EXHIBIT 10.38
THIRD MODIFICATION AGREEMENT
DATE: March 28, 2002
PARTIES: Borrower: WHITE ELECTRONIC DESIGNS CORPORATION,
an Indiana corporation
Lender: BANK ONE, NA, a national banking association with
its main office in Chicago, Illinois, successor by merger
to Bank One, Texas, N.A.
RECITALS:
A. Lender has extended to Borrower credit ("Loan") in the principal amount
of $12,000,000 pursuant to the Loan and Security Agreement, dated January 7,
2000 ("Loan Agreement"), and evidenced by the Promissory Note, dated June 30,
2000 ("Note"). The unpaid principal of the Loan as of the date hereof is $0.00.
Capitalized terms used herein and not otherwise defined shall have the meanings
given them in the Loan Agreement.
B. The Loan is secured by, among other things, the Mortgage, Security
Agreement, Assignment of Rents and Fixture Filing, dated January 7, 2000 ("Deed
of Trust"), by Borrower, as trustor, for the benefit of Lender, as beneficiary,
recorded on January 11, 2000, at Document No. 200002196, records of Xxxxx
County, Indiana. The agreements, documents, and instruments securing the Loan
and the Note are referred to individually and collectively as the "Security
Documents."
C. Lender and Borrower have executed and delivered previously the following
agreements ("Modifications") modifying the terms of the Loan, the Note, the Loan
Agreement, and/or the Security Documents: First Amendment to Loan and Security
Agreement dated as of June 30, 2000 and Second Amendment to Loan and Security
Agreement dated as of June 29, 2001. The Note, the Loan Agreement, the Security
Documents, any arbitration resolution, any environmental certification and
indemnity agreement, and all other agreements, documents, and instruments
evidencing, securing, or otherwise relating to the Loan, as modified in the
Modifications, are sometimes referred to individually and collectively as the
"Loan Documents." Hereinafter, "Note," "Loan Agreement," "Deed of Trust" and
"Security Documents" shall mean such documents as modified in the Modifications.
D. Unlimited Guaranties guaranteeing repayment of the Loan (the "Guarantee
Agreements") were executed and delivered to Lender by Electronic Designs, Inc.,
a Delaware corporation ("EDI"), and Panelview, Incorporated, an Oregon
corporation ("Panelview") (hereinafter EDI and Panelview together called
"Guarantors").
E. Administration of the Loan has been transferred by Lender from Dallas,
Texas to Phoenix, Arizona in the state where Borrower has its chief executive
office.
F. Borrower has requested that Lender modify the Loan and the Loan
Documents as provided herein. Lender is willing to so modify the Loan and the
Loan Documents, subject to the terms and conditions herein.
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Borrower and Lender agree as follows:
SECTION 1. ACCURACY OF RECITALS; ACKNOWLEDGEMENT.
1.1 Borrower acknowledges the accuracy of the Recitals.
1.2 Borrower hereby acknowledges that, as of December 31, 2001, based on
its Investment in Panelview in an amount in excess of $3,000,000, it was not in
compliance with Section 9.11 of the Loan Agreement (the "Covenant
Non-Compliance").
SECTION 2. MODIFICATION OF LOAN DOCUMENTS; OTHER AGREEMENTS.
2.1 The following definitions in Section 1.1 of the Loan Agreement are
hereby amended to read as follows:
"Borrowing Base" means, as of any date, an amount equal to the sum of:
(a) eighty percent (80%) of Eligible Accounts on such date, PLUS (b) the
lesser of (i) fifty percent (50%) of the value of Eligible Inventory
consisting of finished goods, PLUS twenty-five percent (25%) of the value
of Eligible Inventory consisting of raw materials, (ii) $4,000,000, or
(iii) the amount outstanding against Eligible Accounts, MINUS (c) the
Reserve.
"Collateral" means and includes all of each Borrower's, Panelview's
and EDI's now owned or hereafter acquired assets, whether tangible or
intangible, including without limitation all of each of Borrower's,
Panelview's and EDI's right, title and interest in and to each of the
following, wherever located and whether now existing or hereafter arising:
(a) all accounts, (b) all inventory, (c) all equipment, (d) all contract
rights, (e) all general intangibles, (f) all Intellectual Property, (g) all
deposit accounts, (h) all investment property, (i) all instruments, (j) all
chattel paper, (k) all goods, (l) all documents, (m) all insurance and
certificates of insurance pertaining to any and all items of Collateral,
(n) all files, correspondence, computer programs, tapes, disks and related
data processing software which contain information identifying or
pertaining to any of the Collateral or any Account Debtor or showing the
amounts thereof or payments thereon or otherwise necessary or helpful in
the realization thereon or the collection thereof, (o) all cash deposited
with Lender or any Affiliate thereof, and (p) any and all products and cash
and non-cash proceeds of the foregoing (including, but not limited to, any
claims to any items referred to in this definition and any claims against
third parties for loss of, damage to or destruction of any or
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all of the Collateral or for proceeds payable under or unearned premiums
with respect to policies of insurance) in whatever form.
"Committed Sum" means $8,000,000.
"Debt Service Coverage Ratio" means, for any period, the ratio of (i)
consolidated Net Income of Borrower before income taxes for such period,
plus interest expense and depreciation and amortization expenses for such
period, less Non-Financed Capital Expenditures for such period, to (ii)
principal and interest actually paid on Funded Indebtedness during such
period.
"Eligible Accounts" shall mean all accounts of each of Borrower,
Panelview and EDI which are deemed by Lender in the exercise of its sole
and absolute discretion to be eligible for inclusion in the calculation of
the Borrowing Base net of any and all interest, finance charges, sales tax,
fees, returns, discounts, claims, credits, charges, contra accounts,
exchange contracts or other allowances, offsets and rights of offset,
deductions, counterclaims, disputes, rejections, shortages or other
defenses and all credits owed or allowed by Borrower, Panelview or EDI, as
appropriate, upon any of their respective accounts and further reduced by
the aggregate amount of all reserves, limits and deductions provided for in
this definition and elsewhere in this Agreement. Eligible Accounts shall
not include the following:
(a) accounts which remain unpaid more than ninety (90) days past
their invoice dates;
(b) accounts which are not due and payable within thirty (30)
days after their invoice dates;
(c) accounts owing by a single Account Debtor if twenty percent
(20%) or more of the aggregate balance owing by said Account Debtor is
ineligible pursuant to clauses (a) or (b) above;
(d) accounts with respect to which the Account Debtor is an
Affiliate of Borrower, Panelview or EDI;
(e) accounts with respect to which the obligation of payment b
the Account Debtor is or may be conditional for any reason whatsoever
including, without limitation, accounts arising with respect to goods
that were (i) not sold on an absolute basis, (ii) sold on a xxxx and
hold sale basis, (iii) sold on a consignment sale basis, (iv) sold on
a guaranteed sale basis, (v) sold on a sale or return basis, or (vi)
sold on the basis of any other similar understanding;
(f) Canadian accounts in excess of an aggregate cap of
$1,500,000, and other accounts with respect to which the Account
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Debtor is not a resident or citizen of, or otherwise located in, the
continental United States of America, or with respect to which the
Account Debtor is not subject to service of process in the continental
United States of America, unless such accounts are backed in full by
irrevocable letters of credit or insurance in form and substance
satisfactory to Lender issued or confirmed by a domestic commercial
bank acceptable to Lender; provided, however, that such non-Canadian
accounts shall not exceed $2,500,000 in the aggregate;
(g) accounts in excess of $100,000 in the aggregate with respect
to which the Account Debtor is the United States of America or any
other federal governmental body unless such accounts are duly assigned
to Lender in compliance with all applicable governmental requirements
(including, without limitation, the Federal Assignment of Claims Act
of 1940, as amended, if applicable);
(h) accounts with respect to which Borrower, Panelview or EDI is
or may be liable to the Account Debtor for goods sold or services
rendered by such Account Debtor, but only to the extent of such
liability to such Account Debtor;
(i) accounts with respect to which the goods giving rise thereto
have not been shipped and delivered to and accepted as satisfactory by
the applicable Account Debtor or with respect to which the services
performed giving rise thereof have not been completed and accepted as
satisfactory by the Account Debtor thereon;
(j) accounts which are not invoiced within FIVE (5) DAYS after
the shipment and delivery to and acceptance by said Account Debtor of
the goods giving rise thereto or the performance of the services
giving rise thereto;
(k) accounts which are not subject to a first priority perfected
security interest in favor of Lender;
(l) that portion of an account balance owed by a single Account
Debtor which exceeds fifteen percent (15%) of total accounts otherwise
deemed eligible hereunder; and
(m) accounts that Lender, in its sole discretion, has determined
to be ineligible.
"Eligible Equipment" shall mean, as of any date of determination, all
equipment owned by and in the possession of Borrower, Panelview or EDI that
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Lender, in its sole and absolute discretion, deems to be eligible for
borrowing purposes.
"Eligible Inventory" means, as at any date of determination, all
inventory owned by and in the possession of Borrower, Panelview or EDI and
located in the United States of America that Lender, in its sole and
absolute discretion, deems to be eligible for borrowing purposes. Without
limiting the generality of the foregoing, unless otherwise agreed by
Lender, the following is not Eligible Inventory:
(a) work-in-process;
(b) finished goods which do not meet the specifications of the
purchase order for such goods;
(c) inventory which Lender determines, in its sole and absolute
discretion, to be unacceptable for borrowing purposes;
(d) inventory with respect to which Lender does not have a valid,
first priority and fully perfected security interest;
(e) inventory with respect to which there exists any Lien in
favor of any Person other than Lender;
(f) packaging and shipping materials, products and labels;
(g) inventory that is obsolete or returned or repossessed or used
goods taken in trade;
(h) inventory produced in violation of the Fair Labor Standards
Act, in particular provisions contained in Title 29 U.S.C. 215(a)(i);
and
(i) inventory located at a location for which Lender does not
have a valid landlord's or warehouseman's waiver or subordination on
terms and conditions acceptable to Lender in its sole discretion and
inventory located at any location other than those listed on SCHEDULE
5.1(q).
"Lender's Office" means that office of Lender located at 000 Xxxxx
Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx 00000, Attention: Commercial Banking
AZ1-1178 with a mailing address of Xxxx Xxxxxx Xxx 00, Xxxxxxx, Xxxxxxx
00000, Attention: Commercial Banking AZ1-1178, or such other office as
Lender may designate from time to time.
"Loans" means the Revolving Loan.
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"Notes" means the Revolving Note.
"Permitted Investments" means Investments of Borrower in: (a)
negotiable certificates of deposit issued by Lender, (b) any direct
obligation of the United States of America or any agency or instrumentality
thereof which has a remaining maturity at the time of purchase of not more
than one year and repurchase agreements relating to the same, (c) EDI,
which shall not exceed at any time outstanding the amount of availability
resulting from Collateral of EDI as shown on the most recent Borrowing Base
Report, and (d) Panelview, which shall not exceed $5,000,000 outstanding at
any time. The amount of the Investments that are outstanding to each of EDI
and Panelview shall be the remainder of (A) the sum of all disbursements
to, and other Investments by Borrower in, EDI or Panelview, as appropriate,
minus (B) all receipts by Borrower of accounts of EDI or Panelview, as
appropriate.
"Schedule of Equipment" means a schedule of all equipment of Borrower,
Panelview and EDI delivered by Borrower to Lender from time to time.
"Termination Date" means March 28, 2004.
2.2 Section 1.1 of the Loan Agreement is hereby amended by the deletion of
the following definition:
"Permitted Indebtedness"
2.3 Sections 2.4 and 2.5 of the Loan Agreement are hereby amended to read
in each case as follows:
Section 2.4 [Intentionally deleted.]
Section 2.5 [Intentionally deleted.]
2.4 Section 2.7 of the Loan Agreement is hereby amended to read as
follows:
Section 2.7 Mandatory Prepayment. Upon any sale by Borrower,
Panelview or EDI of any of its equipment, any and all amounts received
by Borrower, Panelview or EDI, as appropriate, as proceeds from the
sale of any such equipment shall be paid, promptly upon receipt by
Borrower, Panelview or EDI, to Lender, and shall be applied to the
Revolving Loan.
2.5 Section 3.1 of the Loan Agreement is hereby amended to read as
follows:
Section 3.1 Interest.
(a) Revolving Loan. Borrower shall pay interest on the unpaid
principal amount of the Revolving Loan at the rate(s) per annum set
forth in the Revolving Note in accordance with the terms of the
Revolving Note.
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(b) Default Rate. From and after the occurrence of an Event of
Default, the unpaid principal amount of the Obligations shall bear
interest until paid in full (or, if earlier, until such Event of
Default is cured or waived in writing by Lender) at a rate per annum
equal to the lesser of (A) the Maximum Rate, or (B) the Default Rate,
payable on demand.
(c) Computation of Interest. The interest rates provided for in
Section 3.1(a) shall be computed on the basis of a year of 360 days
and the actual number of days elapsed.
(d) Effective Interest Rate. Borrower agrees to an effective rate
of interest that is the rate stated above plus any additional rate of
interest resulting from any other charges in the nature of interest
paid or to be paid by or on behalf of Borrower, or any benefit
received or to be received by Lender, in connection with the Notes.
2.6 Section 3.2(a) of the Loan Agreement is hereby amended to read as
follows:
(a) Unused Facility Fee. As consideration for Lender's commitment
hereunder, Borrower shall pay to Lender an unused facility fee equal
to one fourth of one percent (0.25%) per annum of the average daily
unused portion of the Committed Sum in effect from time to time,
payable monthly in arrears. Such fee shall be payable on the first day
of each month and on the Termination Date.
2.7 Section 3.4(b) of the Loan Agreement is hereby amended to read as
follows:
(b) [Intentionally left blank].
2.8 Sections 6.2 and 6.4 of the Loan Agreement are hereby amended to read
as follows:
Section 6.2 Collection of Accounts.
(a) Upon the occurrence of an Event of Default, Borrower shall,
and shall cause EDI to, cause all moneys, checks, notes, drafts and
other payments relating to or constituting proceeds of accounts, or of
any other Collateral, to be forwarded to a Lockbox for deposit in (i)
the Collection Account, if such Lockbox is maintained pursuant to a
Lockbox agreement with Lender, and (ii) a Blocked Account, if such
Lockbox is maintained with a Collecting Bank pursuant to a Blocked
Account Agreement, in accordance with the procedures set out in the
corresponding Blocked Account Agreement. In particular, upon the
occurrence of an Event of Default, Borrower shall, and shall cause EDI
to, (i)
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advise each Account Debtor to address to a Lockbox specified by Lender
all remittances with respect to amounts payable on all accounts, and
(ii) stamp all invoices relating to any such amounts with a legend
satisfactory to Lender indicating that payment is to be made to
Borrower or EDI, as appropriate, via such specified Lockbox.
(b) Upon the occurrence of an Event of Default, Borrower shall
cause Panelview to cause all moneys, checks, notes, drafts and other
payments relating to or constituting proceeds of accounts, and of all
other Collateral provided by Panelview, to be deposited in, or
forwarded to, the Collection Account not less often than weekly. Upon
the occurrence of an Event of Default, Borrower shall cause Panelview
to cause all such proceeds to be deposited in a Blocked Account for
forwarding to the Collection Account.
(c) Upon the occurrence of an Event of Default, Borrower and
Lender shall (and Borrower shall cause EDI to) cause all balances in
each Blocked Account to be transmitted daily to the Collection Account
by wire transfer or depository transfer check or Automated Clearing
House transfer in accordance with the procedures set forth in the
corresponding Blocked Account Agreement. Deposits in the Collection
Account that represent proceeds of accounts of Borrower or of EDI
shall be credited, subject to final payment, to the payment of the
Obligations TWO DAYS after the date of actual receipt and deposit into
the Collection Account by Lender. Deposits in the Collection Account
that represent proceeds of accounts of Panelview shall be credited,
subject to final payment, to the payment of the Obligations on the
date of actual receipt and deposit into the Collection Account by
Lender. The delay in applying funds held in the Collection Account to
the Obligations shall in all respects be limited so that interest on
the Obligations is at all times less than interest calculated at the
Maximum Rate.
(d) Upon the occurrence of an Event of Default, Borrower shall,
and shall cause EDI and Panelview to, hold any payments which are
received by Borrower, EDI or Panelview (including any payment
evidenced by a promissory note or other instrument) in trust for
Lender. Borrower shall, and shall cause EDI and Panelview to, cause
all such payments to be (i) deposited in the Collection Account, or
(ii) delivered to Lender, as promptly as possible in the exact form
received, together with any necessary endorsements.
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Section 6.4 Disputes, Returns and Adjustments.
(a) Borrower shall, and shall cause Panelview and EDI to, provide
Lender with prompt written notice of amounts in excess of $100,000
that are in dispute with respect to any accounts.
(b) Borrower shall, and shall cause Panelview and EDI to, notify
Lender promptly of all returns and credits in respect of any account,
which notice shall specify the accounts affected and be included in
the Borrowing Base Certificate delivered to Lender in accordance with
SECTION 8.3(e). Borrower shall, and cause Panelview and EDI to, notify
Lender promptly of any pending return or credit in excess of $100,000,
and shall specify the account affected, the related Account Debtor and
the goods to be returned.
(c) Borrower, Panelview or EDI may, in the ordinary course of
business and prior to a Default or an Event of Default, grant any
extension of time for payment of any account or compromise, compound
or settle the same for less than the full amount thereof or release
wholly or partly any Person liable for the payment thereof or allow
any credit or discount whatsoever thereon; PROVIDED that (i) neither
Borrower, Panelview nor EDI shall taken any such action that results
in the reduction of more than five percent (5%) of the amount payable
with respect to any account or of more than $25,000 with respect to
all accounts of Borrower, Panelview or EDI, as appropriate, in any
fiscal year, and (ii) Borrower shall, and shall cause Panelview and
EDI to, promptly notify Lender (but not less often than ten (10) days
after the end of each month) of the amount of such adjustments and the
account(s) affected thereby.
2.9 Article VIII of the Loan Agreement is hereby amended to read as
follows:
ARTICLE VIII - FINANCIAL AND COLLATERAL REPORTING
So long as this Agreement shall be in effect or any of the Obligations
shall be outstanding, Borrower shall furnish to Lender:
Section 8.1 Financial Statements.
(a) Audited Year-End Statements. As soon as available, but in any
event within one hundred twenty (120) days after the end of each
fiscal year of Borrower, copies of the audited consolidated and
consolidating balance sheet of Borrower and its subsidiaries as of the
end of such fiscal year and the related consolidated and consolidating
audited statements of income, shareholders' equity and cash flow for
such fiscal year, in each
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case setting forth in comparative form the figures for the previous
year of Borrower and its subsidiaries and certified by independent
certified public accountants selected by Borrower and acceptable to
Lender. In addition on or before such date, Borrower shall provide
Lender with copies of all management reports received from its
certified public accountants.
(b) Quarterly Financial Statements. As soon as available, but in
any event within sixty (60) days after the end of each fiscal quarter
of Borrower, copies of the unaudited consolidated and consolidating
balance sheet of Borrower as of the end of such fiscal quarter and the
related unaudited consolidated and consolidating income statement and
statement of cash flow for Borrower for such fiscal quarter and for
the portion of the fiscal year of Borrower through such fiscal
quarter, certified by the chief financial officer of Borrower as
presenting fairly the financial condition and results of operations of
Borrower as of the date thereof and for the periods ended on such
date, subject to normal year end adjustments.
(c) Projected Financial Statements. As soon as available, but in
any event at least thirty (30) days prior to the end of each fiscal
year of Borrower, forecasted financial statements prepared by
Borrower, consisting of consolidated and consolidating balance sheets,
cash flow statements and income statements of Borrower, reflecting
projected borrowings hereunder and setting forth the assumptions on
which such forecasted financial statements were prepared, covering the
one-year period until the next fiscal year end.
All such financial statements shall be complete and correct in all
material respects and all such financial statements referred to in
clauses (a) and (b) shall be prepared in accordance with GAAP (except,
with respect to interim financial statements, for the omission of
footnotes) applied consistently throughout the periods reflected
therein.
Section 8.2 Compliance Certificate. Within sixty (60) days after the
end of each fiscal quarter of Borrower, a certificate of Borrower's
President or chief financial officer in the form of Exhibit B.
Section 8.3 Collateral Information and Reports.
(a) Schedules of Accounts. Within thirty (30) days after the end of
each month if there is an outstanding Revolving Loan balance and no
later than five (5) days prior to any advance, a Schedule of Accounts
listing all accounts of Borrower, Panelview and EDI as of the last
business day of such month setting forth (A)
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the name of each Account Debtor together with account balances
detailed by invoice number, amount (and any applicable rebate or
discount), invoice date and terms, (B) aging of all account setting
forth accounts thirty (30) days past the invoice date or less,
accounts over thirty (30) days but less than sixty-one (61) days past
the invoice date, accounts over sixty (60) days but less than
ninety-one (91) days past the invoice date, accounts over ninety days
but less than one hundred twenty-one (121) days past the invoice date
and accounts over one hundred twenty (120) days past the invoice date,
and (C) a reconciliation the Schedule of Accounts to the Borrowing
Base Certificate as of the most recent month end and Borrower's,
Panelview's and EDI's general ledger as of such month end.
(b) Schedules of Accounts Payable. Within thirty (30) days after
the end of each month if there is an outstanding Revolving Loan
balance and no later than five (5) days prior to any advance, a
statement of accounts payable of Borrower, Panelview and EDI as of the
last business day of such month setting forth (A) a detailed aged
trial balance of all of Borrower's, Panelview's and EDI's respective
accounts payable, specifying the name of and the balance due to each
creditor, and (B) a reconciliation to the schedule of accounts payable
delivered in respect of the next preceding month.
(c) Schedule of Inventory. Within thirty (30) days after the end
of each month if there is an outstanding Revolving Loan balance and no
later than five (5) days prior to any advance, (A) (i) a Schedule of
Inventory, based upon Borrower's, Panelview's and EDI's perpetual
inventory, as of the last business day of such month, itemizing and
describing the kind, type, quantity and location of all inventory of
Borrower, Panelview and EDI and the cost thereof with a summary of
inventory by category, (ii) a detailed statement of all inventory that
is not located on the premises described on Schedule 5.1(o), and (iii)
an inventory turnover report, in form and substance acceptable to
Lender, and (B) a reconciliation of the Schedule of Inventory to the
Borrowing Base Certificate as of the most recent month end and
Borrower's general ledger as of such month end
(d) Borrowing Base Certificate. Within thirty (30) days after the
end of each month if there is an outstanding Revolving Loan balance
and no later than five (5) days prior to any advance, a Borrowing Base
Certificate prepared as of the close of business on the last business
day of such week, along with supporting documentation, in form and
substance satisfactory to Lender
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(including but not limited to information on sales, credit,
collections, adjustments and inventory changes).
(e) Certification. Each of the schedules and certificates
delivered to Lender pursuant to this Section 8.3 shall be signed and
certified by the president, chief financial officer or treasurer of
Borrower to be true, correct and complete as of the date indicated
thereon.
(f) Other Information. Lender may, in its sole discretion, from
time to time require Borrower to deliver the schedules and
certificates described in Section 8.3 more or less often and on
different schedules than specified in such Section. Borrower shall
also furnish to Lender such other additional information as Lender may
from time to time request.
2.10 Section 9.1 of the Loan Agreement is hereby amended to read as
follows:
Section 9.1 Financial Covenants.
(a) Maximum Liabilities to Tangible Net Worth. Permit the ratio
of Borrower's consolidated total Liabilities to its consolidated
Tangible Net Worth at any month end to be greater than 1.25 to 1.0.
(b) Minimum Debt Service Coverage. Permit, as of the last day of
each fiscal quarter, the ratio of Borrower's consolidated Debt Service
Coverage Ratio for the twelve consecutive months ending with such
quarter end, to be less than 1.25 to 1.0.
(c) Minimum Tangible Net Worth. Permit the consolidated Tangible
Net Worth of Borrower as of the end of any fiscal quarter to be less
than $30,000,000 plus the sum of fifty percent (50%) of year to date
consolidated Net Income (but not net losses) of Borrower.
In the event that Borrower acquires any additional subsidiaries in
accordance with SECTION 9.11, the above financial covenants shall be
calculated solely with reference to the financial statements of
Borrower, Panelview and EDI without including the financial statements
or condition of any such additional subsidiaries.
2.11 Sections 9.2, 9.3 and 9.4 of the Loan Agreement are hereby amended to
read as follows:
Section 9.2 Capital Expenditures. Make or incur any Capital
Expenditures, except that Borrower may make or incur Capital
Expenditures in
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any fiscal year in an amount not to exceed, in the aggregate $5,000,000 in
fiscal year 2002 and $3,000,000 in any fiscal year thereafter.
Section 9.3 Prohibited Distributions and Payments, Etc. Declare or
make any Prohibited Distributions or Prohibited Payment.
Section 9.4 Indebtedness. Except as disclosed on Schedule 5.1(h),
create, assume, or otherwise become or remain obligated in respect of, or
permit or suffer to exist or to be created, assumed or incurred or to be
outstanding any Indebtedness for Money Borrowed.
2.12 Section 11.4 of the Loan Agreement is hereby amended to read as
follows:
Section 11.4 Venue; Service of Process. BORROWER AND LENDER HEREBY
AGREE THAT THE FEDERAL COURT SITTING IN PHOENIX, ARIZONA OR, AT THE OPTION
OF LENDER, ANY COURT IN WHICH LENDER SHALL INITIATE LEGAL OR EQUITABLE
PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN
CONTROVERSY AND WHICH SITS IN A JURISDICTION IN WHICH BORROWER TRANSACTS
BUSINESS SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER, PERTAINING DIRECTLY OR
INDIRECTLY TO THIS AGREEMENT OR THE LOAN DOCUMENTS OR TO ANY MATTER ARISING
THEREFROM. Borrower expressly submits and consents in advance to such
jurisdiction in any action or proceeding commenced in such courts, and
hereby waives personal service of the summons and complaint or other
process or papers issued therein and agrees that service of such summons
and complaint or other process or papers may be made by registered or
certified mail addressed to Borrower at the address set forth in Section
11.1(b), which service shall be deemed made upon receipt thereof. All
parties hereto agree that venue is proper in Maricopa County, Arizona, that
such county is a convenient forum in which to decide any dispute arising
hereunder and hereby agree not to assert any argument that such county is
an inconvenient or improper forum for any such dispute.
2.13 Section 11.11 of the Loan Agreement is hereby amended to read as
follows:
Section 11.11 Governing Law. This Agreement, the Note and all Loan
Documents shall be construed in accordance with and governed by the law of
the State of Arizona.
2.14 The Borrowing Base Certificate is hereby amended to read in the form
attached hereto as Exhibit "A".
2.15 Exhibit B (Compliance Certificate) of the Loan Agreement is hereby
amended to read as attached hereto as Exhibit "B".
2.16 Schedules 5.1(i), 5.1(o), 5.1(p) and 5.1(r) are hereby amended to read
as attached hereto as Schedules 5.1(i), 5.1(o), 5.1(p) and 5.1(r).
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2.17 All references in the Loan Agreement to "Term Loan" and "Term Note"
are hereby deleted.
2.18 All references in the Loan Agreement to "Central time" or to "Dallas,]
Texas time" are hereby amended to read "Phoenix, Arizona time."
2.19 Reference to Lender's address in Section 11.1(b) of the Loan Agreement
and in all other Loan Documents are hereby amended to read as follows:
Xxxx Xxxxxx Xxx 00
Xxxxxxx, Xxxxxxx 00000
Attention: Commercial Banking AZ1-1178
Facsimile No.: (000) 000-0000
2.20 All references in the Loan Documents to "$12,000,000" or "Twelve
Million and No/100 Dollars" with respect to the Revolving Loan and the
Revolving Note are hereby amended to read "$8,000,000" and "Eight Million
and No/100 Dollars," respectively.
2.21 All Loan Documents are hereby amended to provide that they shall be
governed by the law of the State of Arizona.
2.22 The Note is hereby amended as follows:
(a) The definition of Interest Period in Section 1 of the Note is
hereby amended to read as follows:
"Interest Period" shall mean, with respect to any LIBOR Balance,
a period commencing: (i) on any date which, pursuant to an Interest
Notice, the principal amount of such LIBOR Balance beings to accrue
interest at the Adjusted LIBOR Rate, or (ii) the Business Day
following the last day of the immediately preceding Interest Period in
the case of a rollover to a successive Interest Period and ending one,
two, three or six months thereafter as Borrower shall elect in
accordance with the provisions hereof; provided, that: (A) any
Interest Period which would otherwise end on a day which is not a
LIBOR Business Day shall be extended to the next succeeding LIBOR
Business Day, and (B) any Interest Period which would otherwise end
after the Maturity Date shall end on the Maturity Date.
(b) "Maturity Date" is hereby amended from January 7, 2003 to March
28, 2004.
(c) "Total Principal Amount" is hereby amended from Twelve Million and
No/100 Dollars ($12,000,000.00) to Eight Million and No/100 Dollars
($8,000,000.00).
2.23 Each of the Loan Documents is modified to provide that it shall be a
default or an event of default thereunder if Borrower shall fail to comply
with any of the covenants of
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Borrower herein or if any representation or warranty by Borrower herein or by
any guarantor in any related Consent and Agreement of Guarantors is materially
incomplete, incorrect, or misleading as of the date hereof.
2.24 Each reference in the Loan Documents to any of the Loan Documents is
hereby amended to be a reference to such document as modified herein.
2.25 Lender hereby waives the Covenant Non-Compliance. Notwithstanding this
or any prior waiver of forbearance, actual or implied, of any nature by Lender,
time is hereby declared to be of the essence hereof, of the Obligations, of the
Loan Agreement and of all Security Documents, and Lender requires, and Borrower
agrees to, strict performance of each and every covenant, condition, provision
and agreement hereof, of the Obligations, of the Loan Agreement and of all
Security Documents.
SECTION 3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
The Loan Documents are ratified and affirmed by Borrower and shall remain
in full force and effect as modified herein. Any property or rights to or
interests in property granted as security in the Loan Documents shall remain as
security for the Loan and the obligations of Borrower in the Loan Documents.
SECTION 4. BORROWER REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Lender:
4.1 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the passage
of time or both, would be a default or an event of default under the Loan
Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial condition of
Borrower or any other person whose financial statement has been delivered to
Lender in connection with the Loan from the most recent financial statement
received by Lender.
4.3 Each and all representations and warranties of Borrower in the Loan
Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and binding
obligation of Borrower, enforceable against Borrower in accordance with their
terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Loan Documents as modified herein.
The execution and delivery of this Agreement and the performance of the Loan
Documents as modified herein have been duly
-15-
authorized by all requisite action by or on behalf of Borrower. This Agreement
has been duly executed and delivered on behalf of Borrower.
SECTION 5. BORROWER COVENANTS.
Borrower covenants with Lender:
5.1 Borrower shall execute, deliver, and provide to Lender such additional
agreements, documents, and instruments as reasonably required by Lender to
effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and absolutely and forever releases and
discharges Lender and its present and former directors, shareholders, officers,
employees, agents, representatives, successors and assigns, and their separate
and respective heirs, personal representatives, successors and assigns, from any
and all actions, causes of action, claims, debts, damages, demands, liabilities,
obligations, and suits, of whatever kind or nature, in law or equity of
Borrower, whether now known or unknown to Borrower, and whether contingent or
matured, (i) in respect of the Loan, the Loan Documents, or the actions or
omissions of Lender in respect of the Loan or the Loan Documents and (ii)
arising from events occurring prior to the date of this Agreement.
SECTION 6. CONDITIONS PRECEDENT.
The agreements of Lender and the modifications contained herein shall not
be binding upon Lender until Lender has executed and delivered this Agreement
and Lender has received, at Borrower's expense, all of the following, all of
which shall be in form and content satisfactory to Lender and shall be subject
to approval by Lender:
6.1 An original of this Agreement fully executed by the Borrower and all
Guarantors;
6.2 An updated Schedule of Equipment;
6.3 If Borrower or any Guarantor is a corporation, limited liability
company, partnership or trust, such resolutions or authorizations and such other
documents as Lender may require relating to the existence and good standing of
that corporation, partnership or trust, and the authority of any person
executing this Agreement or other documents on behalf of that corporation,
limited liability company, partnership or trust; and
6.4 Payment of all the internal and external costs and expenses incurred by
Lender in connection with this Agreement (including, without limitation, inside
and outside attorneys, appraisal, appraisal review, processing, title, filing,
and recording costs, expenses, and fees).
SECTION 7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR
WAIVER.
The Loan Documents as modified herein contain the complete understanding
and agreement of Borrower and Lender in respect of the Loan and supersede all
prior representations, warranties, agreements, arrangements, understandings, and
negotiations. No provision of the
-16-
Loan Documents as modified herein may be changed, discharged, supplemented,
terminated, or waived except in a writing signed by the parties thereto.
SECTION 8. BINDING EFFECT.
The Loan Documents as modified herein shall be binding upon and shall inure
to the benefit of Borrower and Lender and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees, and
beneficiaries of Borrower, provided, however, Borrower may not assign any of its
right or delegate any of its obligation under the Loan Documents and any
purported assignment or delegation shall be void.
SECTION 9. CHOICE OF LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Arizona, without giving effect to conflicts of law
principles.
SECTION 10. COUNTERPART EXECUTION.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.
DATED as of the date first above stated.
WHITE ELECTRONIC DESIGNS
CORPORATION, an Indiana corporation
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
BORROWER
BANK ONE, NA, a national
banking association with
its main office in Chicago,
Illinois, successor by
merger to Bank One, Texas,
N.A.
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
LENDER
-17-
CONSENT AND AGREEMENT OF GUARANTORS
With respect to the Third Modification Agreement, dated March 28, 2002
("Agreement"), between WHITE ELECTRONIC DESIGNS CORPORATION, an Indiana
corporation ("Borrower"), and BANK ONE, NA, a national banking association with
its main office in Chicago, Illinois, successor by merger to Bank One, Texas,
N.A. ("Lender"), the undersigned (individually and, if more than one,
collectively "Guarantor") agrees for the benefit of Lender as follows:
1. Guarantor acknowledges (i) receiving a copy of and reading the
Agreement, (ii) the accuracy of the Recitals in the Agreement, and (iii) the
effectiveness of (A) the Guarantee Agreements as modified herein, and (B) any
other agreements, documents, or instruments securing or otherwise relating to
the Guarantee Agreements (including, without limitation, any arbitration
resolution and any environmental certification and indemnity agreement
previously executed and delivered by the undersigned) and the Security Documents
delivered by Guarantor (the "Security Agreements"), as modified herein. The
Guarantee Agreements, the Security Agreements and such other agreements,
documents, and instruments, as modified herein, are referred to individually and
collectively as the "Guarantor Documents."
2. Guarantor consents to the modification of the Loan Documents and all
other matters in the Agreement.
3. Guarantor fully, finally, and forever releases and discharges Lender and
its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits of whatever kind or nature, in law
or equity, that Guarantor has or in the future may have, whether known or
unknown, (i) in respect of the Loan, the Loan Documents, the Guarantor
Documents, or the actions or omissions of Lender in respect of the Loan, the
Loan Documents, or the Guarantor Documents and (ii) arising from events
occurring prior to the date hereof.
4. Guarantor agrees that all references, if any, to the Note, the Loan
Agreement, the Deed of Trust, the Security Documents, and the Loan Documents in
the Guarantor Documents shall be deemed to refer to such agreements, documents,
and instruments as modified by the Agreement.
5. Guarantor reaffirms the Guarantor Documents and agrees that the
Guarantor Documents continue in full force and effect and remain unchanged,
except as specifically modified by this Consent and Agreement of Guarantors. Any
property or rights to or interests in property granted as security in the
Guarantor Documents shall remain as security for the Guarantee Agreements and
the obligations of Guarantor in the Guarantee Agreements.
6. Guarantor agrees that the Loan Documents, as modified by the Agreement,
and the Guarantor Documents, as modified by this Consent and Agreement of
Guarantors, are the legal, valid, and binding obligations of Borrower and the
undersigned, respectively, enforceable in accordance with their terms against
Borrower and the undersigned, respectively.
7. Guarantor agrees that Guarantor has no claims, counterclaims, defenses,
or offsets with respect to the enforcement against Guarantor of the Guarantor
Documents.
8. Guarantor represents and warrants that there has been no material
adverse change in the financial condition of any Guarantor from the most recent
financial statement received by Lender.
9. Guarantor waives and agrees not to assert with respect to the Guarantor
Documents: (a) any right to require Lender to proceed against Borrower or any
other guarantor, to proceed against or exhaust any security for the
indebtedness, to pursue any other remedy available to Lender, or to pursue any
remedy in any particular order or manner; (b) demand, diligence, presentment for
payment, protest and demand, and notice of extension, dishonor, protest, demand,
nonpayment and acceptance of the Guarantee Agreements; (c) notice of the
existence, creation or incurring of new or additional indebtedness of Borrower
to Lender; (d) the benefits of any statutory provision limiting the liability of
a surety, including without limitation the provisions of A.R.S. Sections
12-1641, et seq.; (e) any defense arising by reason of any disability or other
defense of Borrower or by reason of the cessation from any cause whatsoever
(other than payment in full) of the liability of Borrower for the indebtedness;
and (f) the benefits of any statutory provision limiting the right of Lender to
recover a deficiency judgment, or to otherwise proceed against any person or
entity obligated for payment of the indebtedness, after any foreclosure or
trustee's sale of any security for the indebtedness.
10. Guarantor agrees that the Guarantor Documents are hereby modified to
provide that they shall be governed by and construed in accordance with the laws
of the State of Arizona, without giving effect to conflicts of law principles.
11. Guarantor agrees that this Consent and Agreement of Guarantors may be
executed in one or more counterparts, each of which shall be deemed an original
and all of which together shall constitute one and the same document. Signature
and acknowledgement pages may be detached from the counterparts and attached to
a single copy of this Consent and Agreement of Guarantors to physically form one
document.
DATED as of the date of the Agreement.
ELECTRONIC DESIGNS, INC., a Delaware
corporation
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
-2-
PANELVIEW, INCORPORATED, an Oregon
corporation
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
GUARANTOR
-3-
EXHIBIT "A"
BORROWING BASE CERTIFICATE
EXHIBIT "B"
COMPLIANCE CERTIFICATE
This Compliance Certificate (this "Certificate") is executed and
delivered pursuant to and in accordance with the provisions of that certain Loan
and Security Agreement (as amended from time to time, the "Loan Agreement")
dated as of January 7, 1999, between WHITE ELECTRONIC DESIGNS CORPORATION, AN
INDIANA CORPORATION ("Borrower"), and BANK ONE, NA, A NATIONAL BANKING
ASSOCIATION WITH ITS MAIN OFFICE IN CHICAGO, ILLINOIS SUCCESSOR BY MERGER TO
BANK ONE, TEXAS, N.A. ("Bank"). All capitalized terms used in this Certificate,
if not otherwise defined herein, shall have the respective meanings assigned to
such terms under the Loan Agreement.
The undersigned hereby represents and warrants to Bank as follows:
1. Authority. The undersigned is the [president] [chief financial officer]
of Borrower.
2. Review. The undersigned has reviewed (a) the activities of Borrower
during Borrower's fiscal period ending ____________, 200__ (the
"Subject Fiscal Period"), (b) the financial condition of Borrower as of
the last day of the Subject Fiscal Period, and (c) the Loan Agreement
and all of the other Loan Documents.
3. Compliance. Based upon my review of the financial condition of Borrower
and the other information and documents described in paragraph 2 above,
Borrower (a) has observed, performed and fulfilled its obligations and
covenants contained in the Loan Agreement and the other Loan Documents,
and (b) no Default or Event of Default has occurred and is continuing
or, if any Default or Event of Default has occurred, the nature and
status of such Default or Event of Default is described as follows:
______________________________________________________________________
______________________________________________________________________
4. Financial Covenants. The financial information of Borrower that the
undersigned has provided below demonstrates the Borrower's compliance
with the financial covenants set forth in the Loan Agreement. All of
such financial information is true and correct as of the last day of
the Subject Fiscal Period (unless another date or a specific time
period is stated). The Subsections specifically referenced below have
been provided to identify the applicable provision in the Loan
Agreement which covers the subject financial covenant. All financial
covenants are calculated on a consolidated basis.
(a) Maximum Liabilities to Tangible Net Worth. Permit the ratio of
Borrower's consolidated total Liabilities to its consolidated Tangible Net Worth
at any month end to be greater than 1.25 to 1.0.
(A) Maximum ratio of Liabilities to Tangible Net Worth
permitted under Section 9.1(a) of the Loan Agreement 1.25 to 1.0
(B) Total Liabilities: $
----------------
(C) Net Worth $
----------------
(D) All intangible items, amounts due from Affiliates,
employees and shareholders and all other items which
should properly be treated as intangibles in
accordance with GAAP $
(E) Tangible Net Worth (item (C) minus item (D)): $
----------------
(F) Ratio of total Liabilities to Tangible Net Worth
(total of item (B) above divided by item (C) above) ___ to 1.0
(b) Minimum Debt Service Coverage. Pursuant to Section 9.1(b) of the Loan Agreement, Borrower shall not
permit, as of the last day of each fiscal quarter, the ratio of Borrower's consolidated Debt Service Coverage
Ratio for the twelve consecutive months ending with such quarter end, to be less 1.25 to 1.0.
(A) Consolidated Net Income of Borrower $
----------------
(B) Income Taxes $
----------------
(C) Interest Expense $
----------------
(D) Depreciation and amortization expense $
----------------
(E) Non-Financed Capital Expenditures $
----------------
(F) Principal and interest paid on Funded Indebtedness $
----------------
(G) Debt Service Coverage Ratio [(A)+(B)+(C)+(D)-(E)/(F)] $
----------------
(c) Tangible Net Worth. Pursuant to Section 9.1(c) of the Loan Agreement, the Borrower shall not permit
the consolidated Tangible Net Worth of Borrower as of the end of any fiscal quarter to be less than $30,000,000
plus the sum of (i) fifty percent (50%) of year to date Net Income, minus (ii) amounts paid to redeem preferred
stock (not to exceed $3,000,000 in the aggregate for all periods), plus (iii) the amount of any additions to net
worth generated by conversion of preferred stock.
(A) Tangible Net Worth (from item (a) (E) above) $
----------------
(B) Fifty percent (50%) of year to date Net Income $
----------------
(C) Amounts paid to redeem preferred stock $
----------------
(D) Additions to net worth generated by conversion of
preferred stock $
----------------
(E) Sum of (A)+(B)-(C)+(D) $
----------------
-2-
Dated:
-----------------------
WHITE ELECTRONIC DESIGNS
CORPORATION
By:
---------------------------------------
Xxxxx X. Xxxxxxxxxx, President
-3-
SCHEDULE 5.1(i)
LITIGATION
SCHEDULE 5.1(o)
LOCATIONS OF INVENTORY
SCHEDULE 5.1(p)
LOCATIONS OF EQUIPMENT
SCHEDULE 5.1(r)
CORPORATE AND FACILITIES NAMES
White Electronic Designs Corp.
Electronic Designs Inc.
Panelview, Incorporated
