EXHIBIT 10.1
ENCAD, INC.
CREDIT AGREEMENT BETWEEN SANWA BANK AND THE COMPANY
CREDIT AGREEMENT
(LINE OF CREDIT)
This Agreement (the "Agreement") is made and entered into as of
April 26, 2000 by and between SANWA BANK CALIFORNIA (the "Bank") and ENCAD,
INC. (the "Borrower"), on the terms and conditions that follow:
SECTION
1
DEFINITIONS
1.1 CERTAIN DEFINED TERMS: Unless elsewhere defined in this Agreement, the
following terms shall have the following meanings (such meanings to be
generally applicable to the singular and plural forms of the terms
defined):
1.1.1 "ACCEPTANCE FACILITY": shall mean the credit facility
described as such in Section 2.
1.1.2 "ADVANCE": shall mean an advance to the Borrower under the
credit facility (ies) described in Section 2.
1.1.3 "BUSINESS DAY": shall mean a day, other than a Saturday or
Sunday, on which commercial banks are open for business in
California.
1.1.4 "CLOSE-OUT DATE": shall mean the Business Day on which the
Bank closes out and liquidates an FX Transaction.
1.1.5 "CLOSING VALUE": has the meaning given to it in Section 8.6(i)
hereof.
1.1.6 "CLOSING GAIN" AND "CLOSING LOSS": shall mean the amount
determined in accordance with Section 8.6(ii) hereof.
1.1.7 "COLLATERAL": shall mean the property described in Section 3,
together with any other personal or real property in which the
Bank may be granted a lien or security interest to secure
payment of the Obligations.
1.1.8 "COMPENSATING BALANCE REQUIREMENT": shall have the meaning
provided in Section 2.2 hereof.
1.1.9 "CREDIT PERCENTAGE": shall mean 15%.
1.1.10 "CURRENT LIABILITIES": shall mean current liabilities as
determined in accordance with generally accepted accounting
principles, including any negative cash balance on the
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Borrower's financial statement and Indebtedness for borrowed
money under lines of credit with the Bank used by the Borrower
for working capital purposes.
1.1.11 "DEBT": shall mean all liabilities of the Borrower less
Subordinated Debt, if any.
1.1.12 "EFFECTIVE TANGIBLE NET WORTH": shall mean the Borrower's
stated net worth plus Subordinated Debt but less all
intangible assets of the Borrower (i.e., goodwill, trademarks,
patents, copyrights, organization expense, and similar
intangible items including, but not limited to, investments in
and all amounts due from affiliates, officers or employees).
1.1.13 "ENVIRONMENTAL CLAIMS": shall mean all claims, however
asserted, by any governmental authority or other person
alleging potential liability or responsibility for violation
of any Environmental Law or for release or injury to the
environment or threat to public health, personal injury
(including sickness, disease or death), property damage,
natural resources damage, or otherwise alleging liability or
responsibility for damages (punitive or otherwise), cleanup,
removal, remedial or response costs, restitution, civil or
criminal penalties, injunctive relief, or other type of
relief, resulting from or based upon (a) the presence,
placement, discharge, emission or release (including
intentional and unintentional, negligent and non-negligent,
sudden or non-sudden, accidental or non-accidental placement,
spills, leaks, discharges, emissions or releases) of any
Hazardous Material at, in, or from property, whether or not
owned by the Borrower, or (b) any other circumstances forming
the basis of any violation, or alleged violation, of any
Environmental Law.
1.1.14 "ENVIRONMENTAL LAWS": shall mean all federal, state or local
laws, statutes, common law duties, rules, regulations,
ordinances and codes, together with all administrative orders,
directed duties, requests, licenses, authorizations and
permits of, and agreements with, any governmental authorities,
in each case relating to environmental, health, safety and
land use matters; including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"),
the Clean Air Act, the Federal Water Pollution Control Act of
1972, the Solid Waste Disposal Act, the Federal Resource
Conservation and Recovery Act, the Toxic Substances Control
Act, the Emergency Planning and Community Right-to-Know Act,
the California Hazardous Waste Control Law, the California
Solid Waste Management, Resource, Recovery and Recycling Act,
the California Water Code and the California Health and Safety
Code.
1.1.15 "ENVIRONMENTAL PERMITS": shall have the meaning provided in
Section 5.11 hereof.
1.1.16 "ERISA": shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time, including (unless
the context otherwise requires) any rules or regulations
promulgated thereunder.
1.1.17 "EVENT OF DEFAULT": shall have the meaning set forth in
Section 7.
1.1.18 "EXPIRATION DATE": shall mean April 15, 2002, or the date of
termination of the Bank's commitment to lend under this
Agreement pursuant to Section 8, whichever shall occur first.
1.1.19 "FOREIGN CURRENCY": shall mean any legally traded currency
other than US dollars and which may be transferred by
paperless wire transfer or cash and in which the Bank
regularly trades.
1.1.20 "FOREIGN EXCHANGE FACILITY": shall mean the credit facility
described as such in Section 2.
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1.1.21 "FX RISK LIABILITY": shall mean the product of (a) the Credit
Percentage, times (b) the aggregate of the Notional Values of
all FX Transactions outstanding, net of any Offsetting
Transactions.
1.1.22 "FX LIMIT": shall mean $1,500,000.00.
1.1.23 "FX TRANSACTION": shall mean any transaction between the Bank
and the Borrower pursuant to which the Bank has agreed to sell
to or to purchase from the Borrower a Foreign Currency of an
agreed amount at an agreed price in US dollars or such other
agreed upon Foreign Currency, deliverable and payable on an
agreed date.
1.1.24 "HAZARDOUS MATERIALS": shall mean all those substances which
are regulated by, or which may form the basis of liability
under, any Environmental Law, including all substances
identified under any Environmental Law as a pollutant,
contaminant, hazardous waste, hazardous constituent, special
waste, hazardous substance, hazardous material, or toxic
substance, or petroleum or petroleum derived substance or
waste.
1.1.25 "INDEBTEDNESS": shall mean, with respect to the Borrower, (i)
all indebtedness for borrowed money or for the deferred
purchase price of property or services in respect of which the
Borrower is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or in respect of which the Borrower
otherwise assures a creditor against loss and (ii) obligations
under leases which shall have been or should be, in accordance
with generally accepted accounting principles, reported as
capital leases in respect of which the Borrower is liable,
contingently or otherwise, or in respect of which the Borrower
otherwise assures a creditor against loss.
1.1.26 "LETTER OF CREDIT FACILITY": shall mean the credit facility
described as such in Section 2.
1.1.27 "LIBOR ADVANCE": shall have the respective meaning as it is
defined for each facility under Section 2, hereof.
1.1.28 "LIBOR INTEREST PERIOD": shall have the respective meaning as
it is defined for each facility under Section 2, hereof.
1.1.29 "LIBOR RATE": shall have the respective meaning as it is
defined for each facility under Section 2, hereof.
1.1.30 "LINE ACCOUNT": shall have the meaning provided in Section 2.6
hereof.
1.1.31 "LINE OF CREDIT": shall mean the credit facility described as
such in Section 2.
1.1.32 "NOTIONAL VALUE": shall mean the US Dollar equivalent of the
price at which the Bank agreed to purchase or sell to the
Borrower a Foreign Currency.
1.1.33 "OBLIGATIONS": shall mean all amounts owing by the Borrower to
the Bank pursuant to this Agreement including, but not limited
to, the unpaid principal amount of Advances.
1.1.34 "OFFSETTING TRANSACTION": shall mean a FX Transaction to
purchase a Foreign Currency and a FX Transaction to sell the
same Foreign Currency, each with the same Settlement Date and
designated as an Offsetting Transaction at the time of
entering into the FX Transaction.
1.1.35 "ORDINARY COURSE OF BUSINESS": shall mean, with respect to any
transaction involving the Borrower or any of its subsidiaries
or affiliates, the ordinary course of the Borrower's business,
as conducted by the Borrower in accordance with past practice
and undertaken
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by the Borrower in good faith and not for the purpose of
evading any covenant or restriction in this Agreement or in
any other document, instrument or agreement executed in
connection herewith.
1.1.36 "PERMITTED LIENS": shall mean: (i) liens and security
interests securing indebtedness owed by the Borrower to the
Bank; (ii) liens for taxes, assessments or similar charges not
yet due; (iii) liens of materialmen, mechanics, warehousemen,
or carriers or other like liens arising in the Ordinary Course
of Business and securing obligations which are not yet
delinquent; (iv) purchase money liens or purchase money
security interests upon or in any property acquired or held by
the Borrower in the Ordinary Course of Business to secure
Indebtedness outstanding on the date hereof or permitted to be
incurred herein; (v) liens and security interests which, as of
the date hereof, have been disclosed to and approved by the
Bank in writing; and (vi) those liens and security interests
which in the aggregate constitute an immaterial and
insignificant monetary amount with respect to the net value of
the Borrower's assets.
1.1.37 "REFERENCE RATE": shall mean an index for a variable interest
rate which is quoted, published or announced by Bank as its
reference rate and as to which loans may be made by Bank at,
above or below such rate.
1.1.38 "SETTLEMENT DATE": shall mean the Business Day on which the
Borrower has agreed to (a) deliver the required amount of
Foreign Currency, or (b) pay in US dollars the agreed upon
purchase price of the Foreign Currency.
1.1.39 "SUBORDINATED DEBT": shall mean such liabilities of the
Borrower which have been subordinated to those owed to the
Bank in a manner acceptable to the Bank.
1.1.40 "VARIABLE RATE ADVANCE": shall have the respective meaning as
it is defined for each facility under Section 2, hereof.
1.1.41 "VARIABLE RATE": shall have the respective meaning as it is
defined for each facility under Section 2, hereof.
1.2 ACCOUNTING TERMS: All references to financial statements, assets,
liabilities, and similar accounting items not specifically defined
herein shall mean such financial statements or such items prepared or
determined in accordance with generally accepted accounting principles
consistently applied and, except where otherwise specified, all
financial data submitted pursuant to this Agreement shall be prepared
in accordance with such principles.
1.3 OTHER TERMS: Other terms not otherwise defined shall have the meanings
attributed to such terms in the California Uniform Commercial Code.
SECTION
2
CREDIT FACILITIES
2.1 THE LINE OF CREDIT
2.1.1 THE LINE OF CREDIT: On terms and conditions as set forth
herein, the Bank agrees to make Advances to the Borrower from
time to time from the date hereof to the Expiration Date,
provided the aggregate amount of such Advances outstanding at
any time does not exceed $15,000,000.00 (the "Line of
Credit"). Within the foregoing limits, the Borrower may
borrow, partially or wholly prepay, and reborrow under this
Section 2.1. Proceeds of the Line of
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Credit shall be used for working capital and general
corporate purposes.
2.1.2 MAKING LINE ADVANCES: Each Advance shall be conclusively
deemed to have been made at the request of and for the benefit
of the Borrower (i) when credited to any deposit account of
the Borrower maintained with the Bank or (ii) when paid in
accordance with the Borrower's written instructions. Subject
to the requirements of Section 4 and provided such request is
made in a timely manner as provided in Section 2.1.5 below,
Advances shall be made by the Bank under the Line of Credit.
2.1.3 REPAYMENT: On the Expiration Date, the Borrower hereby
promises and agrees to pay to the Bank in full the aggregate
unpaid principal amount of all Advances then outstanding,
together with all accrued and unpaid interest thereon.
2.1.4 INTEREST ON ADVANCES: Interest shall accrue from the date of
each Advance under the Line of Credit at one of the following
rates, as quoted by the Bank and as elected by the Borrower
pursuant to Subsection (i) or Subsection (ii) below:
(i) VARIABLE RATE ADVANCES: A variable rate per annum
equivalent to the Reference Rate (the "Variable
Rate"). Interest shall be adjusted concurrently with
any change in the Reference Rate. An Advance based
upon the Variable Rate is hereinafter referred to as
a "Variable Rate Advance".
(ii) LIBOR ADVANCES: A fixed rate quoted by the Bank for
1, 2, 3, or 6 months or for such other period of time
that the Bank may quote and offer (provided that any
such period of time does not extend beyond the
Expiration Date) (the "LIBOR Interest Period") for
Advances in the minimum amount of $500,000.00. Such
interest rate shall be a percentage approximately
equivalent to 1.25% in excess of the Bank's LIBOR
Rate which is that rate determined by the Bank's
Treasury Desk as being the arithmetic mean (rounded
upwards, if necessary, to the nearest whole multiple
of one-sixteenth of one percent (1/16%)) of the U. S.
dollar London Interbank Offered Rates for such period
appearing on page 3750 (or such other page as may
replace page 3750) of the Telerate screen at or about
11:00 a.m. (London time) on the second Business Day
prior to the first days of such period (adjusted for
any and all assessments, surcharges and reserve
requirements) (the "LIBOR Rate"). An Advance based
upon the LIBOR Rate is hereinafter referred to as a
"LIBOR Advance".
Interest on any Advance shall be computed on the
basis of 360 days per year, but charged on the actual
number of days elapsed.
The Borrower hereby promises and agrees to pay
interest in arrears on Variable Rate Advances on the
last calendar day of each month.
Interest on any LIBOR Advance with a LIBOR Interest
Period of 3 months or less shall be paid on the last
day of the LIBOR Interest Period. The Borrower
further promises and agrees to pay the Bank interest
on any LIBOR Advance with a LIBOR Interest Period in
excess of 3 months on a quarterly basis (i.e., on the
last day of each 3 month period occurring in such
LIBOR Interest Period) and on the last day of the
LIBOR Interest Period.
If interest is not paid as and when it is due, it
shall be added to the principal, become and be
treated as a part thereof, and shall thereafter bear
like interest.
2.1.5 NOTICE OF BORROWING: Upon written or telephonic notice which
shall be received by the Bank at or before 2:00 p.m.
(California time) on a Business Day, the Borrower may borrow
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under the Line of Credit by requesting:
(i) A Variable Rate Advance. A Variable Rate Advance may
be made on the day notice is received by the Bank;
provided, however, that if the Bank shall not have
received notice at or before 2:00 p.m. on the day
such Advance is requested to be made, such Variable
Rate Advance may, at the Bank's option, be made on
the next Business Day.
(ii) A LIBOR Advance. Notice of any LIBOR Advance shall be
received by the Bank no later than two Business Days
prior to the day (which shall be a Business Day) on
which the Borrower requests such LIBOR Advance to be
made.
2.1.6 NOTICE OF ELECTION TO ADJUST INTEREST RATE: The Borrower may
elect:
(i) That interest on a Variable Rate Advance shall be
adjusted to accrue at the LIBOR Rate; provided,
however, that such notice shall be received by the
Bank no later than two Business Days prior to the day
(which shall be a Business Day) on which the Borrower
requests that interest be adjusted to accrue at the
LIBOR Rate.
(ii) That interest on a LIBOR Advance shall continue to
accrue at a newly quoted LIBOR Rate or shall be
adjusted to commence to accrue at the Variable Rate;
provided, however, that such notice shall be received
by the Bank no later than two Business Days prior to
the last day of the LIBOR Interest Period pertaining
to such LIBOR Advance. If the Bank shall not have
received notice (as prescribed herein) of the
Borrower's election that interest on any LIBOR
Advance shall continue to accrue at the newly quoted
LIBOR Rate, the Borrower shall be deemed to have
elected that interest thereon shall be adjusted to
accrue at the Variable Rate upon the expiration of
the LIBOR Interest Period pertaining to such Advance.
2.1.7 PREPAYMENT: The Borrower may prepay any Advance in whole or in
part, at any time and without penalty, provided, however,
that: (i) any partial prepayment shall first be applied, at
the Bank's option, to accrued and unpaid interest and next to
the outstanding principal balance; and (ii) during any period
of time in which interest is accruing on any Advance on the
basis of the LIBOR Rate, no prepayment shall be made except on
a day which is the last day of the LIBOR Interest Period
pertaining thereto. If the whole or any part of any LIBOR
Advance is prepaid by reason of acceleration or otherwise, the
Borrower shall, upon the Bank's request, promptly pay to and
indemnify the Bank for all costs, expenses and any loss
(including loss of future interest income) actually incurred
by the Bank and any loss (including loss of profit resulting
from the re-employment of funds) deemed sustained by the Bank
as a consequence of such prepayment.
The Bank shall be entitled to fund all or any portion of its
Advances in any manner it may determine in its sole
discretion, but all calculations and transactions hereunder
shall be conducted as though the Bank actually funded all
Advances through the purchase of dollar deposits bearing
interest at the same rate as U.S. Treasury securities in the
amount of the relevant Advance and in maturities corresponding
to the date of such purchase to the Expiration Date hereunder.
2.1.8 INDEMNIFICATION FOR LIBOR RATE COSTS: During any period of
time in which interest on any Advance is accruing on the basis
of the LIBOR Rate, the Borrower shall, upon the Bank's
request, promptly pay to and reimburse the Bank for all costs
incurred and payments made by the Bank by reason of any future
assessment, reserve, deposit or similar requirement or any
surcharge, tax or fee imposed upon the Bank or as a result of
the Bank's compliance with any directive or requirement of any
regulatory authority pertaining or relating to funds used by
the Bank in quoting and determining the LIBOR Rate.
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2.1.9 CONVERSION FROM LIBOR RATE TO VARIABLE RATE: In the event that
the Bank shall at any time determine that the accrual of
interest on the basis of the LIBOR Rate (i) is infeasible
because the Bank is unable to determine the LIBOR Rate due to
the unavailability of U.S. dollar deposits, contracts or
certificates of deposit in an amount approximately equal to
the amount of the relevant Advance and for a period of time
approximately equal to relevant LIBOR Interest Period or (ii)
is or has become unlawful or infeasible by reason of the
Bank's compliance with any new law, rule, regulation,
guideline or order, or any new interpretation of any present
law, rule, regulation, guideline or order, then the Bank shall
give telephonic notice thereof (confirmed in writing) to the
Borrower, in which event any Advance bearing interest at the
LIBOR Rate shall be deemed to be a Variable Rate Advance and
interest shall thereupon immediately accrue at the Variable
Rate.
2.1.10 COMMITMENT FEE: The Borrower agrees to pay to the Bank a
commitment fee on the unused portion of the Line of Credit of
.125% per annum, payable quarterly in arrears, commencing June
30, 2000, and computed on a year of 360 days for actual days
elapsed.
2.2 COMPENSATING BALANCES:
2.2.1 The Borrower covenants and agrees that, during the term hereof
and so long thereafter as the Borrower is indebted to the Bank
hereunder, the Borrower shall, unless the Bank otherwise
consents in writing, maintain demand deposits with the Bank
with net free compensating balances in an amount equivalent to
not less than $1,000,000.00 on an average daily basis during
each month (the "Compensating Balance Requirement"). If the
amount of average daily balances actually maintained by the
Borrower during any month shall be less than the Compensating
Balance Requirement, the Borrower shall pay to the Bank, on
the first day following the last day of each month, a fee of
$5,600.00.
For purposes hereof, the term "net free compensating balances"
mean balances excluding deposits for which funds have not yet
been collected by the Bank and less all fees and all service
and other charges.
2.3 LETTER OF CREDIT SUB-FACILITY
2.3.1 LETTER OF CREDIT SUB-FACILITY: The Bank agrees to issue
commercial and/or standby letters of credit (each a "Letter of
Credit") on behalf of the Borrower of up to $5,000,000.00. At
no time, however, shall the total principal amount of all
Advances outstanding under the Line of Credit Facility,
together with the total face amount of all Letters of Credit
outstanding, less any partial draws paid by the Bank, exceed
the Line of Credit.
(i) Upon the Bank's request, the Borrower shall promptly
pay to the Bank issuance fees and such other fees,
commissions, costs and any out-of-pocket expenses
charged or incurred by the Bank with respect to any
Letter of Credit.
(ii) The commitment by the Bank to issue Letters of Credit
shall, unless earlier terminated in accordance with
the terms of the Agreement, automatically terminate
on the Expiration Date of the Line of Credit and no
Standby Letter of Credit shall expire on a date which
is 365 days after the Expiration Date and commercial
Letters of Credit shall expire on the Expiration
Date.
(iii) Each Letter of Credit shall be in form and substance
satisfactory to the Bank and in favor of
beneficiaries satisfactory to the Bank, provided that
the Bank may refuse to issue a Letter of Credit due
to the nature of the transaction or its terms or in
connection with any transaction where the Bank, due
to the beneficiary or the
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nationality or residence of the beneficiary, would be
prohibited by any applicable law, regulation or order
from issuing such Letter of Credit.
(iv) Prior to the issuance of each Letter of Credit, but
in no event later than 10:00 a.m. (California time)
on the day such Letter of Credit is to be issued
(which shall be a Business Day), the Borrower shall
deliver to the Bank a duly executed form of the
Bank's standard form of application for issuance of a
Letter of Credit with proper insertions.
(v) The Borrower shall, upon the Bank's request, promptly
pay to and reimburse the Bank for all costs incurred
and payments made by the Bank by reason of any future
assessment, reserve, deposit or similar requirement
or any surcharge, tax or fee imposed upon the Bank or
as a result of the Bank's compliance with any
directive or requirement of any regulatory authority
pertaining or relating to any Letter of Credit.
In the event that the Borrower fails to pay any drawing under any
Letter of Credit or the balances in the depository account or accounts
maintained by the Borrower with Bank are insufficient to pay such
drawing, without limiting the rights of Bank hereunder or waiving any
Event of Default caused thereby, Bank may, and Borrower hereby
authorizes Bank to create an Advance bearing interest at the rate or
rates provided in Section 9.2 hereof to pay such drawing.
2.4 ACCEPTANCE SUB-FACILITY
2.4.1 ACCEPTANCE SUB-FACILITY: The Borrower may from time to time
request the Bank to accept one or more drafts drawn on the
Bank for the account of the Borrower (each an "Acceptance") of
up to 5,000,000.00. At no time, however, shall the total
principal balance of all Acceptances outstanding, together
with the total face amount of all outstanding Letters of
Credit less any partial draws paid by the Bank, exceed the sum
of $10,000,000.00 and, together with the total principal
balance of all Advances outstanding under the Letter of Credit
Facility, exceed the Line of Credit.
(i) REQUESTS FOR ACCEPTANCES. Each request for an
Acceptance shall be made in writing or by telephone
confirmed in writing (each a "Request"), shall be
irrevocable, and shall involve one or more drafts as
described below. Each Request shall be delivered or
communicated to the Bank no later than 10:00 a.m.
(California time) on the day (which shall be a
business day) on which the creation of an Acceptance
is requested. By making any such Request, the
Borrower agrees that all matters relating to each
such Acceptance shall be governed hereby and the
Borrower restates all warranties and representations
made by the Borrower herein as if made on the date of
the Request and on the date that the Acceptance is
created.
(ii) ACCEPTANCES. Each Acceptance shall be created upon a
Request by the Bank's acceptance of a draft in form
and substance satisfactory to the Bank (each a
"Draft"). Each Draft shall: (i) be drawn on the Bank
by or on behalf or for the account of the Borrower in
accordance with the provisions hereof; (ii) have a
minimum face amount of $100,000.00; (iii) be for the
purpose of financing only those transactions
permitted by Subsection 7 of Section 13 of the
Federal Reserve Act, as amended from time to time;
and (iv) mature not more than 90 days after the date
thereof (provided that, if such date is not a
Business Day, the maturity shall be extended to the
next succeeding Business Day). However, no Draft
shall mature after the Expiration Date. The Borrower
hereby warrants that any Acceptances relating to the
importation or exportation of goods or relating to
the domestic shipment of goods shall: (i) not have a
term in excess of the period of time which is
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usual and reasonably necessary to finance
transactions of the character of the underlying
import or export transaction or the underlying
domestic shipment; (ii) not, together with all
other Acceptances relating to any such shipment,
have an aggregate face amount exceeding the CIF
value of such shipment; and (iii) not be created
more than 30 days after the date of shipment of
goods to which such Acceptance relates.
Acceptances relating to the storage of goods shall
be subject to the further conditions that: (i) at
the time such Acceptance is created, the goods
being stored are covered by a warehouse receipt
issued by a bonded warehouse independent of the
Borrower and acceptable to the Bank; (ii) the
goods covered by the warehouse receipt are readily
marketable staples (as such term is defined in
Section 13 of the Federal Reserve Act by the Board
of Governors of the Federal Reserve System or by
Federal Reserve Bulletins) held pending a
reasonably immediate sale, distribution or
shipment; and (iii) the face amount of the
Acceptance relating to such goods does not exceed
the fair market value of the goods.
(iii) ACCEPTANCE LIABILITY. The Borrower is obligated, and
hereby unconditionally promises and agrees, to pay
the Bank, on the maturity date of each Acceptance or
on such earlier date as may be required pursuant
hereto, the face amount of each such Acceptance.
(iv) ACCEPTANCE COMMISSIONS. The Borrower agrees, upon
acceptance by the Bank of each Draft and as a
condition precedent to such Acceptance, to pay to the
Bank a fee (the "Commission") in an amount equal to
.25% per annum of the face amount of each Acceptance
calculated on the basis of 360 days per year for the
actual number of days (including the first day but
excluding the last day) during the period which is
for the term of the Draft.
(v) DISCOUNT OF ACCEPTANCES. The Bank agrees to discount
any Acceptance that is created and presented to it
for discount at a rate quoted by the Bank at the time
the Acceptance is presented to the Bank for discount
and for a similar dollar amount and a similar
maturity as the Draft being presented to the Bank by
the Borrower for acceptance (the "Acceptance Discount
Rate"). On the date any such Acceptance is presented
for discount, the Bank shall: (i) cause the aggregate
discounted amount (less any Commission then payable
by the Borrower to the Bank hereunder) to be made
available to the Borrower by crediting such amount to
the Borrower's demand deposit account maintained with
the Bank, unless the Acceptance is created by a
beneficiary under a Letter of Credit, in which event
the Bank will cause the amount to be paid to such
beneficiary and will notify the Borrower as to the
creation of the Acceptance; and (ii) advise the
Borrower of the Acceptance Discount Rate at which the
Bank discounted such Acceptance. The Bank shall have
the right, in its sole discretion, to sell,
rediscount, hold or otherwise deal with or dispose of
any such Acceptance discounted by it.
(vi) ACCEPTANCE COLLATERAL. Each Draft accepted by the
Bank shall be secured by a security interest in the
goods (as defined in the California Uniform
Commercial Code) involved in the transaction out of
which the Acceptance arose to the extent that such a
security interest is either required by the Bank or
in order that the relevant Acceptance conform to the
requirements of Section 13 of the Federal Reserve
Act.
(vii) FUTURE ASSESSMENTS. The Borrower shall, upon the
Bank's request, promptly pay to and reimburse the
Bank for all costs incurred and payments made by the
Bank by reason of any future assessment, reserve,
deposit or similar requirement or any surcharge, tax
or fee imposed upon the Bank or as a result of the
Bank's
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compliance with any directive or requirement of
any regulatory authority pertaining or relating to
any Acceptance.
2.5 FOREIGN EXCHANGE SUB-FACILITY
2.5.1 FOREIGN EXCHANGE SUB-FACILITY: The Bank agrees to enter into
FX Transactions with the Borrower, at the Borrower's request
therefor made prior to the Expiration Date, provided however,
that at no time shall the aggregate FX Risk Liability of the
Borrower exceed the FX Limit, and provided further, at no time
shall the aggregate FX Risk Liability combined with the total
face amount of all Letters of Credit outstanding, less any
partial draws paid by the Bank, together with the total
principal balance of all Acceptances outstanding, together
with the total principal amount of all outstanding Advances,
exceed the Line of Credit. Each FX Transaction shall be used
to hedge the Borrower's foreign exchange exposure.
(i) REQUESTS. Each request for a FX Transaction shall be
made by telephone to the Bank's Treasury Department
("Request"), shall specify the Foreign Currency to be
purchased or sold, the amount of such Foreign
Currency and the Settlement Date. Each Request shall
be communicated to the Bank no later than 3:00 p.m.
California time on the Business Day on which the FX
Transaction is requested.
(ii) TENOR. No FX Transaction shall have a Settlement Date
which is more than 365 days after the date of entry
into such FX Transaction, and provided further, no FX
Transaction shall expire on a date which is more than
375 days after the Expiration Date.
(iii) AVAILABILITY. Bank may refuse to enter into a FX
Transaction with the Borrower where the Bank, at its
sole discretion, determines that (1) the requested
Foreign Currency is unavailable, or (2) the Bank is
not then dealing in the requested Foreign Currency,
or (3) the Bank would be prohibited by any applicable
law, rule, regulation or order from purchasing such
Foreign Currency.
(iv) PAYMENT. Payment is due on the Settlement Date of the
relevant FX Transaction. The Bank is hereby
authorized by the Borrower to charge the full
settlement price of any FX Transaction against the
depository account or accounts maintained by the
Borrower with the Bank on the Settlement Date. In the
event that the Borrower fails to pay the settlement
price of any FX Transaction on the Settlement Date or
the balances in the depository account or accounts
maintained with Bank are insufficient to pay the
settlement price, without limiting the rights of Bank
hereunder or waiving any Event of Default caused
thereby, Bank may, and Borrower hereby authorizes
Bank to, create an Advance bearing interest at the
Variable Rate to pay the settlement price on the
Settlement Date.
(v) INCREASED COSTS. Borrower shall promptly pay to and
reimburse the Bank for all costs incurred and
payments made by the Bank by reason of any
assessment, reserve, deposit, capital maintenance or
similar requirement or any surcharge, tax or fee
imposed upon the Bank or as a result of the Bank's
compliance with any directive or requirement of any
regulatory authority pertaining or relating to any FX
Transaction.
(vi) IMPOSSIBILITY OF PERFORMANCE. In the event that the
Borrower or the Bank cannot perform under a FX
Transaction due to force majeure or an act of State
or it becomes unlawful or impossible to perform, all
in the good faith judgement of the Borrower or the
Bank, then upon notice to the other party, the
Borrower or the Bank may require the close-out and
liquidation of the affected FX Transaction in
accordance with the provisions of this Agreement.
10
2.6 LINE ACCOUNT: The Bank shall maintain on its books a record of account
in which the Bank shall make entries for each Advance and such other
debits and credits as shall be appropriate in connection with the
credit facilities granted hereunder (the "Line Account"). The Bank
shall provide the Borrower with a statement of the Borrower's Line
Account, which statement shall be considered to be correct and
conclusively binding on the Borrower unless the Borrower notifies the
Bank to the contrary within 30 days after the Borrower's receipt of any
such statement which it deems to be incorrect.
2.7 PAYMENTS: If any payment required to be made by the Borrower hereunder
becomes due and payable on a day other than a Business Day, the due
date thereof shall be extended to the next succeeding Business Day and
interest thereon shall be payable at the then applicable rate during
such extension. All payments required to be made hereunder shall be
made to the office of the Bank designated for the receipt of notices
herein or such other office as Bank shall from time to time designate.
2.8 LATE PAYMENT: In addition to any other rights the Bank may have
hereunder, if any payment of principal or interest or any portion
thereof, under this Agreement is not paid within 5 days of when due, a
late payment charge equal to five percent (5%) of such past due payment
may be assessed and shall be immediately payable.
SECTION
3
COLLATERAL
3.1 THE COLLATERAL: To secure payment and performance of all the Borrower's
Obligations under this Agreement and all other liabilities, loans,
guarantees, covenants and duties owed by the Borrower to the Bank,
whether or not evidenced by this or by any other agreement, absolute or
contingent, due or to become due, now existing or hereafter and
howsoever created, the Borrower hereby grants the Bank a security
interest in and to all of the following property ("Collateral"):
(i) EQUIPMENT. All goods now owned or hereafter acquired
by the Borrower or in which the Borrower now has or
may hereafter acquire any interest, including, but
not limited to, all machinery, equipment, furniture,
furnishings, fixtures, tools, supplies and motor
vehicles of every kind and description, and all
additions, accessions, improvements, replacements and
substitutions thereto and thereof (the "Equipment").
(ii) INVENTORY. All inventory now owned or hereafter
acquired by the Borrower, including, but not limited
to, all raw materials, work in process, finished
goods, merchandise, parts and supplies of every kind
and description, including inventory temporarily out
of the Borrower's custody or possession, together
with all returns on accounts (the "Inventory").
(iii) ACCOUNTS. All accounts, contract rights and general
intangibles now owned or hereafter created or
acquired by the Borrower, including, but not limited
to, all receivables, goodwill, trademarks, trademark
applications, trade styles, trade names, patents,
patent applications, copyrights and copyright
applications, customer lists, business records and
computer programs, tapes, disks and related data
processing software that at any time evidence or
contain information relating to any of the
Collateral.
11
(iv) DOCUMENTS. All documents, instruments and chattel
paper now owned or hereafter acquired by the
Borrower, including, but not limited to, warehouse
and other receipts, bills of sale and bills of
lading.
(v) MONIES. All monies, deposit accounts, certificates of
deposit and securities of the Borrower now or
hereafter in the Bank's or its agents' possession.
The Bank's security interest in the Collateral shall be a continuing lien and
shall include the proceeds and products of the Collateral including, but not
limited to, the proceeds of any insurance thereon.
The security interest granted to Bank in the Collateral shall not secure or be
deemed to secure any Indebtedness of the Borrower to the Bank which is, at the
time of its creation, subject to the provisions of any state or federal consumer
credit or truth-in-lending disclosure statutes.
SECTION
4
CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE: The obligation of the Bank
to make the initial Advance and the first extension of credit to or on
account of the Borrower hereunder is subject to the conditions
precedent that the Bank shall have received before the date of such
initial Advance and such first extension of credit all of the
following, in form and substance satisfactory to the Bank:
(i) AUTHORITY TO BORROW. Evidence that the execution,
delivery and performance by the Borrower of this
Agreement and any document, instrument or agreement
required hereunder have been duly authorized.
(ii) FINANCING STATEMENTS. Executed UCC-1 financing
statement(s) describing the Collateral, which have
been filed with the Secretary of State or the county
recorder as a lien of first priority.
(iii) GUARANTY AGREEMENTS. Guaranties of subsidiaries will
be required at such time subsidiaries achieve 10% of
consolidated assets or 10% of consolidated revenues.
(iv) MISCELLANEOUS. Such other evidence as the Bank may
request to establish the consummation of the
transaction contemplated hereunder and compliance
with the conditions of this Agreement.
4.2 CONDITIONS PRECEDENT TO ALL ADVANCES: The obligation of the Bank to
make each Advance and each other extension of credit to or on account
of the Borrower (including the initial Advance and the first extension
of credit) shall be subject to the further conditions precedent that,
on the date of each Advance or each extension of credit and after the
making of such Advance or extension of credit:
(i) SUBSEQUENT APPROVALS. The Bank shall have received
such supplemental approvals, opinions or documents as
the Bank may reasonably request.
(ii) REPRESENTATIONS AND WARRANTIES. The representations
contained in Section 5 and in any other document,
instrument or certificate delivered to the Bank
hereunder are true, correct and complete.
12
(iii) EVENT OF DEFAULT. No event has occurred and is
continuing which constitutes, or with the lapse of
time or giving of notice or both, would constitute an
Event of Default.
(iv) COLLATERAL. The security interest in the Collateral
has been duly authorized, created and perfected with
first priority and is in full force and effect.
The Borrower's acceptance of the proceeds of any loan, advance or extension of
credit or the Borrower's execution of any document or instrument evidencing or
creating any Obligation hereunder shall be deemed to constitute the Borrower's
representation and warranty that all of the above statements are true and
correct.
SECTION
5
REPRESENTATIONS AND WARRANTIES
The Borrower hereby makes the following representations and warranties
to the Bank, which representations and warranties are continuing:
5.1 STATUS: The Borrower is a corporation duly organized and validly
existing under the laws of the state of California and is properly
licensed and is qualified to do business and in good standing in, and,
where necessary to maintain the Borrower's rights and privileges, has
complied with the fictitious name statute of every jurisdiction in
which the Borrower is doing business.
5.2 AUTHORITY: The execution, delivery and performance by the Borrower of
this Agreement and any instrument, document or agreement required
hereunder have been duly authorized and do not and will not: (i)
violate any provision of any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award presently in
effect having application to the Borrower; (ii) result in a breach of
or constitute a default under any material indenture or loan or credit
agreement or other material agreement, lease or instrument to which the
Borrower is a party or by which it or its properties may be bound or
affected; or (iii) require any consent or approval of its stockholders
or violate any provision of its articles of incorporation or by-laws.
5.3 LEGAL EFFECT: This Agreement constitutes, and any instrument, document
or agreement required hereunder when delivered hereunder will
constitute, legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective
terms.
5.4 FICTITIOUS TRADE STYLES: There are no fictitious trade styles used by
the Borrower in connection with its business operations. The Borrower
shall notify the Bank not less than 30 days prior to effecting any
change in the matters described herein or prior to using any other
fictitious trade style at any future date, indicating the trade style
and state(s) of its use.
5.5 FINANCIAL STATEMENTS: All financial statements, information and other
data which may have been or which may hereafter be submitted by the
Borrower to the Bank are true, accurate and correct and have been or
will be prepared in accordance with generally accepted accounting
principles consistently applied and accurately represent the financial
condition or, as applicable, the other information disclosed therein.
Since the most recent submission of such financial information or data
to the Bank, the Borrower represents and warrants that no material
adverse change in the Borrower's financial condition or operations has
occurred which has not been fully disclosed to the Bank in writing.
5.6 LITIGATION: Except as have been disclosed to the Bank in writing, there
are no actions, suits or proceedings pending or, to the knowledge of
the Borrower, threatened against or affecting the
13
Borrower or the Borrower's properties before any court or
administrative agency which, if determined adversely to the
Borrower, would have a material adverse effect on the Borrower's
financial condition or operations or on the Collateral.
5.7 TITLE TO ASSETS: The Borrower has good and marketable title to all of
its assets (including, but not limited to, the Collateral) and the same
are not subject to any security interest, encumbrance, lien or claim of
any third person except for Permitted Liens.
5.8 ERISA: If the Borrower has a pension, profit sharing or retirement plan
subject to ERISA, such plan has been and will continue to be funded in
accordance with its terms and otherwise complies with and continues to
comply with the requirements of ERISA.
5.9 TAXES: The Borrower has filed all tax returns required to be filed and
paid all taxes shown thereon to be due, including interest and
penalties, other than such taxes which are currently payable without
penalty or interest or those which are being duly contested in good
faith.
5.10 MARGIN STOCK. The proceeds of any loan or advance hereunder will not be
used to purchase or carry margin stock as such term is defined under
Regulation U of the Board of Governors of the Federal Reserve System.
5.11 ENVIRONMENTAL COMPLIANCE. The operations of the Borrower comply, and
during the term of this Agreement will at all times comply, in all
respects with all Environmental Laws; the Borrower has obtained all
licenses, permits, authorizations and registrations required under
any Environmental Law ("ENVIRONMENTAL PERMITS") and necessary for
its ordinary course operations, all such Environmental Permits are
in good standing, and the Borrower is in compliance with all
material terms and conditions of such Environmental Permits; neither
the Borrower nor any of its present property or operations is
subject to any outstanding written order from or agreement with any
governmental authority nor subject to any judicial or docketed
administrative proceeding, respecting any Environmental Law,
Environmental Claim or Hazardous Material; there are no Hazardous
Materials or other conditions or circumstances existing, or arising
from operations prior to the date of this Agreement, with respect to
any property of the Borrower that would reasonably be expected to
give rise to Environmental Claims; PROVIDED, however, that with
respect to property leased from an unrelated third party, the
foregoing representation is made to the best knowledge of the
Borrower. In addition, (i) the Borrower does not have any
underground storage tanks that are not properly registered or
permitted under applicable Environmental Laws, or that are leaking
or disposing of Hazardous Materials off-site, and (ii) the Borrower
has notified all of their employees of the existence, if any, of any
health hazard arising from the conditions of their employment and
have met all notification requirements under Title III of CERCLA and
all other Environmental Laws.
5.12 INVENTORY:
(i) The Borrower keeps correct and accurate records.
(itemizing and describing the kind, type, quality and
quantity of inventory, the Borrower's cost therefor
and selling price thereof, and the daily withdrawals
therefrom and additions thereto).
(ii) All inventory is of good and merchantable quality,
free from defects.
(iii) The inventory is not stored with a bailee,
warehouseman or similar party.
14
SECTION
6
COVENANTS
The Borrower covenants and agrees that, during the term of this Agreement, and
so long thereafter as the Borrower is indebted to the Bank under this Agreement,
the Borrower will, unless the Bank shall otherwise consent in writing:
6.1 REPORTING AND CERTIFICATION REQUIREMENTS: Deliver or cause to be
delivered to the Bank in form and detail satisfactory to the Bank:
(i) Not later than 120 days after the end of each of the
Borrower's fiscal years, a copy of the annual audited
consolidated financial report of the Borrower for
such year, prepared by a firm of certified public
accountants acceptable to Bank and accompanied by an
unqualified opinion of such firm and a copy of the
annual consolidating financial report of the Borrower
for such year.
(ii) Not later than 45 days after the end of each quarter,
the Borrower's financial statement as of the end of
such period.
(iii) Concurrently with the delivery of the financial
reports required hereunder, a compliance certificate
stating that the Borrower is in compliance with all
covenants contained herein and that no Event of
Default or potential Event of Default has occurred or
is continuing, and certified to by the chief
financial officer of the Borrower.
(iv) Promptly upon the Bank's request, such other
information pertaining to the Borrower, the
Collateral or any guarantor hereunder as the Bank may
reasonably request.
6.2 FINANCIAL CONDITION: The Borrower promises and agrees, during the term
of this Agreement and until payment in full of all of the Borrower's
Obligations, the Borrower will maintain at all times:
(i) A minimum Effective Tangible Net Worth of at least
$48,000,000.00.
(ii) A ratio of Debt to Effective Tangible Net Worth of
not more than 0.75 to 1.
(iii) A ratio of the sum of cash, cash equivalents and
accounts receivable to Current Liabilities of not
less than 1.25 to 1.
(iv) A minimum net profit after tax of at least $1.00 at
each fiscal year end.
6.3 PRESERVATION OF EXISTENCE; COMPLIANCE WITH APPLICABLE LAWS: Maintain
and preserve its existence and all rights and privileges now enjoyed;
and conduct its business and operations in accordance with all
applicable laws, rules and regulations.
6.4 MERGE OR CONSOLIDATE: Not liquidate or dissolve, merge or consolidate
with or into, or acquire any other business organization.
6.5 MAINTENANCE OF INSURANCE: Keep and maintain the Collateral insured for
not less than its full replacement value against all risks of loss and
damage and maintain insurance in such amounts and covering such risks
as is usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the
Borrower operates and maintain
15
such other insurance and coverages as may be required by the Bank.
All such insurance shall be in form and amount and with companies
satisfactory to the Bank.
With respect to insurance covering properties in which the Bank
maintains a security interest or lien, such insurance shall name the
Bank as loss payee pursuant to a loss payable endorsement satisfactory
to the Bank and shall not be altered or canceled except upon 10 days'
prior written notice to the Bank. Upon the Bank's request, the Borrower
shall furnish the Bank with the original policy or binder of all such
insurance.
6.6 MAINTENANCE OF COLLATERAL AND OTHER PROPERTIES: Except for Permitted
Liens, keep and maintain the Collateral free and clear of all levies,
liens, encumbrances and security interests (including, but not limited
to, any lien of attachment, judgment or execution) and defend the
Collateral against any such levy, lien, encumbrance or security
interest; comply with all laws, statutes and regulations pertaining to
the Collateral and its use and operation; execute, file and record such
statements, notices and agreements, take such actions and obtain such
certificates and other documents as necessary to perfect, evidence and
continue the Bank's security interest in the Collateral and the
priority thereof; maintain accurate and complete records of the
Collateral which show all sales, claims and allowances; and properly
care for, house, store and maintain the Collateral in good condition,
free of misuse, abuse and deterioration, other than normal wear and
tear. The Borrower shall also maintain and preserve all its properties
in good working order and condition in accordance with the general
practice of other businesses of similar character and size, ordinary
wear and tear excepted.
6.7 PAYMENT OF OBLIGATIONS AND TAXES: Make timely payment of all
assessments and taxes and all of its liabilities and obligations
including, but not limited to, trade payables, unless the same are
being contested in good faith by appropriate proceedings with the
appropriate court or regulatory agency. For purposes hereof, the
Borrower's issuance of a check, draft or similar instrument without
delivery to the intended payee shall not constitute payment.
6.8 INSPECTION RIGHTS AND ACCOUNTING RECORDS: The Borrower will maintain
adequate books and records in accordance with generally accepted
accounting principles consistently applied and in a manner otherwise
acceptable to Bank, and, at any reasonable time and from time to time,
permit the Bank or any representative thereof to examine and make
copies of the records and visit the properties of the Borrower and
discuss the business and operations of the Borrower with any employee
or representative thereof. If the Borrower shall maintain any records
(including, but not limited to, computer generated records or computer
programs for the generation of such records) in the possession of a
third party, the Borrower hereby agrees to notify such third party to
permit the Bank free access to such records at all reasonable times and
to provide the Bank with copies of any records which it may request,
all at the Borrower's expense, the amount of which shall be payable
immediately upon demand.
6.9 PAYMENT OF DIVIDENDS: Not declare or pay any dividends on any class of
stock now or hereafter outstanding except dividends payable solely in
the Borrower's capital stock.
6.10 REDEMPTION OR REPURCHASE OF STOCK: Not redeem or repurchase any class
of the Borrower's stock now or hereafter outstanding.
6.11 ADDITIONAL INDEBTEDNESS: Not, after the date hereof, create, incur or
assume, directly or indirectly, any additional Indebtedness other than
(i) Indebtedness owed or to be owed to the Bank or (ii) Indebtedness to
trade creditors incurred in the Ordinary Course of Business.
6.12 LOANS: Not make any loans or advances or extend credit to any third
person, including, but not limited to, directors, officers,
shareholders, partners, employees, affiliated entities and subsidiaries
of the Borrower, except for credit extended in the Ordinary Course of
the Borrower's business as presently conducted and except up to
$100,000.00 in any one fiscal year.
16
6.13 LIENS AND ENCUMBRANCES: Not create, assume or permit to exist any
security interest, encumbrance, mortgage, deed of trust, or other lien
(including, but not limited to, a lien of attachment, judgment or
execution) affecting any of the Borrower's properties, or execute or
allow to be filed any financing statement or continuation thereof
affecting any of such properties, except for Permitted Liens or as
otherwise provided in this Agreement.
6.14 TRANSFER ASSETS: Not, after the date hereof, sell, contract for sale,
convey, transfer, assign, lease or sublet, any of its assets
(including, but not limited to, the Collateral) except in the Ordinary
Course of Business and, then, only for full, fair and reasonable
consideration.
6.15 CHANGE IN NATURE OF BUSINESS: Not make any material change in its
financial structure or the nature of its business as existing or
conducted as of the date hereof.
6.16 COMPENSATION OF EMPLOYEES: Compensate its employees for services
rendered at an hourly rate at least equal to the minimum hourly rate
prescribed by any applicable federal or state law or regulation.
6.17 RENTALS: Not incur liability for the payment of, or pay, rentals for
the renting, leasing or use of real or personal property in an
aggregate amount exceeding $2,500,000.00 in any one fiscal year.
6.18 CAPITAL EXPENSE: Not make any fixed capital expenditure or any
commitment therefor, including, but not limited to, incurring liability
for leases which would be, in accordance with generally accepted
accounting principles, reported as capital leases, or purchase any real
or personal property in an aggregate amount exceeding $5,000,000.00 in
any one fiscal year.
6.19 NOTICE: Give the Bank prompt written notice of any and all (i) Events
of Default; (ii) litigation, arbitration or administrative proceedings
to which the Borrower is a party and in which the claim or liability
exceeds $100,000.00 or which affects the Collateral; (iii) other
matters which have resulted in, or might result in a material adverse
change in the Collateral or the financial condition or business
operations of the Borrower, and (iv) any enforcement, cleanup, removal
or other governmental or regulatory actions instituted, completed or
threatened against the Borrower or any of its properties.
6.20 ENVIRONMENTAL COMPLIANCE: The Borrower shall conduct its operations and
keep and maintain all of its property in compliance with all
Environmental Laws and, upon the written request of the Bank, the
Borrower shall submit to the Bank, at the Borrower's sole cost and
expense, at reasonable intervals, a report providing the status of any
environmental, health or safety compliance, hazard or liability.
6.21 INVENTORY:
(i) Except as provided herein below, the Borrower's
inventory shall, at all times, be in the Borrower's
physical possession, shall not be held by others on
consignment, sale on approval, or sale or return and
shall be kept only at: 0000 Xxxxxxxxxxx Xxxxx Xxxx,
Xxx Xxxxx, XX 00000, 0000 Xxxxxxxxxxx Xxxxx Xxxx, Xxx
Xxxxx, XX 00000 and 0000 Xxxxxx Xxxxxx, Xxx Xxxxx, XX
00000.
(ii) The Borrower shall keep correct and accurate records.
(iii) All inventory shall be of good and merchantable
quality, free from defects.
(iv) The inventory shall not at any time or times
hereafter be stored with a bailee, warehouseman or
similar party without the Bank's prior written
consent and, in such event, the Borrower will
concurrently therewith cause any such bailee,
warehouseman or similar party to issue and deliver to
the Bank, in form acceptable
17
to the Bank, warehouse receipts in the Bank's name
evidencing the storage of inventory.
(v) At any reasonable time and from time to time, allow
Bank to have the right, upon demand, to inspect and
examine inventory and to check and test the same as
to quality, quantity, value and condition and the
Borrower agrees to reimburse the Bank for the Bank's
reasonable costs and expenses in so doing.
6.22 LOCATION AND MAINTENANCE OF EQUIPMENT:
(i) The Equipment shall at all times be in the Borrower's
physical possession, shall not be held for sale or
lease, and shall be kept only at the following
location(s): 0000 Xxxxxxxxxxx Xxxxx Xxxx, Xxx Xxxxx,
XX 00000, 0000 Xxxxxxxxxxx Xxxxx Xxxx, Xxx Xxxxx, XX
00000 and 0000 Xxxxxx Xxxxxx, Xxx Xxxxx, XX 00000.
The Borrower shall not secrete, abandon or remove, or
permit the removal of, the Equipment, or any part
thereof, from the location(s) shown above or remove
or permit to be removed any accessories now or
hereafter placed upon the Equipment.
(ii) Upon the Bank's demand, the Borrower shall
immediately provide the Bank with a complete and
accurate description of the Equipment including, as
applicable, the make, model, identification number
and serial number of each item of Equipment. In
addition, the Borrower shall immediately notify the
Bank of the acquisition of any new or additional
Equipment or the replacement of any existing
Equipment and shall supply the Bank with a complete
description of any such additional or replacement
Equipment.
(iii) The Borrower shall, at the Borrower's sole cost and
expense, keep and maintain the Equipment in a good
state of repair and shall not destroy, misuse, abuse,
illegally use or be negligent in the care of the
Equipment or any part thereof. The Borrower shall not
remove, destroy, obliterate, change, cover, paint,
deface or alter the name plates, serial numbers,
labels or other distinguishing numbers or
identification marks placed upon the Equipment or any
part thereof by or on behalf of the manufacturer, any
dealer or rebuilder thereof, or the Bank. The
Borrower shall not be released from any liability to
the Bank hereunder because of any injury to or loss
or destruction of the Equipment. The Borrower shall
allow the Bank and its representatives free access to
and the right to inspect the Equipment at all times
and shall comply with the terms and conditions of any
leases covering the real property on which the
Equipment is located and any orders, ordinances,
laws, regulations or rules of any federal, state or
municipal agency or authority having jurisdiction of
such real property or the conduct of the business of
the persons having control or possession of the
Equipment.
(iv) The Equipment is not now and shall not at any time
hereafter be so affixed to the real property on which
it is located as to become a fixture or a part
thereof. The Equipment is now and shall at all times
hereafter be and remain personal property of the
Borrower.
18
SECTION
7
EVENTS OF DEFAULT
Any one or more of the following described events shall constitute an
event of default (an "Event of Default") under this Agreement:
7.1 NON-PAYMENT: Any Borrower shall fail to pay the principal amount of any
Obligations when due or interest on the Obligations within 5 days of
when due.
7.2 PERFORMANCE UNDER THIS AGREEMENT: The Borrowers shall fail in any
material respect to perform or observe any term, covenant or agreement
contained in this Agreement or in any document, instrument or agreement
relating to this Agreement or any other document or agreement executed
by the Borrowers with or in favor of Bank and any such failure shall
continue unremedied for more than 30 days after the occurrence thereof.
7.3 REPRESENTATIONS AND WARRANTIES; FINANCIAL STATEMENTS: Any
representation or warranty made by the Borrower under or in connection
with this Agreement or any financial statement given by the Borrower or
any guarantor shall prove to have been incorrect in any material
respect when made or given or when deemed to have been made or given.
7.4 OTHER AGREEMENTS: If there is a default under any other agreement with
Bank or under an agreement to which Borrower is a party with Bank or
with a third party or parties resulting in a right by the Bank or by
such third party or parties, whether or not exercised, to accelerate
the maturity of any Indebtedness.
7.5 INSOLVENCY: The Borrower or any guarantor shall: (i) become insolvent
or be unable to pay its debts as they mature; (ii) make an assignment
for the benefit of creditors or to an agent authorized to liquidate any
substantial amount of its properties and assets; (iii) file a voluntary
petition in bankruptcy or seeking reorganization or to effect a plan or
other arrangement with creditors; (iv) file an answer admitting the
material allegations of an involuntary petition relating to bankruptcy
or reorganization or join in any such petition; (v) become or be
adjudicated a bankrupt; (vi) apply for or consent to the appointment
of, or consent that an order be made, appointing any receiver,
custodian or trustee, for itself or any of its properties, assets or
businesses; or (vii) in an involuntary proceeding, any receiver,
custodian or trustee shall have been appointed for all or substantial
part of the Borrower's or guarantor's properties, assets or businesses
and shall not be discharged within 30 days after the date of such
appointment.
7.6 EXECUTION: Any writ of execution or attachment or any judgment lien
shall be issued against any property of the Borrower and shall not be
discharged or bonded against or released within 30 days after the
issuance or attachment of such writ or lien.
7.7 SUSPENSION: The Borrower shall voluntarily suspend the transaction of
business or allow to be suspended, terminated, revoked or expired any
permit, license or approval of any governmental body necessary to
conduct the Borrower's business as now conducted.
7.8 MATERIAL ADVERSE CHANGE: If there occurs a material adverse change in
the Borrower's business or financial condition, or if there is a
material impairment of the prospect of repayment of any portion of the
Obligations or there is a material impairment of the value or priority
of the Bank's security interest in the Collateral.
7.9 CHANGE IN OWNERSHIP: There shall occur a sale, transfer, disposition or
encumbrance (whether voluntary or involuntary to), or an agreement
shall be entered into to do so, with any Person or
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group of Persons (as such terms are defined pursuant to Federal
securities laws) with respect to more than 10% of the issued and
outstanding capital stock of the Borrower and, as a result thereof,
such Person or group of Persons has the ability to direct or cause
the direction of the management and policies of the Borrower.
7.10 IMPAIRMENT OF COLLATERAL. There shall occur any injury or damage to all
or any part of the Collateral or all or any part of the Collateral
shall be lost, stolen or destroyed.
SECTION
8
REMEDIES ON DEFAULT
Upon the occurrence of any Event of Default, the Bank may, at its sole and
absolute election, without demand and only upon such notice as may be required
by law:
8.1 ACCELERATION: Declare any or all of the Borrower's indebtedness owing
to the Bank, whether under this Agreement or any other document,
instrument or agreement, immediately due and payable, whether or not
otherwise due and payable.
8.2 CEASE EXTENDING CREDIT: Cease making Advances or otherwise extending
credit to or for the account of the Borrower under this Agreement or
under any other agreement now existing or hereafter entered into
between the Borrower and the Bank.
8.3 TERMINATION: Terminate this Agreement as to any future obligation of
the Bank without affecting the Borrower's obligations to the Bank or
the Bank's rights and remedies under this Agreement or under any other
document, instrument or agreement.
8.4 LETTERS OF CREDIT: Require the Borrower to pay immediately to the Bank,
for application against drawings under any outstanding Letters of
Credit, the outstanding principal amount of any such Letters of Credit
which have not expired. Any portion of the amount so paid to the Bank
which is not applied to satisfy draws under any such Letters of Credit
or any other obligations of the Borrower to the Bank shall be repaid to
the Borrower without interest.
8.5 ACCEPTANCES: Require the Borrower to pay immediately to the Bank, for
application against outstanding Acceptances, the outstanding principal
amount of any such Acceptances which have not matured. Any portion of
the amount so paid to the Bank which is not applied to repayments on
any such matured Acceptances or any other obligations of the Borrower
to the Bank shall be repaid to the Borrower without interest.
8.6 CLOSE-OUT AND LIQUIDATION: Close-out and liquidate each outstanding FX
Transaction so that each FX Transaction is canceled in accordance with
the following:
(i) CLOSING VALUE. The Bank shall calculate value of such
canceled FX Transaction by converting (1) in the case
of a FX Transaction whose Settlement Date is the same
as or later than the Close-Out Date, the amount of
Foreign Currency into US dollars at a rate of
exchange at which the Bank can buy or sell US dollars
with or against the Foreign Currency for delivery on
the Settlement Date of the relevant FX Transaction;
or (2) in the case of a FX Transaction whose
Settlement Date precedes the Close-Out Date, the
amount of the Foreign Currency adjusted by adding
interest with respect thereto at the Variable Rate
from the Settlement Date to the Close-Out Date, into
US Dollars at a rate of exchange at which the Bank
can buy or sell US dollars with or against the
Foreign Currency for delivery on the Close-Out Date.
20
(ii) CLOSING GAIN OR LOSS. (1) For a FX Transaction for
which the Bank agreed to purchase a Foreign Currency,
the amount by which the Closing Value exceeds the
Notional Value shall be a Closing Loss and the amount
by which the Closing Value is less than the Notional
Value shall be a Closing Gain; and (2) For a FX
Transaction for which the Bank agreed to sell a
Foreign Currency, the amount by which the Closing
Value exceeds the Notional Value shall be a Closing
Gain and the amount by which the Closing Value is
less than the Notional Value shall be a Closing Loss.
(iii) NET PRESENT VALUE. The Closing Gain or Closing Loss
for each Settlement Date falling after the Close-out
Date will be discounted by the Bank to it net present
value.
(iv) PAYMENT. To the extent that the net amount of the
aggregate Closing Gains exceeds the Closing Losses,
such amount shall be payable by the Bank to the
Borrower. To the extent that the aggregate net amount
of the Closing Losses exceeds the Closing Gains, such
amount shall be payable by the Borrower to the Bank.
8.7 PROTECTION OF SECURITY INTEREST: Make such payments and do such acts as
the Bank, in its sole judgment, considers necessary and reasonable to
protect its security interest or lien in the Collateral. The Borrower
hereby irrevocably authorizes the Bank to pay, purchase, contest or
compromise any encumbrance, lien or claim which the Bank, in its sole
judgment, deems to be prior or superior to its security interest.
Further, the Borrower hereby agrees to pay to the Bank, upon demand
therefor, all expenses and expenditures (including attorneys' fees)
incurred in connection with the foregoing.
8.8 FORECLOSURE: Enforce any security interest or lien given or provided
for under this Agreement or under any security agreement, mortgage,
deed of trust or other document, in such manner and such order, as to
all or any part of the properties subject to such security interest or
lien, as the Bank, in its sole judgment, deems to be necessary or
appropriate and the Borrower hereby waives any and all rights,
obligations or defenses now or hereafter established by law relating to
the foregoing. In the enforcement of its security interest or lien, the
Bank is authorized to enter upon the premises where any Collateral is
located and take possession of the Collateral or any part thereof,
together with the Borrower's records pertaining thereto, or the Bank
may require the Borrower to assemble the Collateral and records
pertaining thereto and make such Collateral and records available to
the Bank at a place designated by the Bank. The Bank may sell the
Collateral or any portions thereof, together with all additions,
accessions and accessories thereto, giving only such notices and
following only such procedures as are required by law, at either a
public or private sale, or both, with or without having the Collateral
present at the time of the sale, which sale shall be on such terms and
conditions and conducted in such manner as the Bank determines in its
sole judgment to be commercially reasonable. Any deficiency which
exists after the disposition or liquidation of the Collateral shall be
a continuing liability of the Borrower to the Bank and shall be
immediately paid by the Borrower to the Bank.
8.9 NON-EXCLUSIVITY OF REMEDIES: Exercise one or more of the Bank's rights
set forth herein or seek such other rights or pursue such other
remedies as may be provided by law, in equity or in any other agreement
now existing or hereafter entered into between the Borrower and the
Bank, or otherwise.
8.10 APPLICATION OF PROCEEDS: All amounts received by the Bank as proceeds
from the disposition or liquidation of the Collateral shall be applied
to the Borrower's indebtedness to the Bank as follows: first, to the
costs and expenses of collection, enforcement, protection and
preservation of the Bank's lien in the Collateral, including court
costs and reasonable attorneys' fees, whether or not suit is commenced
by the Bank; next, to those costs and expenses incurred by the Bank in
protecting,
21
preserving, enforcing, collecting, liquidating, selling or disposing
of the Collateral; next, to the payment of accrued and unpaid
interest on all of the Obligations; next, to the payment of the
outstanding principal balance of the Obligations; and last, to the
payment of any other indebtedness owed by the Borrower to the Bank.
SECTION
9
MISCELLANEOUS
9.1 AMOUNTS PAYABLE ON DEMAND: If the Borrower shall fail to pay on demand
any amount so payable under this Agreement, the Bank may, at its option
and without any obligation to do so and without waiving any default
occasioned by the Borrower having so failed to pay such amount, create
an Advance under this Agreement in an amount equal to the amount so
payable, which Advance shall thereafter bear interest as provided
hereunder.
9.2 DEFAULT INTEREST RATE: If an Event of Default, or an event which, with
notice or passage of time could become an Event of Default, has
occurred or is continuing, the Borrower shall pay to the Bank interest
on any Indebtedness or amount payable under this Agreement at a rate
which is 3% in excess of the rate or rates then in effect under this
Agreement.
9.3 RELIANCE AND FURTHER ASSURANCES: Each warranty, representation,
covenant, obligation and agreement contained in this Agreement shall be
conclusively presumed to have been relied upon by the Bank regardless
of any investigation made or information possessed by the Bank and
shall be cumulative and in addition to any other warranties,
representations, covenants and agreements which the Borrower now or
hereafter shall give, or cause to be given, to the Bank. Borrower
agrees to execute all documents and instruments and to perform such
acts as the Bank may reasonably deem necessary to confirm and secure to
the Bank all rights and remedies conferred upon the Bank by this
agreement and all other documents related thereto.
9.4 ATTORNEYS' FEES: Borrower shall pay to the Bank all costs and expenses,
including but not limited to reasonable attorneys fees, incurred by
Bank in connection with the administration, enforcement, including any
bankruptcy, appeal or the enforcement of any judgment or any
refinancing or restructuring of this Agreement or any document,
instrument or agreement executed with respect to, evidencing or
securing the indebtedness hereunder.
9.5 NOTICES: All notices, payments, requests, information and demands which
either party hereto may desire, or may be required to give or make to
the other party hereto, shall be given or made to such party by hand
delivery or through deposit in the United States mail, postage prepaid,
or by facsimile delivery, or to such other address as may be specified
from time to time in writing by either party to the other.
TO THE BORROWER: TO THE BANK:
ENCAD, INC. SANWA BANK CALIFORNIA
0000 Xxxxxxxxxxx Xxxxx Xxxx Xxx Xxxxx Main (CBC)
Xxx Xxxxx, XX 00000 0000 0xx Xxxxxx
Attn: Xxxxx Xxxxxxxxx Xxx Xxxxx, XX 00000
Attn:
FAX: (000) 000-0000 ----------------
FAX: (000) 000-0000
9.6 WAIVER: Neither the failure nor delay by the Bank in exercising any
right hereunder or under any document, instrument or agreement
mentioned herein shall operate as a waiver thereof, nor shall
22
any single or partial exercise of any right hereunder or under any
other document, instrument or agreement mentioned herein preclude
other or further exercise thereof or the exercise of any other
right; nor shall any waiver of any right or default hereunder, or
under any other document, instrument or agreement mentioned herein,
constitute a waiver of any other right or default or constitute a
waiver of any other default of the same or any other term or
provision.
9.7 CONFLICTING PROVISIONS: To the extent the provisions contained in this
Agreement are inconsistent with those contained in any other document,
instrument or agreement executed pursuant hereto, the terms and
provisions contained herein shall control. Otherwise, such provisions
shall be considered cumulative.
9.8 BINDING EFFECT; ASSIGNMENT: This Agreement shall be binding upon and
inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the
right to assign its rights hereunder or any interest herein without the
prior written consent of the Bank. The Bank may sell, assign or grant
participation in all or any portion of its rights and benefits
hereunder. The Borrower agrees that, in connection with any such sale,
grant or assignment, the Bank may deliver to the prospective buyer,
participant or assignee financial statements and other relevant
information relating to the Borrower and any guarantor.
9.9 JURISDICTION: This Agreement, any notes issued hereunder, the rights of
the parties hereunder to and concerning the Collateral, and any
documents, instruments or agreements mentioned or referred to herein
shall be governed by and construed according to the laws of the State
of California without regard to conflict of law principles, to the
jurisdiction of whose courts the parties hereby submit.
9.10 WAIVER OF JURY TRIAL: THE BORROWER AND THE BANK EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN
ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY
OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT
TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE BORROWER AND THE
BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED
BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS
WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE
VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
9.11 TELEPHONE RECORDING: The Borrower agrees that the Bank may
electronically record all telephone conversations between the Borrower
and the Bank with respect to any FX Transaction and that any such
recording may be submitted in evidence in any arbitration or other
legal proceeding. Such recording shall be deemed to be conclusive
evidence as to the terms of any FX Transaction in the event of a
dispute.
9.12 COUNTERPARTS: This Agreement may be executed in any number of
counterparts and all such counterparts taken together shall be deemed
to constitute one and the same instrument.
9.13 HEADINGS: The headings herein set forth are solely for the purpose of
identification and have no legal significance.
23
9.14 ENTIRE AGREEMENT AND AMENDMENTS: This Agreement and all documents,
instruments and agreements mentioned herein constitute the entire and
complete understanding of the parties with respect to the transactions
contemplated hereunder. All previous conversations, memoranda and
writings between the parties pertaining to the transactions
contemplated hereunder not incorporated or referenced in this Agreement
or in such documents, instruments and agreements are superseded hereby.
This Agreement may be amended only by an instrument in writing signed
by the Borrower and the Bank.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first hereinabove written.
BANK: BORROWER:
SANWA BANK CALIFORNIA ENCAD, INC.
BY: /s/ Xxxxxx X. Xxxxxxx BY:
----------------------------- --------------------------------------
NAME: Xxxxxx X. Xxxxxxx NAME: Xxxx Xxxxxxx, Vice President/Chief
Vice President Financial Officer
BY: /s/ Xxxxx X. Xxxxxxxxxxx
-------------------------------------
NAME: Xxxxx Xxxxxxxxxxx, Vice President
of Operations
BY:
---------------------------------------
NAME: Xxxxxx Xxxxx, Vice President/
General Counsel/Secretary
