP.
Section 7.08 Indemnification. The Borrower hereby agrees to indemnify
and hold the Bank and the LC Bank, and their respective officers, directors,
shareholders, employees, agents and servants, harmless from and against any and
all claims, damages, losses, liabilities, costs or expenses (including, without
limitation, reasonable attorneys' fees or expenses to the extent permitted by
law) which the Bank or the LC Bank may incur or which may be claimed against the
Bank or the LC Bank by any Person by reason of or in connection with this
Agreement and the payment or failure to make lawful payment under the Letter of
Credit; provided, however, that the Borrower shall not be required to indemnify
the Bank or the LC Bank pursuant to this Section 7.08 for any claims, damages,
losses, liabilities, costs or expenses to the extent caused by the Bank's or the
LC Bank's willful misconduct or gross negligence. If any action, suit or
proceeding arising from any of the foregoing is brought against the Bank, the LC
Bank or any other Person indemnified pursuant to this Section 7.08, then the
Borrower, to the extent and in the manner directed by the Bank, will resist and
defend such action, suit or proceeding or cause the same to be resisted or
defended by counsel designated by the Person or Persons indemnified or intended
to be indemnified (which counsel shall be satisfactory to the Borrower).
Section 7.09 Costs, Expenses and Taxes. The Borrower agrees to pay on
demand such costs and expenses incurred by the Bank or the LC Bank in connection
with the preparation, issuance, delivery, filing and recording of this Agreement
and the Security Documents. In addition, the Borrower shall pay all costs and
expenses in connection with the enforcement of this Agreement and the Security
Documents and such other documents which may be delivered in connection with
this Agreement and the Security Documents. In addition, the Borrower shall pay
any and all stamp and other taxes and fees payable or determined to be payable
by the Bank in connection with the execution, delivery, filing and recording of
this Agreement and the Security Documents, and the Borrower agrees to save the
Bank and the LC Bank harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes
and fees.
Section 7.10 [Intentionally left blank].
Section 7.11 Further Assurances. The Borrower agrees to do such further
acts and things and to execute and deliver to the Bank such additional
assignments, agreements, powers and instruments, as the Bank may reasonably
require or deem advisable to carry into effect the purposes of this Agreement or
to better assure and confirm unto the Bank its rights, powers and remedies
hereunder.
Section 7.12 Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
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Section 7.13 Binding Effect. This Agreement shall become effective when
it shall have been executed by the Borrower and the Bank and thereafter shall be
binding upon and inure to the benefit of the Borrower and the Bank and their
respective successors and assigns. The Bank may assign to any financial
institution all or any part of, or any interest (undivided or divided) in, its
rights and benefits under this Agreement, and to the extent of that assignment
such assignee shall have the same rights and benefits against the Borrower
hereunder as it would have had if such assignee were the Bank.
Section 7.14 Severability. The parties hereto intend and believe that
each provision in this Agreement comports with all applicable local, state and
Federal laws and judicial decisions. However, if any provision or provisions, or
if any portion of any provision or provisions, in this Agreement are found by a
court of law to be in violation of any applicable local, state or Federal
ordinance, statute, law, administrative or judicial decision, or public policy,
and if such court should declare such portion, provision or provisions of this
Agreement to be illegal, invalid, unlawful, void or unenforceable as written,
then it is the intent of the parties hereto that such portion, provision or
provisions shall be given force and effect to the fullest possible extent, that
the remainder of this Agreement shall be construed as if such provision or
provisions were not contained herein and that the rights, obligations and
interests of the parties under the remainder of this Agreement shall continue in
full force and effect.
Section 7.15 Governing Law; Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of Arizona.
The parties hereto consent to and by this Agreement submit themselves to the
personal jurisdiction of the Court of Common Pleas of Maricopa County, Arizona
and the United States District Court sitting in Phoenix, Arizona for the
purposes of any judicial proceedings which are instituted with respect to any
matter arising under this Agreement, or any of the Security Documents or any
other agreement, instrument or note related hereto. The parties agree that venue
is proper in said jurisdiction.
Section 7.16 [Intentionally left blank].
Section 7.17 Headings. Section headings and captions in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose and are not to be considered as
defining or limiting in any way the scope or intent of the provisions of this
Agreement.
Section 7.18 Time of Essence. Time shall be of the essence in the
performance of all the obligations of the Borrower under the Agreement and the
Security Documents.
Section 7.19 Entirety of Agreement. This Agreement and the Security
Documents contain the final, complete and exclusive agreement of the parties
pertaining to its subject matter and supersede all prior written and oral
agreements pertaining thereto.
Section 7.20 No Third Party Beneficiaries. The provisions of this
Agreement shall inure to the benefit and responsibility of the parties hereto,
their successors and assigns (but only to the extent such assignment is
permitted herein) and shall not benefit or affect any third party.
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Section 7.21 Construction of Provisions. Each covenant by the Borrower
contained in this Agreement and the Security Documents shall be construed
without reference to any other such covenant, and any determination of whether
the Borrower is in compliance with any such covenant shall be made without
reference to whether the Borrower is in compliance with any other such covenant.
In the event of any conflict between or among the provisions as contained in
this Agreement or any of the Security Documents, this Agreement shall control.
Section 7.22 Termination. The Borrower's obligations under this
Agreement (except the obligations set forth in Sections 2.03, 7.08 and 7.09 of
this Agreement and the obligation to pay fees when due under Section 2.02 of
this Agreement, all of which shall survive the termination of this Agreement)
shall terminate upon the Expiration Date.
Section 7.23 Arbitration.
(a) The Bank and the Borrower agree that upon the written
demand of either party, made before the institution of any legal proceedings,
all disputes, claims and controversies between them, whether individual, joint,
or class in nature, arising from this Agreement, the Master Agreement, the
Security Documents, and the Borrower Note or otherwise, including without
limitation contract disputes and tort claims, may be resolved by non-binding
arbitration pursuant to the Commercial Rules of the American Arbitration
Association. Any arbitration proceeding held pursuant to this arbitration
provision shall be conducted in the city nearest the Borrower's address having
an AAA regional office, or at any other place selected by mutual agreement of
the parties. No act to take or dispose of any collateral contemplated in the
Security Agreement hereunder shall constitute a waiver of this arbitration
agreement or be prohibited by this arbitration agreement. This arbitration
provision shall not limit the right of either party during any dispute, claim or
controversy to seek, use, and employ ancillary, or preliminary rights and/or
remedies, judicial or otherwise, for the purposes of realizing upon, preserving,
protecting, foreclosing upon or proceeding under forcible entry and detainer for
possession of, any real or personal property, and any such action shall not be
deemed an election of remedies. Such remedies include, without limitation,
obtaining injunctive relief or a temporary restraining order, invoking a power
of sale under any deed of trust or mortgage, obtaining a writ of attachment or
imposition of a receivership, or exercising any rights relating to personal
property, including the exercising of set off rights or taking or disposing of
such property with or without judicial process pursuant to the Uniform
Commercial Code. Any disputes, claims or controversies concerning the lawfulness
or reasonableness of an act, or exercise of any right or remedy concerning any
collateral, including any claim to rescind, reform, or otherwise modify any
agreement relating to the collateral, shall also be subject to non-binding
arbitration; provided, however that no arbitrator shall have the right or the
power to enjoin or restrain any act of either party. Judgment upon any award
rendered by any arbitrator may be entered in any court having jurisdiction. The
statute of limitations, estoppel, waiver, laches and similar doctrines which
would otherwise be applicable in an action brought by a party shall be
applicable in any arbitration proceeding, and the commencement of an arbitration
proceeding shall be deemed the commencement of any action for these purposes.
The Federal Arbitration Act (Title 9 of the United States Code) shall apply to
the construction, interpretation, and enforcement of this arbitration provision.
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(b) Notwithstanding anything to the contrary in this
arbitration provision, either party may at any time elect to terminate the
arbitration proceeding and require that the dispute, claim and controversy be
resolved solely by legal proceedings.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective representatives thereunto duly
authorized as of the date first above written.
BANK:
BANK ONE, ARIZONA, NA
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxxxx
-----------------------------
Title: Senior Vice President
----------------------------
BORROWER:
HYPERCOM CORPORATION, a Delaware
corporation
By: /s/ Xxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxx X. Xxxxx
----------------------------
Title: President and CEO
---------------------------
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EXHIBIT A
PRINCIPAL PAYMENT SCHEDULE
The Borrower will deposit monthly into an account maintained at the
Bank an amount equal to:
Loan
Payment Date Amount
------------ ------
05/01/99 $18,489.13
06/01/99 18,604.69
07/01/99 18,720.97
08/01/99 18,837.97
09/01/99 18,955.71
10/01/99 19,391.53
11/01/99 19,193.40
12/01/99 19,313.36
01/01/00 19,434.06
02/01/00 19,555.53
03/01/00 19,677.75
04/01/00 19,825.90
05/01/00 19,924.49
06/01/00 20,049.02
07/01/00 20,174.32
08/01/00 20,300.41
09/01/00 20,427.29
10/01/00 20,124.47
11/01/00 20,683.43
12/01/00 20,812.70
01/01/01 20,942.78
02/01/01 21,073.67
03/01/01 21,205.38
04/01/01 21,282.04
05/01/01 21,471.28
06/01/01 21,605.48
07/01/01 21,740.51
08/01/01 21,876.39
09/01/01 22,013.12
10/01/01 22,293.22
11/01/01 22,289.14
12/01/01 22,428.45
01/01/02 22,568.62
02/01/02 22,709.68
03/01/02 22,851.61
04/01/02 23,152.50
05/01/02 23,138.15
06/01/02 23,282.77
32
Loan
Payment Date Amount
------------ ------
07/01/02 23,428.28
08/01/02 23,574.71
09/01/02 23,722.05
10/01/02 23,854.04
11/01/02 24,019.50
12/01/02 24,169.63
01/01/03 24,320.69
02/01/03 24,472.69
03/01/03 24,625.64
04/01/03 24,391.85
05/01/03 24,934.43
06/01/03 25,090.27
07/01/03 25,247.08
08/01/03 25,404.88
09/01/03 25,563.66
10/01/03 25,759.68
11/01/03 25,884.20
12/01/03 26,045.98
01/01/04 26,208.76
02/01/04 26,372.57
03/01/04 26,537.40
04/01/04 26,951.09
05/01/04 26,870.15
06/01/04 27,038.09
07/01/04 27,207.08
08/01/04 27,377.12
09/01/04 27,548.23
10/01/04 27,959.33
11/01/04 27,893.66
12/01/04 28,067.99
01/01/05 28,243.42
02/01/05 28,419.94
03/01/05 28,597.56
04/01/05 28,777.43
05/01/05 28,956.15
06/01/05 29,137.13
07/01/05 29,319.23
08/01/05 29,502.48
09/01/05 29,686.87
10/01/05 29,398.14
11/01/05 30,059.11
12/01/05 30,246.98
01/01/06 30,436.03
02/01/06 30,626.25
03/01/06 30,817.67
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33
Loan
Payment Date Amount
------------ ------
04/01/06 * 30,813.96
05/01/06 31,204.09
06/01/06 31,399.12
07/01/06 31,595.36
08/01/06 31,792.83
09/01/06 31,991.54
10/01/06 33,017.06
11/01/06 32,392.68
12/01/06 32,595.14
01/01/07 32,798.86
02/01/07 33,003.85
03/01/07 33,210.12
04/01/07 32,999.35
05/01/07 33,626.55
06/01/07 33,836.71
07/01/07 34,048.19
08/01/07 34,260.99
09/01/07 34,475.12
10/01/07 34,752.44
11/01/07 34,907.41
12/01/07 35,125.58
01/01/08 35,345.12
02/01/08 35,566.02
03/01/08 35,788.31
04/01/08 36,267.56
05/01/08 36,237.06
06/01/08 36,463.54
07/01/08 36,691.44
08/01/08 36,920.76
09/01/08 37,151.52
10/01/08 37,535.68
11/01/08 37,617.36
12/01/08 37,852.47
01/01/09 38,089.05
02/01/09 38,327.11
03/01/09 38,566.65
04/01/09 38,547.36
05/01/09 39,050.24
06/01/09 39,294.30
07/01/09 39,539.89
08/01/09 39,787.02
09/01/09 40,035.69
10/01/09 40,292.86
11/01/09 40,537.70
12/01/09 40,791.06
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34
Loan
Payment Date Amount
------------ ------
01/01/10 41,046.00
02/01/10 41,302.54
03/01/10 41,560.68
04/01/10 41,762.02
05/01/10 42,081.81
06/01/10 42,344.82
07/01/10 42,609.48
08/01/10 42,875.79
09/01/10 43,143.76
10/01/10 42,944.34
11/01/10 43,684.74
12/01/10 43,957.77
01/01/11 44,232.51
02/01/11 44,508.96
03/01/11 44,787.14
04/01/11 45,828.88
05/01/11 45,348.73
06/01/11 45,632.16
07/01/11 45,917.36
08/01/11 46,204.35
09/01/11 46,493.12
10/01/11 46,404.28
11/01/11 47,076.10
12/01/11 47,370.33
01/01/12 47,666.39
02/01/12 47,964.31
03/01/12 48,264.09
04/01/12 48,658.78
05/01/12 48,869.27
06/01/12 49,174.70
07/01/12 49,482.05
08/01/12 49,791.31
09/01/12 50,102.51
10/01/12 50,580.16
11/01/12 50,730.74
12/01/12 51,047.81
01/01/13 51,366.86
02/01/13 51,687.90
03/01/13 52,010.95
04/01/13 52,155.74
05/01/13 52,663.12
06/01/13 52,992.27
07/01/13 53,323.47
08/01/13 53,656.74
09/01/13 53,992.09
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35
Loan
Payment Date Amount
------------ ------
10/01/13 54,372.31
11/01/13 54,669.10
12/01/13 55,010.79
01/01/14 55,354.60
02/01/14 55,700.57
03/01/14 56,048.70
04/01/14 56,216.24
05/01/14 56,751.50
06/01/14 57,106.19
07/01/14 57,463.11
08/01/14 57,822.25
09/01/14 58,183.64
10/01/14 58,673.31
11/01/14 58,913.21
12/01/14 59,281.42
01/01/15 59,651.92
02/01/15 60,024.75
03/01/15 60,399.90
04/01/15 60,728.80
05/01/15 61,157.26
06/01/15 61,539.49
07/01/15 61,924.12
08/01/15 62,311.14
09/01/15 62,700.59
10/01/15 63,367.40
11/01/15 63,486.79
12/01/15 63,883.59
01/01/16 64,282.86
02/01/16 64,684.63
03/01/16 65,088.90
04/01/16 65,573.23
05/01/16 65,905.06
06/01/16 66,316.97
07/01/16 66,731.45
08/01/16 67,148.52
09/01/16 67,568.20
10/01/16 67,329.80
11/01/16 68,415.44
12/01/16 68,843.03
01/01/17 69,273.30
02/01/17 69,706.26
03/01/17 70,141.93
04/01/17 70,620.04
05/01/17 71,021.44
06/01/17 71,465.32
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Loan
Payment Date Amount
------------ ------
07/01/17 71,911.98
08/01/17 72,361.43
09/01/17 72,813.69
10/01/17 73,426.14
11/01/17 73,726.71
12/01/17 74,187.50
01/01/18 74,651.17
02/01/18 75,117.74
03/01/18 75,587.23
04/01/18 75,729.65
05/01/18 76,535.02
06/01/18 77,013.36
07/01/18 77,494.70
08/01/18 77,979.04
09/01/18 78,466.41
10/01/18 79,511.47
11/01/18 79,450.30
12/01/18 79,946.87
01/01/19 80,446.53
02/01/19 80,949.33
03/01/19 81,455.26
04/01/19 81,751.71
$10,238,000.00
* If the Letter of Credit is not extended as provided in the
Reimbursement Agreement, the entire unpaid principal amount will be due and
payable on April 1, 2006.
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EXHIBIT B
FORM OF THE BORROWER'S AND THE GUARANTORS' COUNSEL OPINION
Bank One, Arizona, NA Bank One, XX
Xxxx Xxxxxx Xxx 00 000 Xxxx Xxxxx Street, 7th Floor
Phoenix, Arizona 85001 Xxxxxxxx, Xxxx 00000
Bank One Trust Company, NA Capital One Funding Corporation
000 Xxxx Xxxxx Xxxxxx, 0xx Xxxxx 000 Xxxx Xxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx, Xxxx 00000-0000 Xxxxxxxx, Xxxx 00000
Subject: $10,238,000.00 Loan from Capital One Funding Corporation
Gentlemen:
We have acted as counsel to Hypercom Corporation, a Delaware corporation (the
"Borrower"), and Hypercom (Arizona), Inc., an Arizona corporation, Hypercom
Latino America, Inc., an Arizona corporation, and Hypercom Manufacturing
Services, Inc., an Arizona corporation (collectively, the "Guarantors"), with
respect to a certain loan that Capital One Funding Corporation (the "Lender") is
making to the Borrower in the amount of $10,238,000.00 (the "Loan"). The funds
for the Loan have been raised through the private placement by Banc One Capital
Corporation, as Underwriter, of the Lender's floating rate option notes (the
"Lender's Notes"). Repayment of the Lender's Notes is secured by an
unconditional, irrevocable, direct pay letter of credit issued by Bank One, NA
(the "Letter of Credit"). Bank One, Arizona, NA (the "Bank"), has entered into a
Reimbursement Agreement with the Borrower pursuant to which the Borrower has
agreed to reimburse the Bank for any amounts drawn under the Letter of Credit.
You have asked for our opinion concerning certain matters relating to the
Borrower, the Guarantors and the Loan. In that regard, we have examined the
following documents:
(a) Reimbursement Agreement by and between the Borrower and the Bank
with an effective date as of April 1, 1999 (the "Reimbursement Agreement");
(b) Promissory Note made by the Borrower in favor of the Lender with an
effective date as of April 1, 1999 in the original principal amount of
$10,238,000.00 (the "Borrower Note");
(c) Deed of Trust, Assignment of Leases and Rents, Security Agreement
and Financing Statement with an amendment thereto with an effective date as of
April 1, 1999 for the Real Property located at 0000 Xxxx Xxxxxxxx Xxxx, Xxxxxxx,
Xxxxxxx 00000-0000, granted by the Borrower to the Bank to secure the
obligations of the Borrower under the Reimbursement Agreement (the "Deed of
Trust");
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(d) Unconditional Guarantees of Payment with an effective date as of
April 1, 1999 from each of the Guarantors for the benefit of the Bank (the
"Guaranty");
(e) ISDA Master Agreement by and between the Bank and the Borrower and
any schedules or confirmations thereunder entered into by the parties at any
time (the "Master Agreement");
(f) UCC Financing Statements (the "Financing Statements") granted by
the Borrower to the Bank covering the collateral described therein (the
"Collateral");
(g) Environmental Indemnity Agreement dated as of April 1, 1999 from
the Borrower and the Guarantors for the benefit of the Bank ("Environmental
Agreement"); and
(h) The organizational documents of the Borrower and each Guarantor
including its Articles of Incorporation, its Code of Regulations, any other
governing documents and any amendments thereto, and resolutions.
The Deed of Trust, the Guaranty, the Master Agreement, the Financing Statements
and the Environmental Agreement are hereinafter collectively referred to as the
"Security Documents."
In rendering this opinion, we have relied upon representations made in the
foregoing documents as to various questions of fact material to the matters set
forth below.
We have not assumed any responsibility for making any independent investigation
or verification of any factual matters, including, but not limited to, any
factual matters stated or represented by any of the foregoing documents. We have
assumed the conformity to originals of all copies of all documents submitted to
us and the authenticity of all signatures thereon.
Whenever our opinion herein with respect to the existence or absence of facts is
indicated to be based on our knowledge, it is intended to signify that during
the course of our representation of the Borrower or the Guarantors, no
information has come to our attention which would give us actual knowledge of
the existence or absence of such facts.
Based upon and subject to the foregoing, it is our opinion that:
1. The Borrower (a) is duly organized and validly existing under the
laws of the State of Delaware, (b) is in good standing under the laws of, and is
qualified to do business in, the State of Arizona, (c) has all necessary power
and authority to operate the Real Property and (d) has all necessary power and
authority to own and operate its properties, including the Real Property, and
conduct its businesses in each jurisdiction where its ownership of property or
conduct of business requires such qualification.
2. All applicable licenses, if any, under Title 37 of the Ohio Revised
Code for the Real Property are in good standing and in full force and effect.
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39
3. The Borrower has duly authorized (a) the execution and delivery of,
and due performance of obligations under the Reimbursement Agreement, the
Borrower Note and the applicable Security Documents and (b) the taking of any
and all actions as may be required on the part of the Borrower to carry out,
give effect to and consummate the transactions contemplated by such documents.
4. The Reimbursement Agreement, the Borrower Note and the applicable
Security Documents have been duly and validly executed and delivered by the
Borrower and, assuming that they have been duly and validly authorized, executed
and delivered by the other parties thereto, are legal, valid and binding
obligations of the Borrower enforceable in accordance with their terms, except
as the same may be limited by general principles of equity and by bankruptcy or
other applicable laws affecting the enforcement of creditors' rights generally.
5. The Borrower has obtained all requisite consents, approvals,
authorizations or orders in any court, governmental agency or body, or other
entity (whether governmental or private), required for its authorization,
execution and delivery of, or the performance by the Borrower of obligations
under the Reimbursement Agreement, the Borrower Note and the Security Documents,
or for the consummation by the Borrower of the transactions contemplated
thereby.
6. Each Guaranty has been duly and validly executed and delivered by
each of the Guarantors and, assuming that each Guaranty has been duly and
validly authorized, executed and delivered by the other parties thereto, each is
a legal, valid and binding obligation of each of the Guarantors enforceable in
accordance with its terms, except as the same may be limited by general
principles of equity and by bankruptcy or other enforceable laws affecting the
enforcement of creditors' rights generally.
7. There is no action, temporary restraining order, injunction, suit,
proceeding, inquiry or investigation at law or in equity or before or by any
court, public board, regulatory agency, or body, pending or, to the best of our
knowledge, threatened (a) against, or affecting or involving the Borrower,
either of the Guarantors, or the Real Property, businesses or any securities of
the Borrower or either of the Guarantors, or, to the best of our knowledge, any
basis for any such action, temporary restraining order, injunction, suit,
proceeding, inquiry or investigation, (b) for the purpose of (i) restraining or
enjoining or seeking to restrain or enjoin the execution and delivery of the
Reimbursement Agreement, the Borrower Note or the Security Documents, (ii) in
any way contesting or affecting any authority for the execution and delivery of
or the validity of the Reimbursement Agreement, the Borrower Note or the
Security Documents, (iii) contesting or affecting the validity or enforceability
of the Reimbursement Agreement, the Borrower Note or the Security Documents or
the transactions contemplated thereby, or (iv) in any way contesting or
affecting the existence, organization or powers of the Borrower or either of the
Guarantors or (c) which would, if successful, individually or in the aggregate,
materially adversely affect the business, condition (financial or otherwise),
prospects or assets of the Borrower or either of the Guarantors.
8. The execution and delivery of the Reimbursement Agreement, the
Borrower Note and the Security Documents and the performance by the Borrower and
the Guarantors of their respective obligations thereunder, and the consummation
of any other of the transactions
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40
contemplated therein, do not and will not (a) constitute a default under,
conflict with, result in a breach of or violate any of the Borrower's governing
documents or agreements or of any statute, law, court or administrative rule or
regulation, or of any indenture, mortgage, deed of trust, guaranty, agreement or
other instrument to which the Borrower or either of the Guarantors is a party or
by which the Borrower or either of the Guarantors or any of their respective
property is bound on the date hereof or (b) result in the creation of any lien,
security interest, charge or encumbrance of any nature whatsoever upon any of
the property of the Borrower or the Guarantors pursuant to the terms of any
agreement or instrument, except for liens, security interests, charges or
encumbrances to be created by the Reimbursement Agreement, the Borrower Note or
the Security Documents.
9. Neither the Borrower nor any of the Guarantors is in default in the
performance or observance of any obligation, agreement, covenant or condition
contained in any bond, debenture, note or other evidence of indebtedness or in
any contract, indenture, mortgage, loan agreement or lease to which any is a
party or by which any may be bound and which materially adversely affects the
business, condition (financial or otherwise), prospects or assets of the
Borrower. No Event of Default (as defined in the Reimbursement Agreement or the
Security Documents) has occurred and is continuing and no event has occurred and
is continuing which, with the lapse of time or giving of notice or both, would
constitute such an Event of Default.
10. Once the Security Documents and accompanying UCC Financing
Statements have been filed with the Secretary of State of and the Office of the
County Recorder of Maricopa County, Arizona, there is no other legal requirement
to record, re-record, file or re-file the Security Documents or the accompanying
UCC Financing Statements, in order to create, perfect, protect and maintain the
enforceability and validity of the liens and pledges created by the Security
Documents. There are no prior recorded security interest in and to such the
property covered by the Security Documents except those specifically disclosed
in writing to, and approved by, the Bank.
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41
EXHIBIT C
AFFIRMATIVE AND NEGATIVE COVENANTS
AFFIRMATIVE COVENANTS
1. INSURANCE. The Borrower shall maintain hazard and other insurance
upon all of its assets and business properties and liability insurance with
responsible and reputable insurers of such character and amounts as are usually
maintained by companies engaged in like business. All insurance policies shall
be written for the benefit of the Borrower and the Bank as their interest may
appear and shall contain a provision requiring the insurance company to provide
the Bank not less than thirty days' written notice prior to cancellation of any
such policy. All insurance policies or certificates evidencing the same shall be
furnished to the Bank.
2. PAYMENT OF TAXES AND CLAIMS. The Borrower shall pay all taxes,
assessments and other governmental charges imposed upon its properties or assets
or in respect of any of its franchises, business, income or profits before any
penalty or interest accrues thereon, and all claims (including, without
limitation, claims for labor, services, materials and supplies) for sums which
have become due and payable and which by law have or might become a lien or
charge upon any of its properties or assets, provided that (unless any material
item of property would be lost, forfeited or materially damaged as a result
thereof) no such charge or claim need be paid if the amount, applicability or
validity thereof is currently being contested in good faith and if such reserve
or other appropriate provision, if any, as shall be required by GAAP shall have
been made therefor.
3. COMPLIANCE WITH LAWS. The Borrower shall comply in all substantial
respects with all applicable statutes, laws, ordinances and governmental rules,
regulations and orders and all judgments, orders, and decrees of any arbitrator
to which it is subject or which are applicable to its business, properties and
assets to specifically include any regulatory requirements relating to the
Borrower's business, properties or assets if noncompliance therewith would
materially adversely affect such businesses; provided that (unless such contest
or noncompliance would materially adversely affect such businesses) the Borrower
need not so comply if any such statute, law, ordinance, or governmental rule,
regulation or order is currently being contested in good faith.
4. MAINTENANCE OF TANGIBLE ASSETS. The Borrower shall maintain its
tangible assets in good condition and repair and shall not permit any action or
omission which might materially impair the value thereof, normal wear and tear
accepted.
5. PERFORMANCE OF CONTRACTS. The Borrower shall perform and comply with
in accordance with their terms, all material provisions of each and every
material contract, agreement or instrument now or hereafter binding upon the
Borrower, except to the extent that the Borrower shall contest the provisions
thereof in good faith and by proper proceedings.
42
6. BANK DEPOSITS. The Borrower covenants that the Bank shall be the
principal bank of account and primary depository for the Borrower and any of its
subsidiaries within three (3) months after the Effective Date.
7. EMPLOYEE PENSION BENEFIT PLANS. The Borrower shall furnish to the
Bank (i) as soon as possible, and in any event within 10 days after any
executive officer or partner of the Borrower knows or has reason to know that a
reportable event with respect to any Plan has occurred, a statement of the chief
financial officer of the Borrower setting forth details as to such reportable
event and the action which is proposed to be taken with respect thereto,
together with a copy of the notice of such reportable event given to the PBGC;
(ii) promptly after distribution to Plan participants, copies of each summary
annual report with respect to each Plan; (iii) promptly after receipt thereof, a
copy of any notice the Borrower may receive from the PBGC relating to the
intention of the PBGC to terminate any Plan or to appoint a trustee to
administer any Plan; and (iv) promptly after the filing thereof with the
Internal Revenue Service and/or the PBGC, copies of Form 5310 and all other
filings relating to the termination of any Plan.
8. FURNISHING OF DISCLOSURE DOCUMENTS. The Borrower shall promptly upon
issuance furnish to the Bank all communications between it and its partners and
between it and the Securities and Exchange Commission, including without
limitation, copies of all financial information, annual reports and periodic
filings.
9. MAINTENANCE OF SERVICE CONTACT. The Borrower shall maintain service
contracts with qualified Persons for the maintenance of the Borrower's machinery
and equipment.
10. PAYOFF OF EXISTING LOAN. Contemporaneously with the execution of
this Agreement and the provision of the Loan, the Borrower agrees that the Bank
shall retain sufficient proceeds from the Loan to pay off Borrower's existing
loan with the Bank. The Borrower agrees to cooperate with the Bank and to
execute and deliver such documents as are necessary in the opinion of the Bank
to release as soon as possible any and all liens on the Collateral or any other
property of the Borrower.
11. CHANGES OF ACCOUNTING REPORTING METHODS AND/OR FINANCIAL
STATEMENTS. The Borrower shall provide to the Bank written notice of any change
in policies, rules or procedures related to accounting reporting methods or
change in the entries (or financial reporting thereunder) contained on any of
the Borrower's respective financing statements, other than simple numerical
balance entry changes for period to period from business operations. The
Borrower shall provide such notice to the Bank within ten (10) Business Days
after such change has been made. Upon such approval, the Bank shall have the
right, in its reasonable discretion, to revise the covenants and security under
this Agreement to reflect any such changes. The purpose of this Item 11 is to
allow the Bank, to the extent possible, to maintain substantially equivalent
financial covenants and security after any change by the Borrower of its
policies, rules or procedures related to accounting reporting methods and/or
financial statements.
-2-
43
12. YEAR 2000. The Borrower shall:
(A) Furnish such additional information, statements and other
reports with respect to the Borrower's activities, course of action and progress
towards becoming Year 2000 Compliant as the Bank may request from time to time.
(B) Promptly upon its becoming available, furnish to the Bank one
copy of each financial statement, report, notice, or proxy statement sent by the
Borrower to stockholders generally and of each regular or periodic report,
registration statement or prospectus filed by the Borrower with any securities
exchange or the Securities and Exchange Commission or any successor agency, and
of any order issued by any Governmental Authority in any proceeding to which the
Borrower is a party. For purposes of these provisions, "Governmental Authority"
shall mean any government (or any political subdivision or jurisdiction
thereof), court, bureau, agency or other governmental entity having or asserting
jurisdiction over the Borrower or any of its business, operations or properties.
(C) Give any representative of the Bank access during all business
hours to, and permit such representative to examine, copy or make excerpts from,
any and all books, records and documents in the possession of the Borrower and
relating to its affairs, and to inspect any of the properties and Systems of the
Borrower, and to project test the Systems to determine if they are Year 2000
Compliant in an integrated environment, all at the sole cost and expense of the
Bank.
13. CROSS-COLLATERALIZATION. At the Bank's request at any time and from
time to time, the Borrower agrees to execute and deliver such additional
agreements, documents, and instruments as the Bank determines to be necessary or
appropriate so that all Collateral shall also secure any or all (as determined
by the Bank) other obligations of the Borrower to the Bank and/or so that any or
all property, interests in property, and rights to property (as selected by
Bank) securing other obligations of the Borrower to the Bank also secure all
obligations of the Borrower hereunder. The Borrower agrees to pay all costs,
expenses, and fees incurred by the Bank in connection with any and all such
cross-collateralization requests by the Bank (including, without limitation,
costs, expenses, and fees of the Bank's attorneys).
14. FURTHER ASSURANCES. The Borrower shall promptly execute,
acknowledge, and deliver such additional agreements, documents, and instruments
and do or cause to be done such other acts as the Bank may reasonably request
from time to time to better assure, preserve, protect, and perfect the interest
of the Bank in the Collateral and the rights and remedies of the Bank hereunder.
NEGATIVE COVENANTS
1. [INTENTIONALLY LEFT BLANK].
2. LIENS AND OTHER ENCUMBRANCES. The Borrower shall not create, incur,
assume or suffer to exist any security interest, mortgage, pledge, lien or other
encumbrance of any nature whatsoever on any of its property or assets whether
now owned or hereafter acquired, except (i) liens
-3-
44
securing the payment of taxes, either not yet due or the validity of which is
being contested in good faith by appropriate proceedings (so long as no material
item of property would be lost, forfeited or materially damaged as a result
thereof), and as to which the Borrower shall, as appropriate under GAAP, have
set aside on its books and records adequate reserves; (ii) deposits under
workers' compensation, unemployment insurance, social security and other similar
laws or to secure the performance of bids, tenders or contracts (other than for
the repayment of purchase price Indebtedness or borrowed money) or to secure
statutory obligations or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds, all in the ordinary course of business;
(iii) liens and security interests in favor of the Bank; (iv) zoning
restrictions, easements, licenses, covenants and other restrictions affecting
the use of real property, so long as the Borrower's use of, or the value of, the
Borrower's property subject thereto is not impaired thereby; and (v) liens and
security interests securing purchase price Indebtedness permitted under the
preceding paragraph labeled "Indebtedness", provided that liens and security
interests may attach only to assets purchased with the proceeds of such
permitted Indebtedness and may first attach only at the time of the initial
acquisition of such assets by the Borrower.
3. GUARANTIES AND OTHER CONTINGENT LIABILITIES. Unless the Borrower
shall have previously provided written notice to Bank (Commercial Banking,
AZ1-1178, Attention: Xxxxx X. Xxxxxxxx or successor), the Borrower shall not
become an indemnitor, guarantor or surety or otherwise become liable for any of
the obligations or Liabilities of any Person.
4. FUNDAMENTAL CHANGES. Unless the Borrower shall have previously
provided written notice to Bank (Commercial Banking, AZ1-1178, Attention: Xxxxx
X. Xxxxxxxx or successor), the Borrower shall not (i) enter into any transaction
of merger or consolidation or amalgamation, or (ii) liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or (iii) convey,
sell, lease, transfer or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its business or assets, whether now
owned or hereafter acquired, or (iv) acquire by purchase or otherwise all or
substantially all the business or assets of, or stock or other evidence of
beneficial ownership of, any Person, or (v) make any material change in the
nature of its business or in the methods by which it conducts business.
5. SUBSIDIARIES OF BORROWER. Each Subsidiary shall deliver a Guaranty
for the benefit of the Bank.
6. [INTENTIONALLY LEFT BLANK].
7. [INTENTIONALLY LEFT BLANK].
8. SALE AND LEASEBACK. The Borrower shall not enter into any agreement
with any lender or investor providing for the leasing of (i) real or personal
property which has been or is to be sold or transferred by the Borrower to such
lender or investor, or (ii) other real or personal property intended to be used
for substantially the same purpose as the property sold or transferred by the
Borrower.
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45
9. DISPOSITION OF ASSETS. The Borrower shall not dispose of any of its
assets in any transaction or series of transactions other than those disposed of
in the ordinary course of business and except in connection with the replacement
of assets sold by like assets.
10. SALE OF ACCOUNTS. The Borrower shall not sell, assign or exchange
any of their Accounts or notes receivable with or without recourse.
11. TRANSACTIONS WITH AFFILIATED PERSONS. The Borrower shall not:
(A) enter into any transaction, including without limitation,
the purchase, sale or exchange of property or the rendering of any
services, with any Affiliated Person or any officer or director
thereof, enter into, assume or suffer to exist any employment or
consulting contract with any Affiliated Person, except any transaction
or contract which is in the ordinary course of the Borrower's business
and which is upon fair and reasonable terms no less favorable to the
Borrower than it would obtain in a comparable arms-length transaction;
or
(B) pay any fees or expenses to, or reimburse or assume any
obligation for the reimbursement of any expenses incurred by, any
Affiliated Person or any officer or director thereof except as may be
permitted in accordance with the preceding clauses of this paragraph.
12. EMPLOYEE PENSION BENEFIT PLANS. With respect to each plan
established or maintained by the Borrower, the Borrower (a) shall maintain each
such Plan as a qualified plan under Section 401 of the Code and, in all material
respects, in accordance with its terms and with all provisions of ERISA
applicable thereto; (b) shall not permit any condition (financial or otherwise)
to exist or any event to occur which would subject such plan to termination
pursuant to Section 4042 of ERISA; (c) shall not incur any liability to the PBGC
other than for premiums not yet due and payable; (d) shall not permit the
aggregate amount of vested unfunded liabilities (for benefits which vest or
might become vested only as a result of the termination of any or all of such
Plans) to exceed ten percent of the Tangible Net Worth of the Borrower; (e) will
not engage in any transaction which could subject the Borrower to either a
material civil penalty assessed pursuant to Section 502(i) of ERISA or a
material tax imposed by Section 4975 of the Code; (f) will pay all premiums (and
all penalties and interest, if applicable) due the PBGC with respect to any
Plan; (g) will not become subject to Section 4062 of ERISA; (h) will not
withdraw as a substantial employer so as to become subject to Section 4063 of
ERISA; (i) will not make a complete or partial withdrawal from a "multi-employer
plan" as defined in Section 3(37) of ERISA so as to incur "withdrawal liability"
as defined in Section 4201 of ERISA, without regard to 4207 or 4208 of ERISA;
(j) will not cease making contributions to any Plan subject to Section 4064(a)
of ERISA to which the Borrower made contributions during the five year period
prior to the date thereof and will not terminate any Plan or have termination
proceedings instituted with respect to any Plan pursuant to Section 4041 (c) or
4042 of ERISA; and (k) will not engage in any prohibited transactions within the
meaning of Section 406 of ERISA (for which no exemption exists under Section 408
of ERISA) and Section 4975(c)(1) of the Code (for which no exemption exists
under Section 4975(c)(2) of the Code).
-5-
46
13. FINANCIAL COVENANTS. Except as otherwise noted, all capitalized
terms in this Item 13 not defined in this Agreement shall have the meanings
determined in accordance with GAAP. In addition, except as otherwise noted, all
financial computations shall be made in accordance with GAAP and on a
Consolidated basis. Until the Expiration Date and until all obligations of the
Borrower hereunder are paid and performed in full, the Borrower agrees that,
unless the Bank otherwise agrees in writing in the Bank's absolute and sole
discretion, the Borrower shall maintain at the end of each fiscal quarter the
following (the "Financial Covenants"):
(A) Tangible Net Worth. A minimum Tangible Net Worth in an
amount equal to the sum of (i) $50,000,000.00 and (ii) the aggregate of
twenty-five percent (25.0%) of the Consolidated net income of Borrower
for each fiscal year, commencing with that fiscal year ending December
31, 1998. "Tangible Net Worth" means (i) the sum of all Consolidated
capital accounts of the Borrower (including, without limitation, any
paid-in capital, capital surplus, and retained earnings), less (ii) the
sum of the value on Borrower's books of all Consolidated Intangible
Assets. "Intangible Assets" means all intangible assets under GAAP,
provided, that regardless of GAAP, Intangible Assets shall include:
copyrights; franchises; goodwill; licenses; loan origination fees;
non-competition covenants; organization or formation expenses; patents;
shares of the capital stock of Borrower; service marks; service names;
trademarks; tradenames; write-up in the book value of any asset in
excess of the acquisition cost of the asset to Borrower; any amount,
however designated on the balance sheet, representing the excess of the
purchase price paid for assets or stock acquired over the value
assigned thereto on the books of Borrower; unamortized debt discount;
deferred discount; computer software; and research and development
costs and expenses. Tangible Net Worth shall not be reduced by any net
income that is less than zero (i.e., a net deficit or loss).
(B) Owner's Equity Percentage. An Owner's Equity Percentage
equal to or exceeding 35%. "Owner's Equity Percentage" means the result
obtained by dividing (i) Owner's Equity Amount by (ii) Total Assets,
less Intangible Assets. "Owner's Equity Amount" means the sum of
Tangible Net Worth and Subordinated Indebtedness.
(C) Current Ratio. A minimum current ratio of 1.30 to 1.0
calculated by dividing Borrower's Current Assets by Borrower's Current
Liabilities where:
"Current Assets" means Consolidated current assets
under GAAP, provided that, regardless of GAAP, Current Assets
shall not include: accounts receivable other than trade
accounts receivable; receivables due from stockholders,
directors, officers, partners, members, employees,
subsidiaries, and other affiliates; promissory notes,
including the portion due within the current period, unless
the obligation evidenced thereby has been independently
verified to Bank by an independent certified public
accountant; accrued interest receivable; income tax refunds
receivable; prepaid expenses; cash
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47
surrender value of life insurance policies; guarantee or
performance deposits; and dealer reserves; and
"Current Liabilities" means Consolidated current
liabilities under GAAP and, in addition, the following: all
indebtedness to stockholders, directors, officers, partners,
members, employees, subsidiaries, and other affiliates that is
not subordinated to the satisfaction of Bank to the
obligations of Borrower under the Loan Documents as to Liens
and Encumbrances, time and right of payment, and rights
against Collateral.
(D) Working Capital. A minimum Working Capital in the amount
of $40,000,000.00. "Working Capital" means Borrower's Current Assets,
less Borrower's Current Liabilities, on a Consolidated basis.
(E) Debt Coverage Ratio. A minimum debt coverage ratio of 2.0
to l.0. This ratio shall be calculated on a rolling four quarter basis
by dividing (i) Borrower's Consolidated net income after interest and
taxes and before amortization and depreciation, by (ii) the prior
period current portion of long term debt, all on a Consolidated basis.
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48
DEFINITIONS
with respect to Exhibit C
"ACCOUNTS" shall have the meaning given it by the Uniform Commercial
Code as in effect in the State of Arizona.
"AFFILIATED PERSON" means any Person directly or indirectly
controlling, under common control with, or controlled by the Borrower and shall
include any officer, director, or record or beneficial owner of 5% or more of
the outstanding capital stock of any class of the Borrower. For purposes of the
definition of Affiliated Person, "control" when used with respect to any
specific Person, means the power to direct the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings relative to the foregoing.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"CONSOLIDATED" means the consolidation of the accounts of the Borrower
and its Subsidiaries in accordance with generally accepted accounting principles
applied on a consistent basis; provided, however, that if there are no
Subsidiaries, the accounts of which are required under generally accepted
accounting principles to be consolidated with those of the Borrower, this term
shall not be applicable to the financial statements and financial ratios of the
Borrower referred to herein; and provided further that, the fact that there are
no Subsidiaries, the accounts of which are required to be so consolidated, shall
not relieve the Borrower from its obligations to furnish financial statements
and comply with the financial ratios set forth herein.
"ERISA" means the Employee Retirement Income Security Act of 1 974, as
amended.
"INDEBTEDNESS" as applied to any Person, means all obligations of that
Person which are included in clauses (i), (ii), (iii) and (iv) of the definition
of Liabilities below, irrespective of whether or not any such obligations also
would be included within any other clause of such definition, but including,
however, obligations properly treated as capital lease obligations or their
equivalent under GAAP.
"LIABILITIES" as applied to any Person means: (i) all obligations of
that Person to repay or pay money borrowed from another Person or the deferred
portion of the purchase price of services or property (other than inventory
purchased in the ordinary course of business unless evidenced by a note
payable); (ii) all obligations of that Person under bankers acceptances; (iii)
all obligations of that Person under letters of credit; (iv) obligations of
others which that Person has directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business),
discounted or sold with recourse or agreed (contingently or otherwise) to
purchase or repurchase or otherwise acquire, or in respect of which that Person
has agreed to supply or advance funds (whether by way of loan, stock purchase,
capital contribution or otherwise) or otherwise to become directly or indirectly
liable; (v) all obligations evidenced or secured by any mortgage, pledge, lien
or conditional sale or other title retention agreement to which any property or
asset
49
owned or held by that Person is subject, whether or not the obligation
evidenced or secured thereby shall have been assumed; and (vi) all other items
(except items of capital stock, capital surplus, general contingency reserves,
deferred income taxes, retained earnings and amounts attributable to minority
interest, if any) which in accordance with GAAP would be included in determining
total liabilities as shown on the liability side of a balance sheet of that
Person as of the date Liabilities is to be determined, including, without
limitation, obligations of that Person properly treated as capital lease
obligations or their equivalent under GAAP.
"PBGC" is the Pension Benefit Guaranty Corporation.
"PLAN" means any pension or other benefit plan subject to the
provisions of ERISA.
"SUBORDINATED INDEBTEDNESS" means all of the unsecured Indebtedness of
the Borrower which is subordinated to all Indebtedness now or hereafter owed by
the Borrower to the Lender on specific terms and conditions satisfactory to and
approved in writing by the Bank.
"SUBSIDIARY" means, with respect to the Borrower, any corporation of
which more than 50% of the outstanding stock having ordinary voting power to
elect a majority of the board of directors of such corporation is at the time
directly or indirectly owned by the Borrower, or by one or more of its
Subsidiaries, or by the Borrower and one or more of its Subsidiaries taken
together.
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