CREDIT AND SECURITY AGREEMENT
Dated as of June 28, 2001
VARI-L COMPANY, INC., a Colorado corporation (the "Borrower"), and
XXXXX FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"),
hereby agree as follows:
Article I.
Definitions
Section 1.1 DEFINITIONS. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the
terms defined in this Article have the meanings assigned to them in this
Article, and include the plural as well as the singular; and all
accounting terms not otherwise defined herein have the meanings assigned
to them in accordance with GAAP.
"Accounts" means all of the Borrower's accounts, as such term is
defined in the UCC, including without limitation the aggregate unpaid
obligations of customers and other account debtors to the Borrower arising
out of the sale or lease of goods or rendition of services by the Borrower
on an open account or deferred payment basis.
"Advance" means a Revolving Advance, the Term Advance or a CapEx
Advance.
"Affiliate" or "Affiliates" means any Person controlled by,
controlling or under common control with the Borrower, including (without
limitation) any Subsidiary of the Borrower. For purposes of this
definition, "control," when used with respect to any specified Person,
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" means this Credit and Security Agreement, as amended,
supplemented or restated from time to time.
"Availability" means the difference of (i) the Borrowing Base and
(ii) the outstanding principal balance of the Revolving Note.
"Banking Day" means a day other than a Saturday, Sunday or other day
on which banks are generally not open for business in Minneapolis,
Minnesota and Denver, Colorado.
"Book Net Worth" means the aggregate of the common and preferred
stockholders' equity in the Borrower, determined in accordance with GAAP.
"Borrowing Base" means, at any time the lesser of:
(a) the Maximum Line; or
(b) subject to change from time to time in the Lender's sole
discretion, upon three (3) business days notice to the Borrower, the sum
of:
(i) 80% of Eligible Accounts, plus
(ii) the lesser of (A) 50% of Eligible Inventory or (B)
$2,500,000.
"CapEx Advance" has the meaning specified in Section 2.4.
"CapEx Floating Rate" means an annual rate equal to the sum of the
Prime Rate plus one percent (1.00%), which annual rate shall change when
and as the Prime Rate changes.
"CapEx Note" means the Borrower's promissory note, payable to the
order of the Lender in substantially the form of Exhibit C hereto and any
note or notes issues in substitution therefore, as the same may hereafter
be amended, supplemented or restated from time to time.
"Capital Expenditures" for a period means any expenditure of money
for the lease, purchase or other acquisition of any capital asset, or for
the lease of any other asset capitalized on the Borrower's balance sheet
in accordance with GAAP.
"Collateral" means all of the Borrower's assets including but not
limited to all of the Borrower's Equipment, General Intangibles,
Inventory, Receivables, Investment Property, chattel paper, goods, all
sums on deposit in any Collateral Account, and any items in any Lockbox;
all of the Borrower's instruments and documents (as each such term is
defined in the UCC), commercial deposit accounts, letters of credit and
letter of credit rights; together with (i) all substitutions and
replacements for and products of any of the foregoing; (ii) proceeds of
any and all of the foregoing; (iii) in the case of all tangible goods, all
accessions; (iv) all accessories, attachments, parts, equipment and
repairs now or hereafter attached or affixed to or used in connection with
any tangible goods; and (v) all warehouse receipts, bills of lading and
other documents of title now or hereafter covering such goods.
"Collateral Account" means the Lender Account.
"Commitment" means the Lender's commitment to make Advances to or for
the Borrower's account pursuant to Article II.
"Credit Facility" means the credit facility being made available to
the Borrower by the Lender pursuant to Article II.
"Debt" of any Person means all items of indebtedness or liability
which in accordance with GAAP would be included in determining total
liabilities as shown on the liabilities side of a balance sheet of that
Person as at the date as of which Debt is to be determined. For purposes
of determining a Person's aggregate Debt at any time, "Debt" shall also
include the aggregate payments required to be made by such Person at any
time under any lease that is considered a capitalized lease under GAAP.
"Default" means an event that, with giving of notice or passage of
time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the first day
of any month during which a Default or Event of Default has occurred and
ending on the date the Lender notifies the Borrower in writing that such
Default or Event of Default has been cured or waived.
"Default Rate" means, with respect to the Revolving Advances, an
annual rate equal to three percent (3%) over the Revolving Floating Rate,
which rate shall change when and as the Revolving Floating Rate changes,
with respect to the Term Advance, an annual rate equal to three percent
(3%) over the Term Floating Rate, which rate shall change when and as the
Term Floating Rate changes and with respect to the CapEx Advances, an
annual rate equal to three percent (3%) over the CapEx Floating Rate,
which rate shall change when and as the CapEx Floating Rate changes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Eligible Accounts" means all unpaid Accounts, net of any credits,
except the following shall not in any event be deemed Eligible Accounts:
(i) That portion of Accounts unpaid 90 days or more after the
invoice date or, if the Lender in its discretion has determined that a
particular dated Account may be eligible, that portion of such Account
which is unpaid more than 30 days past the stated due date or more than
120 days past the invoice date;
(ii) That portion of Accounts that is disputed or subject to a
claim of offset or a contra account;
(iii) That portion of Accounts not yet earned by the final
delivery of goods or rendition of services, as applicable, by the Borrower
to the customer;
(iv) Accounts owed by any unit of government, whether foreign or
domestic (provided, however, that there shall be included in Eligible
Accounts that portion of Accounts owed by such units of government for
which the Borrower has provided evidence satisfactory to the Lender that
(A) the Lender has a first priority perfected security interest and (B)
such Accounts may be enforced by the Lender directly against such unit of
government under all applicable laws);
(v) Accounts owed by an account debtor located outside the
United States which are not (A) backed by a bank letter of credit naming
the Lender as beneficiary or assigned to the Lender, in the Lender's
possession and acceptable to the Lender in all respects, in its sole
discretion, or (B) covered by a foreign receivables insurance policy
acceptable to the Lender in its sole discretion and that portion of such
Accounts that exceeds $5,000,000;
(vi) Accounts owed by an account debtor that is insolvent, the
subject of bankruptcy proceedings or has gone out of business;
(vii) Accounts owed by a shareholder, Subsidiary, Affiliate,
officer or employee of the Borrower;
(viii) Accounts not subject to a duly perfected security
interest in the Lender's favor or which are subject to any lien, security
interest or claim in favor of any Person other than the Lender including
without limitation any payment or performance bond;
(ix) That portion of Accounts that has been restructured,
extended, amended or modified;
(x) That portion of Accounts that constitutes advertising,
finance charges, service charges or sales or excise taxes;
(xi) Accounts owed by an account debtor, regardless of whether
otherwise eligible, if 20% or more of the total amount due under Accounts
from such debtor is ineligible under clauses (i), (ii) or (ix) above;
(xii) That portion of the aggregate Accounts of a single
customer, other than ACAL, Ericsson, Motorola and Nokia, that exceeds 15%
of all Accounts of the Borrower and that portion of the aggregate Accounts
of each of ACAL, Ericsson, Motorola or Nokia that exceeds 30% of all
Accounts of the Borrower; and
(xiii) Accounts, or portions thereof, otherwise deemed
ineligible by the Lender in its sole discretion.
"Eligible Inventory" means all Inventory of the Borrower, at the
lower of cost or market value as determined in accordance with GAAP;
provided, however, that the following shall not in any event be deemed
Eligible Inventory:
(i) Inventory that is: in-transit; located at any warehouse,
job site or other premises not approved by the Lender in writing; located
outside of the states, or localities, as applicable, in which the Lender
has filed financing statements to perfect a first priority security
interest in such Inventory; covered by any negotiable or non-negotiable
warehouse receipt, xxxx of lading or other document of title; on
consignment from any Person; on consignment to any Person or subject to
any bailment unless such consignee or bailee has executed an agreement
with the Lender;
(ii) Supplies, packaging, maintenance parts or sample Inventory;
(iii) Work-in-process Inventory;
(iv) Inventory that is damaged, obsolete, slow moving or not
currently saleable in the normal course of the Borrower's operations;
(v) Inventory that the Borrower has returned, has attempted to
return, is in the process of returning or intends to return to the vendor
thereof;
(vi) Inventory that is perishable or live;
(vii) Inventory manufactured by the Borrower pursuant to a
license unless the applicable licensor has agreed in writing to permit the
Lender to exercise its rights and remedies against such Inventory;
(viii) Inventory that is subject to a security interest in favor
of any Person other than the Lender; and
(ix) Inventory otherwise deemed ineligible by the Lender in its
sole discretion.
"Environmental Law" has the meaning specified in Section 5.12.
"Equipment" means all of the Borrower's equipment, as such term is
defined in the UCC, whether now owned or hereafter acquired, including but
not limited to Manufacturing Equipment and all present and future
machinery, vehicles, furniture, fixtures, manufacturing equipment, shop
equipment, office and recordkeeping equipment, parts, tools, supplies, and
including specifically (without limitation) the goods described in any
equipment schedule or list herewith or hereafter furnished to the Lender
by the Borrower.
"Event of Default" has the meaning specified in Section 8.1.
"Funding Date" has the meaning given in Section 2.1.
"GAAP" means generally accepted accounting principles, applied on a
basis consistent with the accounting practices applied in the financial
statements described in Section 5.5, except for any change in accounting
practices to the extent that, due to a promulgation of the Financial
Accounting Standards Board changing or implementing any new accounting
standard, the Borrower either (i) is required to implement such change, or
(ii) for future periods will be required to and for the current period may
in accordance with generally accepted accounting principles implement such
change, for its financial statements to be in conformity with generally
accepted accounting principles (any such change is herein referred to as a
"Required GAAP Change"), provided that (1) the Borrower shall fully
disclose in such financial statements any such Required GAAP Change and
the effects of the Required GAAP Change on the Borrower's income, retained
earnings or other accounts, as applicable, and (2) the Borrower's
financial covenants set forth in Section 6.12, Section 6.13, and Section
7.10 shall be adjusted as necessary to reflect the effects of such
Required GAAP Change.
"General Intangibles" means all of the Borrower's general
intangibles, as such term is defined in the UCC, whether now owned or
hereafter acquired, including (without limitation) all present and future
patents, patent applications, copyrights, trademarks, trade names, trade
secrets, customer or supplier lists and contracts, manuals, operating
instructions, permits, franchises, the right to use the Borrower's name,
and the goodwill of the Borrower's business.
"Hazardous Substance" has the meaning given in Section 5.12.
"Inventory" means all of the Borrower's inventory, as such term is
defined in the UCC, whether now owned or hereafter acquired, whether
consisting of whole goods, raw goods, spare parts or components, supplies
or materials, whether acquired, held or furnished for sale, for lease or
under service contracts or for manufacture or processing, and wherever
located.
"Investment Property" means all of the Borrower's investment
property, as such term is defined in the UCC, whether now owned or
hereafter acquired, including but not limited to all securities, security
entitlements, securities accounts, commodity contracts, commodity
accounts, stocks, bonds, mutual fund shares, money market shares and U.S.
Government securities.
"Lender Account" has the meaning given in the Lockbox Agreement.
"Loan Documents" means this Agreement, the Notes and the Security
Documents.
"Lockbox" has the meaning given in the Lockbox Agreement.
"Lockbox Agreement" means the Lockbox and Collection Agreement by and
among the Borrower, Xxxxx Fargo, Regulus West LLC and the Lender, of even
date herewith.
"Manufacturing Equipment" means the manufacturing equipment to be
purchased with the proceeds of the CapEx Advance, which would include,
without limitation, x-ray machines, lasers, test haulers, welders,
spectrum analyzers and similar equipment used by the Borrower in the
manufacturing of its products.
"Maturity Date" means June 28, 2004.
"Maximum Line" means $6,000,000, unless said amount is reduced
pursuant to Section 2.10, in which event it means the amount to which said
amount is reduced.
"Minimum Interest Charge" has the meaning given in Section 2.6(d).
"Net Income" means fiscal year-to-date pre-tax net income from
continuing operations, as determined in accordance with GAAP.
"Note" means the Revolving Note, the Term Note or the CapEx Note and
"Notes" means the Revolving Note, the Term Note and the CapEx Note.
"Obligations" means the Notes and each and every other debt,
liability and obligation of every type and description which the Borrower
may now or at any time hereafter owe to the Lender, whether such debt,
liability or obligation now exists or is hereafter created or incurred,
whether it arises in a transaction involving the Lender alone or in a
transaction involving other creditors of the Borrower, and whether it is
direct or indirect, due or to become due, absolute or contingent, primary
or secondary, liquidated or unliquidated, or sole, joint, several or joint
and several, and including specifically, but not limited to, all
indebtedness of the Borrower arising under this Agreement, the Notes or
any other loan or credit agreement or guaranty between the Borrower and
the Lender, whether now in effect or hereafter entered into.
"Patent and Trademark Security Agreement" means the Patent and
Trademark Security Agreement by the Borrower in favor of the Lender of
even date herewith.
"Permitted Lien" has the meaning given in Section 7.1.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Plan" means an employee benefit plan or other plan maintained for
the Borrower's employees and covered by Title IV of ERISA.
"Premises" means all premises where the Borrower conducts its
business and has any rights of possession, including (without limitation)
the premises legally described in Exhibit E attached hereto.
"Prime Rate" means the rate of interest publicly announced from time
to time by Xxxxx Fargo Bank, N.A.-San Francisco as its "prime rate" or, if
such bank ceases to announce a rate so designated, any similar successor
rate designated by the Lender.
"Receivables" means each and every right of the Borrower to the
payment of money, whether such right to payment now exists or hereafter
arises, whether such right to payment arises out of a sale, lease or other
disposition of goods or other property, out of a rendering of services,
out of a loan, out of the overpayment of taxes or other liabilities, or
otherwise arises under any contract or agreement, whether such right to
payment is created, generated or earned by the Borrower or by some other
person who subsequently transfers such person's interest to the Borrower,
whether such right to payment is or is not already earned by performance,
and howsoever such right to payment may be evidenced, together with all
other rights and interests (including all liens and security interests)
which the Borrower may at any time have by law or agreement against any
account debtor or other obligor obligated to make any such payment or
against any property of such account debtor or other obligor; all
including but not limited to all present and future accounts, contract
rights, loans and obligations receivable, chattel papers, bonds, notes and
other debt instruments, tax refunds and rights to payment in the nature of
general intangibles.
"Reportable Event" shall have the meaning assigned to that term in
Title IV of ERISA.
"Revolving Advance" has the meaning given in Section 2.1.
"Revolving Floating Rate" means an annual rate equal to the sum of
the Prime Rate plus one half of one percent (0.50%), which annual rate
shall change when and as the Prime Rate changes.
"Revolving Note" means the Borrower's revolving promissory note,
payable to the order of the Lender in substantially the form of Exhibit A
hereto and any note or notes issued in substitution therefor, as the same
may hereafter be amended, supplemented or restated from time to time.
"Security Documents" means this Agreement, the Lockbox Agreement, the
Patent and Trademark Security Agreement, and any other document delivered
to the Lender from time to time to secure the Obligations, as the same may
hereafter be amended, supplemented or restated from time to time.
"Security Interest" has the meaning given in Section 3.1.
"Subsidiary" means any corporation of which more than 50% of the
outstanding shares of capital stock having general voting power under
ordinary circumstances to elect a majority of the board of directors of
such corporation, irrespective of whether or not at the time stock of any
other class or classes shall have or might have voting power by reason of
the happening of any contingency, is at the time directly or indirectly
owned by the Borrower, by the Borrower and one or more other Subsidiaries,
or by one or more other Subsidiaries.
"Term Advance" has the meaning specified in Section 2.2.
"Term Floating Rate" means an annual rate equal to the sum of the
Prime Rate plus one percent (1.00%), which annual rate shall change when
and as the Prime Rate changes.
"Term Note" means the Borrower's promissory note, payable to the
order of the Lender in substantially the form of Exhibit B hereto and any
note or notes issued in substitution therefor, as the same may hereafter
be amended, supplemented or restated from time to time.
"Termination Date" means the earliest of (i) the Maturity Date, (ii)
the date the Borrower terminates the Credit Facility, or (iii) the date
the Lender demands payment of the Obligations after an Event of Default
pursuant to Section 8.2.
"UCC" means the Uniform Commercial Code as in effect from time to
time in the state designated in Section 9.13 as the state whose laws shall
govern this Agreement, or in any other state whose laws are held to govern
this Agreement or any portion hereof. Borrower and Lender agree that,
with respect to any term used herein that is defined in either (i) Article
9 of the Uniform Commercial Code as in effect on the date hereof in the
state designated in Section 9.13 as the state whose laws shall govern this
Agreement, or in any other state whose laws are held to govern this
Agreement or any portion hereof or (ii) Article 9 of the Uniform
Commercial Code as in effect from time to time hereafter in the state
designated in Section 9.13 as the state whose laws shall govern this
Agreement, or in any other state whose laws are held to govern this
Agreement or any portion hereof, the meaning to be ascribed thereto with
respect to any particular item of property shall be that under the more
encompassing of the two definitions.
"Unfinanced Capital Expenditures" means that portion of Capital
Expenditures that are not leased and that are not paid for using proceeds
of indebtedness.
"Xxxxx Fargo" means Xxxxx Fargo Bank, N.A.
Section 1.2 CROSS REFERENCES. All references in this Agreement to
Articles, Sections and subsections, shall be to Articles, Sections and
subsections of this Agreement unless otherwise explicitly specified.
Article II.
AMOUNT AND TERMS OF THE CREDIT FACILITY
Section 2.1 REVOLVING ADVANCES. The Lender agrees, on the terms and
subject to the conditions herein set forth, to make advances to the
Borrower from time to time from the date all of the conditions set forth
in Section 4.1 are satisfied or waived in writing by the Lender (the
"Funding Date") to the Termination Date (the "Revolving Advances"). The
Lender shall have no obligation to make a Revolving Advance if, after
giving effect to such requested Revolving Advance, the sum of the
outstanding and unpaid Revolving Advances would exceed the Borrowing Base.
The Borrower's obligation to pay the Revolving Advances shall be evidenced
by the Revolving Note and shall be secured by the Collateral as provided
in Article III. Within the limits set forth in this Section 2.1, the
Borrower may borrow and reborrow and prepay pursuant to Section 2.10. The
Borrower agrees to comply with the following procedures in requesting
Revolving Advances under this Section 2.1:
(a) The Borrower shall make each request for a Revolving Advance to
the Lender before 11:00 a.m. (Denver time) of the day of the requested
Revolving Advance. Requests may be made in writing or by telephone,
specifying the date of the requested Revolving Advance and the amount
thereof. Each request shall be by (i) any officer of the Borrower; or
(ii) any person designated as the Borrower's agent by any officer of the
Borrower in a writing delivered to the Lender; or (iii) any person whom
the Lender reasonably believes to be an officer of the Borrower or such a
designated agent.
(b) Upon fulfillment of the applicable conditions set forth in
Article IV, the Lender shall disburse the proceeds of the requested
Revolving Advance by crediting the same to the Borrower's demand deposit
account maintained with Xxxxx Fargo unless the Lender and the Borrower
shall agree in writing to another manner of disbursement. Upon the
Lender's request, the Borrower shall promptly confirm each telephonic
request for an Advance by executing and delivering an appropriate
confirmation certificate to the Lender. The Borrower shall repay all
Advances even if the Lender does not receive such confirmation and even if
the person requesting an Advance was not in fact authorized to do so. Any
request for an Advance, whether written or telephonic, shall be deemed to
be a representation by the Borrower that the conditions set forth in
0Section 4.2 have been satisfied as of the time of the request.
Section 2.2 TERM ADVANCES. The Lender agrees, on the terms and subject
to the conditions herein set forth, to make two advances to the Borrower
during the period from the Funding Date to the Termination Date (the "Term
Advances"). The Lender shall have no obligation to make the initial Term
Advance under this Section 2.2 if, after giving effect to such requested
Term Advance, the outstanding principal balance of the Term Advance would
exceed the lesser of (i) $1,500,000 or (ii) the Borrowing Base less the
sum of the outstanding and unpaid Revolving Advances. For purposes of
calculating Availability, the initial Term Advance shall be considered a
Revolving Advance made under Section 2.1. The Lender shall have no
obligation to make the second Term Advance under this Section 2.2 if, (i)
the initial Term Advance has not been paid in full or the proceeds of the
second Term Advance will not be used to pay the initial Term Advance in
full and (ii) after giving effect to such requested Term Advance, the
outstanding principal balance of the Term Advance would exceed the lesser
of $2,500,000 or 90% of the auction value of certain of the Borrower's
Equipment, reduced by the aggregate amount of the scheduled principal
payments described in Section 2.3. The Borrower's obligation to pay the
Term Advances shall be evidenced by the Term Note and shall be secured by
the Collateral as provided in Article III.
(a) The Borrower shall make each request for a Term Advance to the
Lender before 11:00 a.m. (Denver time) one Banking Day before the day of
the requested Term Advance. Requests may be made in writing or by
telephone, specifying the date of the requested Term Advance and the
amount thereof.
(b) Each request shall be by an individual authorized pursuant to
Section 2.1(a).
(c) Upon fulfillment of the applicable conditions set forth in
Article IV, the Lender shall deposit the proceeds of each Term Advance by
crediting the same to the Borrower's demand deposit account specified in
Section 2.1(b) unless the Lender and the Borrower shall agree in writing
to another manner of disbursement. Upon the Lender's request, the
Borrower shall promptly confirm a telephonic request for each Term Advance
by executing and delivering an appropriate confirmation certificate to the
Lender. The Borrower shall be obligated to repay each Term Advance
notwithstanding the Lender's failure to receive such confirmation and
notwithstanding the fact that the person requesting the same was not in
fact authorized to do so. A request for each Term Advance, whether
written or telephonic, shall be deemed to be a representation by the
Borrower that the conditions set forth in Section 4.2 have been satisfied
as of the time of the request.
Section 2.3 PAYMENT OF TERM NOTE. The outstanding principal balance of
the Term Note shall be due and payable as follows:
(a) Beginning on the first day of the month following each Term
Advance, and on the first day of each month thereafter, in substantially
equal monthly installments equal to an amount sufficient to fully amortize
the principal balance of the Term Note over an assumed term ending on the
seventh anniversary of the date of each Term Advance; and
(b) On the Termination Date, the entire unpaid principal balance of
the Term Note, and all unpaid interest accrued thereon, shall in any event
be due and payable.
Section 2.4 CAPEX ADVANCES. The Lender agrees, on the terms and
subject to the conditions herein set forth, to make advances to the
Borrower from time to time from the Funding Date to the Termination Date
(the "CapEx Advances"). The Lender shall have no obligation to make a
CapEx Advance under this Section 2.4 if, after giving effect to such
requested CapEx Advance, the outstanding principal balance of the CapEx
Advances would exceed the lesser of: (i) $1,500,000, (ii) 90% of the
invoice amount, less taxes, freight, and set up charges of the
Manufacturing Equipment to be purchased, or (iii) the appraisal value as
of the date of acquisition of the Manufacturing Equipment or actual
appraised value of the Manufacturing Equipment at the time of purchase;
reduced by the aggregate amount of the scheduled principal payments
described in Section 2.5. The Borrower's obligation to pay the CapEx
Advances shall be evidenced by the CapEx Note and shall be secured by the
Collateral as provided in Article III.
(a) The Borrower shall make each request for a CapEx Advance to the
Lender before 11:00 a.m. (Denver time) one Banking Day before the day of
the requested CapEx Advance. Requests may be made in writing or by
telephone, specifying the date of the requested CapEx Advance and the
amount thereof.
(b) Each CapEx Advance shall be in a minimum amount of $100,000 and
for any advances over $100,000, in minimum increments of $10,000.
(c) Each request shall be by an individual authorized pursuant to
Section 2.1(a).
(d) Upon fulfillment of the applicable conditions set forth in
Article IV, the Lender shall deposit the proceeds of the requested CapEx
Advance by crediting the same to the Borrower's demand deposit account
specified in Section 2.1(b) unless the Lender and the Borrower shall agree
in writing to another manner of disbursement. Upon the Lender's request,
the Borrower shall promptly confirm each telephonic request for a CapEx
Advance by executing and delivering an appropriate confirmation
certificate to the Lender. The Borrower shall be obligated to repay all
CapEx Advances notwithstanding the Lender's failure to receive such
confirmation and notwithstanding the fact that the person requesting the
same was not in fact authorized to do so. Any request for a CapEx
Advance, whether written or telephonic, shall be deemed to be a
representation by the Borrower that the conditions set forth in Section
4.2 have been satisfied as of the time of the request.
Section 2.5 PAYMENT OF CAPEX NOTE. The outstanding principal balance
of the CapEx Note shall be due and payable as follows:
(a) Beginning on the first day of the month six months after the
date of the initial CapEx Advance, and on the first day of each month
thereafter, in substantially equal monthly installments equal to an amount
sufficient to fully amortize the principal balance of the CapEx Note over
an assumed term ending on the fifth anniversary of the date of the initial
CapEx Advance (the "Assumed Maturity Date"). If the Lender makes CapEx
Advances after the initial CapEx Advance, the amount of each installment
will be increased so that the remaining payments would fully amortize the
outstanding principal balance of the CapEx Note in substantially equal
amounts by the Assumed Maturity Date; and
(b) On the Termination Date, the entire unpaid principal balance of
the CapEx Note, and all unpaid interest accrued thereon, shall in any
event be due and payable.
Section 2.6 INTEREST; MINIMUM INTEREST CHARGE; DEFAULT INTEREST; USURY.
(a) REVOLVING NOTE. Except as set forth in Section 2.6(d), Section
2.6(e) and Section 2.6(g), the outstanding principal balance of the
Revolving Note shall bear interest at the Revolving Floating Rate.
Interest accruing on the Revolving Note shall be due and payable in
arrears on the first day of each month.
(b) TERM NOTE. Except as set forth in Section 2.6(d), Section
2.6(e) and Section 2.6(g), the outstanding principal balance of the Term
Note shall bear interest at the Term Floating Rate. Interest accruing on
the Term Note shall be due and payable in arrears on the first day of each
month.
(c) CAPEX NOTE. Except as set forth in Section 2.6(d), Section
2.6(e) and Section 2.6(g), the outstanding principal balance of the CapEx
Note shall bear interest at the CapEx Floating Rate. Interest accruing on
the CapEx Note shall be due and payable in arrears on the first day of
each month.
(d) MINIMUM INTEREST CHARGE. Notwithstanding the interest payable
pursuant to Section 2.6(a), (b) and (c), the Borrower shall pay to the
Lender interest of not less than $30,000 per calendar quarter (the
"Minimum Interest Charge") during the term of this Agreement, and the
Borrower shall pay any deficiency between the Minimum Interest Charge and
the amount of interest otherwise calculated under Section 2.6(a), (b) and
(c), and Section 2.6(e) on the date and in the manner provided in Section
2.8.
(e) DEFAULT INTEREST RATE. At any time during any Default Period,
in the Lender's sole discretion and without waiving any of its other
rights and remedies, the principal of the Advances outstanding from time
to time shall bear interest at the Default Rate, effective for any periods
designated by the Lender from time to time during that Default Period.
(f) PARTICIPATIONS. If any Person shall acquire a participation in
the Advances under this Agreement, the Borrower shall be obligated to the
Lender to pay the full amount of all interest calculated under this
Agreement, along with all other fees, charges and other amounts due under
this Agreement, regardless if such Person elects to accept interest with
respect to its participation at a lower rate than the Revolving Floating
Rate or the Term Floating Rate, or otherwise elects to accept less than
its pro rata share of such fees, charges and other amounts due under this
Agreement.
(g) USURY. In any event no rate change shall be put into effect
which would result in a rate greater than the highest rate permitted by
law. Notwithstanding anything to the contrary contained in any Loan
Document, all agreements which either now are or which shall become
agreements between the Borrower and the Lender are hereby limited so that
in no contingency or event whatsoever shall the total liability for
payments in the nature of interest, additional interest and other charges
exceed the applicable limits imposed by any applicable usury laws. If any
payments in the nature of interest, additional interest and other charges
made under any Loan Document are held to be in excess of the limits
imposed by any applicable usury laws, it is agreed that any such amount
held to be in excess shall be considered payment of principal hereunder,
and the indebtedness evidenced hereby shall be reduced by such amount so
that the total liability for payments in the nature of interest,
additional interest and other charges shall not exceed the applicable
limits imposed by any applicable usury laws, in compliance with the
desires of the Borrower and the Lender. This provision shall never be
superseded or waived and shall control every other provision of the Loan
Documents and all agreements between the Borrower and the Lender, or their
successors and assigns.
Section 2.7 FEES.
(a) ORIGINATION FEE. The Borrower hereby agrees to pay the Lender a
fully earned and non-refundable origination fee of $42,500, due and
payable upon the execution of this Agreement.
(b) UNUSED LINE FEE. For the purposes of this Section 2.7(b),
"Unused Amount" means the Maximum Line reduced by outstanding Revolving
Advances. The Borrower agrees to pay to the Lender an unused line fee at
the rate of one quarter of one percent (0.25%) per annum on the average
daily Unused Amount from the date of this Agreement to and including the
Termination Date, due and payable monthly in arrears on the first day of
the month and on the Termination Date.
(c) AUDIT FEES. The Borrower hereby agrees to pay the Lender, on
demand, audit fees in connection with any audits or inspections conducted
by the Lender of any Collateral or the Borrower's operations or business
at the rates established from time to time by the Lender as its audit fees
(which fees are currently $80 per hour per auditor), together with all
actual out-of-pocket costs and expenses incurred in conducting any such
audit or inspection.
(d) CAPEX ORIGINATION FEE. The Borrower hereby agrees to pay the
Lender a fully earned and non-refundable origination fee of $7,500, due
and payable on the date of the initial CapEx Advance.
Section 2.8 COMPUTATION OF INTEREST AND FEES; WHEN INTEREST DUE AND
PAYABLE. Interest accruing on the outstanding principal balance of the
Advances and fees hereunder outstanding from time to time shall be
computed on the basis of actual number of days elapsed in a year of 360
days. Interest shall be payable in arrears on the first day of each month
and on the Termination Date.
Section 2.9 CAPITAL ADEQUACY. If any Related Lender determines at any
time that its Return has been reduced as a result of any Rule Change, such
Related Lender may require the Borrower to pay it the amount necessary to
restore its Return to what it would have been had there been no Rule
Change. For purposes of this Section 2.9:
(a) "CAPITAL ADEQUACY RULE" means any law, rule, regulation,
guideline, directive, requirement or request regarding capital adequacy,
or the interpretation or administration thereof by any governmental or
regulatory authority, central bank or comparable agency, whether or not
having the force of law, that applies to any Related Lender. Such rules
include rules requiring financial institutions to maintain total capital
in amounts based upon percentages of outstanding loans, binding loan
commitments and letters of credit.
(b) "RETURN," for any period, means the return as determined by such
Related Lender on the Advances based upon its total capital requirements
and a reasonable attribution formula that takes account of the Capital
Adequacy Rules then in effect. Return may be calculated for each calendar
quarter and for the shorter period between the end of a calendar quarter
and the date of termination in whole of this Agreement.
(c) "Rule Change" means any change in any Capital Adequacy Rule
occurring after the date of this Agreement, but the term does not include
any changes in applicable requirements that at the date of this Agreement
are scheduled to take place under the existing Capital Adequacy Rules or
any increases in the capital that any Related Lender is required to
maintain to the extent that the increases are required due to a regulatory
authority's assessment of the financial condition of such Related Lender.
(d) "Related Lender" includes (but is not limited to) the Lender,
any parent corporation of the Lender and any assignee of any interest of
the Lender hereunder and any participant in the loans made hereunder.
Certificates of any Related Lender sent to the Borrower from time to
time claiming compensation under this Section 2.9, stating the reason
therefor and setting forth in reasonable detail the calculation of the
additional amount or amounts to be paid to the Related Lender hereunder to
restore its Return shall be conclusive absent manifest error. In
determining such amounts, the Related Lender may use any reasonable
averaging and attribution methods.
Section 2.10 VOLUNTARY PREPAYMENT; REDUCTION OF THE MAXIMUM LINE;
TERMINATION OF THE CREDIT FACILITY BY THE BORROWER. Except as otherwise
provided herein, the Borrower may prepay the Revolving Advances in whole
at any time or from time to time in part. The Borrower may prepay the
Term Advance or the CapEx Advances (other than in accordance with Section
2.3 or Section 2.5), terminate the Credit Facility or reduce the Maximum
Line at any time if it (i) gives the Lender at least 30 days' prior
written notice and (ii) pays the Lender the prepayment, termination or
line reduction fees in accordance with Section 2.11. Any prepayment of
the Term Advance or the CapEx Advances (other than in accordance with
Section 2.3 or Section 2.5) or reduction in the Maximum Line must be in an
amount not less than $100,000 or an integral multiple thereof. If the
Borrower reduces the Maximum Line to zero, all Obligations shall be
immediately due and payable. Any partial prepayments of the Term Note or
the CapEx Note (other than in accordance with Section 2.3 or Section 2.5)
shall be applied to principal payments due and owing in inverse order of
their maturities. Upon termination of the Credit Facility and payment and
performance of all Obligations, the Lender shall release or terminate the
Security Interest and the Security Documents to which the Borrower is
entitled by law.
Section 2.11 TERMINATION, LINE REDUCTION AND PREPAYMENT FEES; WAIVER OF
TERMINATION, PREPAYMENT AND LINE REDUCTION FEES.
(a) TERMINATION AND LINE REDUCTION FEES. If the Credit Facility is
terminated by the Borrower for any reason as of a date other than the
Maturity Date, or the Borrower reduces the Maximum Line, the Borrower
shall pay to the Lender a fee in an amount equal to a percentage of the
Maximum Line (or the reduction, as the case may be) as follows: (i) three
percent (3%) if the termination or reduction occurs on or before the first
anniversary of the Funding Date; (ii) two percent (2%) if the termination
or reduction occurs after the first anniversary of the Funding Date but on
or before the second anniversary of the Funding Date; and (iii) 1 percent
(1%) if the termination or reduction occurs after the second anniversary
of the Funding Date.
(b) PREPAYMENT FEES. If the Term Note or the CapEx Note is prepaid
by the Borrower for any reason except in accordance with Section 2.3 or
Section 2.5, the Borrower shall pay to the Lender a fee in an amount equal
to a percentage of the amount prepaid as follows: (i) three percent (3%)
if prepayment occurs on or before the first anniversary of the Funding
Date; (ii) two percent (2%) if prepayment occurs after the first
anniversary of the Funding Date but on or before the second anniversary of
the Funding Date; and (iii) one percent (1%) if prepayment occurs after
the second anniversary of the Funding Date.
(c) Waiver of Termination, Line Reduction and Prepayment Fees. The
Borrower will not be required to pay the termination, line reduction and
prepayment fees otherwise due under this Section 2.11 if such termination,
line reduction or prepayment is (i) made because of refinancing of the
Borrower by an affiliate of the Lender, (ii) a result of the Borrower's
refinancing with a third party lender within ninety (90) days of the
Certificate sent to the Borrower in accordance with Section 2.9, or (iii)
made within ninety (90) days of the Lender designating the required
amounts of the new covenants, in accordance with Section 6.14, at levels
higher than the Borrower's projections for such periods.
Section 2.12 MANDATORY PREPAYMENT. Without notice or demand, if the
outstanding principal balance of the Revolving Advances shall at any time
exceed the Borrowing Base, the Borrower shall immediately prepay the
Revolving Advances to the extent necessary to eliminate such excess. Any
payment received by the Lender under this Section 2.12 or under Section
2.10 may be applied to the Obligations, in such order and in such amounts
as the Lender, in its discretion, may from time to time determine;
provided that any prepayment under Section 2.10 which the Borrower
designates as a partial prepayment of the Term Note or the CapEx Note, as
the case may be, shall be applied to principal installments of the Term
Note or the CapEx Note, as the case may be, in inverse order of maturity.
Section 2.13 PAYMENT. All payments to the Lender shall be made in
immediately available funds and shall be applied to the Obligations one
(1) Banking Day after receipt by the Lender. The Lender may hold all
payments not directly remitted to the Lockbox or not constituting
immediately available funds for three (3) additional days before applying
them to the Obligations. Notwithstanding anything in Section 2.1, the
Borrower hereby authorizes the Lender, in its discretion at any time or
from time to time without the Borrower's request and even if the
conditions set forth in Section 4.2 would not be satisfied, to make a
Revolving Advance in an amount equal to the portion of the Obligations
from time to time due and payable.
Section 2.14 PAYMENT ON NON-BANKING DAYS. Whenever any payment to be
made hereunder shall be stated to be due on a day which is not a Banking
Day, such payment may be made on the next succeeding Banking Day, and such
extension of time shall in such case be included in the computation of
interest on the Advances or the fees hereunder, as the case may be.
Section 2.15 USE OF PROCEEDS. The Borrower shall use the proceeds of
Advances for ordinary working capital purposes.
Section 2.16 LIABILITY RECORDS. The Lender may maintain from time to
time, at its discretion, liability records as to the Obligations. All
entries made on any such record shall be presumed correct until the
Borrower establishes the contrary. Upon the Lender's demand, the Borrower
will admit and certify in writing the exact principal balance of the
Obligations that the Borrower then asserts to be outstanding. Any billing
statement or accounting rendered by the Lender shall be conclusive and
fully binding on the Borrower unless the Borrower gives the Lender
specific written notice of exception within 30 days after receipt.
Article III.
SECURITY INTEREST; OCCUPANCY; SETOFF
Section 3.1 GRANT OF SECURITY INTEREST. The Borrower hereby pledges,
assigns and grants to the Lender a security interest (collectively
referred to as the "Security Interest") in the Collateral, as security for
the payment and performance of the Obligations.
Section 3.2 NOTIFICATION OF ACCOUNT DEBTORS AND OTHER OBLIGORS. The
Lender may at any time during a Default Period notify any account debtor
or other person obligated to pay the amount due that such right to payment
has been assigned or transferred to the Lender for security and shall be
paid directly to the Lender. The Borrower will join in giving such notice
if the Lender so requests. At any time after the Borrower or the Lender
gives such notice to an account debtor or other obligor, the Lender may,
but need not, in the Lender's name or in the Borrower's name, (a) demand,
xxx for, collect or receive any money or property at any time payable or
receivable on account of, or securing, any such right to payment, or grant
any extension to, make any compromise or settlement with or otherwise
agree to waive, modify, amend or change the obligations (including
collateral obligations) of any such account debtor or other obligor; and
(b) as the Borrower's agent and attorney-in-fact, notify the United States
Postal Service to change the address for delivery of the Borrower's mail
to any address designated by the Lender, otherwise intercept the
Borrower's mail, and receive, open and dispose of the Borrower's mail,
applying all Collateral as permitted under this Agreement and holding all
other mail for the Borrower's account or forwarding such mail to the
Borrower's last known address.
Section 3.3 ASSIGNMENT OF INSURANCE. As additional security for the
payment and performance of the Obligations, the Borrower hereby assigns to
the Lender any and all monies (including, without limitation, proceeds of
insurance and refunds of unearned premiums) due or to become due under,
and all other rights of the Borrower with respect to, any and all policies
of insurance now or at any time hereafter covering the Collateral or any
evidence thereof or any business records or valuable papers pertaining
thereto, and the Borrower hereby directs the issuer of any such policy to
pay all such monies directly to the Lender. At any time, whether or not a
Default Period then exists, the Lender may (but need not), in the Lender's
name or in the Borrower's name, execute and deliver proof of claim,
receive all such monies, endorse checks and other instruments representing
payment of such monies, and adjust, litigate, compromise or release any
claim against the issuer of any such policy.
Section 3.4 OCCUPANCY.
(a) The Borrower hereby irrevocably grants to the Lender the right
to take possession of the Premises at any time during a Default Period.
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise
dispose of goods that are Collateral and for other purposes that the
Lender may in good xxxxx xxxx to be related or incidental purposes.
(c) The Lender's right to hold the Premises shall cease and
terminate upon the earlier of (i) payment in full and discharge of all
Obligations and termination of the Commitment, and (ii) final sale or
disposition of all goods constituting Collateral and delivery of all such
goods to purchasers.
(d) The Lender shall not be obligated to pay or account for any rent
or other compensation for the possession, occupancy or use of any of the
Premises; provided, however, that if the Lender does pay or account for
any rent or other compensation for the possession, occupancy or use of any
of the Premises, the Borrower shall reimburse the Lender promptly for the
full amount thereof. In addition, the Borrower will pay, or reimburse the
Lender for, all taxes, fees, duties, imposts, charges and expenses at any
time incurred by or imposed upon the Lender by reason of the execution,
delivery, existence, recordation, performance or enforcement of this
Agreement or the provisions of this Section 3.4.
Section 3.5 LICENSE. Without limiting the generality of the Patent and
Trademark Security Agreement, the Borrower hereby grants to the Lender a
non-exclusive, worldwide and royalty-free license to use or otherwise
exploit all trademarks, franchises, trade names, copyrights and patents of
the Borrower for the purpose of selling, leasing or otherwise disposing of
any or all Collateral during any Default Period.
Section 3.6 FINANCING STATEMENT. A carbon, photographic or other
reproduction of this Agreement or of any financing statements signed by
the Borrower is sufficient as a financing statement and may be filed as a
financing statement in any state to perfect the security interests granted
hereby. For this purpose, the following information is set forth:
Name and address of Debtor:
Vari-L Company, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Federal Tax Identification No. 00-0000000
Name and address of Secured Party:
Xxxxx Fargo Business Credit, Inc.
MAC C7300-300
0000 Xxxxxxxx
Xxxxxx, Xxxxxxxx 00000
Federal Tax Identification No. 00-0000000
Section 3.7 SETOFF. The Borrower agrees that the Lender may at any
time or from time to time, at its sole discretion and without demand and
without notice to anyone, setoff any liability owed to the Borrower by the
Lender, whether or not due, against any Obligation, whether or not due.
In addition, upon two (2) business days notice to the Borrower (unless a
Default or Event of Default has occurred), each other Person holding a
participating interest in any Obligations shall have the right to
appropriate or setoff any deposit or other liability then owed by such
Person to the Borrower, whether or not due, and apply the same to the
payment of said participating interest, as fully as if such Person had
lent directly to the Borrower the amount of such participating interest.
Article IV.
CONDITIONS OF LENDING
Section 4.1 CONDITIONS PRECEDENT TO THE INITIAL REVOLVING, TERM AND
CAPEX ADVANCES. The Lender's obligation to make the initial Revolving,
Term and CapEx Advances hereunder shall be subject to the condition
precedent that the Lender shall have received all of the following, each
in form and substance satisfactory to the Lender:
(a) This Agreement, properly executed by the Borrower.
(b) The Notes, properly executed by the Borrower.
(c) A true and correct copy of any and all leases pursuant to which
the Borrower is leasing the Premises, together with a landlord's
disclaimer and consent with respect to each such lease.
(d) A true and correct copy of any and all mortgages pursuant to
which the Borrower has mortgaged the Premises, together with a mortgagee's
disclaimer and consent with respect to each such mortgage.
(e) A true and correct copy of any and all agreements pursuant to
which the Borrower's property is in the possession of any Person other
than the Borrower, together with, in the case of any goods held by such
Person for resale, (i) a consignee's acknowledgment and waiver of liens,
(ii) UCC financing statements sufficient to protect the Borrower's and the
Lender's interests in such goods, and (iii) UCC searches showing that no
other secured party has filed a financing statement against such Person
and covering property similar to the Borrower's other than the Borrower,
or if there exists any such secured party, evidence that each such secured
party has received notice from the Borrower and the Lender sufficient to
protect the Borrower's and the Lender's interests in the Borrower's goods
from any claim by such secured party.
(f) An acknowledgment and waiver of liens from each warehouse in
which the Borrower is storing Inventory.
(g) A true and correct copy of any and all agreements pursuant to
which the Borrower's property is in the possession of any Person other
than the Borrower, together with, (i) an acknowledgment and waiver of
liens from each subcontractor who has possession of the Borrower's goods
from time to time, (ii) UCC financing statements sufficient to protect the
Borrower's and the Lender's interests in such goods, and (iii) UCC
searches showing that no other secured party has filed a financing
statement covering such Person's property other than the Borrower, or if
there exists any such secured party, evidence that each such secured party
has received notice from the Borrower and the Lender sufficient to protect
the Borrower's and the Lender's interests in the Borrower's goods from any
claim by such secured party.
(h) The Lockbox Agreement, properly executed by the Borrower, Xxxxx
Fargo and Regulus West LLC.
(i) The Patent and Trademark Security Agreement, properly executed
by the Borrower.
(j) Current searches of appropriate filing offices showing that (i)
no state or federal tax liens have been filed and remain in effect against
the Borrower, (ii) no financing statements or assignments of patents,
trademarks or copyrights have been filed and remain in effect against the
Borrower except those financing statements and assignments of patents,
trademarks or copyrights relating to Permitted Liens or to liens held by
Persons who have agreed in writing that upon receipt of proceeds of the
Advances, they will deliver UCC releases and/or terminations and releases
of such assignments of patents, trademarks or copyrights satisfactory to
the Lender, and (iii) the Lender has duly filed all financing statements
necessary to perfect the Security Interest, to the extent the Security
Interest is capable of being perfected by filing.
(k) A certificate of the Borrower's Secretary or Assistant Secretary
certifying as to (i) the resolutions of the Borrower's directors and, if
required, shareholders, authorizing the execution, delivery and
performance of the Loan Documents, (ii) the Borrower's articles of
incorporation and bylaws, and (iii) the signatures of the Borrower's
officers or agents authorized to execute and deliver the Loan Documents
and other instruments, agreements and certificates, including Advance
requests, on the Borrower's behalf.
(l) A current certificate issued by the Colorado Secretary of State,
certifying that the Borrower is in compliance with all applicable
organizational requirements of the State of Colorado.
(m) Evidence that the Borrower is duly licensed or qualified to
transact business in all jurisdictions where the character of the property
owned or leased or the nature of the business transacted by it makes such
licensing or qualification necessary.
(n) A certificate of an officer of the Borrower confirming, in his
corporate capacity, the representations and warranties set forth in
Article V.
(o) An opinion of counsel to the Borrower, addressed to the Lender.
(p) Certificates of the insurance required hereunder, with all
hazard insurance containing a lender's loss payable endorsement in the
Lender's favor and with all liability insurance naming the Lender as an
additional insured.
(q) Availability shall be equal to or greater than $750,000
immediately after the initial Advance which shall be used to pay in full
all existing senior secured creditors of the Borrower, all of the
Borrower's accounts payable over 60 days past due and all of the fees and
commission set forth in Section 4.1(r) below.
(r) Payment of the fees and commissions due through the date of the
initial Advance under Section 2.70 and expenses incurred by the Lender
through such date and required to be paid by the Borrower under Section
9.6, including all legal expenses incurred through the date of this
Agreement.
(s) Such other documents as the Lender in its sole discretion may
require.
Section 4.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The Lender's
obligation to make each Advance shall be subject to the further conditions
precedent that on such date:
(a) the representations and warranties contained in Article V are
correct on and as of the date of such Advance as though made on and as of
such date, except to the extent that such representations and warranties
relate solely to an earlier date; and
(b) no event has occurred and is continuing, or would result from
such Advance which constitutes a Default or an Event of Default.
Section 4.3 ADDITIONAL CONDITIONS PRECEDENT TO THE TERM ADVANCE. In
addition to the conditions precedent set forth in Section 4.1, the
Lender's obligation to make the Term Advance hereunder shall be subject to
the further conditions precedent that:
(a) the Lender shall have received an appraisal of the Borrower's
Equipment, in form and substance satisfactory to the Lender in its sole
discretion;
(b) the representations and warranties contained in Article V are
correct on and as of the date of such Advance as though made on and as of
such date, except to the extent that such representations and warranties
relate solely to an earlier date; and
(c) no event has occurred and is continuing, or would result from
such Advance which constitutes a Default or an Event of Default
Section 4.4 CONDITIONS PRECEDENT TO ALL CAPEX ADVANCES. In addition to
the conditions precedent set forth in Section 4.1, the Lender's obligation
to make the initial CapEx Advance hereunder shall be subject to the
further conditions precedent that:
(a) the actions as against the Borrower set forth on Schedule 5.6
have been settled or dismissed with prejudice, as determined by the Lender
in its sole discretion, and no action, suits or proceedings by the
Borrower's shareholders are pending or, to the Borrower's knowledge,
threatened against or affecting the Borrower or any of its Affiliates or
the properties of the Borrower or any of its Affiliates before any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign;
(b) the representations and warranties contained in Article V are
correct on and as of the date of such Advance as though made on and as of
such date, except to the extent that such representations and warranties
relate solely to an earlier date; and
(c) no event has occurred and is continuing, or would result from
such Advance which constitutes a Default or an Event of Default
Article V.
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as follows:
Section 5.1 CORPORATE EXISTENCE AND POWER; NAME; CHIEF EXECUTIVE
OFFICE; INVENTORY AND EQUIPMENT LOCATIONS; TAX IDENTIFICATION NUMBER. The
Borrower is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Colorado and is duly licensed or
qualified to transact business in all jurisdictions where the character of
the property owned or leased or the nature of the business transacted by
it makes such licensing or qualification necessary. The Borrower has all
requisite power and authority, corporate or otherwise, to conduct its
business, to own its properties and to execute and deliver, and to perform
all of its obligations under, the Loan Documents. During its existence,
the Borrower has done business solely under the names set forth in
Schedule 5.1 hereto. The Borrower's chief executive office and principal
place of business is located at the address set forth in Schedule 5.1
hereto, and all of the Borrower's records relating to its business or the
Collateral are kept at the locations identified in Schedule 5.1. All
Inventory and Equipment is located at that location or at one of the other
locations set forth in Schedule 5.1 hereto. The Borrower's tax
identification number is correctly set forth in Section 3.6 hereto.
Section 5.2 AUTHORIZATION OF BORROWING; NO CONFLICT AS TO LAW OR
AGREEMENTS. The execution, delivery and performance by the Borrower of
the Loan Documents and the borrowings from time to time hereunder have
been duly authorized by all necessary corporate action and do not and will
not (i) require any consent or approval of the Borrower's stockholders;
(ii) require any authorization, consent or approval by, or registration,
declaration or filing with, or notice to, any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
or any third party, except such authorization, consent, approval,
registration, declaration, filing or notice as has been obtained,
accomplished or given prior to the date hereof; (iii) violate any
provision of any law, rule or regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or
of any order, writ, injunction or decree presently in effect having
applicability to the Borrower or of the Borrower's articles of
incorporation or bylaws; (iv) result in a breach of or constitute a
default under any indenture or loan or credit agreement or any 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; or (v) result
in, or require, the creation or imposition of any mortgage, deed of trust,
pledge, lien, security interest or other charge or encumbrance of any
nature (other than the Security Interest) upon or with respect to any of
the properties now owned or hereafter acquired by the Borrower.
Section 5.3 LEGAL AGREEMENTS. This Agreement constitutes and, upon due
execution by the Borrower, the other Loan Documents will constitute the
legal, valid and binding obligations of the Borrower, enforceable against
the Borrower in accordance with their respective terms.
Section 5.4 SUBSIDIARIES. Except as set forth in Schedule 5.4 hereto,
the Borrower has no Subsidiaries.
Section 5.5 FINANCIAL CONDITION; NO ADVERSE CHANGE. The Borrower has
heretofore furnished to the Lender its audited financial statements for
its fiscal year ended June 30, 2000 and its unaudited financial statements
for the fiscal year-to-date period ended May 31, 2001 and those statements
fairly present the Borrower's financial condition on the dates thereof and
the results of its operations and cash flows for the periods then ended
and were prepared in accordance with generally accepted accounting
principles. Since the date of the most recent financial statements, there
has been no material adverse change in the Borrower's business, properties
or condition (financial or otherwise).
Section 5.6 LITIGATION. Other than as set forth in Schedule 5.6
hereto, there are no actions, suits or proceedings pending or, to the
Borrower's knowledge, threatened against or affecting the Borrower or any
of its Affiliates or the properties of the Borrower or any of its
Affiliates before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which, if
determined adversely to the Borrower or any of its Affiliates, would have
a material adverse effect on the financial condition, properties or
operations of the Borrower or any of its Affiliates.
Section 5.7 REGULATION U. The Borrower is not engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any Advance will
be used to purchase or carry any margin stock or to extend credit to
others for the purpose of purchasing or carrying any margin stock.
Section 5.8 TAXES. Other than as set forth in Schedule 5.8 hereto, the
Borrower and its Affiliates have paid or caused to be paid to the proper
authorities when due all federal, state and local taxes required to be
withheld by each of them. The Borrower and its Affiliates have filed all
federal, state and local tax returns which to the knowledge of the
officers of the Borrower or any Affiliate, as the case may be, are
required to be filed, and the Borrower and its Affiliates have paid or
caused to be paid to the respective taxing authorities all taxes as shown
on said returns or on any assessment received by any of them to the extent
such taxes have become due.
Section 5.9 TITLES AND LIENS. The Borrower has good and absolute title
to all Collateral described in the collateral reports provided to the
Lender and all other Collateral, properties and assets reflected in the
latest financial statements referred to in Section 5.5 and all proceeds
thereof, free and clear of all mortgages, security interests, liens and
encumbrances, except for Permitted Liens. No financing statement naming
the Borrower as debtor is on file in any office except to perfect only
Permitted Liens.
Section 5.10 PLANS. Except as disclosed to the Lender in writing prior
to the date hereof, neither the Borrower nor any of its Affiliates
maintains or has maintained any Plan. Neither the Borrower nor any
Affiliate has received any notice or has any knowledge to the effect that
it is not in full compliance with any of the requirements of ERISA. No
Reportable Event or other fact or circumstance which may have an adverse
effect on the Plan's tax qualified status exists in connection with any
Plan. Neither the Borrower nor any of its Affiliates has:
(a) Any accumulated funding deficiency within the meaning of ERISA;
or
(b) Any liability or knows of any fact or circumstances which could
result in any liability to the Pension Benefit Guaranty Corporation, the
Internal Revenue Service, the Department of Labor or any participant in
connection with any Plan (other than accrued benefits which are or which
may become payable to participants or beneficiaries of any such Plan).
Section 5.11 DEFAULT. Other than as set forth in Schedule 5.11 hereto,
the Borrower is in compliance with all provisions of all agreements,
instruments, decrees and orders to which it is a party or by which it or
its property is bound or affected, the breach or default of which could
have a material adverse effect on the Borrower's financial condition,
properties or operations.
Section 5.12 ENVIRONMENTAL MATTERS.
(a) Definitions. As used in this Agreement, the following terms
shall have the following meanings:
(i) "Environmental Law" means any federal, state, local or
other governmental statute, regulation, law or ordinance dealing with the
protection of human health and the environment.
(ii) "Hazardous Substances" means pollutants, contaminants,
hazardous substances, hazardous wastes, petroleum and fractions thereof,
and all other chemicals, wastes, substances and materials listed in,
regulated by or identified in any Environmental Law.
(b) To the Borrower's best knowledge, there are not present in, on
or under the Premises any Hazardous Substances in such form or quantity as
to create any liability or obligation for either the Borrower or the
Lender under the common law of any jurisdiction or under any Environmental
Law, and no Hazardous Substances have ever been stored, buried, spilled,
leaked, discharged, emitted or released in, on or under the Premises in
such a way as to create any such liability.
(c) To the Borrower's best knowledge, the Borrower has not disposed
of Hazardous Substances in such a manner as to create any liability under
any Environmental Law.
(d) There are not and there never have been any requests, claims,
notices, investigations, demands, administrative proceedings, hearings or
litigation, relating in any way to the Premises or the Borrower, alleging
liability under, violation of, or noncompliance with any Environmental Law
or any license, permit or other authorization issued pursuant thereto. To
the Borrower's best knowledge, no such matter is threatened or impending.
(e) To the Borrower's best knowledge, the Borrower's businesses are
and have in the past always been conducted in accordance with all
Environmental Laws and all licenses, permits and other authorizations
required pursuant to any Environmental Law and necessary for the lawful
and efficient operation of such businesses are in the Borrower's
possession and are in full force and effect. No permit required under any
Environmental Law is scheduled to expire within 12 months and there is no
threat that any such permit will be withdrawn, terminated, limited or
materially changed.
(f) To the Borrower's best knowledge, the Premises are not and never
have been listed on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System or
any similar federal, state or local list, schedule, log, inventory or
database.
(g) The Borrower has delivered to Lender all environmental
assessments, audits, reports, permits, licenses and other documents
describing or relating in any way to the Premises or the Borrower's
businesses.
Section 5.13 SUBMISSIONS TO LENDER. All financial and other information
provided to the Lender by or on behalf of the Borrower in connection with
the Borrower's request for the credit facilities contemplated hereby is
true and correct in all material respects and, as to projections,
valuations or proforma financial statements, present a good faith opinion
as to such projections, valuations and proforma condition and results.
Section 5.14 FINANCING STATEMENTS. The Borrower has provided to the
Lender signed financing statements sufficient when filed to perfect the
Security Interest and the other security interests created by the Security
Documents. When such financing statements are filed in the offices noted
therein, the Lender will have a valid and perfected security interest in
all Collateral and all other collateral described in the Security
Documents which is capable of being perfected by filing financing
statements. None of the Collateral or other collateral covered by the
Security Documents is or will become a fixture on real estate, unless a
sufficient fixture filing is in effect with respect thereto.
Section 5.15 RIGHTS TO PAYMENT. Each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral or other collateral covered by the Security
Documents is (or, in the case of all future Collateral or such other
collateral, will be when arising or issued) the valid, genuine and legally
enforceable obligation, subject to no defense, setoff or counterclaim, of
the account debtor or other obligor named therein or in the Borrower's
records pertaining thereto as being obligated to pay such obligation.
Article VI.
BORROWER'S AFFIRMATIVE COVENANTS
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrower will comply with the
following requirements, unless the Lender shall otherwise consent in
writing:
Section 6.1 REPORTING REQUIREMENTS. The Borrower will deliver, or
cause to be delivered, to the Lender each of the following, which shall be
in form and detail acceptable to the Lender:
(a) as soon as available, and in any event within 90 days after the
end of each fiscal year of the Borrower, the Borrower's audited financial
statements with the unqualified opinion of independent certified public
accountants selected by the Borrower and acceptable to the Lender, which
annual financial statements shall include the Borrower's balance sheet as
at the end of such fiscal year and the related statements of the
Borrower's income, retained earnings and cash flows for the fiscal year
then ended, prepared, if the Lender so requests, on a consolidating and
consolidated basis to include any Affiliates, all in reasonable detail and
prepared in accordance with GAAP, together with (i) copies of all
management letters prepared by such accountants; (ii) a report signed by
such accountants stating that in making the investigations necessary for
said opinion they obtained no knowledge, except as specifically stated, of
any Default or Event of Default hereunder and all relevant facts in
reasonable detail to evidence, and the computations as to, whether or not
the Borrower is in compliance with the requirements set forth in Section
6.12, Section 6.13, and Section 7.10; and (iii) a certificate of the
Borrower's chief financial officer stating that such financial statements
have been prepared in accordance with GAAP and whether or not such officer
has knowledge of the occurrence of any Default or Event of Default
hereunder and, if so, stating in reasonable detail the facts with respect
thereto;
(b) as soon as available and in any event within 30 days after the
end of each month, an unaudited/internal balance sheet and statements of
income and retained earnings of the Borrower as at the end of and for such
month and for the year to date period then ended, prepared, if the Lender
so requests, on a consolidating and consolidated basis to include any
Affiliates, in reasonable detail and stating in comparative form the
figures for the corresponding date and periods in the previous year, all
prepared in accordance with GAAP, subject to year-end audit adjustments;
and accompanied by a certificate of the Borrower's chief financial
officer, substantially in the form of Exhibit D hereto stating (i) that
such financial statements have been prepared in accordance with GAAP,
subject to year-end audit adjustments, (ii) whether or not such officer
has knowledge of the occurrence of any Default or Event of Default
hereunder not theretofore reported and remedied and, if so, stating in
reasonable detail the facts with respect thereto, and (iii) all relevant
facts in reasonable detail to evidence, and the computations as to,
whether or not the Borrower is in compliance with the requirements set
forth in Section 6.12, Section 6.13, and Section 7.10;
(c) within 15 days after the end of each month or more frequently if
the Lender so requires, agings of the Borrower's accounts receivable and
its accounts payable, an inventory certification report, and a calculation
of the Borrower's Accounts, Eligible Accounts, Inventory and Eligible
Inventory as at the end of such month or shorter time period;
(d) weekly, or more frequently if the Lender so requires,
receivables schedules, sales reports, and collection reports; and copies
of invoices to account debtors, credit memos, shipment documents and
delivery receipts for goods sold in excess of $75,000;
(e) by August 31, 2001, for the six month period ending June 30,
2002, and at least 30 days before the beginning of each fiscal year of the
Borrower (beginning with fiscal year 2003), the projected balance sheets
and income statements for each month of such year, each in reasonable
detail, representing the Borrower's good faith projections and certified
by the Borrower's chief financial officer as being the most accurate
projections available and identical to the projections used by the
Borrower for internal planning purposes, together with such supporting
schedules and information as the Lender may in its discretion require;
(f) immediately after the commencement thereof, notice in writing of
all litigation and of all proceedings before any governmental or
regulatory agency affecting the Borrower of the type described in Section
5.12 or which seek a monetary recovery against the Borrower in excess of
$10,000;
(g) as promptly as practicable (but in any event not later than five
business days) after an officer of the Borrower obtains knowledge of the
occurrence of any breach, default or event of default under any Security
Document or any event which constitutes a Default or Event of Default
hereunder, notice of such occurrence, together with a detailed statement
by a responsible officer of the Borrower of the steps being taken by the
Borrower to cure the effect of such breach, default or event;
(h) as soon as possible and in any event within 30 days after the
Borrower knows or has reason to know that any Reportable Event with
respect to any Plan has occurred, the statement of the Borrower's chief
financial officer setting forth details as to such Reportable Event and
the action which the Borrower proposes to take with respect thereto,
together with a copy of the notice of such Reportable Event to the Pension
Benefit Guaranty Corporation;
(i) as soon as possible, and in any event within 10 days after the
Borrower fails to make any quarterly contribution required with respect to
any Plan under Section 412(m) of the Internal Revenue Code of 1986, as
amended, the statement of the Borrower's chief financial officer setting
forth details as to such failure and the action which the Borrower
proposes to take with respect thereto, together with a copy of any notice
of such failure required to be provided to the Pension Benefit Guaranty
Corporation;
(j) promptly upon knowledge thereof, notice of (i) any disputes or
claims by the Borrower's customers exceeding $50,000 individually or
$100,000 in the aggregate during any fiscal year; (ii) credit memos; (iii)
any goods returned to or recovered by the Borrower; and (iv) any change in
the persons constituting the Borrower's officers and directors;
(k) promptly upon knowledge thereof, notice of any loss of or
material damage to any Collateral or other collateral covered by the
Security Documents or of any substantial adverse change in any Collateral
or such other collateral or the prospect of payment thereof;
(l) promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Borrower shall have
sent to its stockholders;
(m) promptly after the sending or filing thereof, copies of all
regular and periodic reports which the Borrower shall file with the
Securities and Exchange Commission or any national securities exchange;
(n) as soon as possible, and in any event by not later than ten days
after the filing thereof, copies of the state and federal tax returns and
all schedules thereto of the Borrower;
(o) promptly upon knowledge thereof, notice of the Borrower's
violation of any law, rule or regulation, the non-compliance with which
could materially and adversely affect the Borrower's business or its
financial condition;
(p) promptly upon knowledge thereof, notice of any proposed
settlement agreement or other accommodation of pending or threatened
litigation; and
(q) from time to time, with reasonable promptness, deposit records,
equipment schedules, copies of invoices to account debtors, shipment
documents and delivery receipts for goods sold, and such other material,
reports, records or information as the Lender may request.
Section 6.2 BOOKS AND RECORDS; INSPECTION AND EXAMINATION.
The Borrower will keep accurate books of record and account for
itself pertaining to the Collateral and pertaining to the Borrower's
business and financial condition and such other matters as the Lender may
from time to time request in which true and complete entries will be made
in accordance with GAAP and, upon the Lender's request, will permit any
officer, employee, attorney or accountant for the Lender to audit, review,
make extracts from or copy any and all corporate and financial books and
records of the Borrower at all times during ordinary business hours, to
send and discuss with account debtors and other obligors requests for
verification of amounts owed to the Borrower, and to discuss the
Borrower's affairs with any of its directors, officers, employees or
agents. The Borrower will permit the Lender, or its employees,
accountants, attorneys or agents, to examine and inspect any Collateral,
other collateral covered by the Security Documents or any other property
of the Borrower at any time during ordinary business hours.
Section 6.3 ACCOUNT VERIFICATION.
The Lender may at any time and from time to time send or require the
Borrower to send requests for verification of accounts or notices of
assignment to account debtors and other obligors. The Lender may also at
any time and from time to time telephone account debtors and other
obligors to verify accounts.
Section 6.4 COMPLIANCE WITH LAWS.
(a) Other than as set forth in Schedule 6.4 hereto, the Borrower
will (i) comply with the requirements of applicable laws and regulations,
the non-compliance with which would materially and adversely affect its
business or its financial condition and (ii) use and keep the Collateral,
and require that others use and keep the Collateral, only for lawful
purposes, without violation of any federal, state or local law, statute or
ordinance.
(b) Without limiting the foregoing undertakings, the Borrower
specifically agrees that it will comply with all applicable Environmental
Laws and obtain and comply with all permits, licenses and similar
approvals required by any Environmental Laws, and will not generate, use,
transport, treat, store or dispose of any Hazardous Substances in such a
manner as to create any liability or obligation under the common law of
any jurisdiction or any Environmental Law.
Section 6.5 PAYMENT OF TAXES AND OTHER CLAIMS.
The Borrower will pay or discharge, when due, (a) all taxes,
assessments and governmental charges levied or imposed upon it or upon its
income or profits, upon any properties belonging to it (including, without
limitation, the Collateral) or upon or against the creation, perfection or
continuance of the Security Interest, prior to the date on which penalties
attach thereto, (b) all federal, state and local taxes required to be
withheld by it, and (c) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien or charge upon any
properties of the Borrower; provided, that the Borrower shall not be
required to pay any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which proper reserves have been made.
Section 6.6 MAINTENANCE OF PROPERTIES.
(a) The Borrower will keep and maintain the Collateral, the other
collateral covered by the Security Documents and all of its other
properties necessary or useful in its business in good condition, repair
and working order (normal wear and tear excepted) and will from time to
time replace or repair any worn, defective or broken parts; provided,
however, that nothing in this Section 6.6 shall prevent the Borrower from
discontinuing the operation and maintenance of any of its properties if
such discontinuance is, in the Lender's judgment, desirable in the conduct
of the Borrower's business and not disadvantageous in any material respect
to the Lender.
(b) The Borrower will defend the Collateral against all claims or
demands of all persons (other than the Lender) claiming the Collateral or
any interest therein.
(c) The Borrower will keep all Collateral and other collateral
covered by the Security Documents free and clear of all security
interests, liens and encumbrances except Permitted Liens.
Section 6.7 INSURANCE. The Borrower will obtain and at all times
maintain insurance with insurers believed by the Borrower to be
responsible and reputable, in such amounts and against such risks as may
from time to time be required by the Lender, but in all events in such
amounts and against such risks as is usually carried by companies engaged
in similar business and owning similar properties in the same general
areas in which the Borrower operates. Without limiting the generality of
the foregoing, the Borrower will at all times keep all tangible Collateral
insured against risks of fire (including so-called extended coverage),
theft, collision (for Collateral consisting of motor vehicles) and such
other risks and in such amounts as the Lender may reasonably request, with
any loss payable to the Lender to the extent of its interest, and all
policies of such insurance shall contain a lender's loss payable
endorsement for the Lender's benefit acceptable to the Lender. All
policies of liability insurance required hereunder shall name the Lender
as an additional insured.
Section 6.8 PRESERVATION OF EXISTENCE. The Borrower will preserve and
maintain its existence and all of its rights, privileges and franchises
necessary or desirable in the normal conduct of its business and shall
conduct its business in an orderly, efficient and regular manner.
Section 6.8 DELIVERY OF INSTRUMENTS, ETC. Upon request by the Lender,
the Borrower will promptly deliver to the Lender in pledge all
instruments, documents and chattel papers constituting Collateral, duly
endorsed or assigned by the Borrower.
Section 6.9 COLLATERAL ACCOUNT.
(a) The Borrower shall irrevocably direct all present and future
Account debtors and other Persons obligated to make payments constituting
Collateral to make such payments directly to the Lockbox. All of the
Borrower's invoices, account statements and other written or oral
communications directing, instructing, demanding or requesting payment of
any Account or any other amount constituting Collateral shall
conspicuously direct that all payments be made to the Lockbox and shall
include the Lockbox address. All payments received in the Lockbox shall
be processed to the Collateral Account.
(b) The Borrower agrees to deposit in the Collateral Account or, at
the Lender's option, to deliver to the Lender all collections on Accounts,
contract rights, chattel paper and other rights to payment constituting
Collateral, and all other cash proceeds of Collateral, which the Borrower
may receive directly notwithstanding its direction to Account debtors and
other obligors to make payments to the Lockbox, immediately upon receipt
thereof, in the form received, except for the Borrower's endorsement when
deemed necessary. Until delivered to the Lender or deposited in the
Collateral Account, all proceeds or collections of Collateral shall be
held in trust by the Borrower for and as the property of the Lender and
shall not be commingled with any funds or property of the Borrower. (All
such collections shall constitute proceeds of Collateral and shall not
constitute payment of any Obligation.)
(c) Amounts deposited in the Collateral Account shall not bear
interest and shall not be subject to withdrawal by the Borrower, except
after full payment and discharge of all Obligations.
(d) All deposits in the Collateral Account shall constitute proceeds
of Collateral and shall not constitute payment of the Obligations. The
Lender from time to time at its discretion may, after allowing one Banking
Day, apply deposited funds in the Collateral Account to the payment of the
Obligations, in any order or manner of application satisfactory to the
Lender, by transferring such funds to the Lender's general account.
(e) All items deposited in the Collateral Account shall be subject
to final payment. If any such item is returned uncollected, the Borrower
will immediately pay the Lender, or, for items deposited in the Collateral
Account, the bank maintaining such account, the amount of that item, or
such bank at its discretion may charge any uncollected item to the
Borrower's commercial account or other account. The Borrower shall be
liable as an endorser on all items deposited in the Collateral Account,
whether or not in fact endorsed by the Borrower.
Section 6.11 PERFORMANCE BY THE LENDER. If the Borrower at any time
fails to perform or observe any of the foregoing covenants contained in
this Article VI or elsewhere herein, and if such failure shall continue
for a period of ten calendar days after the Lender gives the Borrower
written notice thereof (or in the case of the agreements contained in
Section 6.5, Section 6.7 and Section 6.10, immediately upon the occurrence
of such failure, without notice or lapse of time), the Lender may, but
need not, perform or observe such covenant on behalf and in the name,
place and stead of the Borrower (or, at the Lender's option, in the
Lender's name) and may, but need not, take any and all other actions which
the Lender may reasonably deem necessary to cure or correct such failure
(including, without limitation, the payment of taxes, the satisfaction of
security interests, liens or encumbrances, the performance of obligations
owed to account debtors or other obligors, the procurement and maintenance
of insurance, the execution of assignments, security agreements and
financing statements, and the endorsement of instruments); and the
Borrower shall thereupon pay to the Lender on demand the amount of all
monies expended and all costs and expenses (including reasonable
attorneys' fees and legal expenses) incurred by the Lender in connection
with or as a result of the performance or observance of such agreements or
the taking of such action by the Lender, together with interest thereon
from the date expended or incurred at the Floating Rate. To facilitate
the Lender's performance or observance of such covenants of the Borrower,
the Borrower hereby irrevocably appoints the Lender, or the Lender's
delegate, acting alone, as the Borrower's attorney in fact (which
appointment is coupled with an interest) with the right (but not the duty)
from time to time to create, prepare, complete, execute, deliver, endorse
or file in the name and on behalf of the Borrower any and all instruments,
documents, assignments, security agreements, financing statements,
applications for insurance and other agreements and writings required to
be obtained, executed, delivered or endorsed by the Borrower under this
Section 6.11.
Section 6.12 MINIMUM BOOK NET WORTH. The Borrower will maintain, during
each period described below, its Book Net Worth, determined as at the end
of each month, at an amount not less than the amount set forth opposite
such period:
PERIOD MINIMUM BOOK NET WORTH
The month ending June 30, 2001 $14,100,000
The month ending July 31, 2001 $13,350,000
The month ending August 31, 2001 $13,250,000
The month ending September 30, 2001 $13,250,000
The month ending October 31, 2001 $13,450,000
The month ending November 30, 2001 $13,550,000
The month ending December 31, 2001 and thereafter $13,700,000
Section 6.13 MINIMUM NET INCOME. The Borrower will achieve during each
period described below, Net Income of not less than, or a Net Loss not
greater than, the amount set forth opposite such period (number appearing
between "()" are negative):
PERIOD MINIMUM NET INCOME
The twelve months ending June 30, 2001 $(1,000,000)
The three months ending September 30, 2001 $(1,350,000)
The six months ending December 31, 2001 $(925,000)
Section 6.14 NEW COVENANTS. On or before September 30, 2001, for the
nine month period ending June 30, 2002, and on or before June 30, 2002
thereafter, the Borrower and the Lender shall agree on new covenant levels
for Section 6.12, Section 6.13 and Section 7.10 for periods after such
date. The new covenant levels will be based on the Borrower's projections
for such periods and shall be no less stringent than the present levels,
but if the Borrower and the Lender do not agree, the Lender may designate
the required amounts in its sole discretion and the failure by the
Borrower to maintain the designated amounts shall constitute an Event of
Default.
Article VII.
NEGATIVE COVENANTS
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrower agrees that, without the
Lender's prior written consent:
Section 7.1 LIENS. The Borrower will not create, incur or suffer to
exist any mortgage, deed of trust, pledge, lien, security interest,
assignment or transfer upon or of any of its assets, now owned or
hereafter acquired, to secure any indebtedness; excluding, however, from
the operation of the foregoing, the following (collectively, "Permitted
Liens"):
(a) in the case of any of the Borrower's property which is not
Collateral or other collateral described in the Security Documents,
covenants, restrictions, rights, easements and minor irregularities in
title which do not materially interfere with the Borrower's business or
operations as presently conducted;
(b) mortgages, deeds of trust, pledges, liens, security interests
and assignments in existence on the date hereof and listed in Schedule 7.1
hereto, securing indebtedness for borrowed money permitted under Section
7.2;
(c) the Security Interest and liens and security interests created
by the Security Documents; and
(d) purchase money security interests relating to the acquisition of
machinery and equipment of the Borrower not exceeding the lesser of cost
or fair market value thereof and so long as no Default Period is then in
existence and none would exist immediately after such acquisition.
Section 7.2 INDEBTEDNESS. The Borrower will not incur, create, assume
or permit to exist any indebtedness or liability on account of deposits or
advances or any indebtedness for borrowed money or letters of credit
issued on the Borrower's behalf, or any other indebtedness or liability
evidenced by notes, bonds, debentures or similar obligations, except:
(a) indebtedness arising hereunder;
(b) indebtedness of the Borrower in existence on the date hereof and
listed in Schedule 7.2 hereto; and
(c) indebtedness relating to liens permitted in accordance with
Section 7.1.
Section 7.3 GUARANTIES. The Borrower will not assume, guarantee,
endorse or otherwise become directly or contingently liable in connection
with any obligations of any other Person, except:
(a) the endorsement of negotiable instruments by the Borrower for
deposit or collection or similar transactions in the ordinary course of
business; and
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons, in
existence on the date hereof and listed in Schedule 7.2 hereto.
Section 7.4 INVESTMENTS AND SUBSIDIARIES.
(a) The Borrower will not purchase or hold beneficially any stock or
other securities or evidences of indebtedness of, make or permit to exist
any loans or advances to, or make any investment or acquire any interest
whatsoever in, any other Person, including specifically but without
limitation any partnership or joint venture, except:
(i) investments in direct obligations of the United States of
America or any agency or instrumentality thereof whose obligations
constitute full faith and credit obligations of the United States of
America having a maturity of one year or less, commercial paper issued by
U.S. corporations rated "A-1" or "A-2" by Standard & Poors Corporation or
"P-1" or "P-2" by Xxxxx'x Investors Service or certificates of deposit or
bankers' acceptances having a maturity of one year or less issued by
members of the Federal Reserve System having deposits in excess of
$100,000,000 (which certificates of deposit or bankers' acceptances are
fully insured by the Federal Deposit Insurance Corporation);
(ii) travel advances or loans to the Borrower's officers and
employees not exceeding at any one time an aggregate of $5,000 and
(iii) advances in the form of progress payments, prepaid rent
not exceeding one month or security deposits.
(a) The Borrower will not create or permit to exist any Subsidiary,
other than any Subsidiary in existence on the date hereof and listed in
Schedule 5.4.
Section 7.5 DIVIDENDS. Except as set forth below, the Borrower will
not declare or pay any dividends (other than dividends payable solely in
stock of the Borrower) on any class of its stock or make any payment on
account of the purchase, redemption or other retirement of any shares of
such stock or make any distribution in respect thereof, either directly or
indirectly; PROVIDED, HOWEVER, that so long as no Default exists, or would
exist immediately thereafter, the Borrower may purchase shares of its
stock for up to an aggregate amount of $1,500,000, if (I) average
Availability for the ninety (90) days prior to and immediately after each
such purchase is equal to or greater than $1,500,000 and (ii) the actions
set forth on Schedule 5.6 have been settled or dismissed with prejudice,
as determined by the Lender in its sole discretion, and no action, suits
or proceedings by the Borrower's shareholders are pending or, to the
Borrower's knowledge, threatened against or affecting the Borrower or any
of its Affiliates or the properties of the Borrower or any of its
Affiliates before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign.
Section 7.6 SALE OR TRANSFER OF ASSETS; SUSPENSION OF BUSINESS
OPERATIONS. The Borrower will not sell, lease, assign, transfer or
otherwise dispose of (i) the stock of any Subsidiary, (ii) all or a
substantial part of its assets, or (iii) any Collateral or any interest
therein (whether in one transaction or in a series of transactions) to any
other Person other than the sale of Inventory in the ordinary course of
business and will not liquidate, dissolve or suspend business operations.
The Borrower will not in any manner transfer any property without prior or
present receipt of full and adequate consideration.
Section 7.7 CONSOLIDATION AND MERGER; ASSET ACQUISITIONS. The Borrower
will not consolidate with or merge into any Person, or permit any other
Person to merge into it, or acquire (in a transaction analogous in purpose
or effect to a consolidation or merger) all or substantially all the
assets of any other Person.
Section 7.8 SALE AND LEASEBACK. The Borrower will not enter into any
arrangement, directly or indirectly, with any other Person whereby the
Borrower shall sell or transfer any real or personal property, whether now
owned or hereafter acquired, and then or thereafter rent or lease as
lessee such property or any part thereof or any other property which the
Borrower intends to use for substantially the same purpose or purposes as
the property being sold or transferred.
Section 7.9 RESTRICTIONS ON NATURE OF BUSINESS. The Borrower will not
engage in any line of business materially different from that presently
engaged in by the Borrower and will not purchase, lease or otherwise
acquire assets not related to its business.
Section 7.10 CAPITAL EXPENDITURES. The Borrower will not incur or
contract to incur Unfinanced Capital Expenditures of more than (i)
$4,000,000 during its fiscal year ending June 30, 2001 and (ii) $750,000
during the period from July 1, 2001 through December 31, 2001.
Section 7.11 ACCOUNTING. The Borrower will not adopt any material
change in accounting principles other than as required by GAAP. The
Borrower will not adopt, permit or consent to any change in its fiscal
year.
Section 7.12 DISCOUNTS, ETC. The Borrower will not, after notice from
the Lender, grant any discount, credit or allowance to any customer of the
Borrower or accept any return of goods sold, or at any time (whether
before or after notice from the Lender) modify, amend, subordinate, cancel
or terminate the obligation of any account debtor or other obligor of the
Borrower.
Section 7.13 DEFINED BENEFIT PENSION PLANS. The Borrower will not
adopt, create, assume or become a party to any defined benefit pension
plan, unless disclosed to the Lender pursuant to Section 5.10.
Section 7.14 OTHER DEFAULTS. The Borrower will not permit any breach,
default or event of default to occur under any note, loan agreement,
indenture, lease, mortgage, contract for deed, security agreement or other
contractual obligation binding upon the Borrower.
Section 7.15 PLACE OF BUSINESS; NAME. The Borrower will not transfer
its chief executive office or principal place of business, or move,
relocate, close or sell any business location. The Borrower will not
permit any tangible Collateral or any records pertaining to the Collateral
to be located in any state or area in which, in the event of such
location, a financing statement covering such Collateral would be required
to be, but has not in fact been, filed in order to perfect the Security
Interest. The Borrower will not change its name.
Section 7.16 ORGANIZATIONAL DOCUMENTS; S CORPORATION STATUS. The
Borrower will not amend its certificate of incorporation, articles of
incorporation or bylaws. The Borrower will not become an S Corporation
within the meaning of the Internal Revenue Code of 1986, as amended.
Section 7.17 SALARIES. The Borrower will not pay excessive or
unreasonable salaries, bonuses, commissions, consultant fees or other
compensation; or increase the salary, bonus, commissions, consultant fees
or other compensation of any director, officer or consultant, or any
member of their families, by more than 25% in any one year, either
individually or for all such persons in the aggregate, or pay any such
increase from any source other than profits earned in the year of payment.
Section 7.18 CHANGE IN OWNERSHIP. The Borrower will not issue or sell
any stock of the Borrower or change the percentage of voting and non-
voting stock issued and outstanding.
Section 7.19 SETTLEMENT OF ACTIONS. The Borrower will not enter into
any settlement agreement or other accommodation of threatened or pending
litigation for the payment of money in excess of $50,000.
Article VIII.
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
Section 8.1 EVENTS OF DEFAULT. "Event of Default", wherever used
herein, means any one of the following events:
(a) Default in the payment of the Obligations when they become due
and payable;
(b) Default in the payment of any fees, commissions, costs or
expenses required to be paid by the Borrower under this Agreement;
(c) Default in the performance, or breach, of any covenant or
agreement of the Borrower contained in this Agreement;
(d) The Borrower shall be or become insolvent, or admit in writing
its inability to pay its debts as they mature, or make an assignment for
the benefit of creditors; or the Borrower shall apply for or consent to
the appointment of any receiver, trustee, or similar officer for it or him
or for all or any substantial part of its property; or such receiver,
trustee or similar officer shall be appointed without the application or
consent of the Borrower; or the Borrower shall institute (by petition,
application, answer, consent or otherwise) any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution,
liquidation or similar proceeding relating to it or him under the laws of
any jurisdiction; or any such proceeding shall be instituted (by petition,
application or otherwise) against the Borrower; or any judgment, writ,
warrant of attachment or execution or similar process shall be issued or
levied against a substantial part of the property of the Borrower;
(e) A petition shall be filed by or against the Borrower under the
United States Bankruptcy Code naming the Borrower as debtor;
(f) Any representation or warranty made by the Borrower in this
Agreement or by the Borrower (or any of its officers) in any agreement,
certificate, instrument or financial statement or other statement
contemplated by or made or delivered pursuant to or in connection with
this Agreement or any such guaranty shall prove to have been incorrect in
any material respect when deemed to be effective;
(g) The rendering against the Borrower of a final judgment, decree
or order for the payment of money in excess of $100,000, and the
continuance of such judgment, decree or order unsatisfied and in effect
for any period of 30 consecutive days without a stay of execution;
(h) A default under any bond, debenture, note or other evidence of
indebtedness of the Borrower owed to any Person other than the Lender, or
under any indenture or other instrument under which any such evidence of
indebtedness has been issued or by which it is governed, or under any
lease of any of the Premises, and the expiration of the applicable period
of grace, if any, specified in such evidence of indebtedness, indenture,
other instrument or lease;
(i) Any Reportable Event, which the Lender determines in good faith
might constitute grounds for the termination of any Plan or for the
appointment by the appropriate United States District Court of a trustee
to administer any Plan, shall have occurred and be continuing 30 days
after written notice to such effect shall have been given to the Borrower
by the Lender; or a trustee shall have been appointed by an appropriate
United States District Court to administer any Plan; or the Pension
Benefit Guaranty Corporation shall have instituted proceedings to
terminate any Plan or to appoint a trustee to administer any Plan; or the
Borrower shall have filed for a distress termination of any Plan under
Title IV of ERISA; or the Borrower shall have failed to make any quarterly
contribution required with respect to any Plan under Section 412(m) of the
Internal Revenue Code of 1986, as amended, which the Lender determines in
good faith may by itself, or in combination with any such failures that
the Lender may determine are likely to occur in the future, result in the
imposition of a lien on the Borrower's assets in favor of the Plan;
(j) An event of default shall occur under any Security Document or
under any other security agreement, mortgage, deed of trust, assignment or
other instrument or agreement securing any obligations of the Borrower
hereunder or under any note;
(k) The Borrower shall liquidate, dissolve, terminate or suspend its
business operations or otherwise fail to operate its business in the
ordinary course, or sell all or substantially all of its assets, without
the Lender's prior written consent;
(l) The Borrower shall fail to pay, withhold, collect or remit any
tax or tax deficiency when assessed or due (other than any tax deficiency
which is being contested in good faith and by proper proceedings and for
which it shall have set aside on its books adequate reserves therefor) or
notice of any state or federal tax liens shall be filed or issued;
(m) Default in the payment of any amount owed by the Borrower to the
Lender other than any indebtedness arising hereunder;
(n) Any event or circumstance with respect to the Borrower shall
occur such that the Lender shall believe in good faith that the prospect
of payment of all or any part of the Obligations or the performance by the
Borrower under the Loan Documents is impaired or any material adverse
change in the business or financial condition of the Borrower shall occur.
(o) Any breach, default or event of default by or attributable to
any Affiliate under any agreement between such Affiliate and the Lender.
Section 8.2 RIGHTS AND REMEDIES. During any Default Period, the Lender
may exercise any or all of the following rights and remedies:
(a) the Lender may, by notice to the Borrower, declare the
Commitment to be terminated, whereupon the same shall forthwith terminate;
(b) the Lender may, by notice to the Borrower, declare the
Obligations to be forthwith due and payable, whereupon all Obligations
shall become and be forthwith due and payable, without presentment, notice
of dishonor, protest or further notice of any kind, all of which the
Borrower hereby expressly waives;
(c) the Lender may, without notice to the Borrower and without
further action, apply any and all money owing by the Lender to the
Borrower to the payment of the Obligations;
(d) the Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC,
including, without limitation, the right to take possession of Collateral,
or any evidence thereof, proceeding without judicial process or by
judicial process (without a prior hearing or notice thereof, which the
Borrower hereby expressly waives) and the right to sell, lease or
otherwise dispose of any or all of the Collateral, and, in connection
therewith, the Borrower will on demand assemble the Collateral and make it
available to the Lender at a place to be designated by the Lender which is
reasonably convenient to both parties;
(e) the Lender may exercise and enforce its rights and remedies
under the Loan Documents; and
(f) the Lender may exercise any other rights and remedies available
to it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in subsections (d) or (e) of Section 8.1, the Obligations shall
be immediately due and payable automatically without presentment, demand,
protest or notice of any kind.
Section 8.3 CERTAIN NOTICES. If notice to the Borrower of any intended
disposition of Collateral or any other intended action is required by law
in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Section 9.3) at least ten
calendar days before the date of intended disposition or other action.
Article IX.
MISCELLANEOUS
Section 9.1 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay by the
Lender in exercising any right, power or remedy under the Loan Documents
shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under
the Loan Documents. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law.
Section 9.2 AMENDMENTS, ETC. No amendment, modification, termination
or waiver of any provision of any Loan Document or consent to any
departure by the Borrower therefrom or any release of a Security Interest
shall be effective unless the same shall be in writing and signed by the
Lender, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No notice
to or demand on the Borrower in any case shall entitle the Borrower to any
other or further notice or demand in similar or other circumstances.
Section 9.3 ADDRESSES FOR NOTICES, ETC. Except as otherwise expressly
provided herein, all notices, requests, demands and other communications
provided for under the Loan Documents shall be in writing and shall be (a)
personally delivered, (b) sent by first class United States mail, (c) sent
by overnight courier of national reputation, or (d) transmitted by
telecopy, in each case addressed or telecopied to the party to whom notice
is being given at its address or telecopier number as set forth below:
If to the Borrower:
Vari-L Company, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxxxx
If to the Lender:
Xxxxx Fargo Business Credit, Inc.
MAC C7300-300
0000 Xxxxxxxx
Xxxxxx, Xxxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other
party complying as to delivery with the terms of this Section. All such
notices, requests, demands and other communications shall be deemed to
have been given on (a) the date received if personally delivered, (b) when
deposited in the mail if delivered by mail, (c) the date sent if sent by
overnight courier, or (d) the date of transmission if delivered by
telecopy, except that notices or requests to the Lender pursuant to any of
the provisions of Article II shall not be effective until received by the
Lender.
Section 9.4 FURTHER DOCUMENTS. The Borrower will from time to time
execute and deliver or endorse any and all instruments, documents,
conveyances, assignments, security agreements, financing statements and
other agreements and writings that the Lender may reasonably request in
order to secure, protect, perfect or enforce the Security Interest or the
Lender's rights under the Loan Documents (but any failure to request or
assure that the Borrower executes, delivers or endorses any such item
shall not affect or impair the validity, sufficiency or enforceability of
the Loan Documents and the Security Interest, regardless of whether any
such item was or was not executed, delivered or endorsed in a similar
context or on a prior occasion).
Section 9.5 COLLATERAL. This Agreement does not contemplate a sale of
accounts, contract rights or chattel paper, and, as provided by law, the
Borrower is entitled to any surplus and shall remain liable for any
deficiency. The Lender's duty of care with respect to Collateral in its
possession (as imposed by law) shall be deemed fulfilled if it exercises
reasonable care in physically keeping such Collateral, or in the case of
Collateral in the custody or possession of a bailee or other third person,
exercises reasonable care in the selection of the bailee or other third
person, and the Lender need not otherwise preserve, protect, insure or
care for any Collateral. The Lender shall not be obligated to preserve
any rights the Borrower may have against prior parties, to realize on the
Collateral at all or in any particular manner or order or to apply any
cash proceeds of the Collateral in any particular order of application.
Section 9.6 COSTS AND EXPENSES. The Borrower agrees to pay on demand
all costs and expenses, including (without limitation) attorneys' fees,
incurred by the Lender in connection with the Obligations, this Agreement,
the Loan Documents, and any other document or agreement related hereto or
thereto, and the transactions contemplated hereby, including without
limitation all such costs, expenses and fees incurred in connection with
the negotiation, preparation, execution, amendment, administration,
performance, collection and enforcement of the Obligations and all such
documents and agreements and the creation, perfection, protection,
satisfaction, foreclosure or enforcement of the Security Interest.
Section 9.7 INDEMNITY. In addition to the payment of expenses pursuant
to Section 9.6, the Borrower agrees to indemnify, defend and hold harmless
the Lender, and any of its participants, parent corporations, subsidiary
corporations, affiliated corporations, successor corporations, and all
present and future officers, directors, employees, attorneys and agents of
the foregoing (the "Indemnitees") from and against any of the following
(collectively, "Indemnified Liabilities"):
(a) any and all transfer taxes, documentary taxes, assessments or
charges made by any governmental authority by reason of the execution and
delivery of the Loan Documents or the making of the Advances;
(b) any claims, loss or damage to which any Indemnitee may be
subjected if any representation or warranty contained in Section 5.12
proves to be incorrect in any respect or as a result of any violation of
the covenant contained in Section 6.4(b); and
(c) any and all other liabilities, losses, damages, penalties,
judgments, suits, claims, costs and expenses of any kind or nature
whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel) in connection with the foregoing and any other
investigative, administrative or judicial proceedings, whether or not such
Indemnitee shall be designated a party thereto, which may be imposed on,
incurred by or asserted against any such Indemnitee, in any manner related
to or arising out of or in connection with the making of the Advances and
the Loan Documents or the use or intended use of the proceeds of the
Advances, provided, however, that the Borrower need not indemnify against
any loss or liability incurred by the Lender as a result of the Lender's
gross negligence or willful misconduct.
If any investigative, judicial or administrative proceeding arising from
any of the foregoing is brought against any Indemnitee, upon such
Indemnitee's request, the Borrower, or counsel designated by the Borrower
and satisfactory to the Indemnitee, will resist and defend such action,
suit or proceeding to the extent and in the manner directed by the
Indemnitee, at the Borrower's sole costs and expense. Each Indemnitee
will use its best efforts to cooperate in the defense of any such action,
suit or proceeding. If the foregoing undertaking to indemnify, defend and
hold harmless may be held to be unenforceable because it violates any law
or public policy, the Borrower shall nevertheless make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrower's
obligation under this Section 9.7 shall survive the termination of this
Agreement and the discharge of the Borrower's other obligations hereunder.
Section 9.8 PARTICIPANTS. The Lender and its participants, if any, are
not partners or joint venturers, and the Lender shall not have any
liability or responsibility for any obligation, act or omission of any of
its participants. All rights and powers specifically conferred upon the
Lender may be transferred or delegated to any of the Lender's
participants, successors or assigns.
Section 9.9 EXECUTION IN COUNTERPARTS. This Agreement and other Loan
Documents may be executed in any number of counterparts, each of which
when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the
same instrument.
Section 9.10 BINDING EFFECT; ASSIGNMENT; COMPLETE AGREEMENT; EXCHANGING
INFORMATION. The Loan Documents shall be binding upon and inure to the
benefit of the Borrower and the Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign its
rights thereunder or any interest therein without the Lender's prior
written consent. This Agreement, together with the Loan Documents,
comprises the complete and integrated agreement of the parties on the
subject matter hereof and supersedes all prior agreements, written or
oral, on the subject matter hereof. Without limiting the Lender's right
to share information regarding the Borrower and its Affiliates with the
Lender's participants, accountants, lawyers and other advisors, the
Lender, WFC Holdings Corporation, and all direct and indirect subsidiaries
of WFC Holdings Corporation, may exchange any and all information they may
have in their possession regarding the Borrower and its Affiliates, and
the Borrower waives any right of confidentiality it may have with respect
to such exchange of such information.
Section 9.11 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
Section 9.12 HEADINGS. Article and Section headings in this Agreement
are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 9.13 GOVERNING LAW; JURISDICTION, VENUE; WAIVER OF JURY TRIAL.
The Loan Documents shall be governed by and construed in accordance with
the substantive laws (other than conflict laws) of the State of Colorado.
This Agreement shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Colorado.
Each of the parties hereto hereby (i) consents to the personal
jurisdiction of the state and federal courts located in the State of
Colorado in connection with any controversy related to this Agreement;
(ii) waives any argument that venue in any such forum is not convenient,
(iii) agrees that any litigation initiated by the Lender or the Borrower
in connection with this Agreement or the other Loan Documents shall be
venued in either the District Court of the City and County of Denver,
Colorado, or the United States District Court, District of Colorado; and
(iv) agrees that a final judgment in any such suit, action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by law. THE PARTIES WAIVE
ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR
PERTAINING TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of
the date first above written.
XXXXX FARGO BUSINESS CREDIT, INC. VARI-L COMPANY, INC.
By:/s/ Xxxxx X. Xxxxx By:/s/Xxxxxxx X. Xxxxxxxxxx
Name: Xxxxx X. Xxxxx Name: Xxxxxxx X. Xxxxxxxxxx
Its: Vice President Its: Vice President of Finance
and Chief Financial Officer
Table of Exhibits and Schedules
Exhibit A Form of Revolving Note
Exhibit B Form of Term Note
Exhibit C Form of CapEx Note
Exhibit D Compliance Certificate
Exhibit E Premises
------------------------
Schedule 5.1 Trade Names, Chief Executive Office,
Principal Place of Business, and Locations
of Collateral
Schedule 5.4 Subsidiaries
Schedule 5.6 Litigation
Schedule 5.8 Taxes
Schedule 5.11 Default
Schedule 6.4 Compliance with Laws
Schedule 7.1 Permitted Liens
Schedule 7.2 Permitted Indebtedness and Guaranties
Exhibit A to Credit and Security Agreement
REVOLVING NOTE
$6,000,000 Denver, Colorado
June 28, 2001
For value received, the undersigned, VARI-L COMPANY, INC., a Colorado
corporation (the "Borrower"), hereby promises to pay on the Termination
Date under the Credit Agreement (defined below), to the order of XXXXX
FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"), at
its main office in Denver, Colorado, or at any other place designated at
any time by the holder hereof, in lawful money of the United States of
America and in immediately available funds, the principal sum of Six
Million Dollars ($6,000,000) or, if less, the aggregate unpaid principal
amount of all Revolving Advances made by the Lender to the Borrower under
the Credit Agreement (defined below) together with interest on the
principal amount hereunder remaining unpaid from time to time, computed on
the basis of the actual number of days elapsed and a 360-day year, from
the date hereof until this Note is fully paid at the rate from time to
time in effect under the Credit and Security Agreement of even date
herewith (as the same may hereafter be amended, supplemented or restated
from time to time, the "Credit Agreement") by and between the Lender and
the Borrower. The principal hereof and interest accruing thereon shall be
due and payable as provided in the Credit Agreement. This Note may be
prepaid only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit
Agreement, which provides, among other things, for acceleration hereof.
This Note is the Revolving Note referred to in the Credit Agreement. This
Note is secured, among other things, pursuant to the Credit Agreement and
the Security Documents as therein defined, and may now or hereafter be
secured by one or more other security agreements, mortgages, deeds of
trust, assignments or other instruments or agreements.
The Borrower hereby agrees to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when
due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and
protest are expressly waived.
VARI-L COMPANY, INC.
By:
Name: Xxxxxxx X. Xxxxxxxxxx
Its Vice President of Finance
and Chief Financial Officer
Exhibit B to Credit and Security Agreement
TERM NOTE
$2,500,000 Denver, Colorado
June 28, 2001
For value received, the undersigned, VARI-L COMPANY, INC., a Colorado
corporation (the "Borrower"), hereby promises to pay on the Termination
Date under the Credit Agreement (defined below), to the order of XXXXX
FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"), at
its main office in Denver, Colorado, or at any other place designated at
any time by the holder hereof, in lawful money of the United States of
America and in immediately available funds, the principal sum of Two
Million Five Hundred Thousand Dollars ($2,500,000) or, if less, the
aggregate unpaid principal amount of the Term Advance made by the Lender
to the Borrower under the Credit Agreement (defined below) together with
interest on the principal amount hereunder remaining unpaid from time to
time, computed on the basis of the actual number of days elapsed and a 360-
day year, from the date hereof until this Note is fully paid at the rate
from time to time in effect under the Credit and Security Agreement of
even date herewith (as the same may hereafter be amended, supplemented or
restated from time to time, the "Credit Agreement") by and between the
Lender and the Borrower. The principal hereof and interest accruing
thereon shall be due and payable as provided in the Credit Agreement.
This Note may be prepaid only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit
Agreement, which provides, among other things, for acceleration hereof.
This Note is the Term Note referred to in the Credit Agreement. This Note
is secured, among other things, pursuant to the Credit Agreement and the
Security Documents as therein defined, and may now or hereafter be secured
by one or more other security agreements, mortgages, deeds of trust,
assignments or other instruments or agreements.
The Borrower hereby agrees to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when
due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and
protest are expressly waived.
VARI-L COMPANY, INC.
By:
Name: Xxxxxxx X. Xxxxxxxxxx
Its Vice President of Finance
and Chief Financial Officer
Exhibit C to Credit and Security Agreement
CAPEX NOTE
$1,500,000 Denver, Colorado
June 28, 2001
For value received, the undersigned, VARI-L COMPANY, INC., a Colorado
corporation (the "Borrower"), hereby promises to pay on the Termination
Date under the Credit Agreement (defined below), to the order of XXXXX
FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"), at
its main office in Denver, Colorado, or at any other place designated at
any time by the holder hereof, in lawful money of the United States of
America and in immediately available funds, the principal sum of One
Million Five Hundred Thousand Dollars ($1,500,000) or, if less, the
aggregate unpaid principal amount of the CapEx Advances made by the Lender
to the Borrower under the Credit Agreement (defined below) together with
interest on the principal amount hereunder remaining unpaid from time to
time, computed on the basis of the actual number of days elapsed and a 360-
day year, from the date hereof until this Note is fully paid at the rate
from time to time in effect under the Credit and Security Agreement of
even date herewith (as the same may hereafter be amended, supplemented or
restated from time to time, the "Credit Agreement") by and between the
Lender and the Borrower. The principal hereof and interest accruing
thereon shall be due and payable as provided in the Credit Agreement.
This Note may be prepaid only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit
Agreement, which provides, among other things, for acceleration hereof.
This Note is the CapEx Note referred to in the Credit Agreement. This
Note is secured, among other things, pursuant to the Credit Agreement and
the Security Documents as therein defined, and may now or hereafter be
secured by one or more other security agreements, mortgages, deeds of
trust, assignments or other instruments or agreements.
The Borrower hereby agrees to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when
due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and
protest are expressly waived.
VARI-L COMPANY, INC.
By:----------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Its Vice President of Finance
and Chief Financial Officer
Exhibit D to Credit and Security Agreement
COMPLIANCE CERTIFICATE
To: Xxxxxxx X. Xxxxxx
Xxxxx Fargo Business Credit, Inc.
Date: ------------------, 200--
Subject: Vari-L Company, Inc.
Financial Statements
In accordance with our Credit and Security Agreement dated as of June
28, 2001 (the "Credit Agreement"), attached are the financial statements
of Vari-L Company, Inc. (the "Borrower") as of and for -------------------
-----, 20-- (the "Reporting Date") and the year-to-date period then ended
(the "Current Financials"). All terms used in this certificate have the
meanings given in the Credit Agreement.
I certify that the Current Financials have been prepared in
accordance with GAAP, subject to year-end audit adjustments, and fairly
present the Borrower's financial condition and the results of its
operations as of the date thereof.
EVENTS OF DEFAULT. (Check one):
[ ] The undersigned does not have knowledge of the occurrence of a
Default or Event of Default under the Credit Agreement.
[ ] The undersigned has knowledge of the occurrence of a Default or
Event of Default under the Credit Agreement and attached hereto is a
statement of the facts with respect to thereto.
I hereby certify to the Lender as follows:
[ ] The Reporting Date does not xxxx the end of one of the
Borrower's fiscal quarters, hence I am completing only paragraph __ below.
[ ] The Reporting Date marks the end of one of the Borrower's fiscal
quarters, hence I am completing all paragraphs below except paragraph ---.
[ ] The Reporting Date marks the end of the Borrower's fiscal year,
hence I am completing all paragraphs below.
1. MINIMUM BOOK NET WORTH. Pursuant to Section 6.12 of the Credit
Agreement, as of the Reporting Date, the Borrower's Book Net Worth was $--
---------- which [ ] satisfies [ ] does not satisfy the requirement that
such amount be not less than as set forth in table below:
PERIOD MINIMUM BOOK NET WORTH
The month ending June 30, 2001 $14,100,000
The month ending July 31, 2001 $13,350,000
The month ending August 31, 2001 $13,250,000
The month ending September 30, 2001 $13,250,000
The month ending October 31, 2001 $13,450,000
The month ending November 30, 2001 $13,550,000
The month ending December 31, 2001 $13,700,000
and thereafter
2. MINIMUM NET INCOME. Pursuant to Section 6.13 of the Credit
Agreement, the Borrower's Net Income for the -------- period ending on the
Reporting Date, was $------------, which [ ] satisfies [ ] does not
satisfy the requirement that such amount be not less than, or such loss
shall not be greater than, $-------------- during such period as set forth
in table below:
PERIOD MINIMUM NET INCOME
The twelve months ending
June 30, 2001 $(1,000,000)
The three months ending
September 30, 2001 $(1,350,000)
The six months ending
December 31, 2001 $(925,000)
3. CAPITAL EXPENDITURES. Pursuant to Section 7.10 of the Credit
Agreement, for the year-to-date period ending on the Reporting Date, the
Borrower has expended or contracted to expend during the ---- month period
ending --------, for Capital Expenditures, $-------- in the aggregate,
which [ ] satisfies [ ] does not satisfy the requirement that such
expenditures not exceed $---------- in the aggregate during such period.
4. Salaries. As of the Reporting Date, the Borrower [ ] is [ ] is not
in compliance with Section 7.17 of the Credit Agreement concerning
salaries.
Attached hereto are all relevant facts in reasonable detail to
evidence, and the computations of the financial covenants referred to
above. These computations were made in accordance with GAAP.
VARI-L COMPANY, INC.
By: -----------------------------
Its Chief Financial Officer
Exhibit E to Credit and Security Agreement
PREMISES
The Premises referred to in the Credit and Security Agreement are
legally described as follows:
