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Exhibit 10.12
CREDIT AGREEMENT
BY AND BETWEEN
NATIONAL SCIENTIFIC CORPORATION, A TEXAS CORPORATION
AND
XXXXX FARGO HSBC TRADE BANK, N.A.
DATED AS OF
3/29 , 2001
EXHIBIT A - ADDENDUM TO CREDIT AGREEMENT
EXHIBIT B - REVOLVING CREDIT FACILITY SUPPLEMENT
EXHIBIT C - COLLATERAL/CREDIT SUPPORT DOCUMENT
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XXXXX FARGO HSBC TRADE BANK CREDIT AGREEMENT
NATIONAL SCIENTIFIC CORPORATION, A TEXAS CORPORATION ("Borrower"), whose chief
executive office is located at the address specified after its signature to this
Agreement ("Borrower's Address") and XXXXX FARGO HSBC TRADE BANK, N.A. ("Trade
Bank"), whose address is specified after its signature to this Agreement, have
entered into this CREDIT AGREEMENT as of 3/29 , 2001 ("Effective Date"). All
references to this "Agreement" include those covenants included in the Addendum
to Agreement ("Addendum") attached as Exhibit A hereto.
I. CREDIT FACILITY
1.1 THE FACILITY. Subject to the terms and conditions of this Agreement,
Trade Bank will make available to Borrower a Revolving Credit Facility
("Facility") for which a Facility Supplement ("Supplement") is attached as
Exhibit B hereto. Additional terms for the Facility (and each subfacility
thereof ("Subfacility")) are set forth in the Supplement. The Facility will be
available from the Closing Date up to and until March 1, 2002 ("Facility
Termination Date"). Collateral and credit support required the Facility is set
forth in Exhibit C hereto. Definitions for those capitalized terms not otherwise
defined are contained in Article 8 below.
1.2 CREDIT EXTENSION LIMIT. The aggregate outstanding amount of all Credit
Extensions may at no time exceed Five Hundred Thousand Dollars ($500,000)
("Overall Credit Limit"). The aggregate outstanding amount of all Credit
Extensions outstanding at any time under Revolving Credit Facility may not
exceed that amount specified as the "Credit Limit" in the Supplement for the
Facility, and the aggregate outstanding amount of all Credit Extensions
outstanding at any time under each Subfacility (or any subcategory thereof) may
not exceed that amount specified as the "Credit Sublimit" in the Supplement for
the Facility. An amount equal to 100% of each unfunded Credit Extension shall be
used in calculating the outstanding amount of Credit Extensions under this
Agreement.
1.3 OVERADVANCE. All Credit Extensions made hereunder shall be added to
and deemed part of the obligations when made. If, at any time and for any
reason, the aggregate outstanding amount of all Credit Extensions made pursuant
to this Agreement exceeds the dollar limitation in Section 1.2, then Borrower
shall immediately pay to Trade Bank on demand, in cash, the amount of such
excess.
1.4 REPAYMENT; INTEREST AND FEES. Each funded Credit Extension shall be
repaid by Borrower, and shall bear interest from the date of disbursement at
those per annum rates and such interest shall be paid, at the times specified in
the Supplement, Note or Facility Document. Borrower agrees to pay to Trade Bank
with respect to (a) the Revolving Credit Facility, interest at a per annum rate
equal to the Prime Rate as specified in the Note, and (b) the Subfacilities, the
fees specified in the Supplement as well as those fees specified in the relevant
Facility Document(s). Interest and fees will be calculated on the basis of a 360
day year, actual days elapsed. Any overdue payments of principal (and interest
to the extent permitted by law) shall bear interest at a per annum floating rate
equal to the Prime Rate plus 5.0%.
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1.5 PREPAYMENTS. Credit Extensions under any Facility may only be prepaid
in accordance with the terms of the Supplement. At the time of any prepayment
(including, but not limited to, any prepayment which is a result of the
occurrence of an Event of Default and an acceleration of the Obligations)
Borrower will pay to Trade Bank all interest accrued on the amount so prepaid to
the date of such prepayment and all costs, expenses and fees specified in the
Loan Documents.
II. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Trade Bank that the following
representations and warranties are true and correct:
2.1 LEGAL STATUS. Borrower is duly organized and existing and in good
standing under the laws of the jurisdiction indicated in this Agreement, and is
qualified or licensed to do business in all jurisdictions in which such
qualification or licensing is required and in which the failure to so qualify or
to be so licensed could have a material adverse affect on Borrower.
2.2 AUTHORIZATION AND VALIDITY. The execution, delivery and performance of
this Agreement and all other Loan Documents to which Borrower is a party, have
been duly and validly authorized, executed and delivered by Borrower and
constitute legal, valid and binding agreements ,of Borrower, and are enforceable
against Borrower in accordance with their respective terms.
2.3 BORROWER'S NAME. The name of Borrower set forth at the end of this
Agreement is its correct name. If Borrower is conducting business under a
fictitious business name, Borrower is in compliance with all laws relating to
the conduct of such business under such name.
2.4 FINANCIAL CONDITION AND STATEMENTS. All financial statements of
Borrower delivered to Trade Bank have been prepared in conformity with GAAP, and
completely and accurately reflect the financial condition of Borrower (and any
consolidated Subsidiaries) at the times and for the periods stated in such
financial statements. Neither Borrower nor any Subsidiary has any material
contingent liability not reflected in the aforesaid financial statement. Since
the date of the financial statements delivered to Trade Bank for the last fiscal
period of Borrower to end before the Effective Date, there has been no material
adverse change in the financial condition, business or prospects of Borrower.
Borrower is solvent.
2.5 LITIGATION. Except as disclosed in writing to Trade Bank prior to the
Effective Date, there is no action, claim, suit, litigation, proceeding or
investigation pending or (to best of Borrower's knowledge) threatened by or
against or affecting Borrower or any Subsidiary in any court or before any
governmental authority, administrator or agency which may result in (a) any
material adverse change in the financial condition or business of Borrower's, or
(b) any material impairment of the ability of Borrower to carry on its business
in substantially the same manner as it is now being conducted.
2.6 NO VIOLATION. The execution, delivery, and performance by Borrower of
each of the Loan Documents do not violate any provision of any law or
regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in a breach of or
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constitute a default under any contract, obligation, indenture, or other
instrument to which Borrower is a party or by which Borrower may be bound.
2.7 INCOME TAX RETURNS. Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year.
2.8 NO SUBORDINATION. There is no agreement, indenture, contract, or
instrument to which Borrower is a party or by which Borrower may be bound that
requires the subordination in right of payment of any of Borrower's obligations
subject to this Agreement to any other obligation of Borrower.
2.9 ERISA. Borrower is in compliance in all material respects with all
applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended or recodified from time to time ("ERISA"); Borrower has not violated any
provision of any defined employee pension benefit plan (as defined in ERISA)
maintained or contributed to by Borrower (each, a "Plan"); no Reportable Event,
as defined in ERISA, has occurred and is continuing with respect to any Plan
initiated by Borrower, Borrower has met its minimum funding requirements under
ERISA with respect to each Plan; and each Plan will be able to fulfill its
benefit obligations as they come due in accordance with the Plan documents and
under GAAP.
2.10 OTHER OBLIGATIONS. Except as disclosed in writing to Trade Bank prior
to the Effective Date, neither Borrower nor any Subsidiary are in default of any
obligation for borrowed money, any purchase money obligation or any material
lease, commitment, contract, instrument or obligation.
2.11 NO DEFAULTS. No Event of Default, and event which with the giving of
notice or the passage of time or both would constitute an Event of Default, has
occurred and is continuing.
2.12 INFORMATION PROVIDED TO TRADE BANK. The information provided to the
Trade Bank concerning Borrower's business is true and correct.
2.13 ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to Trade Bank
in writing prior to the Effective Date, Borrower (as well as any Subsidiary) is
each in compliance in all material respects with all applicable Federal or state
environmental, hazardous waste, health and safety statutes, and any rules or
regulations adopted pursuant thereto, which govern or affect any Borrower's or
any Subsidiary's operations and/or properties, including without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Superfund Amendments and Reauthorization Act of 1986, the Federal Resource
Conservation and Recovery Act of 1976, the Federal Toxic Substances Control Act
and the California Health and Safety Code, as any of the same may be amended,
modified or supplemented from time to time. None of the operations of Borrower
or of any Subsidiary is the subject of any Federal or state investigation
evaluating whether any remedial action involving a material expenditure is
needed to respond to a release of any toxic or hazardous waste or substance into
the environment.
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III. CONDITIONS TO EXTENDING FACILITIES
3.1 CONDITIONS TO INITIAL CREDIT EXTENSION. The obligation of Trade Bank
to make the first Credit Extension is subject to the fulfillment to Trade Bank's
satisfaction of the following conditions:
(a) APPROVAL OF TRADE BANK COUNSEL. All legal matters relating to
making the Facility available to Borrower must be satisfactory
to counsel for Trade Bank.
(b) DOCUMENTATION. Trade Bank must have received, in form and
substance satisfactory to Trade Bank, the following documents
and instruments duly executed and in full force and effect:
(1) a corporate borrowing resolution and incumbency
certificate if Borrower is a corporation, a partnership
or joint venture borrowing certificate if Borrower is a
partnership or joint venture, and a limited liability
company borrowing certificate if Borrower is a limited
liability company;
(2) the Facility Documents for the Facility, including, but
not limited to, notes) ("Notes") for the Revolving
Credit Facility, Trade Bank's standard Continuing
Commercial Letter of Credit Agreement or Continuing
Standby Letter of Credit Agreement for any letter of
credit Facility;
(3) those guarantees, security agreements, deeds of trust,
subordination agreements, intercreditor agreements,
factoring agreements, tax service contracts, and other
Collateral Documents required by Trade Bank to evidence
the collateral/credit support specified in the
Supplement;
(4) if an audit or inspection of any books, records or
property is specified in the Supplement for the
Facility, an audit or inspection report from Xxxxx Fargo
or another auditor or inspector acceptable to Trade Bank
reflecting values and property conditions satisfactory
to Trade Bank; and (5) if insurance is required in the
Addendum, the insurance policies specified in the
Addendum (or other satisfactory proof thereof) from
insurers acceptable to Trade Bank.
3.2 CONDITIONS TO MAKING EACH CREDIT EXTENSION. The obligation of Trade
Bank to make each Credit Extension is subject to the fulfillment to Trade Bank's
satisfaction of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in this Agreement, the Facility Documents
and the Collateral
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Documents will be true and correct on and as of the date of
the Credit Extension with the same effect as though such
representations and warranties had been made on and as of such
date;
(b) DOCUMENTATION. Trade Bank must have received, in form and
substance satisfactory to Trade Bank, the following documents
and instruments duly executed and in full force and effect:
(1) if the Credit Extension is the issuance of a Commercial
Letter of Credit Trade Bank's standard Application For
Commercial Letter of Credit or standard Application and
Agreement For Commercial Letter of Credit;
(2) if the Credit Extension is the issuance of a Standby
Letter of Credit, Trade Bank's standard Application For
Standby Letter of Credit or standard Application and
Agreement For Standby Letter of Credit;
(3) if a Borrowing Base Certificate is required for the
Credit Extension, a Borrowing Base Certificate
demonstrating compliance with the requirements for such
Credit Extension.
(c) FEES. Trade Bank must have received any fees required by the
Loan Documents to be paid at the time such Credit Extension is
made.
IV. AFFIRMATIVE COVENANTS
Borrower covenants that so long as Trade Bank remains committed to make
Credit Extensions to Borrower, and until payment of all Obligations and Credit
Extensions, Borrower will comply with each of the following covenants: (For
purposes of this Article IV, and Article V below, reference to "Borrower" may
also extend to Borrower's subsidiaries, if so specified in the Addendum.) `
4.1 PUNCTUAL PAYMENTS. Punctually pay all principal, interest, fees and
other Obligations due under this Agreement or under any Loan Document at the
time and place and in the manner specified herein or therein.
4.2 NOTIFICATION TO TRADE BANK. Promptly, but in no event more than 5
calendar days after the occurrence of each such event, provide written notice in
reasonable detail of each of the following:
(a) OCCURRENCE OF A DEFAULT. The occurrence of any Event of
Default or any event which with the giving of notice or the
passage of time or both would constitute an Event of Default;
(b) BORROWER'S TRADE NAMES; PLACE OF BUSINESS. Any change of
Borrower's (or any Subsidiary's) name, trade name or place of
business, or chief executive officer,
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(c) LITIGATION. Any action, claim, proceeding, litigation or
investigation threatened or instituted by or against or
affecting Borrower (or any Subsidiary) in any court or before
any government authority, administrator or agency which may
materially and adversely affect Borrower's (or any
Subsidiary's) financial condition or business or Borrower's
ability to carry on its business in substantially the same
manner as it is now being conducted;
(d) UNINSURED OR PARTIALLY UNINSURED LOSS. Any uninsured or
partially uninsured loss through liability or property damage
or through fire, theft or any other cause affecting Borrowers
(or any Subsidiary's) property in excess of the aggregate
amount required hereunder;
(e) REPORTS MADE TO INSURANCE COMPANIES. Copies of all material
reports made to insurance companies; and
(f) ERISA. The occurrence and nature of any Reportable Event or
Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan.
4.3 BOOKS AND RECORDS. Maintain at Borrower's address books and records in
accordance with GAAP, and permit any representative of Trade Bank, at any
reasonable time, to inspect, audit and examine such books and records, to make
copies of them, and to inspect the properties of Borrower.
4.4 TAX RETURNS AND PAYMENTS. Timely file all tax returns and reports
required by foreign, federal, state and local law, and timely pay all foreign,
federal, state and local taxes, assessments, deposits and contributions owed by
Borrower. Borrower may, however, defer payment of any contested taxes, provided
that Borrower (i) in good faith contests Borrower's obligation to pay the taxes
by appropriate proceedings promptly instituted and diligently conducted, (ii)
notifies trade Bank in writing of the commencement of, and any material
development in, the proceedings, (iii) posts bonds or takes any other steps
required to keep the contested taxes from becoming a lien upon any of the
Collateral, and (iv) makes provision, to Trade Bank's satisfaction, for eventual
payment of such taxes in the event Borrower is obligated to make such payment.
4.5 COMPLIANCE WITH LAWS. Comply in all material respects with the
provisions of all foreign, federal, state and local laws and regulations
relating to Borrower, including, but not limited to, those relating to
Borrower's ownership of real or personal property, the conduct and licensing of
Borrower's business, and health and environmental matters.
4.6 TAXES AND OTHER LIABILITIES. Pay and discharge when due any and all
indebtedness, obligations, assessments and taxes, both real and personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except (a) such as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Trade Bank's satisfaction, for eventual payment thereof
in the event that Borrower is obligated to make such payment.
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4.7 INSURANCE. Maintain and keep in force insurance of the types and in
amounts customarily carried in lines of business similar to that of Borrower,
including, but not limited to, fire, extended coverage, public liability, flood,
property damage and workers' compensation, with all such insurance to be in
amounts satisfactory to Trade Bank and to be carried with companies approved by
Trade Bank before such companies are retained, and deliver to Trade Bank from
time to time at Trade Bank's request schedules setting forth all insurance then
in effect. All insurance policies shall name Trade Bank as an additional loss
payee, and shall contain a lenders loss payee endorsement in form reasonably
acceptable to Trade Bank. (Upon receipt of the proceeds of any such insurance,
Trade Bank shall apply such proceeds in reduction of the outstanding funded
Credit Extensions and shall hold any remaining proceeds as collateral for the
outstanding unfunded Credit Extensions, as Trade Bank shall determine in its
sole discretion, except that, provided no Event of Default has occurred, Trade
Bank shall release to Borrower insurance proceeds with respect to equipment
totaling less than $100,000, which shall be utilized by Borrower for the
replacement of the equipment with respect to which the insurance proceeds were
paid, if Trade Bank receives reasonable assurance that the insurance proceeds so
released will be so used.) If Borrower fails to provide or pay for any
insurance, Trade Bank may, but is not obligated to, obtain the insurance at
Borrower's expense.
4.8 FURTHER ASSURANCES. At Trade Bank's request and in form and substance
satisfactory to Trade Bank, execute all documents and take all such actions at
Borrower's expense as Trade Bank may deem reasonably necessary or useful to
perfect and maintain Trade Bank's perfected security interest in the Collateral
and in order to fully consummate all of the transactions contemplated by the
Loan Documents.
V. NEGATIVE COVENANTS
Borrower covenants that so long as Trade Bank remains committed to make
any Credit Extensions to Borrower and until all Obligations and Credit
Extensions have been paid, Borrower will not:
5.1 MERGE OR CONSOLIDATION, TRANSFER OF ASSETS. Merge into or consolidate
with any other entity; make any substantial change in the nature of Borrower's
business as conducted as of the date hereof; acquire all or substantially all of
the assets of any other entity; nor sell, lease, transfer or otherwise dispose
of all or a substantial or material portion of Borrower's assets except in the
ordinary course of its business.
5.2 USE OF PROCEEDS. Borrower will not use the proceeds of any Credit
Extension except for the purposes, if any, specified for such Credit Extension
in the Supplement covering the Facility under which such Credit Extension is
made.
5.3 LIENS. Mortgage, pledge, grant or permit to exist a security interest
in, or lien upon, all or any portion of Borrower's assets now owned or hereafter
acquired, except any of the foregoing in favor of Trade Bank or which is
existing as of, and disclosed to Trade Bank in writing prior to, the date
hereof.
5.4 ACQUISITIONS OF ASSETS. Borrower will not acquire any assets or enter
into any other transaction outside the ordinary course of Borrower's business.
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5.5 LOANS AND INVESTMENTS. Borrower will not make any loans or advances
to, or investments in, any person or entity except for accounts receivable
created in the ordinary course of Borrower's business.
5.6 INDEBTEDNESS FOR BORROWED MONEY. Borrower will not incur any
indebtedness for borrowed money, except to Trade Bank and except for
indebtedness subordinated to the Obligations by an instrument or agreement in
form acceptable to Trade Bank.
5.7 GUARANTEES. Borrower will not guarantee or otherwise become liable
with respect to the obligations of any other person or entity, except for
endorsement of instruments for deposit into Borrower's account in the ordinary
course of Borrower's business.
5.8 INVESTMENTS IN, OR ACQUISITIONS OF, SUBSIDIARIES. Borrower will not
make any investments in, or form or acquire, any subsidiaries.
VI. EVENTS OF DEFAULT AND REMEDIES
6.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default":
(a) FAILURE TO MAKE PAYMENTS WHEN DUE. Borrower's failure to pay
principal, interest, fees or other amounts when due under any
Loan Document.
(b) FAILURE TO PERFORM OBLIGATIONS. Any failure by Borrower to
comply with any covenant or obligation in this Agreement or in
any Loan Document (other than those referred to in subsection
(a) above), and such default shall continue for a period of
twenty calendar days from the earlier of (i) Borrower's
failure to notify Trade Bank of such Event of Default pursuant
to Section 4.2(a) above, or (ii) Trade Bank's notice to
Borrower of such Event of Default.
(c) UNTRUE OR MISLEADING WARRANTY OR STATEMENT. Any warranty,
representation, financial statement, report or certificate
made or delivered by Borrower under any Loan Document is
untrue or misleading in any material respect when made or
delivered.
(d) DEFAULTS UNDER OTHER LOAN DOCUMENTS. Any "Event of Default'
occurs under any other Loan Document; any Guaranty is no
longer in full force and effect (or any claim thereof made by
Guarantor) or any failure of a Guarantor to comply with the
provisions thereof; or any breach of the provisions of any
Subordination Agreement or Intercreditor Agreement by any
party other than the Trade Bank.
(e) DEFAULTS UNDER OTHER AGREEMENTS OR INSTRUMENTS. Any default in
the payment or performance of any obligation, or the
occurrence of any event of default, under the terms of any
other agreement or instrument pursuant to which Borrower, any
Subsidiary or any Guarantor or general partner of
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Borrower has incurred any debt or other material liability to
any person or entity.
(f) CONCEALING OR TRANSFERRING PROPERTY. Borrower conceals,
removes or transfers any part of its property with intent to
hinder, delay or defraud its creditors, or makes or suffers.,
any transfer of any of its property which may be fraudulent
under any bankruptcy, fraudulent conveyance or similar law.
(g) JUDGMENTS AND LEVIES AGAINST BORROWER. The filing of a notice
of judgment lien against Borrower, or the recording of any
abstract of judgment against Borrower, in any county in which
Borrower has an interest in real property, or the service of a
notice of levy and/or of a writ of attachment or execution, or
other like process, against the assets of Borrower, or the
entry of a judgment against Borrower.
(h) EVENT OR CONDITION IMPAIRING PAYMENT OR PERFORMANCE. Any event
occurs or condition arises which Trade Bank in good faith
believes impairs or is substantially likely to impair the
prospect of payment or performance by Borrower of the
Obligations, including, but not limited to any material
adverse change in Borrower's financial condition, business or
prospects.
(i) VOLUNTARY INSOLVENCY. Borrower, any Subsidiary or any
Guarantor (i) becomes insolvent, (ii) suffers or consents to
or applies for the appointment of a receiver, trustee,
custodian or liquidator of itself or any of its property,
(iii) generally fails to pay its debts as they become due,
(iv) makes a general assignment for the benefit of creditors,
or (v) files a voluntary petition in bankruptcy, or seeks
reorganization, in order to effect a plan or other arrangement
with creditors or any other relief under the Bankruptcy Reform
Act, Title 11 of the United States Code, as amended or
recodified from time to time ("Bankruptcy Code"), or under any
state or Federal law granting relief to debtors, whether now
or hereafter in effect.
(j) INVOLUNTARY INSOLVENCY. Any involuntary petition or proceeding
pursuant to the Bankruptcy Code or any other applicable state
or federal law relating to bankruptcy, reorganization or other
relief for debtors is filed or commenced against Borrower, any
Subsidiary or Guarantor, or an order for relief is entered
against it by any court of competent jurisdiction under the
Bankruptcy Code or any other applicable state or federal law
relating to bankruptcy, reorganization or other relief for
debtors.
(k) CHANGE IN OWNERSHIP. Any change in the ownership of Borrower,
any general partner of Borrower or any Guarantor which' the
Trade Bank determines, in its sole discretion, may adversely
affect the creditworthiness of Borrower or credit support for
the Obligations.
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6.2 REMEDIES. Upon the occurrence of any Event of Default, or at any time
thereafter, Trade Bank, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by Borrower), may do any one or more
of the following: (a) terminate Trade Bank's obligation to make Credit
Extensions or to make available to Borrower the Facility or other financial
accommodations; (b) accelerate and declare all or any part of the Obligations to
be immediately due, payable, and performable, notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
Credit Extension; and/or (c) exercise all its rights, powers and remedies
available under the Loan Documents, or accorded by law, including, but not
limited to, the right to resort to any or all Collateral or other security for
any of the Obligations and to exercise any or all of the rights of a beneficiary
or secured party pursuant applicable law. Notwithstanding the provisions in the
foregoing sentence, if any Event of Default set out in subsections and (j) of
Section 6.1 above shall occur, then all the remedies specified in the preceding
sentence shall automatically take effect without notice or demand of any kind
(all of which are hereby expressly waived by Borrower) with respect to any and
all Obligations. All rights, powers and remedies of Trade Bank may be exercised
at any time by Trade Bank and from time to time after the occurrence of an Event
of Default, are cumulative and not exclusive, and shall be in addition to any
other rights, powers or remedies provided by law or equity.
VII. GENERAL PROVISIONS
7.1 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given personally or by regular first-class mail, by
certified mail return receipt requested, by a private delivery service which
obtains a signed receipt, or by facsimile transmission addressed to Trade Bank
or Borrower at the address indicated after their signature to this Agreement, or
at any other address designated in writing by one party to the other party.
Trade Bank is hereby authorized by Borrower to act on such instructions or
notices sent by facsimile transmission or telecommunications device which Trade
Bank believes come from Borrower. All notices shall be deemed to have been given
upon delivery, in the case of notices personally delivered or delivered by
private delivery service, upon the expiration of 3 calendar days following the
deposit of the notices in the United States mail, in the case of notices
deposited in the United States mail with postage prepaid, or upon receipt, in
the case of notices sent by facsimile transmission.
7.2 WAIVERS. No delay or failure of Trade Bank in exercising any right,
power or remedy under any of the Loan Documents shall affect or operate as a
waiver of such right, power or remedy; nor shall any single or partial exercise
of any such right, power or remedy preclude, waive or otherwise affect any other
or further exercise thereof or the exercise of any other right, power or remedy.
Any waiver, consent or approval by Trade Bank under any of the Loan Documents
must be in writing and shall be effective only to the extent set out in such
writing.
7.3 BENEFIT OF AGREEMENT. The provisions of the Loan Documents shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, executors, administrators, beneficiaries and legal representatives of
Borrower and Trade Bank; provided, however, that Borrower may not assign or
transfer any of its rights under any Loan Document without the prior written
consent of Trade Bank, and any prohibited assignment shall be void. No consent
by f ,Trade Bank to any assignment shall release Borrower from its liability for
the
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Obligations unless such release is specifically given by Trade Bank to Borrower
in writing. Trade Bank reserves the right to sell, assign, transfer, negotiate
or grant participations in all or any part of, or any interest in, Trade Bank's
rights and benefits under each of the Loan Documents. In connection therewith,
Trade Bank may disclose any information relating to the Facility, Borrower or
its business, or any Guarantor or its business.
7.4 JOINT AND SEVERAL LIABILITY. If Borrower consists of more than one
person or entity, the liability of each of them shall be joint and several, and
the compromise of any claim with, or the release of, any one such Borrower shall
not constitute a compromise with, or a release of, any other such Borrower.
7.5 NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered into
for the sole protection and benefit of Borrower and Trade Bank and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, any of the Loan Documents to which it is not a
party.
7.6 GOVERNING LAW AND JURISDICTION. This Agreement shall, unless provided
differently in any Loan Document, be governed by, and be construed in accordance
with, the internal laws of the State of California, except to the extent Trade
Bank has greater rights or remedies under federal law whether as a national bank
or otherwise. Borrower and Trade Bank (a) agree that all actions and proceedings
relating directly or indirectly to this Agreement shall be litigated in courts
located within California; (b) consent to the jurisdiction of any such court and
consent to service of process in any such action or proceeding by personal
delivery or any other method permitted by law; and (c) waive any and all rights
Borrower may have to object to the jurisdiction of any such court or to transfer
or change the venue of any such action or proceeding.
7.7 MUTUAL WAIVER OF JURY TRIAL. Borrower and Trade Bank each hereby waive
the right to trial by jury in any action or proceeding based upon, arising out
of, or in any way relating to, (a) any Loan Document, (b) any other present or
future agreement, instrument or document between Trade Bank and Borrower, or (c)
any conduct, act or omission of Trade Bank or Borrower or any of their
directors, officers, employees, agents, attorneys or any other persons or
entities affiliated with Trade Bank or Borrower, which waiver will apply in all
of the mentioned cases whether the case is a contract or tort case or any other
case. Borrower represents and warrants that no officer, representative or agent
of Trade Bank has represented, expressly or otherwise, that Trade Bank would not
seek to enforce this waiver of jury trial.
7.8 SEVERABILITY. Should any provision of any Loan Document be prohibited
by, or invalid under applicable law, or held by any court of competent
jurisdiction to be void or unenforceable, such defect shall not affect, the
validity of the other provisions of the Loan Documents.
7.9 ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the other Loan
Documents are the final, entire and complete agreement between Borrower and
Trade Bank concerning the Credit Extensions and the Facility; supersede all
prior and contemporaneous negotiations and oral representations and agreements.
There are no oral understandings, representations or agreements between the
parties concerning the Credit Extensions or the
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Facility which are not set forth In the Loan Documents. This Agreement and the
Supplement may not be waived, amended or superseded except in a writing executed
by Borrower and Trade Bank.
7.10 COLLECTION OF PAYMENTS. Unless otherwise specified in any Loan
Document, other than this Agreement or any Note, all principal, interest and any
fees due to Trade Bank by Borrower under this Agreement, the Addendum, any
Supplement, any Facility Document, any Collateral Document or any Note, will be
paid by Trade Bank having Xxxxx Fargo debit any of Borrower's accounts with
Xxxxx Fargo and forwarding such amount debited to Trade Bank, without
presentment, protest, demand for reimbursement or payment, notice of dishonor or
any other notice whatsoever, all of which are hereby expressly waived by
Borrower. Such debit will be made at the time principal, interest or any fee is
due to Trade Bank pursuant to this Agreement, the Addendum, any Supplement, any
Facility Document, any Collateral Document or any Note.
7.11 COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower will reimburse Trade
Bank for all costs and expenses, including, but not limited to, reasonable
attorneys' fees and expenses (which counsel may be Trade Bank or Xxxxx Fargo
employees), expended or incurred by Trade Bank in the preparation and
negotiation of this Agreement, the Notes, the Collateral Documents, the
Addendum, and the Facility Documents, in amending this Agreement, the Collateral
Documents, the Notes, the Addendum, or the Facility Documents, in collecting any
sum which becomes due Trade Bank on the Notes, under this Agreement, the
Collateral Documents, the Addendum, the Supplement, or any of the Facility
Documents, in the protection, perfection, preservation and enforcement of any
and all rights of Trade Bank in connection with this Agreement, the Notes, any
of the Collateral Documents, the Supplement, any of the Addendum, or any of the
Facility Documents, including, without limitation, the fees and costs incurred
in any out-of-court work out or a bankruptcy or reorganization proceeding.
VIII. DEFINITIONS
8.1 "ACCOUNTS RECEIVABLE" means all presently existing and hereafter
arising "Rights to Payment" (as that term is defined in the "Continuing Security
Agreement - Rights to Payment and Inventory" executed by Borrower in favor of
Trade Bank) which arise from the sale, lease or other disposition of Inventory,
or from performance of contracts for service, manufacture, construction or
repair, together with all goods returned by Borrower's customers in connection
with any of the foregoing.
8.2 "AGREEMENTS" means this Agreement and the Addendum attached hereto, as
corrected or modified from time to time by Trade Bank and Borrower.
8.3 "BANKING DAY" means each day except Saturday, Sunday and a day
specified as a holiday by federal or California statute.
8.4 "CLOSING DATES" means the date on which the first Credit Extension is
made.
8.5 "COLLATERAL" means all property securing the Obligations.
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8.6 "COLLATERAL DOCUMENTS" means those security agreement(s), deed(s) of
trust, guarantee(s), subordination agreement(s), intercreditor agreement(s), and
other credit support documents and instruments required by the Trade Bank to
effect the collateral and credit support requirements set forth in the
Supplement with respect to the facility.
8.7 "CREDIT EXTENSION" means each extension of credit under the Facility
(whether funded or unfunded), including, but not limited to, (a) the issuance of
sight or usance commercial letters of credit or commercial letters of credit
supported by back-up letters of credit, (b) the issuance of standby letters of
credit, (c) the issuance of shipping guarantees, (d) the making of revolving
credit working capital loans, (e) the making of loans against imports for
letters of credit, (f) the making of xxxx import loans outside letters of
credit, (g) the making of advances against export orders, (h) the making of
advances against export letters of credit, (i) the making of advances against
outgoing collections, (j) the making of term loans, and (k) the entry Into
foreign exchange contracts.
8.8 "CREDIT LIMIT" means, with respect to the any Facility, the amount
specified under the column labeled "Credit Limit" in the Supplement for that
related Facility.
8.9 "CREDIT SUBLIMIT" means, with respect to any Subfacility, the amount
specified after the name of that Subfacility under the column labeled "Credit
Sublimit" in the Supplement for the related Facility.
8.10 "DOLLARS" and "$" means United States dollars.
8.11 "FACILITY DOCUMENTS" means, with respect to the Facility, those
documents specified in the Supplement for the Facility, and any other documents
customarily required by Trade Bank for said Facility.
8.12 "GAAP" means generally accepted accounting principles, which are
applicable to the circumstances, as of the date of determination, set out in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and in the statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession.
8.13 "INVENTORY" has the meaning assigned to such term in the "Continuing
Security Agreement - Rights to Payment and Inventory" executed by Borrower in
favor of Trade Bank.
8.14 "LOAN DOCUMENTS" means this Agreement, the Addendum, the Supplement,
the Facility Documents and the Collateral Documents.
8.15 "NOTE" has the meaning specified in Section 3.1(b)(2) above.
8.16 "OBLIGATIONS" means (a) the obligation of Borrower to pay principal,
interest and fees on all funded Credit Extensions and fees on all unfunded
Credit Extensions, and (b) the obligation of Borrower to pay and perform when
due all other indebtedness, liabilities, obligations and covenants required
under the Loan Documents.
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8.17 "PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
8.18 "PRIME RATE" means the rate most recently announced by Xxxxx Fargo at
its principal office in San Francisco, California as its "Prime Rate", with the
understanding that the Prime Rate is one of Xxxxx Fargo's base rates and serves
as the basis upon which effective rates of interest are calculated for those
loans making reference thereto, and is evidenced by the recording thereof after
its announcement in such internal publication or publications as Xxxxx Fargo may
designate. Any change in an interest rate resulting from a change in the Prime
Rate shall become effective as of 12:01 a.m. of the Banking Day on which each
change in the Prime Rate is announced by Xxxxx Fargo.
8.19 "SUBSIDIARY" means (i) any corporation at least the majority of whose
securities having ordinary voting power for the election of directors (other
than securities having such power only by reason of the happening of a
contingency) are at the time owned by Borrower and/or one or more Subsidiaries,
and (ii) any joint venture or partnership in which Borrower and/or one or more
Subsidiaries has a majority interest.
8.20 "XXXXX FARGO" means Xxxxx Fargo Bank, N.A.
IX. ARBITRATION
9.1 ARBITRATION. The parties, hereto agree, upon demand by any party, to
submit to binding arbitration all claims, disputes and controversies between or
among them (and their respective employees, officers, directors, attorneys, and
other agents), whether in tort, contract or otherwise arising out of or relating
to in any way (i) the loan and related loan and security documents which are the
subject of this Agreement and its negotiation, execution, collateralization,
administration, repayment, modification, extension, substitution, formation,
inducement, enforcement, default or termination; or (ii) requests for additional
credit.
9.2 GOVERNING RULES. Any arbitration proceeding will (i) proceed in a
location in California selected by the American Arbitration Association ("AAA");
(ii) be governed by the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in any of the
documents between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA's commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA's optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to, as applicable, as the "Rules"). If there
is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to
submit to arbitration following a demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
dispute. Nothing contained herein shall be deemed to be a
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waiver by any party that is a bank of the protections afforded to it under 12
U.S.C. Section 91 or any similar applicable state law.
9.3 NO WAIVER OF PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions (detailed in sections (i), (ii) and (iii) of this paragraph.
9.4 ARBITRATOR QUALIFICATIONS AND POWERS. Any arbitration proceeding in
which the amount in controversy is $5,000,000.00 or less will be decided by a
single arbitrator selected according to the Rules, and who shall not render an
award of greater than $5,000,000.00. Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of California or a neutral retired judge of the
state or federal judiciary of California, in either case with a minimum of ten
years experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated. The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator's discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state
a claim or motions for summary adjudication. The arbitrator shall resolve all
disputes in accordance with the substantive law of California and may grant any
remedy or relief that a court of such state could order or grant within the
scope hereof and such ancillary relief as is necessary to make effective any
award. The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the arbitrator
deems necessary to the same extent a judge could pursuant to the Federal Rules
of Civil Procedure, the California Rules of Civil Procedure or other applicable
law. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction. The institution and maintenance of an action for
judicial relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.
9.5 DISCOVERY. In any arbitration proceeding discovery will be permitted
in accordance with the Rules. All discovery shall be expressly limited to
matters directly relevant to the dispute being arbitrated and must be completed
no later than 20 days before the hearing date and within 180 days of the filing
of the dispute with the AAA. Any requests for an extension of the discovery
periods, or any discovery disputes, will be subject to final determination by
the arbitrator upon a showing that the request for discovery is essential for
the party's presentation and that no alternative means for obtaining information
is available.
9.6 CLASS PROCEEDINGS AND CONSOLIDATIONS. The resolution of any dispute
arising pursuant to the terms of this Agreement shall be determined by a
separate arbitration proceeding
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and such dispute shall not be consolidated with other disputes or included in
any class proceeding.
9.7 PAYMENT OF ARBITRATION COSTS AND FEES. The arbitrator shall award all
costs and expenses of the arbitration proceeding.
9.8 REAL PROPERTY COLLATERAL; JUDICIAL REFERENCE. Notwithstanding anything
herein to the contrary, no dispute shall be submitted to arbitration if the
dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such dispute is not submitted to arbitration, the dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA's selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.
9.9 MISCELLANEOUS. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision cost directly
related to the documents between the parties or the subject matter of the
dispute shall control. This Agreement may be amended or modified only in writing
signed by each party hereto. If any provision of this Agreement shall be held to
be prohibited by or invalid under applicable law such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or any remaining provisions of this
Agreement. This arbitration provision shall survive termination, amendment or
expiration of any of the documents or any relationship between the parties.
Borrower and Trade Bank have caused this Agreement to be executed by their
duly authorized officers or representatives on the date first written above.
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"BORROWER"
NATIONAL SCIENTIFIC CORPORATION
By: /s/ Xxx X. Xxxx
--------------------------------------
Title: S.V.P., CFO
--------------------------------------
Borrower's Address:
0000 X. Xxxxxxxxx Xxxx, Xxxxx X000
Xxxxxxx, XX 00000
"LENDER"
XXXXX FARGO HSBC TRADE BANK,
NATIONAL ASSOCIATION
By:
--------------------------------------
Title:
--------------------------------------
Lender's Address:
0000 Xxxx Xxx.
Xxxxxx, XX 00000
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EXHIBIT A
XXXXX FARGO HSBC TRADE BANK ADDENDUM TO CREDIT AGREEMENT
THIS ADDENDUM IS ATTACHED TO THE CREDIT AGREEMENT ("CREDIT AGREEMENT") BETWEEN
XXXXX FARGO HSBC TRADE BANK AND THE FOLLOWING BORROWER:
NAME OF BORROWER: NATIONAL SCIENTIFIC CORPORATION
ADDITIONAL AFFIRMATIVE COVENANTS
The following covenants are part of Article IV of the Credit Agreement:
REPORTS. Borrower will furnish the following information or deliver the
following reports to Trade Bank at the times indicated below:
- ANNUAL FINANCIAL STATEMENTS. Not later than nine 90 calendar days after
and as of the end of each of Borrower's fiscal years, an annual
unqualified audited financial statement of Borrower prepared by a
certified public accountant acceptable to Trade Bank and prepared in
accordance with GAAP, to include balance sheet, income statement,
statement of cash flow, and source and application of funds statement.
- QUARTERLY FINANCIAL STATEMENTS. Not later than forty-five (45) calendar
days after and as of the end of each of Borrower's fiscal quarters, a
financial statement of Borrower prepared by Borrower, to include balance
sheet and income statement.
CERTIFICATE OF ACCURACY AND NO EVENT OF DEFAULT. At the time each
financial statement of Borrower required above is delivered to Trade Bank,
a certificate of the president or chief financial officer of Borrower that
said financial statements are accurate and that there exists no Event of
Default under the Agreement nor any condition, act or event which with the
giving of notice or the passage of time or both would constitute an Event
of Default.
BY SIGNING HERE BORROWER AGREES TO THE DESIGNATED PROVISIONS IN THIS ADDENDUM:
/s/ Xxx X. Xxxx
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(SIGNATURE)
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EXHIBIT B
XXXXX FARGO HSBC TRADE BANK REVOLVING CREDIT FACILITY SUPPLEMENT
THIS SUPPLEMENT IS AN INTEGRAL PART OF THE CREDIT AGREEMENT BETWEEN XXXXX FARGO
HSBC TRADE BANK AND THE FOLLOWING BORROWER:
NAME OF BORROWER: NATIONAL SCIENTIFIC CORPORATION
CREDIT LIMIT FOR THIS REVOLVING CREDIT LOAN FACILITY AND SUBLIMITS: Credit
Limit: $500,000 (subject to dollar limitations in Section 1.2 of Agreement)
FACILITY DESCRIPTION: Trade Bank will make the Revolving Credit Facility
available to Borrower for the specific purpose of providing general working
capital in Borrower's semiconductor, integrated circuit and telecommunications
related business. Subject to the credit sublimits specified above, the Revolving
Credit Facility may be supported by (i) a standby letter of credit in favor of
Trade Bank, (ii) a guarantee or (iii) accounts receivable, inventory or other
collateral. Revolving Credit Loans cannot be used to repay outstanding Revolving
Credit Loans or Term Loans that have matured or to repay amounts due under any
other Facilities provided to Borrower.
FACILITY DOCUMENTS:
- REVOLVING CREDIT LOANS NOTE: The term, repayment and prepayment conditions
of the Loans under Revolving Credit Facility are set forth in Revolving
Credit Loans Note.
INTEREST RATES:
LOANS UNDER REVOLVING CREDIT FACILITY: All outstanding Loans under
Revolving Credit Facility will bear interest at the following rate:
PRIME RATE: A rate equal to the Prime Rate per annum, in effect from
day to day.
INTEREST PAYMENT DATES: Interest on all outstanding Loans under
Revolving Credit Facility will be paid at least once each month on
the first day of the month.
FEES:
- FACILITIES FEE: Borrower will pay the following Facilities Fee to
Trade Bank before any Facility, including this Facility, is made
available to Borrower: $2,500.
COLLATERAL: See Exhibit C - Collateral/Credit Support Document.
BY INITIALING HERE BORROWER AGREES TO ALL THE TERMS OF THIS SUPPLEMENT:
/s/ SC
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EXHIBIT C
XXXXX FARGO HSBC TRADE BANK COLLATERAL/CREDIT SUPPORT DOCUMENT
- PERSONAL PROPERTY SECURITY FROM BORROWER:
First priority lien in the following assets of Borrower:
Other: Brokerage Account No. 00000000 with Xxxxx Fargo Brokerage
Services, LLC.
COLLATERAL DOCUMENTS:
Security Agreement: Securities Account with Addendum
Securities Account Control Agreement
UCC-3 Search
BY INITIALING HERE BORROWER AGREES TO ALL THE TERMS OF THIS EXHIBIT:
/s/ SC
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