[LOGO]
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is made and entered into as of August 12,
1996 by and between Printrak International Inc., a Delaware corporation
("Borrower") and UNION BANK, a Division of Union Bank of California, N.A.
("Bank").
SECTION 1. THE LOAN
1.1.1 THE REVOLVING LOAN. Bank will loan to Borrower an
amount not to exceed Fifteen Million Dollars ($15,000,000) outstanding in the
aggregate at any one time (the "Revolving Loan"). Borrower may borrow, repay
and reborrow all or part of the Revolving Loan in accordance with the terms of
the Revolving Note. All borrowings of the Revolving Loan must be made before
July 31, 1998 at which time all unpaid principal and interest of the Revolving
Loan shall be due and payable. The Revolving Loan shall be evidenced by a
promissory note (the "Revolving Note") on the standard form used by Bank for
commercial loans. Bank shall enter each amount borrowed and repaid in Bank's
records and such entries shall be deemed to be the amount of the Revolving Loan
outstanding. Omission of Bank to make any such entries shall not discharge
Borrower of its obligation to repay in full with interest all amounts borrowed.
1.1.1 THE L/C SUBLIMIT. As a sublimit to the Revolving Loan,
Bank shall issue, for the account of Borrower, one or more irrevocable, letters
of credit (individually, an "L/C" and collectively, the "L/Cs"). All such L/Cs
shall be drawn on such terms and conditions as are acceptable to Bank. The
aggregate amount available to be drawn under all outstanding L/Cs and the
aggregate amount of unpaid reimbursement obligations under drawn L/Cs shall not
exceed Five Million Dollars ($5,000,000) and shall reduce, dollar for dollar,
the maximum amount available under the Revolving Loan. No L/C shall have an
expiry date more than Twenty-Four (24) months from its date of issuance and each
L/C shall be governed by the terms of (and Borrower agrees to execute) Bank's
standard form for L/C applications and reimbursement agreements. No L/C shall
expire after July 31, 1998.
1.2 TERMINOLOGY.
As used herein the word "Loan" shall mean, collectively, all
the credit facilities described above.
As used herein the word "Note" shall mean, collectively, all
the promissory notes described above.
As used herein, the words "Loan Documents" shall mean all
documents executed in connection with this Agreement.
1.3 PURPOSE OF LOAN. The proceeds of the Revolving Loan shall
be used for general working capital purposes and issuance of letters of credit.
1.4 INTEREST. The unpaid principal balance of the Revolving
Loan shall bear interest at the rate or rates provided in the Revolving Note and
selected by Borrower. The Revolving Loan may be prepaid in full or in part only
in accordance with the terms of the Revolving Note and any such prepayment shall
be subject to the prepayment fee provided for therein.
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1.5 UNUSED COMMITMENT FEE. On the last calendar day of the
third month following the execution of this Agreement and on the last calendar
day of each three-month period thereafter until July 31, 1998, or the earlier
termination of the Loan, Borrower shall pay to Bank a fee of One Quarter percent
(.25%) per year on the average unused portion of the Loan for the preceding
quarter computed on the basis of actual days elapsed of a year of 360 days.
1.6 L/C FEE. Borrower to pay One Hundred Twenty Five (125)
basis point fee per annum to be paid quarterly in advance for the issuance of
L/Cs. Standard charges will apply for other L/C activity.
1.7 BALANCES. Borrower shall maintain its primary depository
accounts with Bank until the Note and all sums payable pursuant to this
Agreement have been paid in full.
1.8 DISBURSEMENT. Upon execution hereof, Bank shall disburse
the proceeds of the Loan as provided in Bank's standard form Authorization
executed by Borrower.
1.9 CONTROLLING DOCUMENT. In the event of any inconsistency
between the terms of this Agreement and any Note or any of the other Loan
Documents, the terms of such Note or other Loan Documents will prevail over the
terms of this Agreement.
SECTION 2. CONDITIONS PRECEDENT
Bank shall not be obligated to disburse all or any portion of the proceeds
of the Loan unless at or prior to the time for the making of such disbursement,
the following conditions have been fulfilled to Bank's satisfaction:
2.1 COMPLIANCE. Borrower shall have performed and complied with
all terms and conditions required by this Agreement to be performed or complied
with by it prior to or at the date of the making of such disbursement and shall
have executed and delivered to Bank the Note and other documents deemed
necessary by Bank.
2.2 BORROWING, RESOLUTION. Borrower shall have provided Bank
with certified copies of resolutions duly adopted by the Board of Directors of
Borrower, authorizing this Agreement and the Loan Documents. Such resolutions
shall also designate the persons who are authorized to act on Borrower's behalf
in connection with this Agreement and to do the things required of Borrower
pursuant to this Agreement.
2.3 GUARANTEES. Printrak Limited ("Guarantors") shall have
executed and delivered to Bank a continuing guaranty in form and amount
satisfactory to Bank. Borrower shall cause Guarantor to submit to Bank not
later than One Hundred Twenty (120) days after the end of each fiscal year such
Guarantor's financial statement in form satisfactory to Bank.
2.4 CONTINUING COMPLIANCE. At the time any disbursement is to
be made, there shall not exist any event, condition or act which constitutes an
event of default under Section 6 hereof or any event, condition or act which
with notice, lapse of time or both would constitute such event of default; nor
shall there by any such event, condition, or act immediately after the
disbursement were it to be made.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that:
3.1 BUSINESS ACTIVITY. The principal business of Borrower is
development and installation of Automated Fingerprint Identification Systems.
3.2 AFFILIATES AND SUBSIDIARIES. Borrower's affiliates and
subsidiaries (those entities in which Borrower has either a controlling interest
or at least 25% ownership interest) and their addresses, and the names of
Borrower's principal shareholders, are as provided on a schedule delivered to
Bank on or before the date of this Agreement.
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3.3 AUTHORITY TO BORROW. The execution, delivery and
performance of this Agreement, the Note and all other agreements and instruments
required by Bank in connection with the Loan are not in contravention of any of
the terms of any indenture, agreement or undertaking to which Borrower is a
party or by which it or any of its property is bound or affected.
3.4 FINANCIAL STATEMENTS. The financial statements of Borrower,
including both a balance sheet at March 31, 1996 together with supporting
schedules, and an income statement for the twelve (12) months ended March 31,
1996, have heretofore been furnished to Bank, and are true and complete and
fairly represent the financial condition of Borrower during the period covered
thereby. Since March 31, 1996 there has been no material adverse change in the
financial condition or operations of Borrower.
3.5 TITLE. Except for assets which may have been disposed of in
the ordinary course of business, Borrower has good and marketable title to all
of the property reflected in its financial statements delivered to Bank and to
all property acquired by Borrower since the date of said financial statements,
free and clear of all liens, encumbrances, security interests and adverse claims
except those specifically referred to in said financial statements.
3.6 LITIGATION. There is no litigation or proceeding pending or
threatened against Borrower or any of its property which is reasonably likely to
affect the financial condition, property or business of Borrower in a materially
adverse manner or result in liability in excess of Borrower's insurance
coverage.
3.7 DEFAULT. Borrower is not now in default in the payment of
any of its material obligations, and there exists no event, condition or act
which constitutes an event of default under Section 6 hereof and no condition,
event or act which with notice or lapse of time, or both, would constitute an
event of default.
3.8 ORGANIZATION. Borrower is duly organized and existing under
the laws of the state of its organization, and has the power and authority to
carry on the business in which it is engaged and/or proposes to engage.
3.9 POWER. Borrower has the power and authority to enter into
this Agreement and to execute and deliver the Note and all of the other Loan
Documents.
3.10 AUTHORIZATION. This Agreement and all things required by
this Agreement have been duly authorized by all requisite action of Borrower.
3.11 QUALIFICATION. Borrower is duly qualified and in good
standing in any jurisdiction where such qualification is required.
3.12 COMPLIANCE WITH LAWS. Borrower is not in violation with
respect to any applicable laws, rules, ordinances or regulations which
materially affect the operations or financial condition of Borrower.
3.13 ERISA. Any defined benefit pension plans as defined in the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), of
Borrower meet, as of the date hereof, the minimum funding standards of Section
302 of ERISA, and no Reportable Event or Prohibited Transaction as defined in
ERISA has occurred with respect to any such plan.
3.14 REGULATION U. No action has been taken or is currently
planned by Borrower, or any agent acting on its behalf, which would cause this
Agreement or the Note to violate Regulation U or any other regulation of the
Board of Governors of the Federal Reserve System or to violate the Securities
and Exchange Act of 1934, in each case as in effect now or as the same may
hereafter be in effect. Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock as one of its
important activities and none of the proceeds of the Loan will be used directly
or indirectly for such purpose.
3.15 CONTINUING REPRESENTATIONS. This representations shall be
considered to have been made again at and as of the date of each disbursement of
the Loan and shall be true and correct as of such date or dates.
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SECTION 4. AFFIRMATIVE COVENANTS
Until the Note and all sums payable pursuant to this Agreement or any other
of the Loan Documents have been paid in full, unless Bank waives compliance in
writing, Borrower agrees that:
4.1 USE OF PROCEEDS. Borrower will use the proceeds of the Loan
only as provided in subsection 1.3 above.
4.2 PAYMENT OF OBLIGATIONS. Borrower will pay and discharge
promptly all taxes, assessments and other governmental charges and claims levied
or imposed upon it or its property, or any part thereof, provided, however, that
Borrower shall have the right in good faith to contest any such taxes,
assessments, charges or claims and, pending the outcome of such contest, to
delay or refuse payment thereof provided that adequately funded reserves are
established by it to pay and discharge any such taxes, assessments, charges and
claims.
4.3 MAINTENANCE OF EXISTENCE. Borrower will maintain and
preserve its existence and assets and all rights, franchises, licenses and other
authority necessary for the conduct of its business and will maintain and
preserve its property, equipment and facilities in good order, condition and
repair. Bank may, at reasonable times, visit and inspect any of the properties
of Borrower.
4.4 RECORDS. Borrower will keep and maintain full and accurate
accounts and records of its operations according to generally accepted
accounting principles and will permit Bank to have access thereto, to make
examination and photocopies thereof, and to make audits during regular business
hours. Costs for such audits shall be paid by Borrower.
4.5 INFORMATION FURNISHED. Borrower will furnish to Bank:
(a) Within Forty-Five (45) days after the close of each
fiscal quarter, except for the final quarter of each fiscal year, its unaudited
balance sheet as of the close of such fiscal quarter, its unaudited income and
expense statement with supportive schedules and statement of retained earnings
for that fiscal quarter, prepared in accordance with generally accepted
accounting principles. An A/R Aging and Open System Contract Report for such
fiscal quarter;
(b) Within One Hundred Twenty (120) days after the close of
each fiscal year, a copy of its statement of financial condition including at
least its balance sheet as of the close of such fiscal year, its income and
expense statement and retained earnings statement for such fiscal year, examined
and prepared on an audited basis by independent certified public accountants
selected by Borrower and reasonably satisfactory to Bank, in accordance with
generally accepted accounting principles applied on a basis consistent with that
of the previous year and a copy of Borrower's Annual Report;
(c) As soon as available, copies of such financial
statements and reports as Borrower may file with any state or federal agency,
including all 10-Q and 10K Reports;
(d) Such other financial statements and information as Bank
may reasonably request from time to time;
(e) In connection with each financial statement provided
hereunder, a statement executed by the chief financial officer of Borrower,
certifying that no default has occurred and no event exists which with notice
or the lapse of time, or both, would result in a default hereunder;
(f) In connection with each fiscal year-end statement
required hereunder, any management letter of Borrower's certified public
accountants.
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(g) Prompt written notice to Bank of all events of default
under any of the terms or provisions of this Agreement or of any other
Agreement, contract, document or instrument entered, or to be entered into with
Bank; and of any litigation which, if decided adversely to Borrower, would have
a material adverse effect on Borrower's financial condition; and of any other
matter which has resulted in, or is likely to result in, a material adverse
change in its financial condition or operations; and
(h) Prior written notice to Bank of any changes in
Borrower's officers and other senior management; Borrower's name; and location
of Borrower's assets, principal place of business or chief executive office.
4.6 QUICK RATIO. Borrower shall maintain at all times a ratio
of cash, accounts receivable and marketable securities to current liabilities of
not less than 1.75:1.0, as such terms are defined by generally accepted
accounting principles.
4.7 TANGIBLE NET WORTH. Borrower will at all times maintain
Tangible Net Worth of not less than Twenty Two Million Three hundred Six
Thousand Dollars ($22,306,000). Thereafter, Borrower will at all times maintain
a minimum Tangible Net Worth that increases from said amount as of the end of
Borrower's fiscal year by Seventy percent (70%) of Borrower's net profit after
taxes plus One Hundred percent (100%) of all future equity additions. "Tangible
Net Worth" shall mean net worth increased by indebtedness of Borrower
subordinated to Bank and decreased by patents, licenses, trademarks, trade
names, goodwill and other similar intangible assets, organizational expenses,
and monies due from affiliates (including officers, shareholders and directors).
4.8 DEBT TO TANGIBLE NET WORTH. Borrower will at all times
maintain a ratio of total liabilities to tangible net worth of not greater than
1.0:1.0.
4.9 PROFITABILITY. Borrower will maintain a net profit, after
provision for income taxes, of any positive amount for any three fiscal
quarters, as reported at the end of each such fiscal quarter and as reported at
its fiscal year end.
4.10 CASH FLOW. Borrower will maintain a ratio of Cash Flow to
Debt Service of not less than 1.50:1.0. Compliance with this subsection shall
be measured as of the end of Borrower's fiscal year. "Cash Flow" shall mean net
profit after taxes to which depreciation, amortization and other noncash
expenses are added for the fiscal year just ended. "Debt Service" shall mean
that portion of long-term liabilities and capital leases coming due within
twelve (12) months after the date of calculation.
4.11 INSURANCE. Borrower will keep all of its insurable
property, real, personal or mixed, insured by good and responsible companies
against fire and such other risks as are customarily insured against by
companies conducting similar business with respect to like properties. Borrower
will maintain adequate worker's compensation insurance and adequate insurance
against liability for damages to persons and property.
4.12 ADDITIONAL REQUIREMENTS. Borrower will promptly, upon
demand by Bank, take such further action and execute all such additional
documents and instruments in connection with this Agreement as Bank in its
reasonable discretion deems necessary, and promptly supply Bank with such other
information concerning its affairs as Bank may request from time to time.
4.13 LITIGATION AND ATTORNEYS' FEES. Borrower will pay promptly
to Bank upon demand, reasonable attorneys' fees (including but not limited to
the reasonable estimate of the allocated costs and expenses of in-house legal
counsel and legal staff) and all costs and other expenses paid or incurred by
Bank in collecting, modifying or compromising the Loan or in enforcing or
exercising its rights or remedies created by, connected with or provided for in
this Agreement or any of the Loan Documents, whether or not an arbitration,
judicial action or other proceeding is commenced. If such proceeding is
commenced, only the prevailing party shall be entitled to attorneys' fees and
court costs.
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4.14 BANK EXPENSES. Borrower will pay or reimburse Bank for all
costs, expenses and fees incurred by Bank in preparing and documenting this
Agreement and the Loan, and all amendments and modifications thereof, including
but not limited to all filing and recording fees, costs of collateral audits,
costs of appraisals, insurance and attorneys' fees, including the reasonable
estimate of the allocated costs and expenses of in-house legal counsel and legal
staff.
4.15 REPORTS UNDER PENSION PLANS. Borrower will furnish to Bank,
as soon as possible and in any event within 15 days after Borrower knows or has
reason to know that any event or condition with respect to any defined benefit
pension plans of Borrower described in Section 3 above has occurred, a statement
of an authorized officer of Borrower describing such event or condition and the
action, if any, which Borrower proposes to take with respect thereto.
4.16 ACQUISITION NOTIFICATION AND CONSENT. Borrower will
promptly notify Bank and attain Bank's consent to make acquisitions of another
business or entity valued in excess of Five Million Dollars ($5,000,000).
SECTION 5. NEGATIVE COVENANTS
Until the Note and all other sums payable pursuant to this Agreement or any
other of the Loan Documents have been paid in full, unless Bank waives
compliance in writing, Borrower agrees that:
5.1 ENCUMBRANCES AND LIENS. Borrower will not create, assume or
suffer to exist any mortgage, pledge, security interest, encumbrance, or lien
(other than for taxes not delinquent and for taxes and other items being
contested in good faith) on property of any kind, whether real, personal or
mixed, now owned or hereafter acquired, or upon the income or profits thereof,
except to Bank and except for minor encumbrances and easements on real property
which do not affect its market value, and except for existing liens on
Borrower's personal property and future purchase money security interests
encumbering only the personal property purchased.
5.2 BORROWINGS. Borrower will not sell, discount or otherwise
transfer any account receivable or any note, draft or other evidence of
indebtedness, except to Bank or except to a financial institution at face value
for deposit or collection purposes only and without any fee other than fees
normally charged by the financial institution for deposit or collection
services. Borrower will not borrow any money, become contingently liable to
borrow money, nor enter any agreement to directly or indirectly obtain borrowed
money, except pursuant to agreements made with Bank.
5.3 SALE OF ASSETS, LIQUIDATION OR MERGER. Borrower will
neither liquidate nor dissolve nor enter into any consolidation, merger,
partnership or other combination, nor convey, nor sell, nor lease all or the
greater part of its assets or business, nor purchase or lease all or the greater
part of the assets or business of another; provided, however, Borrower may
acquire, merge or consolidate with another corporation if Borrower is the
surviving corporation and the aggregate value of the assets so transferred does
not exceed Twenty-Five percent (25%) of Borrower's tangible net worth as of the
end of the month prior to the effective date of such combination and such assets
will not be subject to any lien or encumbrance following the effective date of
such combination.
5.4 LOANS, ADVANCES AND GUARANTIES. Borrower will not, except
in the ordinary course of business as currently conducted, make any loans or
advances, become a guarantor or surety, pledge its credit or properties in any
manner or extend credit.
5.5 INVESTMENTS. Borrower will not purchase the debt or equity
of another person or entity except for savings accounts and certificates of
deposit of Bank, direct U.S. Government obligations and commercial paper issued
by corporations with the top ratings of Xxxxx'x or Standard & Poor's, provided
all such permitted investments shall mature within one year of purchase.
5.6 PAYMENT OF DIVIDENDS. Borrower will not declare or pay any
dividends other than a dividend payable in its own common stock, or authorize or
make any other distribution with respect to any of its stock now or hereafter
outstanding which exceeds in the aggregate for any fiscal year One Million
Dollars ($1,000,000) or Thirty percent (30%) of Borrower's net profits after
taxes whichever is less.
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5.7 RETIREMENT OF STOCK. Borrower will not acquire or retire
any share of its capital stock for value.
5.8 PARENT AND SUBSIDIARY PROPERTY. Borrower will not transfer
any property to its parent or any affiliate of its parent, except for value
received in the normal course of business as business would be conducted with an
unrelated or unaffiliated entity. In no event shall management fees or fees for
services be paid by Borrower to any such direct or indirect affiliate without
Bank's prior written approval.
SECTION 6. EVENTS OF DEFAULT
The occurrence of any of the following events ("Events of Default") shall
terminate any obligation on the part of Bank to make or continue the Loan and
automatically, unless otherwise provided under the Note, shall make all sums of
interest and principal and any other amounts owing under the Loan immediately
due and payable, without notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor, or any other notices or demands:
6.1 Borrower shall default in the due and punctual payment of
the principal of or the interest on the Note or any of the other Loan Documents;
or
6.2 Any default shall occur under the Note; or
6.3 Borrower shall default in the due performance or observance
of any covenant or condition of the Loan Documents;
6.4 Any guaranty or subordination agreement required hereunder
is breached or becomes ineffective, or any Guarantor or subordinating creditor
dies, disavows or attempts to revoke or terminate such guaranty or subordination
agreement; or
6.5 There is a change in ownership or control of ten percent
(10%) or more of the issued and outstanding stock of Borrower or any Guarantor,
or (if Borrower is a partnership) there is a change in ownership or control of
any general partner's interest.
SECTION 7. MISCELLANEOUS PROVISIONS
7.1 ADDITIONAL REMEDIES. The rights, power and remedies given
to Bank hereunder shall be cumulative and not alternative and shall be in
addition to all rights, powers and remedies given to Bank by law against
Borrower or any other person, including but not limited to Bank's rights of set
off or banker's lien.
7.2 NONWAIVER. Any forbearance or failure or delay by Bank in
exercising any right, power or remedy hereunder shall not be deemed a waiver
thereof and any single or partial exercise of any right, power or remedy shall
not preclude the further exercise thereof. No waiver shall be effective unless
it is in writing and signed by an officer of Bank.
7.3 INUREMENT. The benefits of this Agreement shall inure to
the successors and assigns of Bank and the permitted successors and assignees of
Borrower, and any assignment of Borrower without Bank's consent shall be null
and void.
7.4 APPLICABLE LAW. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the State of California.
7.5 SEVERABILITY. Should any one or more provisions of this
Agreement be determined to be illegal or unenforceable, all other provisions
nevertheless shall be effective.
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7.6 INTEGRATION CLAUSE. Except for documents and instruments
specifically referenced herein, this Agreement constitutes the entire Agreement
between Bank and Borrower regarding the Loan and all prior communications verbal
or written between Borrower and Bank shall be of no further effect or
evidentiary value.
7.7 CONSTRUCTION. The Section and subsection headings herein
are for convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
7.8 AMENDMENTS. This Agreement may be amended only in writing
signed by all parties hereto.
7.9 COUNTERPARTS. Borrower and Bank may execute one or more
counterparts to this Agreement, each of which shall be deemed an original.
SECTION 8. SERVICE OF NOTICES
8.1 Any notices or other communications provided for or allowed
hereunder shall be effective only when given by one of the following methods and
addressed to the respective party at its address given with the signatures at
the end of this Agreement and shall be considered to have been validly given:
(a) upon delivery, if delivered personally; (b) upon receipt, if mailed, first
class postage prepaid, with the United States Postal Service; -C- on the next
business day, if sent by overnight courier service of recognized standing; and
(d) upon telephoned confirmation of receipt, if telecopied.
8.2 The addresses to which notices or demands are to be given
may be changed from time to time by notice delivered as provided above.
THIS AGREEMENT is executed on behalf of the parties by duly authorized
officers as of the date first above written.
UNION BANK
By: /s/ Xxx Xx
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Xxx Xx
Title Vice President
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By: /s/ Xxxx Xxxxxx
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Xxxx Xxxxxx
Title Vice President
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000 Xxxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xx. 00000
Attention: Xxx Xx, Vice President
Telecopier: (000)000-0000
Telephone: (000)000-0000
PRINTRAK INTERNATIONAL INC.
By: /s/ Xxxxxxx Xxxxxxx
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Title V.P. Treasurer & Corp. Secretary
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0000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xx. 00000
Attention: Xxxxxxx Xxxxxxx, Vice President, Treasurer & Corporate Secretary
Telecopier: (000)000-0000
Telephone: (000)000-0000
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