LETTER OF CREDIT AGREEMENT
This LETTER OF CREDIT AGREEMENT ("this Agreement") is made as of the
First day of November 1st, 1996 between LLOYDS BANK PLC (the "Bank") and
REFLECTONE, INC. (the "Applicant").
Subject to the terms and conditions of this Agreement the Bank hereby
agrees to issue and provide, for the account and at the request of the
Applicant including its wholly-owned subsidiary Reflectone U.K. Ltd., one or
more: (i) irrevocable letters of credit, and (ii) Bonds and overdraft
facilities as described in the Letter of Agreement between Reflectone U.K.
Ltd and the Bank which is attached hereto as Exhibit A. Each of the Letters
of Credit or Bonds shall be in such currency and each in such form as shall
have been agreed by the Bank and the Applicant (each a "Credit", and together
the "Credits") provided that (a) the aggregate face amount of all unexpired
Credits issued pursuant hereto, together with all amounts drawn under any
Credits issued pursuant hereto and not yet reimbursed by or for the account of
the Applicant shall never when added to the overdraft facilities detailed in
the attached Exhibit A exceed $20,000,000 or its equivalent in other
currencies (as determined by the Bank) (the "Commitment"), (b) the Commitment
shall be available to be utilized by the Applicant by means of its requesting
the Bank to issue Credits for the Applicant's account hereunder from the date
hereof until October 31, 1997 (the "Commitment Termination Date"), (c) no
Credit shall have a term from its date of issuance to its stated date of
expiry of longer than one (1) year and (d) the following statements shall be
true on and as of the date of issuance of each Credit: (i) the representations
and warranties contained in Section 7 of this Agreement are correct on and as
of such date and as though made on and as of such date and (ii) no event which
is, or with the giving of notice or the passage of time, or both, would be, an
Event of Default (collectively, "Defaults", and individually a "Default")
shall then exist and be continuing or shall result from the issuance of such
Credit.
In consideration of the issuance by the Bank of one or more Credits as
requested in the Agreement (as each Credit may, from time to time, be amended
or modified with the written agreement of the Applicant), the Applicant hereby
agrees with the Bank as follows:
1. The Applicant hereby agrees to pay on demand to the Bank at the
Bank's office at Xxx Xxxxxxxx Xxxxxxxxx, Xxxxx, Xxxxxxx 00000 (the "Issuing
Branch"):
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(i) the amount which the Bank shall have paid pursuant to the terms
of each Credit at any time;
(ii) interest on (a) the amounts referred to in clause (i) above from
the date any such amount is paid by the Bank under such Credit until payment in
full is received by the Bank and (b) any other amount due from the Applicant to
the Bank under this Agreement from the date which is ten
(10) days following the Bank's written demand to the Applicant therefor,
at a fluctuating interest rate per annum (computed on the basis of a year of
360 days for the actual number of days elapsed until payment in full) equal to
the rate designated from time to time by the Bank in the United States as its
Prime Rate plus 1%, such rate to change automatically from time to time as of
the opening of business on the effective date of each change in the Prime Rate
(the "Bank Rate"), and
(iii) any and all reasonable charges and expenses as described in
Sections 2 and 6 hereof incurred by the Bank relative to the Credit, together
with interest thereon at the Bank Rate from the tenth (10th) day following
delivery by the Bank to the Applicant of a written invoice detailing any such
charges or expenses.
2. (a) The Applicant will pay to the Bank at the Issuing Branch a
non-refundable commission with respect to each Credit at the rate of 0.25% per
annum on the stated amount of such Credit on each day for the preceding
quarter (the "Maximum Amount"). Such commission shall be computed on the basis
of a 360-day year for the actual number of days elapsed and shall be payable
quarterly in arrears for so long as such Credit remains in effect (and on the
expiry date of such Credit).
(b) If any change in any law, regulation or regulatory guideline, or
in the interpretation thereof by any court or administrative or governmental
authority charged with the administration thereof shall either (i) impose,
modify or deem applicable any reserve, special deposit, capital adequacy or
similar requirement or guideline against letters of credit, or commitments to
extend credit, issued by the Bank or (ii) impose on the Bank any other
condition therefor, and the result of any event referred to in clause (i) or
(ii) above shall be to increase, by an amount deemed by the Bank in its sole
discretion to be material, the cost (other than an increase resulting from a
change in any net income tax imposed upon the Bank) to the Bank of issuing or
maintaining any Credit or the Commitment, then, within ten (10) days following
demand by the Bank, accompanied by the certificate referred to in the
following sentence, the Applicant shall immediately pay to the Bank, from time
to time as specified by the Bank, additional amounts which shall be sufficient
to compensate the Bank for such increased cost. A certificate as to such
increased cost incurred by the Bank as a result of any event mentioned in
clause (i) or (ii) above, submitted by the Bank to the Applicant and including
a statement in reasonable detail as to the reason for and calculation of such
increase, shall, absent manifest error, be conclusive as to the amount
thereof.
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2(A) The obligation of the Bank to issue the initial Credit requested
by the Applicant is subject to the conditions precedent that the Bank shall
have received on or before the day of issuance of such initial Credit the
following, each dated on or within thirty (30) days prior to such date of
issuance, in form and substance satisfactory to the Bank:
(a) A certified copy of the resolution of the Board of Directors of
the Applicant authorizing this Agreement, and all documents evidencing other
necessary corporate (or other) action and governmental approvals, if any, with
respect to this Agreement.
(b) An Incumbency Certificate executed by the Secretary or an
Assistant Secretary of the Applicant certifying the names and true signatures
of the officers of the Applicant authorized to sign this Agreement and the
other documents to be delivered hereunder.
(c) The original of the unconditional guarantee, in a form and in
substance acceptable to the Bank (the "Guarantee"), from British Aerospace Plc
(the "Guarantor"), guaranteeing the prompt payment and performance of the
obligations of the Applicant to the Bank under this Agreement.
(d) A certified copy of the resolution of the Banking Committee of
the Board of Directors of the Guarantor authorizing the Guarantee, and all
documents evidencing other necessary corporate (or other) action and
governmental approvals, if any, with respect to the Guarantee.
(e) A Power of Attorney executed by the Secretary or an Assistant
Secretary of the Guarantor authorizing certain individuals to sign the
Guarantee and any other documents to be delivered thereunder.
3. The obligations of the Applicant under this Agreement shall be absolute
and unconditional and irrevocable, and shall be paid strictly in accordance
with the terms of this Agreement, under all circumstances whatsoever,
including, without limitation, the following circumstances:
(a) any lack of validity or enforceability of this Agreement, any
Credit, or any other agreement or instrument relating thereto (collectively, the
"Related Documents");
(b) any amendment or waiver of or any consent to departure from all
or any of the Related Documents;
(c) the existence of any claim, set-off, defense or other right which
the Applicant may have at any time against the beneficiary of any Credit (or any
entities for whom such beneficiary may be acting), whether in connection with
this Agreement, the transactions contemplated hereby or any unrelated
transaction;
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(d) any statement or any other draft or document presented under any
Credit proving to be forged, fraudulent, invalid or inaccurate in any material
respect;
(e) payment by the Bank under any Credit against presentation of a
statement or draft which does not strictly comply with the terms of the Letter
of Credit,
provided that the action or inaction of the Bank shall not have manifested
gross negligence or willful misconduct on the part of the Bank.
4. In the event of any change or modification, with the written agreement of
the Applicant, relative to any Credit or any instruments or documents called
for thereunder, including waiver of noncompliance of any such instruments or
documents with the terms of such Credit, this Agreement shall be binding upon
the Applicant with regard to such Credit as so changed or modified, and to any
action taken by the Bank or any of its correspondents relative thereto.
5. Neither the Bank nor any of its officers or directors shall be liable or
responsible for: (a) the use which may be made of any Credit or for any acts
or omissions of the beneficiary thereof in connection therewith; (b) the
validity, accuracy or genuineness of documents, or of any endorsement(s)
thereon, even if such documents should in fact prove to be in any or all
respects invalid, inaccurate, fraudulent or forged; (c) payment by the Bank
against presentation of documents which do not strictly comply with the terms
of any Credit, including failure of any documents to bear any reference or
adequate reference to such Credit, or (d) any other circumstances whatsoever
in making or failure to make payment under any Credit, except only that the
Applicant shall have a claim against the Bank, and the Bank shall be liable to
the Applicant to the extent, but only to the extent, of any direct, as opposed
to consequential, damages suffered by the Applicant which the Applicant proves
were caused by (i) the Bank's willful misconduct or gross negligence in
determining whether documents presented under any Credit complied with the
terms of such Credit or (ii) the Bank's willful failure to pay under any
Credit after the presentation to it by the beneficiary thereof of a sight
draft and certificate strictly complying with the terms and conditions of such
Credit. In furtherance and not in limitation of the foregoing, the Bank may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary. In no event shall the Bank be liable to the
Applicant for the actions of any third party, including, without limitation,
correspondents of the Bank selected by the Bank with reasonable care.
6. The Applicant agrees to hold the Bank and its officers, directors,
shareholders, employees, agents and servants (collectively, the "Bank's
Parties") indemnified and harmless against any and all claims, liabilities,
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losses or damages, including the reasonable fees, costs and/or disbursements
of counsel to the Bank, however arising from or in connection with any Credit
and the transactions contemplated thereby and/or hereby except to the extent
of any such loss or damage is incurred as a result of the gross negligence or
willful misconduct of the Bank or any of the Bank's Parties, as the case may
be.
7. The Applicant represents and warrants to the Bank as follows:
(a) The Applicant is a corporation duly organized, validly existing
and in good standing under the laws of the State of Florida and has all
requisite corporate power and authority to own its properties and to conduct
its business as now conducted.
(b) The Applicant has full right, power and authority to enter into
this Agreement, to execute and deliver all Related Documents executed by it,
and to incur the obligations provided for herein and therein, all of which
acts have been duly authorized by all proper and necessary corporate action on
the part of the Applicant.
(c) Except as has been disclosed to the Bank in writing, there are no
actions, suits or proceedings pending or, to the knowledge of the Applicant,
threatened against or affecting the Applicant, or any of its properties or
assets, before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which, if determined
adversely to the Applicant, would have a material adverse effect upon the
ability of the Applicant to perform its obligations hereunder and under the
Related Documents.
(d) The balance sheet of the Applicant and its consolidated
subsidiaries as of and for the fiscal year ending on 31 December, 1995,
and the related statements of income and retained earnings of the Applicant
and its consolidated subsidiaries for the fiscal year then ended, and the
balance sheet of the Guarantor and its consolidated subsidiaries as of and for
the fiscal year ending on 31 December, 1994, and the related statements of
income and retained earnings of the Guarantor and its consolidated
subsidiaries for the fiscal year then ended, copies of all of which have been
furnished to the Bank, fairly present the financial condition of the Applicant
and its consolidated subsidiaries and the Guarantor and its consolidated
subsidiaries for the periods ended on such dates, all in accordance with
generally accepted accounting principles consistently applied in the
jurisdiction of organization of the Applicant and the Guarantor, respectively,
and since those dates, there has been no material adverse change in such
condition of either the Applicant or the Guarantor which has not already been
previously disclosed to the bank prior to the date of this agreement.
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(e) This Agreement and all Related Documents executed by the
Applicant are the legal, valid, and binding obligations of the Applicant
enforceable against the Applicant in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity
and by bankruptcy, insolvency, reorganization or other laws of general
application affecting the enforcement of creditors' rights.
(f) There is no default by the Applicant or, to the best of the
Applicant's knowledge, by any party to any other Related Document and no event
has occurred and is continuing, and no condition exists, which with notice or
the passage of time or both would constitute a default under any thereof.
8. So long as any Credit remains outstanding or any amount remains
outstanding hereunder, the Applicant will, unless the Bank shall otherwise
agree in writing:
(a) Compliance with Laws, Etc. Comply, in all material respects,
with all applicable laws, rules, regulations and governmental orders except
(i) such as are being contested in good faith by appropriate proceedings and
(ii) for failures to comply which, individually or in the aggregate, do not
have a material adverse effect on the financial condition of the Applicant and
its subsidiaries, taken as a whole.
(b) Reporting Requirements. Furnish to the Bank:
(i) as soon as available and in any event within 60 days after the
end of each fiscal quarter in each fiscal year of the Applicant (except the
final such fiscal quarter), a consolidated balance sheet and statement of
income and retained earnings or a Form 10Q of the Applicant and its
subsidiaries as of the end of such fiscal quarter and for the period
commencing at the end of the previous fiscal year and ending with the end of
such fiscal quarter certified by the Applicant's Chief Financial Officer,
which certificate shall also state that no Default has occurred and is
continuing (or if such has occurred and is continuing, providing the details
thereof together with the action which the Applicant has taken or proposes to
take to remedy such Default);
(ii) as soon as available and in any event within 120 days after the
end of each fiscal year of the Applicant and the Guarantor a copy of the
annual report or report and accounts or Form 10k for such year for the
Applicant and its subsidiaries, and the Guarantor and its subsidiaries,
respectively, containing the balance sheet and statement of income and
retained earnings of the Applicant and its subsidiaries and the Guarantor and
its subsidiaries, respectively, as at the end of such fiscal year, certified
in a manner consistent with generally accepted auditing practices by Coopers &
Xxxxxxx and KPMG Peat Marwick respectively, or any other independent public
accountants of recognized national standing then serving as the Applicant's
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and the Guarantor's, respectively, independent public accountants (and
including copies of the transmittal letter from such accountants to the
Applicant and the Guarantor, respectively) and accompanied by a certificate of
the Applicant's Chief Financial Officer to the effect that no Default has
occurred and is continuing (or if such has occurred and is continuing,
providing the details thereof together with the action which the Applicant has
taken or proposes to take to remedy such Default);
(iii) within a reasonable period of time after the sending or filing
thereof, copies of all such proxy statements and reports as the Applicant or
the Guarantor sends to the holders of its securities generally.
(c) Notice of Events. Give the Bank, promptly upon the Applicant's
obtaining knowledge thereof, written notice of any condition or event which
has resulted in a Default.
9.(a) Any of the following events shall constitute an "Event of
Default" hereunder:
(i) The Applicant shall fail to pay within 10 days after the due date
thereof the commission referred to in Section 2(a) hereof or shall fail to pay
when due to the Bank any other amount when due and payable hereunder; or
(ii) Any representation or warranty made by the Applicant in this
Agreement or any Related Document shall prove to have been incorrect in any
material respect when made or deemed made; or
(iii) The Applicant shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement on its part to be performed or
observed and not otherwise enumerated in this Section 9, and any such failure
shall remain unremedied for 30 days after written notice thereof shall have been
given to the Applicant by the Bank; or
(iv) A proceeding shall have been instituted in a court having
jurisdiction in the premises seeking a decree or order for relief in respect of
the Applicant or the Guarantor in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect or for
the appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Applicant or the Guarantor, as
the case may be, of for any substantial part of its property or for the winding
up or liquidation of its affairs and any of the aforesaid proceedings shall
remain undismissed or unstayed and in effect for a period of 60 consecutive days
or a decree or order shall be entered granting the relief sought in such
proceeding; or
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(v) The Applicant or the Guarantor shall become insolvent or unable
to pay its debts as they mature (or shall admit in writing that it is unable
to do so), shall commence a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, shall consent to
the entry of an order for relief in an involuntary case under any such law or
shall take any action in furtherance of any of the foregoing or the Applicant or
the Guarantor, as the case may be, shall consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian or
sequestrator (or other similar official) of it or for any substantial part of
its property, or shall make a general assignment for the benefit of creditors,
or shall fail generally to pay its debts as they become due, or shall take any
action in furtherance of any of the foregoing; or
(vi) The failure of the Guarantee to remain in full force and effect
at any time, or the declaration by the Guarantor that it has no further
obligations thereunder; or
(vii) (a) The Applicant or the Guarantor or a material subsidiary of
the Guarantor defaults in the performance of any other agreement for borrowed
money and such default is not remedied within any applicable period of grace so
as to accelerate the due date of payment of borrowed money thereunder or if any
borrowed money of the Applicant or the Guarantor or a material subsidiary of the
Guarantor becomes due and payable prior to the stated maturity thereof as a
result of any event of default by the Applicant or the Guarantor or a material
subsidiary of the Guarantor or if any borrowed money is not paid at the maturity
thereof and within any period of grace applicable thereto or any guarantee for
borrowed money given by the Applicant or the Guarantor or a material subsidiary
of the Guarantor shall not be honoured when called and within any appliable
period of grace; and
(b) The aggregate of all such borrowed money in default exceeds
10,000,000 pound sterling (or the equivalent amount thereof in other
currencies) provided that, for the purposes of this paragraph (vii) no account
shall be taken of any borrowed money owing to a trade creditor by the Applicant
or the Guarantor or a material subsidiary of the Guarantor, if the Applicant or
Guarantor is in bona fide dispute with such trade creditor and the payment of
such borrowed money is being withheld by reason of such bona fide dispute; or
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(b) If one or more of the foregoing Events of Default shall occur, the
Bank may, in addition to the other remedies available to it hereunder, at law
or in equity, or under any of the Related Documents, exercise one or more of
the following remedies: (i) by notice to the Applicant, declare the
obligations of the Applicant hereunder to be forthwith due and payable, and
the same shall thereupon become due and payable without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly
waived provided, however, that upon the occurrence of an event described in
subsections (a)(iv) or (a)(v) of this Section 9, the obligations of the
Applicant hereunder shall automatically become due and payable without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived, or (ii) exercise such other remedies as may be available to
the Bank under any of the Related Documents or at law.
10. No delay, extension of time, renewal, compromise or other
indulgence which may be granted by the Bank to the Applicant shall impair the
Bank's rights or powers hereunder.
Neither party to this Agreement shall be deemed to have waived any of its
rights hereunder, unless such party or its authorized agent shall have signed
such waiver in writing. No such waiver, unless expressly as stated therein,
shall be effective as to any transaction which occurs subsequent to the date
of such waiver, nor as to any continuance of a breach of any provision of this
Agreement after such waiver.
11.(a) This Agreement is a continuing obligation and shall be binding
upon and inure to the benefit of and be enforceable by the parties hereto and
their respective successors, transferees and assigns; provided, however, that
the Applicant may not assign or delegate any part of this Agreement, or its
obligations hereunder, without the prior written consent of the Bank.
(b) Upon expiration or cancellation of all Credits pursuant to their
terms, and payment by or for the account of the Applicant to the Bank of all
amounts outstanding hereunder, the agreement represented by this Agreement
shall terminate and be of no further force and effect, provided that the
provisions of Section 6 hereof shall survive such termination.
12. Any provision of this Agreement which is prohibited,
unenforceable or not authorized in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition,
unenforceablity or nonauthorization without nvalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of
such provisions in any other jurisdiction.
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13. This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York. The Applicant hereby submits itself to the
non-exclusive jurisdiction of the courts of the State of New York and of the
United States of America sitting in New York City, New York in connection with
any proceeding arising hereunder. Notwithstanding any other provision of this
Agreement, nothing in this Agreement shall be construed to require the
Applicant to pay interest on any amount at a rate per annum in excess of the
highest rate permitted by applicable law.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date set forth in the Preamble of this Agreement.
REFLECTONE INC.
By:/s/Xxxxxxx X. Xxxxxxxxx
---------------------------
As its CFO
LLOYDS BANK PLC,
acting through its Issuing Branch
By: /s/Xxxxxxx Xxxxxx
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By:/s/Xxxxxxx Xxxxxx
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