EXHIBIT 10.52
LINE OF CREDIT AGREEMENT
This Line of Credit Agreement (the "Agreement") is made and entered
into this ___________________ day of May _______, 1997, by and between SANWA
BANK CALIFORNIA (the "Bank") and ELEXSYS INTERNATIONAL, INC. (the "Borrower"),
on the terms and conditions that follow:
SECTION I
DEFINITIONS
1.01 Certain Defined Terms: Unless elsewhere defined in this Agreement,
the following terms shall have the following meanings (such meanings to be
generally applicable to the singular and plural forms of the terms defined):
"Advance": shall mean an advance to the Borrower under the
Line of Credit described in Section 2.
"Alternate Currency": shall mean any lawful currency other
than Dollars which is freely transferable and convertible into Dollars.
"Business Day": shall mean a day other than a Saturday or
Sunday on which commercial banks are open for business in California, USA, and,
with respect to Eurocurrency Advances, on which dealings are carried on in the
London interbank market and banks are open for business in London and in the
country of issue of the currency of such Advance.
"Cash Flow": shall mean the sum of net income after tax and
exclusive of extraordinary gains, plus depreciation and amortization expense
minus dividends and distributions.
"Collateral": shall mean the property described in Section
3.01.
"Cost of Funds Advance", "Cost of Funds Interest Period" and
"Fixed Rate": shall have the meanings provided in Section 2.4 hereof.
"Debt": shall mean all liabilities of the Borrower less
Subordinated Debt.
"Effective Tangible Net Worth": shall mean the Borrower's
stated net worth plus Subordinated Debt less all intangible assets of the
Borrower (i.e., goodwill, trademarks, patents, copyrights, organization expense
and similar intangible items).
"Dollars" and the sign "$": shall mean lawful money of the
United States.
"ERISA": shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time, including (unless the context
otherwise requires) any rules or regulations promulgated thereunder.
"Eurocurrency Advance", "Eurocurrency Interest Period " and
"Eurocurrency Rate": shall have the meanings provided in Section 2.4 hereof.
"Event of Default": shall have the meaning set forth in
Section 7.
"Expiration Date": shall mean January 31, 1998 or the date of
termination of the Bank's commitment to lend under this Agreement pursuant to
Section 8, whichever shall occur first.
"Indebtedness": shall mean, with respect to the Borrower, (i)
all indebtedness for borrowed money or for the deferred purchase price of
property or services in respect of which the Borrower is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or in respect of which the
Borrower otherwise assures a creditor against loss and (ii) obligations under
leases which shall have been or should be, in accordance with generally accepted
accounting principles, reported as capital leases in respect of which the
Borrower is liable, contingently or otherwise, or in respect of which the
Borrower otherwise assures a creditor against loss.
"Line Account": shall have the meaning provided in Section
2.12 hereof.
"Line of Credit": shall mean the credit facility described in
Section 2.
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"Obligations": shall mean all amounts owing by the Borrower to
the Bank pursuant to this Agreement including, but not limited to, the unpaid
principal amount of Advances.
"Permitted Indebtedness": shall mean (i) Indebtedness of
Borrower in favor of Bank arising under this Agreement or any other Loan
Document; (ii) Indebtedness existing on the date hereof and disclosed in writing
to the Bank; (iii) Subordinated Debt; (iv) Indebtedness to trade creditors,
including, without limitation, affiliates of Borrower, incurred in the ordinary
course of business; (v) Other Indebtedness of Borrower not exceeding
$1,000,000.00 in the aggregate outstanding at any time; (vi) Contingent
obligations of Borrowing consisting of guarantees (and other credit support) of
the obligations of vendors and suppliers of Borrower in respect of transactions
entered into in the ordinary course of business; (vii) Indebtedness with respect
to capital lease obligations and purchase money indebtedness incurred in
connection with the acquisition of assets secured by Permitted Liens; (viii)
Extensions, renewals, refundings, refinancings, modifications, amendments and
restatements of any of the items of Permitted Indebtedness.
"Permitted Investment": shall mean (i) investments existing on
the date hereof and disclosed in writing to the Bank; (ii) marketable direct
obligations issued or unconditionally guaranteed by the United States of America
or any agency or any State thereof maturing within one (1) year from the date of
acquisition thereof; (iii)commercial paper maturing no more than one (1) year
from the date of creation thereof and currently having the highest rating
obtainable from either Standard & Poor's Corporation or Xxxxx'x Investors
Service, Inc.; (iv) investments consisting of deposits maturing no more than one
(1) year from the date of investment therein issued by Bank; (v) extensions of
credit in the nature of accounts receivable or notes receivable arising from the
sale or lease of goods or services in the ordinary course of business; (vi)
investments consisting of the endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; (vii)
investments, including debt obligations, received in connection with the
bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of business; (viii) investments consisting of
compensation of employees, officers and directors of Borrower so long as the
Board of Directors of Borrower determines that such compensation is in the best
interest of Borrower, and travel advances, employee relocation loans and other
employee loans and advances in the ordinary course of business; (ix) other
investments aggregating not in excess of $250,000.00 at any time.
"Permitted Liens": shall mean: (i) liens and security
interests securing indebtedness owed by the Borrower to the Bank; (ii) liens for
taxes, assessments or similar charges either not yet due or being contested in
good faith; (iii) liens of materialmen, mechanics, warehousemen, or carriers or
other like liens arising in the ordinary course of business and securing
obligations which are not yet delinquent; (iv) purchase money liens or purchase
money security interests upon or in any property acquired or held by the
Borrower in the ordinary course of business to secure Indebtedness outstanding
on the date hereof or permitted to be incurred under Section 6.09 hereof; (v)
liens and security interests which, as of the date hereof, have been disclosed
to and approved by the Bank in writing; (vi) those liens and security interests
which in the aggregate constitute an immaterial and insignificant monetary
amount with respect to the net value of the Borrower's assets; liens securing
capital lease obligations on assets subject to such capital leases; (vii) liens
arising from judgments, decrees or attachments to the extent and only so long as
such judgment, decree or attachment has not caused or resulted in an Event of
Default, (viii) easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar liens affecting real
property not interfering in any material respect with the ordinary conduct of
the business of Borrower, (ix) liens in favor of customs and revenue authorities
arising as a mater of law to secure payment of customs duties in connection with
the importation of goods, (x) liens arising solely by virtue of any statutory or
common law provision relating to banker's liens, rights of setoff or similar
rights and remedies as to deposit accounts or other funds maintained with a
creditor depository institutions; (xi) liens not otherwise permitted which liens
do not in the aggregate exceed $250,000.00 at any time.
"Redenominate", "Redenomination" and "Redenominated": each
refers to redenomination of each Advance from Dollars into an Alternate Currency
or from an Alternate Currency into Dollars or another Alternate Currency
pursuant to Section 2.06.
"Reference Rate": shall have the meanings provided in Section
2.4 hereof.
"Variable Rate Advance" and "Variable Rate": shall have the
meanings provided in Section 2.4 hereof.
1.2 Accounting Terms: All references to financial statements, assets,
liabilities, and similar accounting items not specifically defined herein shall
mean such financial statements or such items prepared or determined in
accordance with generally accepted accounting principles consistently applied
and, except where otherwise specified, all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles.
1.3 Other Terms: Other terms not otherwise defined shall have the
meanings attributed to such terms in the California Uniform Commercial Code.
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1.4 Currency Equivalents Generally: For all purposes of this Agreement
other than Section 2, the equivalent in any Alternate Currency of an amount in
Dollars shall be determined at the rate of exchange quoted by the Bank in Los
Angeles, at 9:00 A.M. on the date of determination, for the spot purchase in the
relevant foreign exchange market of such amount of Dollars with such Alternate
Currency.
SECTION 2
THE LINE OF CREDIT
2.1 The Line of Credit: On terms and conditions as set forth herein,
the Bank agrees to make Advances in Dollars or in Alternate Currency to the
Borrower from time to time from the date hereof to the Expiration Date, provided
the aggregate amount of such Advances outstanding at any time does not exceed
$5,000,000 or the Dollar equivalent in Alternate Currency of $5,000,000 ("Line
of Credit"). Within the foregoing limits, the Borrower may borrow, partially or
wholly prepay, and reborrow under this Section 2.01.
2.2 Making Line Advances: Each Advance shall be conclusively deemed to
have been made at the request of and for the benefit of the Borrower (i) when
credited to any deposit account of the Borrower maintained with the Bank or (ii)
when paid in accordance with the Borrower's written instructions. Subject to the
requirements of Section 5, Advances shall be made by the Bank upon telephonic or
facsimile request received from the Borrower, and confirmed in writing within
two Business Days, which request shall be received not later than 12:00 p.m.
(Pacific Standard Time) on the date specified for a Variable Rate Advance and
7:00 a.m. (Pacific Standard Time) two business days prior to the date specified
for a Eurocurrency Advance or a Cost of Funds Advance, each of which dates shall
be a Business Day. The rates for a Eurocurrency Advance or a Cost of Funds
Advance shall be set on the same Business Day as the request is received if
received by 7:00 a.m. and on the next Business Day if received after 7:00 a.m..
Requests for Advances received after such time may, at the Bank's option, be
deemed to be a request for an Advance to be made on the next succeeding Business
Day for a Variable Rate Advance and the third succeeding Business Day for a
Eurocurrency Advance or a Cost of Funds Advance.
2.3 Repayment: On the Expiration Date, the Borrower hereby promises and
agrees to pay to the Bank in full the aggregate unpaid principal amount of all
Advances then outstanding, together with all accrued and unpaid interest
thereon, provided, however, that any Advance denominated in Dollars must be
repaid in Dollars and any Advance denominated in an Alternate Currency must be
repaid in the same Alternate Currency.
2.4 Interest on Advances: Interest shall accrue from the date of each
Advance under the Line of Credit at one of the following rates, as quoted by the
Bank and as elected by the Borrower pursuant to paragraph 2.05 or paragraph 2.06
below:
(a) Variable Rate Advances: For Advances denominated in
Dollars, a variable rate per annum equivalent to an index for a variable
interest rate which is quoted, published or announced from time to time by the
Bank as its reference rate and as to which loans may be made by the Bank at,
below or above such reference rate (the "Reference Rate") plus .50% (the
"Variable Rate"). Interest shall be adjusted concurrently with any change in the
Reference Rate. An Advance which bears interest at the Variable Rate is
hereinafter referred to as a "Variable Rate Advance".
(b) Eurocurrency Advances: For Advances denominated in Dollars
or in Alternate Currency, a fixed rate quoted by the Bank for one, three, six,
nine or twelve months or for such other period of time that the Bank may quote
and offer (provided that any such period of time does not extend beyond the
Expiration Date) [the "Eurocurrency Interest Period"] for Advances in the
minimum amount of $500,000 and in $100,000 increments thereafter. Such interest
rate shall be a percentage, rounded upward to the nearest one-hundredth of one
percent, equivalent to 2.50% in excess of the Bank's Eurocurrency Rate for
Dollars or such Alternate Currency which is that rate determined by the Bank's
Treasury Desk as being the approximate rate at which the Bank could purchase
Dollars or Alternate Currency deposits in an amount approximately equal to the
amount of the relevant Advance and for a period of time approximately equal to
the relevant Eurocurrency Interest Period (adjusted for any and all assessments,
surcharges and reserve requirements pertaining to the purchase by the Bank of
such Alternate Currency deposits [the "Eurocurrency Rate"]. An Advance which
bears interest at the Eurocurrency Rate is hereinafter referred to as the
"Eurocurrency Advance".
(c) Cost of Funds Advances. For Advances denominated in
Dollars, the Bank hereby agrees to make Advances to the Borrower, at Borrower's
election, at a fixed rate quoted by Bank in its sole discretion for each Advance
(the "Cost of Funds Rate") and for such period of time that the Bank may quote
and offer, provided that any such period of time shall be for at least ____ days
and provided further that any such period of time does not extend beyond the
Expiration Date (the "Cost of Funds Interest Period") for Advances in the
minimum amount $500,000 and in $100,000 increments thereafter. Advances based
upon the Cost of Funds Rate are hereinafter referred to as "Cost of Funds
Advances". Eurocurrency Advances and Cost of Funds Advances are sometimes
hereinafter referred to as a "Fixed Rate Advance".
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Interest on Variable Rate Advances and Cost of Funds Advances
shall be paid in Dollars in monthly installments commencing on the first day of
the month following the date of the first such Advance and continuing on the
first day of each month thereafter.
Interest on any Eurocurrency Advance shall be paid on the last
day of the Eurocurrency Interest Period pertaining to such Eurocurrency Advance
and shall be paid in Dollars or in the relevant Alternate Currency as the case
may be. The Borrower further promises and agrees to pay the Bank interest on any
Eurocurrency Advance with an Eurocurrency Interest Period in excess of 90 days
on a quarterly basis (i.e., on the last day of each 90-day period occurring in
such Eurocurrency Interest Period) and on the last day of the relevant
Eurocurrency Interest Period.
If interest is not paid as and when it is due, it shall be
added to the principal, become and be treated as a part thereof, and shall
thereafter bear like interest.
2.5 Notice of Election to Adjust Interest Rate: The Borrower may elect
that interest on a Fixed Rate Advance shall continue to accrue at a newly quoted
Eurocurrency Rate or Cost of Funds Rate; provided, however, that such notice
shall be received by the Bank no later than 7:00 a.m. two business days prior to
the last day of the Eurocurrency Interest Period for a Eurocurrency Advance and
1:00 p.m. one business day prior to the last day of a Cost of Funds Interest
Period for a Cost of Funds Advance. Such notice may be by telephone if confirmed
in writing by telecopy with the original of such writing deposited in the US
mail or with an air courier on the same day. The Bank shall not incur any
liability to the Borrower in acting upon any telephonic notice referred to above
that the Bank believes in good faith to have been given by a duly authorized
officer or other person authorized to act on behalf of the Borrower and upon any
borrowing, Redenomination or continuation by the Bank in accordance with this
Agreement pursuant to any telephonic notice, the Borrower shall have effected
the borrowing, redenomination or continuation of Advances hereunder. The
Borrower may elect that interest on a Fixed Rate Advance shall accrue at the
Variable Rate; provided, however, that such notice shall be received by the Bank
no later than one business day prior to the last day of the Interest Period
pertaining to such Fixed Rate Advance, and provided further, however, that such
Fixed Rate Advance shall be in Dollars or Redenominated in Dollars pursuant to
the terms of Section 2.06. If the Bank shall not have received notice (as
prescribed herein) of Borrower's election that interest on any Fixed Rate
Advance shall continue to accrue at the newly quoted Eurocurrency Rate or Cost
of Funds Rate or Variable Rate as the case may be, the Borrower shall be deemed
to have elected that interest thereon shall be adjusted to accrue at the
Variable Rate then in effect and any Alternate Currency shall be Redenominated
in Dollars.
2.6 Redenomination of Advances:
The Borrower may, upon notice given to the Bank at least four
Business Days prior to the date of the proposed Redenomination, request that a
Eurocurrency Advance be Redenominated from Dollars into an Alternate Currency or
from an Alternate Currency into Dollars or another Alternate Currency; provided,
however, that any Redenomination shall be made on, and only on, the last day of
an Interest Period for such Advances. Each such notice of request of a
Redenomination ( "Notice of Redenomination") shall be by telecopier, telex or
cable, confirmed immediately in writing, or may be by telephone if confirmed in
writing by telecopy with the original of such writing deposited in the US mail
or with an air courier on the same day, and the Bank shall not incur any
liability to the Borrower in acting upon any telephonic notice referred to above
that the Bank believes in good faith to have been given by a duly authorized
officer or other person authorized to act on behalf of the Borrower and upon any
borrowing, Redenomination or continuation by the Bank in accordance with this
Agreement pursuant to any telephonic notice, the Borrower shall have effected
the borrowing, redenomination or continuation of Advances hereunder, specifying
(i) the Eurocurrency Advance(s) to be Redenominated, (ii) the date of the
proposed Redenomination, (iii) the Alternate currency into which such Advances
are to be Redenominated, and (iv) the duration of the Interest Period for such
Advances upon being so Redenominated. In the case of a Notice of Redenomination
which requests a Redenomination of Advances into an Alternate Currency, such
Redenomination is subject to confirmation by Bank not later than the third
Business Day before the requested date of such Redenomination that such Bank
agrees to such Redenomination. which confirmation shall be notified to the
Borrower. If no confirmation is provided the Redenomination will not occur. Each
Advance so requested to be Redenominated will be Redenominated, on the date
specified therefor in such Notice of Redenomination, into an equivalent amount
thereof in the currency requested in such Notice of Redenomination, such
equivalent amount to be determined on such date in accordance with Section 2.13,
and, upon being so Redenominated, will have an initial Interest Period as
requested in such Notice of Redenomination.
2.7 Prepayment:
(a) The Borrower may prepay any Advance in whole or in part,
at any time and without penalty, provided, however, that: (i) any partial
prepayment shall first be applied, at the Bank's option, to accrued and unpaid
interest and next to the outstanding principal balance; and (ii) during any
period of time in which interest is accruing on any Advance on the basis of the
Eurocurrency Rate or
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the Cost of Funds Rate, no prepayment shall be made except on a day which is the
last day of the Interest Period pertaining thereto provided, however, if the
whole or any part of any Fixed Rate Advance is prepaid by reason of acceleration
or otherwise, the Borrower shall, upon the Bank's request, promptly pay to and
indemnify the Bank for all costs and any loss actually incurred by the Bank,
excluding loss of profit on any margin, but including any loss resulting from
the re-employment of funds, sustained by the Bank as a consequence of such
prepayment, and provided further, that any prepayment hereunder shall not be
deemed to be an event of default.
(b) If, on the last day of any Interest Period, the equivalent
in Dollars of the aggregate principal amount of all Eurocurrency Advances then
outstanding when combined with the aggregate principal amount of all Variable
Rate Advances and Cost of Funds Advances then outstanding exceeds the Line of
Credit, the Borrower shall on such last day prepay an aggregate principal amount
of such Advances to the Bank in an amount at least equal to such excess, with
accrued interest to the date of such prepayment on the principal amount prepaid.
2.8 Indemnification for Eurocurrency Rate and Cost of Funds Rate Costs:
During any period of time in which interest on any Advance is accruing on the
basis of the Eurocurrency Rate or the Cost of Funds Rate, the Borrower shall,
upon the Bank's written request, which request shall explain in reasonable
detail the reason for such costs or payments, promptly pay to and reimburse the
Bank for all costs incurred and payments made by the Bank by reason of any
future assessment, reserve, deposit or similar requirement or any surcharge, tax
or fee imposed upon the Bank or as a result of the Bank's compliance with any
directive or requirement of any regulatory authority pertaining or relating to
the Alternate Currency or Dollars or cost of funds used by the Bank in quoting
and determining the Eurocurrency Rate or the Cost of Funds Rate under this
Agreement. Bank shall use its best efforts to provide Borrower, in advance, with
an estimate of any such costs which may potentially be incurred hereunder.
2.9 Eurocurrency Rate or Cost of Funds Rate Infeasible: In the event
that the Bank shall at any time determine that the accrual of interest on the
basis of the Eurocurrency Rate or the Cost of Funds Rate (i) is infeasible at
the time of any borrowing, continuation or Redenomination because the Bank is
unable to determine the Eurocurrency Rate or Cost of Funds Rate due to the
unavailability of Dollars or Alternate Currency deposits, contracts or time
deposits in an amount approximately equal to the amount of the relevant Advance
and for a period of time approximately equal to relevant Interest Period or (ii)
is or has become unlawful or infeasible by reason of the Bank's compliance with
any new law, rule, regulation, guideline or order, or any new interpretation of
any present law, rule, regulation, guideline or order, then the Bank shall give
telephonic notice thereof (confirmed in writing) to the Borrower, in which event
such Fixed Rate Advance shall be immediately prepaid but then may be converted
or Redenominated into a Variable Rate Advance at the election of Borrower.
2.10 Failure to Borrow: In the case of any Fixed Rate Advance, the
Borrower shall indemnify Bank against any loss, cost or expense incurred by Bank
as a result of any failure to borrow on the date specified for such Fixed Rate
Advance (other than as a result of Bank's failure to make funds available for
such Advance), including, without limitation, any loss (excluding loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by Bank to fund such Fixed Rate
Advance to be made by Bank when such Fixed Rate Advance is not made on such
date.
2.11 Computations and Payments: Interest on any Advance shall be
computed on the basis of 360 days per year, but charged on the actual number of
days elapsed. Whenever any payment hereunder shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of interest; provided, however, if such extension would
cause payment of interest on or principal of Eurocurrency Advances to be made in
the next following calendar month, such payment shall be made on the immediately
preceding Business Day.
2.12 Taxes:
(a) Any and all payments by the Borrower shall be made
hereunder free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, taxes imposed on the Bank's income,
and franchise taxes imposed on it, by the jurisdiction under the laws of which
Bank is organized or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder (i) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.12) the Bank receives an amount equal to the sum it would have
received had
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no such deductions been made, (ii) Borrower shall make such deductions and (iii)
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law. Bank shall use its best
efforts to advise Borrower of any taxes or levies to the best of Bank's
knowledge thereof.
(b) In addition, Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment or registration of, or otherwise
with respect to, this Agreement (hereinafter referred to as "Other Taxes").
(c) Borrower will indemnify Bank for the full amount of Taxes
or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed
by any jurisdiction on amounts payable under this Section 2.12) paid by Bank and
any liability (including penalties, interest and expenses) arising therefrom or
with respect thereto, other than liabilities arising from Bank's gross
negligence or willful misconduct, whether or not such Taxes or Other Taxes were
correctly or legally asserted. This indemnification shall be made within 30 days
from the date Bank makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower will furnish to the Bank at its address referred to hereinbelow, the
original or a certified copy of a receipt evidencing payment thereof. If no
taxes are payable in respect of any payment hereunder, Borrower will furnish to
the Bank at such address, a certificate from each appropriate taxing authority,
or an opinion of counsel acceptable to the Bank, in either case stating that
such payment is exempt from or not subject to Taxes.
(e) To the extent that any Taxes were not lawfully payable,
any recovery ultimately received by the Bank in respect of any such Taxes shall
be refunded to the Borrower to the extent of the applicable indemnification
payment.
(f) Bank agrees that, upon receiving written notice from
Borrower, Bank shall take all such actions as are reasonably necessary to enable
the Borrower to pay all Taxes in a timely manner and to claim such exemptions as
the Bank may be entitled to claim in respect of all or any portion of any Taxes
which are otherwise required to be paid or deducted or withheld pursuant to this
Section 2.12 in respect of any payments under this Agreement.
(g) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 2.12 shall survive the payment in full of principal
and interest hereunder.
2.13 Currency Equivalents: For purposes of the provisions of this
Section 2, (i) the equivalent in Dollars of any Alternate Currency shall be
determined by using the quoted spot rate at which Bank's principal office in Los
Angeles offers to exchange Dollars for such Alternate Currency at 9:00 A.M. (Los
Angeles time) two Business Days prior to the date on which such equivalent is to
be determined, (ii) the equivalent in any Alternate Currency of any other
Alternate Currency shall be determined by using the quoted spot rate at which
Bank's principal office in Los Angeles offers to exchange such Alternate
Currency for the equivalent in Dollars of such other Alternate Currency at 9:00
A.M. (Los Angeles time) two Business Days prior to the date on which such
equivalent is to be determined, and (iii) the equivalent in any Alternate
Currency of Dollars shall be determined by using the quoted spot rate at which
Bank's principal office in Los Angeles offers to exchange such Alternate
Currency for Dollars at 9:00 A.M. (Los Angeles time) two Business Days prior to
the date on which such equivalent is to be determined. Except as specified in
Section 1.04 , the equivalent in Dollars of each Eurocurrency Rate Advance made
in an Alternative Currency shall be recalculated hereunder on each date that it
shall be necessary to determine the unused portion of Bank's Line of Credit or
any or all Advance or Advances outstanding on such date.
2.14 Line Account:
(a) The Bank shall maintain on its books a record of account
in which the Bank shall make entries for each Advance and such other debits and
credits as shall be appropriate in connection with the Line of Credit (the "Line
Account"). The Bank shall provide the Borrower with a monthly statement of the
Borrower's Line Account upon the Borrower's request therefor from time to time,
which statement shall be considered to be correct and conclusively binding on
the Borrower unless the Borrower notifies the Bank to the contrary within 30
days after the Borrower's receipt of any such statement which it deems to be
incorrect.
(b) The Borrower hereby authorizes the Bank, if and to the
extent payment owed to the Bank under the Line of Credit is not made when due,
to charge, from time to time, against any or all of the Borrower's deposit
accounts with the Bank any amount so due.
(c) If any payment required to be made by the Borrower
hereunder becomes due and payable on a day other than a Business Day, the due
date thereof shall be extended to the next succeeding Business Day and interest
thereon shall be payayble at the
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then applicable rate during such extension. All payments required to be made
hereunder shall be made to the office of the Bank designated for the receipt of
notices herein or such other office as Bank shall from time to time designate.
2.15 Late Payment: In addition to any other rights the Bank may have
hereunder, if any payment of principal (other than a principal payment due
pursuant to Section 2.03) or interest, or any portion thereof, under this
Agreement is not paid when due, a late payment charge equal to five percent (5%)
of such past due payment may be assessed and shall be immediately payable.
2.16 Maximum Outstanding Advances. Notwithstanding anything herein to
the contrary, outstanding Advances under the Line of Credit when combined with
outstanding Advances under that certain Accounts Receivable Credit Agreement
dated of even date herewith and by and between Bank and Borrower may not exceed
$13,000,000.
SECTION 3
COLLATERAL
3.01 The Collateral: To secure payment and performance of all the
Borrower's Obligations under this Agreement and all other liabilities, loans,
guarantees, covenants and duties owed by the Borrower to the Bank, whether or
not evidenced by this or by any other agreement, absolute or contingent, due or
to become due, now existing or hereafter and howsoever created, the Borrower
hereby grants the Bank a security interest in and to all of the following
property:
(a) All goods now owned or hereafter acquired by the Borrower
or in which the Borrower now has or may hereafter acquire any interest,
including, but not limited to, all machinery, equipment, furniture,
furnishings, fixtures, tools, supplies and motor vehicles of every kind
and description, and all additions, accessions, improvements,
replacements and substitutions thereto and thereof.
(b) Bank agrees to release its security interest in any
equipment, fixtures, leasehold improvements, or other property if
within ninety (90) days after Borrower acquires title to such property,
Borrower finances such property pursuant to either (i) a sale and
leaseback transaction or (ii) a debt financing transaction in an amount
not to exceed the purchase price of, and secured by a security interest
in such property.
(c) All inventory now owned or hereafter acquired by the
Borrower, including, but not limited to, all raw materials, work in
process, finished goods, merchandise, parts and supplies of every kind
and description, including inventory temporarily out of the Borrower's
custody or possession, together with all returns on accounts.
(d) All accounts, contract rights and general intangibles now
owned or hereafter created or acquired by the Borrower, including, but
not limited to, all receivables, goodwill, trademarks, trade styles,
trade names, patents, patent applications, software, customer lists and
business records.
(e) All documents, instruments and chattel paper now owned or
hereafter acquired by the Borrower.
(f) All monies, deposit accounts, certificates of deposit and
securities of the Borrower now or hereafter in the Bank's or its
agents' possession.
The Bank's security interest in the Collateral shall be a continuing
lien and shall include the proceeds and products of the Collateral including,
but not limited to, the proceeds of any insurance thereon.
SECTION 4
CONDITIONS OF LENDING
4.1 Conditions Precedent to the Initial Advance: The obligation of the
Bank to make the initial Advance and the first extension of credit to or on
account of the Borrower hereunder is subject to the conditions precedent that
the Bank shall have received before the date of such initial Advance and such
first extension of credit all of the following, in form and substance
satisfactory to the Bank:
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(a) Evidence that the execution, delivery and performance by
the Borrower of this Agreement and any document, instrument or agreement
required hereunder have been duly authorized.
(b) Such other evidence as the Bank may request to establish
the consummation of the transaction contemplated hereunder and compliance with
the conditions of this Agreement.
4.2 Conditions Precedent to All Advances: The obligation of the Bank to
make each Advance and each other extension of credit to or on account of the
Borrower (including the initial Advance and the first extension of credit) shall
be subject to the further conditions precedent that, on the date of each Advance
or each extension of credit and after the making of such Advance or extension of
credit:
(a) The Bank shall have received such supplemental approvals,
opinions or documents as the Bank may reasonably request.
(b) The representations contained in Section 5 and in any
other document, instrument or certificate delivered to the Bank hereunder are
true, correct and complete.
(c) No event has occurred and is continuing which constitutes,
or with the lapse of time or giving of notice or both, would constitute an Event
of Default.
(d) The security interest in the Collateral has been duly
authorized, created and perfected with first priority, assuming Bank has timely
filed and taken all actions necessary or desirable to perfect and protect such
security, and is in full force and effect.
The Borrower's acceptance of the proceeds of any Advance or the
Borrower's execution of any document or instrument evidencing or creating any
Obligation hereunder shall be deemed to constitute the Borrower's representation
and warranty that all of the above statements are true and correct.
SECTION 5
REPRESENTATIONS AND WARRANTIES
The Borrower hereby makes the following representations and warranties to the
Bank, which representations and warranties are continuing:
5.01 Status: The Borrower is a corporation duly organized and validly
existing under the laws of the State of Delaware and is properly licensed and is
qualified to do business and in good standing in, and, where necessary to
maintain the Borrower's rights and privileges, has complied with the fictitious
name statute of every jurisdiction in which the Borrower is doing business and
where failure to so qualify would have a material adverse effect.
5.02 Authority: The execution, delivery and performance by the Borrower
of this Agreement and any instrument, document or agreement required hereunder
have been duly authorized and do not and will not: (i) violate any provision of
any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect having application to the Borrower;
(ii) result in a breach of or constitute a default under any material indenture
or loan or credit agreement or other material agreement, lease or instrument to
which the Borrower is a party or by which it or its properties may be bound or
affected; (iii) require any consent or approval of its stockholders or violate
any provision of its certificate of incorporation.
5.03 Legal Effect: This Agreement constitutes, and any instrument,
document or agreement required hereunder when delivered hereunder will
constitute, legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms.
5.04 Fictitious Trade Styles: There are no fictitious trade styles used
by the Borrower in connection with its business operations. The Borrower shall
notify the Bank within 30 days of effecting any change in the matters described
hereinor prior to using any other fictitious trade style at any future date,
indicating the trade style and state(s) of its use.
5.05 Financial Statements: All financial statements, information and
other data which may have been or which may hereafter be submitted by the
Borrower to the Bank are true, accurate and correct and have been or will be
prepared in accordance with generally accepted accounting principles
consistently applied and accurately represent the financial condition or, as
applicable, the other information disclosed therein. Since the most recent
submission of such financial information or data to the Bank, the Borrower
represents and
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warrants that no material adverse change in the Borrower's financial condition
or operations has occurred which has not been fully disclosed to the Bank in
writing.
5.06 Litigation: Except as have been disclosed to the Bank in writing,
there are no actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or the Borrower's
properties in excess of $500,000 before any court or administrative agency
which, if determined adversely to the Borrower, would have a material adverse
effect on the Borrower's financial condition or operations or on the Collateral.
5.07 Title to Assets: The Borrower has good and marketable title to all
of its assets (including, but not limited to, the Collateral) and the same are
not subject to any security interest, encumbrance, lien or claim of any third
person except for Permitted Liens.
5.08 ERISA: If the Borrower has a pension, profit sharing or retirement
plan subject to ERISA, such plan has been and will continue to be funded in
accordance with its terms and otherwise complies with and continues to comply
with the requirements of ERISA.
5.09 Taxes: The Borrower has filed all tax returns required to be filed
and paid all taxes shown thereon to be due, including interest and penalties,
other than such taxes which are currently payable without penalty or interest or
those which are being duly contested in good faith.
5.10 Environmental Compliance: The Borrower has implemented and
complied in all material respects with all applicable federal, state and local
laws, ordinances, statutes and regulations with respect to hazardous or toxic
wastes, substances or related materials, industrial hygiene or environmental
conditions. There are no suits, proceedings, claims or disputes pending or, to
the knowledge of the Borrower, threatened against or affecting the Borrower or
its property claiming violations of any federal, state or local law, ordinance,
statute or regulation relating to hazardous or toxic wastes, substances or
related materials.
SECTION 6
COVENANTS
The Borrower covenants and agrees that, during the term of this Agreement, and
so long thereafter as the Borrower is indebted to the Bank under this Agreement,
the Borrower will, unless the Bank shall otherwise consent in writing:
6.01 Preservation of Existence; Compliance with Applicable Laws:
Maintain and preserve its existence and all rights and privileges now enjoyed;
not liquidate or dissolve, merge or consolidate with or into, or acquire any
other business organization; notwithstanding the foregoing Borrower may
liquidate or dissolve, or enter into any consolidation, merger, partnership,
joint venture or other combination, acquire any other business organization, or
acquire all or substantially all of the assets of any other person
(collectively, an "Acquisition"), so long as Borrower is in compliance with the
covenants contained in Section 6.14 immediately after such Acquisition; and
conduct its business and operations in accordance with all applicable laws,
rules and regulations.
6.02 Maintenance of Insurance: Maintain insurance in such amounts and
covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which the
Borrower operates and maintain such other insurance and coverages as may be
required by the Bank. All such insurance shall be in form and amount and with
companies satisfactory to the Bank. With respect to insurance covering
properties in which the Bank maintains a security interest or lien, such
insurance shall name the Bank as loss payee pursuant to a loss payable
endorsement satisfactory to the Bank and shall not be altered or canceled except
upon 10 days' prior written notice to the Bank. Upon the Bank's request, the
Borrower shall furnish the Bank with the original policy or binder of all such
insurance.
6.03 Maintenance of Collateral and Other Properties: Except for
Permitted Liens, keep and maintain the Collateral free and clear of all levies,
liens, encumbrances and security interests (including, but not limited to, any
lien of attachment, judgment or execution) and defend the Collateral against any
such levy, lien, encumbrance or security interest; comply with all laws,
statutes and regulations pertaining to the Collateral and its use and operation;
execute, file and record such statements, notices and agreements, take such
actions and obtain such certificates and other documents as necessary to
perfect, evidence and continue the Bank's security interest in the Collateral
and the priority thereof; maintain accurate and complete records of the
Collateral which show all sales, claims and allowances; and properly care for,
house, store and maintain the Collateral in good condition, free of misuse,
abuse and deterioration, other than normal wear and tear. The Borrower shall
also maintain and preserve all its properties in good working order and
condition in accordance with the general practice of other businesses of similar
character and size, ordinary wear and tear excepted.
6.04 Payment of Obligations and Taxes: Make timely payment of all
assessments and taxes and all of its liabilities and obligations including, but
not limited to, trade payables, unless the same are being contested in good
faith by appropriate proceedings with
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the appropriate court or regulatory agency. For purposes hereof, the Borrower's
issuance of a check, draft or similar instrument without delivery to the
intended payee shall not constitute payment.
6.05 Inspection Rights: At any reasonable time and from time to time,
permit the Bank or any representative thereof to examine and make copies of the
records and visit the properties of the Borrower and discuss the business and
operations of the Borrower with any employee or representative thereof. If the
Borrower shall maintain any records (including, but not limited to, computer
generated records or computer programs for the generation of such records) in
the possession of a third party, the Borrower hereby agrees to notify such third
party to permit the Bank free access to such records at all reasonable times and
to provide the Bank with copies of any records which it may request, at the
Borrower's expense, limited to $20,000 or at Bank's expense, the amount of which
shall be payable within five (5) days of written notice. In addition, the Bank
may, at any reasonable time and from time to time, conduct inspections and
audits of the Collateral and the Borrower's accounts payable, the cost and
expenses of which shall be paid by the Borrower to the Bank upon five (5) days
prior written notice.
6.06 Reporting and Certification Requirements: Deliver or cause to be
delivered to the Bank in form and detail satisfactory to the Bank:
(a) Not later than 90 days after the end of each of the
Borrower's fiscal years, a copy of (i) the annual audited financial
report of the Borrower for such year prepared by a firm of certified
public accountants reasonably acceptable to Bank, and (ii) the
Borrower's Form 10-K filed with the Securities Exchange Commission and
(iii) the Borrower's consolidating balance sheet and income statement
for such year; and, not later than 60 days after the end of each of the
Borrower's fiscal years, a copy of the Borrower's projected balance
sheet and income statement for the fiscal year then in effect.
(b) Not later than 45 days after the end of each of the
Borrower's first three fiscal quarters, a copy of the Borrower's Form
10-Q filed with the Securities Exchange Commission and the Borrower's
consolidating balance sheet and income statement
(c) Concurrently with the delivery of the financial reports
required hereunder, a compliance certificate in substantially the form
attached hereto as Exhibit "A", showing the calculations which would
demonstrate compliance with all of the financial covenants contained
herein.
(d) Promptly upon the Bank's request, such other information
pertaining to the Borrower, the Collateral or any guarantor hereunder
as the Bank may reasonably request.
6.07 Payment of Dividends: Not declare or pay any dividends on any
class of stock now or hereafter outstanding except (i) dividends payable solely
in the Borrower's capital stock, or (ii) dividends approved by Bank.
6.08 Redemption or Repurchase of Stock: Not redeem or repurchase in
excess of 5% per year any class of the Borrower's stock now or hereafter
outstanding without prior written Bank approval.
6.09 Additional Indebtedness: Not, after the date hereof, create, incur
or assume, directly or indirectly, any additional Indebtedness other than (i)
indebtedness owed or to be owed to the Bank or (ii) indebtedness to trade
creditors incurred in the ordinary course of the Borrower's business or (iii)
Permitted Indebtedness.
6.10 Loans: Not make any loans or advances or extend credit to any
third person, including, but not limited to, directors, officers, shareholders,
partners, employees, affiliated entities and subsidiaries of the Borrower,
except for (i) credit extended in the ordinary course of the Borrower's business
as presently conducted and (ii) Permitted Investments.
6.11 Liens and Encumbrances: Not create, assume or permit to exist any
security interest, encumbrance, mortgage, deed of trust, or other lien
(including, but not limited to, a lien of attachment, judgment or execution)
affecting any of the Borrower's properties, or execute or allow to be filed any
financing statement or continuation thereof affecting any of such properties,
except for Permitted Liens or as otherwise provided in this Agreement.
6.12 Transfer Assets: Except for an amount not exceeding in the
aggregate $100,000 in any fiscal year, not, after the date hereof, sell,
contract for sale, convey, transfer, assign, lease or sublet, any of its assets
(including, but not limited to, the Collateral) except in the ordinary course of
business as presently conducted by the Borrower and, then, only for fair and
reasonable consideration and (i) sales of inventory in the ordinary course of
business, (ii) transfer of assets in the ordinary course of business that have
become worn out or obsolete or that are promptly being replaced, (iii) transfers
of non-exclusive licenses and similar arrangements for the use of property of
Borrower made in the ordinary course of business, and (iv) transfers which
constitute liquidation of permitted investments.
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6.13 Change in Nature of Business: Not make any material change in its
financial structure or the nature of its business as existing or conducted as of
the date hereof.
6.14 Financial Condition: Maintain at all times:
(a) A minimum Effective Tangible Net Worth of at least
$31,000,000 plus 50% of net profit after taxes at the end of each
fiscal quarter.
(b) A ratio of Debt to Effective Tangible Net Worth of not
more than 1.5 to 1.
(c) A minimum working capital (defined as current assets minus
current liabilities) of not less than $5,000,000.
(d) A ratio of the sum of cash, cash equivalents and accounts
receivable to current liabilities of not less than .65 to 1.0
(e) A minimum net profit after tax of at least $1.00 at the
end of each fiscal quarter for the immediately preceding two (2) fiscal
quarters.
(f): Maintain a ratio of consolidated earnings before
interest, taxes, depreciation and amortization expense to the sum of
(i) interest expense and (ii) the current portion of long term Debt of
not less than 2.00:1.00 at the end of each fiscal quarter for the
immediately preceding 4 fiscal quarters..
6.15 Compensation of Employees: Compensate its employees for services
rendered at an hourly rate at least equal to the minimum hourly rate prescribed
by any applicable federal or state law or regulation.
6.16 Capital Expense: Not make any fixed capital expenditure,
including, but not limited to, incurring liability for leases which would be, in
accordance with generally accepted accounting principles, reported as capital
leases, or purchase any real or personal property in an aggregate amount
exceeding $15,000,000 in any one fiscal year, exclusive of acquisition
financing, provided, however, that Borrower may make capital expenditures in
connection with acquisitions in an amount up to $3,000,000 in any one fiscal
year without the Bank's approval.
6.17 Notice: Give the Bank prompt written notice of any and all (i)
Events of Default; (ii) litigation, arbitration or administrative proceedings to
which the Borrower is a party and in which the claim or liability exceeds
$500,000 or which affects the Collateral; and (iii) other matters which have
resulted in, or might result in a material adverse change in the Collateral or
the financial condition or business operations of the Borrower.
6.18 Environmental Compliance. The Borrower shall:
(a) Implement and comply in all material respects with all
applicable federal, state and local laws, ordinances, statutes and
regulations with respect to hazardous or toxic wastes, substances or
related materials, industrial hygiene or to environmental conditions.
(b) Not own, use, generate, manufacture, store, handle, treat,
release or dispose of any hazardous or toxic wastes, substances or
materials, except in material compliance with all applicable federal,
state and local laws, ordinances, statutes and regulations.
(c) Give prompt written notice of any discovery of or suit,
proceeding, claim, dispute, or filing respecting hazardous or toxic
wastes, substances or related materials.
(d) At all times indemnify and hold harmless Bank from and
against any and all liability arising out of Borrower's use,
generation, manufacture, storage, handling, treatment, or disposal by
Borrower of hazardous or toxic wastes, substances or materials at the
site.
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SECTION 7
EVENTS OF DEFAULT
Any one or more of the following described events shall constitute an event of
default (an "Event of Default") under this Agreement:
7.01 Non-Payment: The Borrower shall fail to pay any Obligations within
10 days of when due.
7.02 Performance Under This and Other Agreements: The Borrower shall
fail in any material respect to perform or observe any term, covenant or
agreement contained in this Agreement or in any document, instrument or
agreement evidencing or relating to any indebtedness of the Borrower (whether
such indebtedness is owed to the Bank or third persons), and any such failure
(exclusive of the payment of money to the Bank under this Agreement or under any
other instrument, document or agreement, which failure shall constitute and be
an Event of Default if not paid within 10 days of when due or when demanded to
be due) shall continue for more than 30 days after written notice from the Bank
to the Borrower of the existence and character of such Event of Default.
7.03 Representations and Warranties; Financial Statements: Any
representation or warranty made by the Borrower under or in connection with this
Agreement or any financial statement given by the Borrower or any guarantor
shall prove to have been incorrect in any material respect when made or given or
when deemed to have been made or given.
7.04 Insolvency: The Borrower or any guarantor shall: (i) become
insolvent or be unable to pay its debts as they mature; (ii) make an assignment
for the benefit of creditors or to an agent authorized to liquidate any
substantial amount of its properties and assets; (iii) file a voluntary petition
in bankruptcy or seeking reorganization or to effect a plan or other arrangement
with creditors; (iv) file an answer admitting the material allegations of an
involuntary petition relating to bankruptcy or reorganization or join in any
such petition; (v) become or be adjudicated a bankrupt; (vi) apply for or
consent to the appointment of, or consent that an order be made, appointing any
receiver, custodian or trustee, for itself or any of its properties, assets or
businesses; or (vii) any receiver, custodian or trustee shall have been
appointed for all or substantial part of its properties, assets or businesses
and shall not be discharged within 60 days after the date of such appointment.
7.05 Execution: Any writ of execution or attachment or any judgment
lien shall be issued against any property of the Borrower and shall not be
discharged or bonded against or released within 60 days after the issuance or
attachment of such writ or lien.
7.06 Suspension: The Borrower shall voluntarily suspend the transaction
of business or allow to be suspended, terminated, revoked or expired any permit,
license or approval of any governmental body necessary to conduct the Borrower's
business as now conducted.
7.07 Change in Ownership: There shall occur a sale, transfer,
disposition or encumbrance (whether voluntary or involuntary), or an agreement
shall be entered into to do so, with respect to more than 25% of the issued and
outstanding capital stock of the Borrower, if a corporation, or there shall
occur a change in any general partner or a change affecting the control of the
Borrower, if a partnership.
SECTION 8
REMEDIES ON DEFAULT
Upon the occurrence of any Event of Default, the Bank may, at its sole and
absolute election, without demand and only upon such notice as may be required
by law:
8.1 Acceleration: Declare any or all of the Borrower's indebtedness
owing to the Bank, whether under this Agreement or any other document,
instrument or agreement, immediately due and payable, whether or not otherwise
due and payable.
8.2 Cease Extending Credit: Cease making Advances or otherwise
extending credit to or for the account of the Borrower under this Agreement or
under any other agreement now existing or hereafter entered into between the
Borrower and the Bank.
8.3 Termination: Terminate this Agreement as to any future obligation
of the Bank without affecting the Borrower's obligations to the Bank or the
Bank's rights and remedies under this Agreement or under any other document,
instrument or agreement.
8.04 Protection of Security Interest: Make such payments and do such
acts as the Bank, in its sole judgment, considers necessary and reasonable to
protect its security interest or lien in the Collateral. The Borrower hereby
irrevocably authorizes the Bank to pay, purchase, contest or compromise any
encumbrance, lien or claim which the Bank, in its sole judgment, deems to be
prior or superior
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to its security interest. Further, the Borrower hereby agrees to pay to the
Bank, upon demand therefor, all reasonable expenses and expenditures (including
reasonable attorneys' fees) incurred in connection with the foregoing.
Notwithstanding the foregoing, Bank shall be responsible for its own gross
negligence or willful misconduct.
8.05 Foreclosure: Enforce any security interest or lien given or
provided for under this Agreement or under any security agreement, mortgage,
deed of trust or other document, in such manner and such order, as to all or any
part of the properties subject to such security interest or lien, as the Bank,
in its sole judgment, deems to be necessary or appropriate and the Borrower
hereby waives any and all rights, obligations or defenses now or hereafter
established by law relating to the foregoing. In the enforcement of its security
interest or lien, the Bank is authorized to enter upon the premises where any
Collateral is located and take possession of the Collateral or any part thereof,
together with the Borrower's records pertaining thereto, or the Bank may require
the Borrower to assemble the Collateral and records pertaining thereto and make
such Collateral and records available to the Bank at a place designated by the
Bank. The Bank may sell the Collateral or any portions thereof, together with
all additions, accessions and accessories thereto, giving only such notices and
following only such procedures as are required by law, at either a public or
private sale, or both, with or without having the Collateral present at the time
of the sale, which sale shall be on such terms and conditions and conducted in
such manner as the Bank determines in its sole judgment to be commercially
reasonable. Any deficiency which exists after the disposition or liquidation of
the Collateral shall be a continuing liability of the Borrower to the Bank and
shall be paid by the Borrower to the Bank within five (5) business days of
written notice.
8.6 Non-Exclusivity of Remedies: Exercise one or more of the Bank's
rights set forth herein or seek such other rights or pursue such other remedies
as may be provided by law, in equity or in any other agreement now existing or
hereafter entered into between the Borrower and the Bank, or otherwise.
8.07 Application of Proceeds: All amounts received by the Bank as
proceeds from the disposition or liquidation of the Collateral shall be applied
to the Borrower's indebtedness to the Bank as follows: first, to the costs and
expenses of collection, enforcement, protection and preservation of the Bank's
lien in the Collateral, including court costs and reasonable attorneys' fees,
whether or not suit is commenced by the Bank; next, to those costs and expenses
incurred by the Bank in protecting, preserving, enforcing, collecting,
liquidating, selling or disposing of the Collateral; next, to the payment of
accrued and unpaid interest on all of the Obligations; next, to the payment of
the outstanding principal balance of the Obligations; and last, to the payment
of any other indebtedness owed by the Borrower to the Bank. Any excess
Collateral or excess proceeds existing after the disposition or liquidation of
the Collateral will be returned or paid by the Bank to the Borrower.
SECTION 9
MISCELLANEOUS
9.01 Amounts Payable on Demand: If the Borrower shall fail to pay on
demand any amount so payable under this Agreement, the Bank may, at its option
and without any obligation to do so and without waiving any default occasioned
by the Borrower having so failed to pay such amount, create an Advance under the
Line of Credit in an amount equal to the amount so payable, which Advance shall
thereafter bear interest as provided under the Line of Credit.
9.02 Default Interest Rate: The Borrower shall pay the Bank interest on
any indebtedness or amount payable under this Agreement, from the date that such
indebtedness or amount became due or was demanded to be due until paid in full,
at a rate which is 3% in excess of the rate otherwise provided under this
Agreement.
9.03 Disposal of Invoices: All documents, schedules, invoices or other
papers received by the Bank from the Borrower may be destroyed or disposed of 6
months after receipt by the Bank, unless the Borrower requests in writing the
return thereof, which shall be done at the Borrower's expense.
9.04 Dispute Resolution. It is understood and agreed that upon the
request of any party to this agreement any dispute, claim, or controversy of any
kind, whether in contract or in tort, statutory or common law, legal or
equitable now existing or hereinafter arising between the parties in any way
arising out of, pertaining to or in connection with: (1) this Agreement, or any
related agreements, documents, or instruments, (2) all past and present loans,
credits, accounts, deposit accounts (whether demand deposits or time deposits),
safe deposit boxes, safekeeping agreements, guarantees, letters of credit, goods
or services, or other transactions, contracts or agreements of any kind, (3) any
incidents, omissions, acts, practices, or occurrences causing injury to either
party whereby the other party or its agents, employees or representatives may be
liable, in whole or in part, or (4) any aspect of the past or present
relationships of the parties, shall be resolved through a two-step dispute
resolution process administered by Judicial Arbitration & Mediation Services,
Inc. ("J-A-M-S") as follows:
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(a) Step I - Mediation: At the request of any party to the
dispute, claim or controversy of the matter shall be referred to the
nearest office of J-A-M-S for mediation, that is, an informal,
non-binding conference or conferences between the parties in which a
retired judge or justice for the J-A-M-S panel will seek to guide the
parties to a resolution of the case.
(b) Step II - Unsecured Contracts - Arbitration: Should any
dispute, claim or controversy remain unresolved at the conclusion of
the Step I Mediation Phase then all such remaining matters shall be
resolved by final and binding arbitration before a different judicial
panelist, unless the parties shall agree to have the mediator panelist
act as arbitrator. The hearing shall be conducted at a location
determined by the arbitrator in San Xxxx County and shall be
administered by and in accordance with the then existing Rules of
Practice and Procedure of Judicial Arbitration & Mediation Services,
Inc., and judgement upon any award rendered by the arbitrator may be
entered by any State or Federal Court having jurisdiction thereof. The
arbitrator shall determine which is the prevailing party and shall
include in the award that party's reasonable attorneys fees and costs.
This subparagraph (b) shall apply only if, at the time of the
submission of the matter to J-A-M-S, the dispute(s) or issue(s) do(es)
not arise out of a transaction(s) which is/are secured by real property
collateral or, if so secured, all parties consent to such submission.
As soon as practicable after selection of the arbitrator, the
arbitrator or his/her designated representative shall determine a
reasonable estimate of anticipated fees and costs of the Arbitrator,
and render a statement to each party setting forth that party's
pro-rata share of said fees and costs. Thereafter each party shall,
within 10 days of receipt of said statement, deposit said sum with the
Arbitrator. Failure of any party to make such a deposit shall result in
a forfeiture by the non-depositing party of the right to prosecute or
defend the claim which is the subject of the arbitration, but shall not
otherwise serve to xxxxx, stay or suspend the arbitration proceedings.
(c) Step II - Contracts Secured By Real Estate - Trial by
Court Reference [ss.638 (1)] Code of Civil Procedure): If the dispute,
claim or controversy is not one required or agreed to be submitted to
arbitration as provided by subparagraph (b) and has not been resolved
by Step I mediation, them any remaining dispute, claim or controversy
shall be submitted for determination by a trial on Order of Reference
conducted by a retired judge or justice from the panel of J-A-M-S
appointed pursuant to the provisions of California Code of Civil
Procedure ss.638(1) or any amendment, addition or successor section
thereto to hear the case and report a statement of decision thereon.
The parties intend this general reference agreement to be specifically
enforceable in accordance with said section. If this parties are unable
to agree upon a member of the J-A-M-S panel to act as referee then one
shall be appointed by the Presiding Judge of the county wherein the
hearing is to be held. The parties shall pay in advance, to the
referee, the estimated reasonable fees and costs of the reference, as
may be specified in advance by the referee. The parties shall initially
share equally, by paying their proportionate amount of the estimated
fees and costs of the reference. Failure of any party to make such a
fee deposit shall result in a forfeiture by the non-depositing party of
the right to prosecute or defend the cause(s) of action which is(are)
the subject of the reference, but shall not otherwise serve to xxxxx,
stay or suspend the reference proceeding.
(d) Provisional Remedies, Self Help and Foreclosure: No
provision of, or the exercise of any right(s) under subparagraph (b),
nor any other provision of this Dispute Resolution Provision, shall
limit the right of any party to exercise self help remedies such as set
off, to foreclose against any real or personal property collateral, or
obtain provisional or ancillary remedies such as injunctive relief or
the appointment of a receiver from any court having jurisdiction
before, during or after the pendency of any arbitration. At Bank's
option, foreclosure under a deed of trust or mortgage may be
accomplished either by exercise of power of sale under the deed of
trust or mortgage, or by judicial foreclosure. The institution and
maintenance of an action for provisional remedies pursuit of
provisional or ancillary remedies or exercise of self help remedies
shall not constitute a waiver of the right of any party, including the
plaintiff, to submit the controversy or claim to arbitration.
9.05 Waiver of Jury Trial. THE BORROWER AND THE BANK EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE
BORROWER AND THE BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
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9.06 Reliance: Each warranty, representation, covenant, obligation and
agreement contained in this Agreement shall be conclusively presumed to have
been relied upon by the Bank regardless of any investigation made or information
possessed by the Bank and shall be cumulative and in addition to any other
warranties, representations, covenants and agreements which the Borrower now or
hereafter shall give, or cause to be given, to the Bank.
9.07 Attorneys' Fees: Borrower shall pay to the Bank all costs and
expenses, including but not limited to reasonable attorneys fees, incurred by
Bank in connection with the administration, enforcement, or any refinancing or
restructuring in the nature of a "work-out", of this Agreement or any document,
instrument or agreement executed with respect to, evidencing or securing the
indebtedness hereunder.
9.08 Notices: All notices, payments, requests, information and demands
which either party hereto may desire, or may be required to give or make to the
other party hereto, shall be given or made to such party by hand delivery or
through deposit in the United States mail, postage prepaid, or by Western Union
telegram, addressed as set forth below or to such other address as may be
specified from time to time in writing by either party to the other.
To the Borrower To the Bank:
ELEXSYS INTERNATIONAL, INC. SANWA BANK CALIFORNIA
0000 Xxxxxxx Xxxxx Xxx Xxxx XXX
Xxx Xxxx, XX 00000 000 Xxxxxxx Xxxx.
Xxx Xxxx, XX 00000
Attn: Xxxxxx XxXxxxxxxxx Attn: Xxxxxxx X. Xxxxxx
Title: C.F.O. Vice President
with a copy to: With a copy to:
COOLEY GODWARD LLP SANWA BANK CALIFORNIA
Five Palo Alto Square Asset Based Financing Department
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000-0000 000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxx
9.09 Waiver: Neither the failure nor delay by the Bank in exercising
any right hereunder or under any document, instrument or agreement mentioned
herein shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder or under any other document, instrument or
agreement mentioned herein preclude other or further exercise thereof or the
exercise of any other right; nor shall any waiver of any right or default
hereunder, or under any other document, instrument or agreement mentioned
herein, constitute a waiver of any other right or default or constitute a waiver
of any other default of the same or any other term or provision.
9.10 Conflicting Provisions: To the extent the provisions contained in
this Agreement are inconsistent with those contained in any other document,
instrument or agreement executed pursuant hereto, the terms and provisions
contained herein shall control. Otherwise, such provisions shall be considered
cumulative.
9.11 Binding Effect; Assignment: This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Bank. The Bank may sell, assign or grant participation in all or
any portion of its rights and benefits hereunder. The Borrower agrees that, in
connection with any such sale, grant or assignment, the Bank may deliver to the
prospective buyer, participant or assignee financial statements and other
relevant information relating to the Borrower and any guarantor.
9.12 Jurisdiction: This Agreement, any notes issued hereunder, the
rights of the parties hereunder to and concerning the Collateral, and any
documents, instruments or agreements mentioned or referred to herein shall be
governed by and construed according to the laws of the State of California, to
the jurisdiction of whose courts the parties hereby submit.
9.13 Headings: The headings herein set forth are solely for the purpose
of identification and have no legal significance.
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9.14 Entire Agreement: This Agreement and all documents, instruments
and agreements mentioned herein constitute the entire and complete understanding
of the parties with respect to the transactions contemplated hereunder. All
previous conversations, memoranda and writings between the parties pertaining to
the transactions contemplated hereunder not incorporated or referenced in this
Agreement or in such documents, instruments and agreements are superseded
hereby.
9.1 Confidentiality Agreement. In handling any confidential information
Bank, and all employees and agents of Bank, including but not limited to
accountants, shall exercise the same degree of care that Bank exercises with
respect to its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Bank in connection with their
present or prospective business relations with Borrower; (ii) to prospective
transferees or purchasers of any interest in the loans, provided that they have
entered into a comparable confidentiality agreement in favor of Borrower and
have delivered a copy to Borrower; (iii) as required by law, regulations, rule
or order, subpoena, judicial order or similar order; (iv) as may be required in
connection with the examination, audit or similar investigation of Bank and (v)
as Bank may determine in connection with the enforcement of any remedies
hereunder. Confidential information hereunder shall not include information that
either: (a) is in the public domain or in the knowledge or possession of Bank
when disclosed to Bank, or becomes part of the public domain after disclosure to
Bank through no fault of Bank; or (b) is disclosed to Bank by a third party,
provided Bank does not have actual knowledge that such third party is prohibited
from disclosing such information.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first hereinabove written.
Borrower Bank:
SANWA BANK CALIFORNIA
ELEXSYS INTERNATIONAL, INC.
BY:________________________________ BY:________________________________
Name: Xxxxxx XxXxxxxxxxx Name: Xxxxxxx X. Xxxxxx
Title: C.F.O. Title: Vice President
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