CREDIT AGREEMENT
THIS AGREEMENT is entered into as of December 15,
1998, by and between BEI TECHNOLOGIES, INC., a Delaware
corporation ("BEI"), and BEI SENSORS & SYSTEMS COMPANY,
INC., a Delaware corporation (individually and collectively,
"Borrower"), and XXXXX FARGO BANK, NATIONAL ASSOCIATION
("Bank").
RECITAL
Borrower has requested from Bank the credit
accommodation described below, and Bank has agreed to
provide said credit accommodation to Borrower on the terms
and conditions contained herein.
Borrower has entered into a Note Purchase Agreement
with certain Purchasers dated as of November 16, 1998
relating to the issuance by Borrower of $35,000,000 6.70%
Senior Notes due November 16, 2005 (the "Note Purchase
Agreement").
NOW, THEREFORE, for valuable consideration, the
receipt and sufficiency of which are hereby acknowledged,
Bank and Borrower hereby agree as follows:
ARTICLE I
DEFINED TERMS
"Bank" has the meaning set forth in the introductory
paragraph.
"Borrower" has the meaning set forth in the introductory
paragraph.
"Consolidated" as used in this Agreement applies to
Borrower and its Restricted Subsidiaries.
"Current Ratio" means the ratio of current assets to
current liabilities, determined in accordance with GAAP.
"EBITDA" has the meaning ascribed to "Consolidated
EBITDA" in the Note Purchase Agreement.
"Fixed Charge Coverage Ratio" has the meaning ascribed to
it in the Note Purchase Agreement.
"Funded Debt" means the outstanding principal balance of
all interest bearing obligations (inclusive of capitalized
lease obligations), determined in accordance with GAAP.
"GAAP" means generally accepted accounting principles,
consistently applied.
"Investment" has the meaning ascribed to it in the Note
Purchase Agreement.
"Lien" has the meaning ascribed to it in the Note Purchase
Agreement.
"Note Purchase Agreement" has the meaning ascribed to it
in the Recitals.
"Selected Provisions" means Sections 10.6, 10.7, 10.8 and
10.10 of the Note Purchase Agreement.
"Restricted Payments" has the meaning ascribed to it in
the Note Purchase Agreement.
"Restricted Subsidiaries" has the meaning ascribed to it
in the Note Purchase Agreement.
"Tangible Net Worth" has the meaning ascribed to it in the
Note Purchase Agreement.
In the event that, for any reason, the Note Purchase
Agreement terminates prior to the termination of this
Agreement, the Selected Provisions (including the
definitions of all defined terms used therein) and the
definitions of "Investment", "Lien", "Restricted
Payments", "Restricted Payments", "Restricted
Subsidiaries" and "Tangible Net Worth" shall be deemed to
be incorporated into and made part of this Agreement as
though fully set forth herein and shall remaining binding
upon Borrower.
ARTICLE I
THE CREDIT
SECTION 1.1. LINE OF CREDIT.
(a) Line of Credit. Subject to the terms and
conditions of this Agreement, Bank hereby agrees to make
advances to Borrower from time to time up to and including
December 15, 2000, not to exceed at any time the aggregate
principal amount of Thirteen Million Dollars
($13,000,000.00) ("Line of Credit"), the proceeds of which
shall be used to finance working capital requirements,
capital expenditures and other corporate purposes; provided,
however, that availability under the Line of Credit shall be
limited to $12,000,000.00 until such time as Bank has
received and reviewed BEI's FYE 1999 audited financial
statement which reflects a ratio of Funded Debt to EBITDA of
not greater than 3.00 to 1.00 for the fiscal year then
ended, at which time (assuming no Event of Default then
exists) availability under the Line of Credit shall be
increased to $13,000,000.00. Borrower's obligation to repay
advances under the Line of Credit shall be evidenced by a
promissory note substantially in the form of Exhibit A
attached hereto ("Line of Credit Note"), all terms of which
are incorporated herein by this reference.
(b) Letter of Credit Subfeature. As a subfeature
under the Line of Credit, Bank agrees from time to time
during the term thereof to issue commercial or standby
letters of credit for the account of Borrower to finance
working capital requirements, capital expenditures and other
corporate purposes (each, a "Letter of Credit" and
collectively, "Letters of Credit"); provided however, that
the form and substance of each Letter of Credit shall be
subject to approval by Bank, in its sole discretion; and
provided further, that the aggregate undrawn amount of all
outstanding Letters of Credit shall not at any time exceed
Three Million Dollars ($3,000,000.00). Each Letter of
Credit shall be issued for a term not to exceed 365 days, as
designated by Borrower; provided however, that no Letter of
Credit shall have an expiration date subsequent to the
maturity date of the Line of Credit. The undrawn amount of
all Letters of Credit shall be reserved under the Line of
Credit and shall not be available for borrowings thereunder.
Each Letter of Credit shall be subject to the additional
terms and conditions of the Letter of Credit Agreement and
related documents, if any, required by Bank in connection
with the issuance thereof (each, a "Letter of Credit
Agreement" and collectively, "Letter of Credit Agreements").
Each draft paid by Bank under a Letter of Credit shall be
deemed an advance under the Line of Credit and shall be
repaid by Borrower in accordance with the terms and
conditions of this Agreement applicable to such advances;
provided however, that if advances under the Line of Credit
are not available, for any reason, at the time any draft is
paid by Bank, then Borrower shall immediately pay to Bank
the full amount of such draft, together with interest
thereon from the date such amount is paid by Bank to the
date such amount is fully repaid by Borrower, at the rate of
interest applicable to advances under the Line of Credit.
In such event Borrower agrees that Bank, in its sole
discretion, may debit any demand deposit account maintained
by Borrower with Bank for the amount of any such draft.
(c) Borrowing and Repayment. Borrower may from time
to time during the term of the Line of Credit borrow,
partially or wholly repay its outstanding borrowings, and
reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note;
provided however, that the total outstanding borrowings
under the Line of Credit shall not at any time exceed the
maximum principal amount available thereunder, as set forth
above.
SECTION 1.2. INTEREST/FEES.
(a) Interest. The outstanding principal balance of
the Line of Credit Note shall bear interest at the rate of
interest set forth in the Line of Credit Note.
(b) Letter of Credit Fees. Borrower shall pay to
Bank (i) fees upon the issuance of each standby Letter of
Credit equal to one and one-half percent (1.50%) of the face
amount thereof, and Borrower shall pay to Bank fees upon the
issuance of each commercial Letter of Credit, upon the
payment or negotiation by Bank of each draft under any
Letter of Credit and upon the occurrence of any other
activity with respect to any Letter of Credit (including
without limitation, the transfer, amendment or cancellation
of any Letter of Credit) determined in accordance with
Bank's standard fees and charges then in effect for such
activity.
(c) Computation and Payment. Interest and fees
(computed on a "per annum" basis) shall be computed on the
basis of a 360-day year, actual days elapsed. Interest
shall be payable at the times and place set forth in the
Line of Credit Note.
(d) Unused Commitment Fee. Borrower shall pay to
Bank a fee equal to twelve hundredths percent (0.12%) per
annum (computed on the basis of a 360-day year, actual days
elapsed) on the average daily unused amount of the Line of
Credit, which fee shall be calculated on a monthly basis by
Bank and shall be due and payable by Borrower in arrears
within ten (10) days after each billing is sent by Bank.
SECTION 1.3. COLLECTION OF PAYMENTS. Borrower
authorizes Bank to collect all interest and fees due under
the Line of Credit by charging Borrower's demand deposit
account number 4435-786082 with Bank, or any other demand
deposit account maintained by Borrower with Bank, for the
full amount thereof. Should there be insufficient funds in
any such demand deposit account to pay all such sums when
due, the full amount of such deficiency shall be immediately
due and payable by Borrower.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and
warranties to Bank, which representations and warranties
shall survive the execution of this Agreement and shall
continue in full force and effect until the full and final
payment, and satisfaction and discharge, of all obligations
of Borrower to Bank subject to this Agreement.
SECTION 2.1. LEGAL STATUS. Borrower is a
corporation, duly organized and existing and in good
standing under the laws of the state of Delaware, and is
qualified or licensed to do business (and is in good
standing as a foreign corporation, if applicable) in all
jurisdictions in which such qualification or licensing is
required or in which the failure to so qualify or to be so
licensed could, with reasonable likelihood, have a material
adverse effect on BEI and its Restricted Subsidiaries taken
as a whole.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This
Agreement, the Line of Credit Note, and each other document,
contract and instrument required hereby or at any time
hereafter delivered to Bank in connection herewith
(collectively, the "Loan Documents") have been duly
authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal,
valid and binding agreements and obligations of Borrower or
the party which executes the same, enforceable in accordance
with their respective terms, except as such enforceability
may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting
the rights of creditors generally, and (ii) general
principles of equity (regardless of whether such
enforceability is considered in equity or at law).
SECTION 2.3. NO VIOLATION. The execution,
delivery and performance by Borrower of each of the Loan
Documents do not violate any provision of any law or
regulation, or contravene any provision of the Certificates
of Incorporation or By-Laws of Borrower, or result in any
breach of or default under any contract, obligation,
indenture or other instrument to which Borrower is a party
or by which Borrower may be bound.
SECTION 2.4. LITIGATION. There are no pending,
or to the best of Borrower's knowledge, threatened actions,
claims, investigations, suits or proceedings by or before
any governmental authority, arbitrator, court or
administrative agency which could, with reasonable
likelihood, have a material adverse effect on the financial
condition or operation of BEI and its Restricted
Subsidiaries taken as a whole, other than those disclosed by
Borrower to Bank in writing prior to the date hereof.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT.
The financial statement of Borrower dated July 4, 1998, a
true copy of which has been delivered by Borrower to Bank
prior to the date hereof, (a) is complete and correct and
presents fairly the Consolidated financial condition of
Borrower, (b) discloses all liabilities of Borrower that are
required to be reflected or reserved against under GAAP
(subject, in the case of any interim financial statements,
to normal year-end adjustments and normal limited footnote
disclosure for interim financial statements) except as set
forth in the notes thereto, and (c) has been prepared in
accordance with GAAP. Since the date of such financial
statement there has been no material adverse change in the
financial condition of Borrower, nor has Borrower mortgaged,
pledged, granted a security interest in or otherwise
encumbered any of its assets or properties except in favor
of Bank or as otherwise permitted pursuant to Section 10.8
of the Note Purchase Agreement.
SECTION 2.6. INCOME TAX RETURNS. Borrower has no
knowledge of any pending assessments or adjustments of its
income tax payable with respect to any year including and
prior to the fiscal year ending September 30, 1995.
SECTION 2.7. NO SUBORDINATION. There is no
agreement, indenture, contract or instrument to which
Borrower is a party or by which Borrower may be bound that
requires the subordination in right of payment of any of
Borrower's obligations subject to this Agreement to any
other obligation of Borrower.
SECTION 2.8. PERMITS, FRANCHISES. Borrower
possesses all permits, consents, approvals, franchises and
licenses required and rights to all trademarks, trade names,
patents, and fictitious names, if any, necessary to enable
it to conduct the business in which it is now engaged in
compliance with applicable law, except those, which if not
possessed, have not resulted and could not be reasonably
expected to result in a material adverse effect on BEI and
its Restricted Subsidiaries taken as a whole.
SECTION 2.9. ERISA. Borrower is in compliance in
all material respects with all applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended
or recodified from time to time ("ERISA") except for such
instances of non-compliance as have not resulted and could
not be reasonably expected to result in a material adverse
effect on BEI and its Restricted Subsidiaries taken as a
whole; Borrower has not violated any provision of any
defined employee pension benefit plan (as defined in ERISA)
maintained or contributed to by Borrower (each, a "Plan");
no Reportable Event as defined in ERISA has occurred and is
continuing with respect to any Plan initiated by Borrower;
Borrower has met its minimum funding requirements under
ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in
accordance with the Plan documents and under generally
accepted accounting principles.
SECTION 2.10. OTHER OBLIGATIONS. Borrower is not
in default on any obligation for borrowed money, any
purchase money obligation or any other material lease,
commitment, contract, instrument or obligation, which
default could be reasonably expected to have a material
adverse effect on BEI and its Restricted Subsidiaries taken
as a whole.
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as
disclosed by Borrower to Bank in writing prior to the date
hereof and except as to non-compliance which has not
resulted and could not be reasonably expected to result in a
material adverse effect on BEI and its Restricted
Subsidiaries taken as a whole, Borrower is in compliance in
all material respects with all applicable federal or state
environmental, hazardous waste, health and safety statutes,
and any rules or regulations adopted pursuant thereto, which
govern or affect any of Borrower's operations and/or
properties, including without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of
1980, the Superfund Amendments and Reauthorization Act of
1986, the Federal Resource Conservation and Recovery Act of
1976, and the Federal Toxic Substances Control Act, as any
of the same may be amended, modified or supplemented from
time to time. To the best of Borrower's knowledge, none of
the operations of Borrower is the subject of any federal or
state investigation evaluating whether any remedial action
involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into
the environment. To the best of Borrower's knowledge,
Borrower has no material contingent liability in connection
with any release of any toxic or hazardous waste or
substance into the environment.
ARTICLE III
CONDITIONS
SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF
CREDIT. The obligation of Bank to extend any credit
contemplated by this Agreement is subject to the fulfillment
to Bank's satisfaction of all of the following conditions:
(a) Approval of Bank Counsel. All legal matters
incidental to the extension of credit by Bank shall be
satisfactory to Bank's counsel.
(b) Documentation. Bank shall have received, in
form and substance satisfactory to Bank, each of the
following, duly executed:
(i) This Agreement and the Line of Credit Note.
(ii) Corporate Resolution: Borrowing.
(iii) Certificate of Incumbency.
(iv) Certificates of Incorporation.
(v) Note Purchase Agreement.
(vi) Such other documents as Bank may reasonably
require under any other Section of this Agreement.
(c) Financial Condition. There shall have been no
material adverse change, as determined by Bank, in the
Consolidated financial condition or business of BEI and its
Restricted Subsidiaries, nor any material decline, as
determined by Bank, in the market value of a substantial or
material portion of the assets of BEI and its Restricted
Subsidiaries.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF
CREDIT. The obligation of Bank to make each extension of
credit requested by Borrower hereunder shall be subject to
the fulfillment to Bank's satisfaction of each of the
following conditions:
(a) Compliance. The representations and warranties
contained herein and in each of the other Loan Documents
shall be true in all material respects on and as of the date
of the signing of this Agreement; and on the date of each
extension of credit hereunder, no Event of Default as
defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would
constitute such an Event of Default, shall have occurred and
be continuing or shall exist.
(b) Documentation. Bank shall have received all
additional documents which may be reasonably requested in
connection with such extension of credit.
ARTICLE IV
AFFIRMATIVE COVENANTS
Borrower covenants that so long as Bank remains
committed to extend credit to Borrower pursuant hereto, or
any liabilities (whether direct or contingent, liquidated or
unliquidated) of Borrower to Bank under any of the Loan
Documents remain outstanding, and until payment in full of
all obligations of Borrower subject hereto, BEI shall, and
shall cause its Restricted Subsidiaries to, unless Bank
otherwise consents in writing:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay
all principal, interest, fees or other liabilities due under
any of the Loan Documents at the times and place and in the
manner specified therein.
SECTION 4.2. ACCOUNTING RECORDS. Maintain
adequate books and records in accordance with generally
accepted accounting principles consistently applied
(subject, in the case of any interim financial statements,
to normal year-end adjustments and normal limited footnote
disclosure for interim financial statements), and permit any
representative of Bank, at any reasonable time (and, if no
Event of Default exists, upon reasonable prior notice to
Borrower), to inspect, audit and examine such books and
records, to make copies of the same, and to inspect the
properties of Borrower and the Restricted Subsidiaries.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to
Bank all of the following, in form and detail satisfactory
to Bank:
(a) not later than 120 days after and as of the end
of each fiscal year, an audited unqualified Consolidated
financial statement of BEI, prepared by independent
certified public accountants of recognized national
standing, to include balance sheet, income statement,
statement of cash flows and footnotes;
(b) not later than 60 days after and as of the end
of each fiscal quarter, a Consolidated financial statement
of Borrower, prepared by Borrower, to include balance sheet,
income statement and statement of cash flows;
(c) promptly upon their becoming available, one copy
of all proxy statements, financial statements, reports, and
notices sent or made available generally by BEI to its
security holders or to any holders of its debt and all
regular, periodic and special reports, and all registration
statements filed with the Securities and Exchange Commission
or any governmental authority that may be substituted
therefor, or with any national securities exchange;
(d) contemporaneously with each annual financial
statement of Borrower required hereby, a certificate of the
president, chief financial officer or treasurer of Borrower
that said financial statements fairly present, in all
material respects, the financial position of the companies
being reported on and their results of operations and cash
flows, subject to changes resulting from year end
adjustments, that there exists no Event of Default nor any
condition, act or event which with the giving of notice or
the passage of time or both would constitute an Event of
Default, with such certificate to include calculations
demonstrating compliance with financial covenants herein and
in the Note Purchase Agreement;
(e) from time to time such other information as Bank
may reasonably request.
SECTION 4.4. COMPLIANCE. Preserve and maintain
all licenses, permits, governmental approvals, rights,
privileges and franchises necessary for the conduct of its
business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern
Borrower's and the Restricted Subsidiaries' continued
existence and with the requirements of all laws, rules,
regulations and orders of any governmental authority
applicable to Borrower, the Restricted Subsidiaries and/or
their businesses, in each instance to the extent necessary
to ensure that non-compliance with such laws, rules,
regulations and orders or failure to preserve and keep in
full force and effect such licenses, permits, governmental
approvals, rights, privileges and franchises could not have
a material adverse effect on BEI and its Restricted
Subsidiaries taken as a whole.
SECTION 4.5. INSURANCE. Maintain and keep in
force insurance of the types and in amounts customarily
carried in lines of business similar to that of Borrower and
the Restricted Subsidiaries, including but not limited to
fire, extended coverage, public liability, property damage
and workers' compensation, with all such insurance carried
with companies of generally recognized standing and in
amounts reasonably satisfactory to Bank, and deliver to Bank
from time to time at Bank's request schedules setting forth
all insurance then in effect.
SECTION 4.6. FACILITIES. Keep all properties
useful or necessary to Borrower's and the Restricted
Subsidiaries' businesses in good repair and condition
(ordinary wear and tear excepted), and from time to time
make necessary repairs, renewals and replacements thereto so
that such properties shall be fully and efficiently
preserved and maintained.
SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay
and discharge when due any and all indebtedness,
obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes
and state and local property taxes and assessments, except
such (a) as Borrower or a Restricted Subsidiary may in good
faith contest or as to which a bona fide dispute may arise,
and for which Borrower or such Restricted Subsidiary has
made provision, to Bank's satisfaction, for eventual payment
thereof in the event Borrower or such Restricted Subsidiary
is obligated to make such payment, or (b) as the nonpayment
of which has not resulted or could not reasonably be
expected to result in a material adverse effect on BEI and
its Restricted Subsidiaries taken as a whole.
SECTION 4.8. LITIGATION. Promptly give notice in
writing to Bank of any litigation pending or threatened
against Borrower or any Restricted Subsidiary with a claim
in excess of $2,500,000.00.
SECTION 4.9. FINANCIAL CONDITION. Maintain BEI's
Consolidated financial condition as follows using generally
accepted accounting principles consistently applied and used
consistently with prior practices (except to the extent
modified by the definitions herein), with compliance
determined commencing with Borrower's financial statements
for the period ending ____________, 1998:
(a) Ratio of Funded Debt to EBITDA not greater than
3.50 to 1.00, determined as of each fiscal quarter end on a
trailing four quarter basis.
(b) Fixed Charge Coverage Ratio not less than 2.00 to
1.00, determined as of each fiscal quarter end on a trailing
four quarter basis.
(c) Current Ratio not less than 1.50 to 1.00,
determined as of each fiscal quarter end.
(d) Tangible Net Worth as required in Section 10.6 of
the Note Purchase Agreement.
SECTION 4.10. NOTICE TO BANK. Promptly (but in no
event more than five (5) days after the occurrence of each
such event or matter) give written notice to Bank in
reasonable detail of: (a) the occurrence of any Event of
Default, or any condition, event or act which with the
giving of notice or the passage of time or both would
constitute an Event of Default; (b) any change in the name
of Borrower or any Restricted Subsidiary; (c) the occurrence
and nature of any Reportable Event or Prohibited
Transaction, each as defined in ERISA, or any funding
deficiency with respect to any Plan; or (d) any termination
or cancellation of any insurance policy (if not replaced
within a reasonable period of time) which Borrower or any
Restricted Subsidiary is required to maintain, or any
uninsured or partially uninsured loss through liability or
property damage, or through fire, theft or any other cause
affecting Borrower's or such Restricted Subsidiary's
property in excess of an aggregate of $2,500,000.00.
SECTION 4.11. YEAR 2000 COMPLIANCE. Perform all
acts reasonably necessary to ensure that (a) Borrower and
any business in which Borrower holds a substantial interest,
and (b) all customers, suppliers and vendors that are
material to Borrower's and its Restricted Subsidiaries'
businesses, become Year 2000 Compliant in a timely manner.
Such acts shall include, without limitation, performing a
comprehensive review and assessment of all of Borrower's
systems and adopting a detailed plan, with itemized budget,
for the remediation, monitoring and testing of such systems.
As used herein, "Year 2000 Compliant" shall mean, with
regard to any entity, that all software, hardware, firmware,
equipment, goods or systems utilized by or material to the
business operations or financial condition of such entity,
will properly perform date sensitive functions before,
during and after the year 2000. Borrower shall, promptly
upon request, provide to Bank such certifications or other
evidence of compliance with the terms hereof as Bank may
from time to time require.
SECTION 4.12. ERISA. Comply in all material
respects with all applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended or
recodified from time to time ("ERISA") except for any non-
compliance which has not resulted or could not reasonably be
expected to result in a material adverse effect on BEI and
its Restricted Subsidiaries taken as a whole; not violate
any provision of any Plan; meet its minimum funding
requirements under ERISA with respect to each Plan; and
cause each Plan to be able to fulfill its benefit
obligations as they come due in accordance with the Plan
documents and under generally accepted accounting
principles.
SECTION 4.13. ENVIRONMENTAL MATTERS. Except for
any non-compliance which has not resulted or could not
reasonably be expected to result in a material adverse
effect on BEI and its Restricted Subsidiaries taken as a
whole, comply in all material respects with all applicable
federal or state environmental, hazardous waste, health and
safety statutes, and any rules or regulations adopted
pursuant thereto, which govern or affect any of Borrower's
operations and/or properties, including without limitation,
the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource
Conservation and Recovery Act of 1976, and the Federal Toxic
Substances Control Act, as any of the same may be amended,
modified or supplemented from time to time.
ARTICLE V
NEGATIVE COVENANTS
Borrower further covenants that so long as Bank
remains committed to extend credit to Borrower pursuant
hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of
the Loan Documents remain outstanding, and until payment in
full of all obligations of Borrower subject hereto, BEI will
not, and will not Permit its Restricted Subsidiaries to,
without Bank's prior written consent:
SECTION 5.1. USE OF FUNDS. Use any of the
proceeds of any credit extended hereunder except for the
purposes stated in Article I hereof.
SECTION 5.2. NATURE OF BUSINESS. Make any
substantial change in the nature of BEI's and its Restricted
Subsidiary's business, taken as a whole, as conducted as of
the date hereof.
SECTION 5.3. TRANSFER OF ASSETS. Transfer any
assets in violation of Section 10.9 of the Note Purchase
Agreement.
SECTION 5.4. MERGER, CONSOLIDATION. Merge into
or consolidate with any other entity nor acquire (i) all or
substantially all of the assets of any other entity, or (ii)
all or a controlling interest of the ownership interest of
any other entity; unless, in the case of a merger or
consolidation, (w) the surviving entity is solvent and
organized under the laws of the United States or any state
thereof or the District of Columbia, (x) the surviving
entity (if not Borrower) executes an assumption agreement in
form and content acceptable to Bank and causes to be
delivered to Bank a legal opinion of nationally recognized
legal counsel, or other independent counsel reasonably
acceptable to Bank that the assumption agreement is
enforceable in accordance with its terms and complies with
the terms hereof, provided, further, that (y) no single or
affiliated transaction(s) permitted under this Section 5.4
shall exceed an aggregate consideration of $15,000,000.00
(exclusive of consideration consisting of stock in Borrower
or a Restricted Subsidiary) and (z) all such transactions
shall not exceed an aggregate consideration of
$25,000,000.00 (exclusive of consideration consisting of
stock in Borrower or a Restricted Subsidiary) during the
term of the Line of Credit.
SECTION 5.5. GUARANTIES. Guarantee or become
liable in any way as surety, endorser (other than as
endorser of negotiable instruments for deposit or collection
in the ordinary course of business), accommodation endorser
or otherwise for, nor pledge or hypothecate any assets of
Borrower or Restricted Subsidiary as security for, any
liabilities or obligations of any other person or entity,
except any of the foregoing (a) in favor of Bank, (b) which
are existing as of the date hereof and disclosed to Bank in
writing prior to the date hereof, including replacements and
substitutions thereof (but not increases thereof), and (c)
incurred after the date hereof (including increases of items
described in clause (b)) in an aggregate amount not to
exceed $2,500,000.00.
SECTION 5.6. INDEBTEDNESS. Create, incur,
assume or permit to exist any indebtedness or liabilities
resulting from borrowings, loans or advances, whether
secured or unsecured, matured or unmatured, liquidated or
unliquidated, joint or several, except (a) the liabilities
of Borrower under the Note Purchase Agreement, and (b)
additional liabilities (inclusive of liabilities under this
Agreement) not to exceed at any time an aggregate
outstanding principal balance of $12,000,000.00 (increasing
to $13,000,000.00 if and when the availability under the
Line of Credit increases to such amount.
SECTION 5.7. INVESTMENTS. Make any
Investments in violation of Section 10.10 of the Note
Purchase Agreement.
SECTION 5.8. RESTRICTED PAYMENTS. Make any
Restricted Payments in violation of the Section 10.7 of the
Note Purchase Agreement.
SECTION 5.9. LIENS. Create, incur, assume or
permit to exist (upon the happening of a contingency or
otherwise) a Lien in violation of the terms in Section 10.8
of the Note Purchase Agreement.
SECTION 5.10. SELECTED PROVISIONS Amend, or
agree to agree to amend (a) any of the Selected Provisions,
or (b) any of the provisions of the Note Purchase Agreement
if the effect thereof is to, directly or indirectly, amend
or delete the Selected Provisions.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1. The occurrence of any of the
following shall constitute an "Event of Default" under this
Agreement:
(a) Borrower shall fail to pay when due any
principal, or, within 5 days after the applicable due date,
any interest, fees or other amounts payable under any of the
Loan Documents.
(b) Any financial statement or certificate furnished
to Bank in connection with, or any representation or
warranty made by Borrower or any other party under this
Agreement or any other Loan Document shall prove to be
incorrect, false or misleading in any material respect when
furnished or made.
(c) Any default in the performance of or compliance
with any obligation, agreement or other provision contained
herein or in any other Loan Document (other than those
referred to in subsections (a) and (b) above), and with
respect to any such default which by its nature can be
cured, such default shall continue for a period of thirty
(30) days from the date Borrower first learned (or, using
reasonable due diligence, should have first learned) of such
default.
(d) (i) BEI or any Restricted Subsidiary is in
default (as principal or as guarantor or other surety) in
the payment of any principal of or premium make-whole amount
or interest on any Funded debt that is outstanding in an
aggregate principal amount of at least $2,500,000 beyond any
period of grace provided with respect thereto, or (ii) BEI
or any Restricted Subsidiary is in default in the
performance of or compliance with any term of any evidence
of any Funded Debt in an aggregate outstanding principal
amount of at least $2,500,000 or of any mortgage, indenture
or other agreement relating thereto or any other condition
exists, and as a consequence of such default or condition
such Funded Debt has become, or has been declared due and
payable before its stated maturity or before its regularly
scheduled dates of payment, or (iii) as a consequence of the
occurrence or continuation of any event or condition (other
than the passage of time or the right of holder of Funded
Debt to convert such Funded Debt into equity interests), BEI
or any Restricted Subsidiary has become obligated to
purchase or repay Funded Debt before its regular maturity or
before its regularly scheduled dates of payment in an
aggregate outstanding principal amount of at least
$2,500,000.
(e) The filing of a notice of judgment lien against
Borrower; or the recording of any abstract of judgment
against Borrower in any county in which Borrower has an
interest in real property; or the service of a notice of
levy and/or of a writ of attachment or execution, or other
like process, against the assets of Borrower; or the entry
of a final judgment against Borrower; and, with respect to
any of the foregoing, the amount of such judgement or writ
exceeds $2,500,000.00, and the proceeding in question shall
not have been dismissed or nullified within 60 days after
its filing; provided, however, that Bank shall not be
obligated to make advances during such 60 day period.
(f) Borrower shall become insolvent, or shall suffer
or consent to or apply for the appointment of a receiver,
trustee, custodian or liquidator of itself or any of its
property, or shall generally fail to pay its debts as they
become due, or shall make a general assignment for the
benefit of creditors; Borrower shall file a voluntary
petition in bankruptcy, or seeking reorganization, in order
to effect a plan or other arrangement with creditors or any
other relief under the Bankruptcy Reform Act, Title 11 of
the United States Code, as amended or recodified from time
to time ("Bankruptcy Code"), or under any state or federal
law granting relief to debtors, whether now or hereafter in
effect; or any involuntary petition or proceeding pursuant
to the Bankruptcy Code or any other applicable state or
federal law relating to bankruptcy, reorganization or other
relief for debtors is filed or commenced against Borrower
(and such involuntary petition or other proceeding shall not
have been dismissed or nullified within 60 days after its
filing; provided, however, that Bank shall not be obligated
to make advances during such 60 day period), or Borrower
shall file an answer admitting the jurisdiction of the court
and the material allegations of any involuntary petition; or
Borrower shall be adjudicated a bankrupt, or an order for
relief shall be entered against Borrower by any court of
competent jurisdiction under the Bankruptcy Code or any
other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors.
(g) The dissolution or liquidation of Borrower; or
Borrower, or any of its directors, stockholders or members,
shall take action seeking to effect the dissolution or
liquidation of Borrower.
(h) Any change in ownership during the term of this
Agreement of an aggregate of twenty-five percent (25%) or
more of the common stock of Borrower in a single transaction
or in a series of related transactions.
SECTION 6.2. REMEDIES. Upon the occurrence of
any Event of Default: (a) all indebtedness of Borrower
under each of the Loan Documents, any term thereof to the
contrary notwithstanding, shall at Bank's option and without
notice become immediately due and payable without
presentment, demand, protest or notice of dishonor, all of
which are hereby expressly waived by each Borrower; (b) the
obligation, if any, of Bank to extend any further credit
under any of the Loan Documents shall immediately cease and
terminate; and (c) Bank shall have all rights, powers and
remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to
resort to any or all security for any credit accommodation
from Bank subject hereto and to exercise any or all of the
rights of a beneficiary or secured party pursuant to
applicable law. All rights, powers and remedies of Bank may
be exercised at any time by Bank and from time to time after
the occurrence of an Event of Default, are cumulative and
not exclusive, and shall be in addition to any other rights,
powers or remedies provided by law or equity.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. NO WAIVER. No delay, failure or
discontinuance of Bank in exercising any right, power or
remedy under any of the Loan Documents shall affect or
operate as a waiver of such right, power or remedy; nor
shall any single or partial exercise of any such right,
power or remedy preclude, waive or otherwise affect any
other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent
or approval of any kind by Bank of any breach of or default
under any of the Loan Documents must be in writing and shall
be effective only to the extent set forth in such writing.
SECTION 7.2. NOTICES. All notices, requests and
demands which any party is required or may desire to give to
any other party under any provision of this Agreement must
be in writing delivered to each party at the following
address:
BORROWER: BEI Technologies, Inc.
0 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
BANK: XXXXX FARGO BANK, NATIONAL ASSOCIATION
000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
or to such other address as any party may designate by
written notice to all other parties. Each such notice,
request and demand shall be deemed given or made as follows:
(a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3)
days after deposit in the U.S. mail, first class and postage
prepaid; and (c) if sent by telecopy, upon receipt of
confirmation of transmission.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES.
Borrower shall pay to Bank immediately upon demand the full
amount of all payments, advances, charges, costs and
expenses, including reasonable attorneys' fees (to include
outside counsel fees and all allocated costs of Bank's
in-house counsel), expended or incurred by Bank in
connection with (a) the negotiation and preparation of this
Agreement and the other Loan Documents, Bank's continued
administration hereof and thereof, and the preparation of
any amendments and waivers hereto and thereto, (b) the
enforcement of Bank's rights and/or the collection of any
amounts which become due to Bank under any of the Loan
Documents, and (c) the prosecution or defense of any action
in any way related to any of the Loan Documents, including
without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of
the foregoing incurred in connection with any bankruptcy
proceeding (including without limitation, any adversary
proceeding, contested matter or motion brought by Bank or
any other person) relating to any Borrower or any other
person or entity.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This
Agreement shall be binding upon and inure to the benefit of
the heirs, executors, administrators, legal representatives,
successors and assigns of the parties; provided however,
that Borrower may not assign or transfer its interest
hereunder without Bank's prior written consent. Bank
reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest
in, Bank's rights and benefits under each of the Loan
Documents; provided, however, that in each such instance
(other than participations), Bank shall provide not less
that 45 days prior written notice to Borrower. In
connection therewith, Bank may disclose all documents and
information which Bank now has or may hereafter acquire
relating to any credit extended by Bank to Borrower,
Borrower or its business, or any collateral required
hereunder.
SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This
Agreement and the other Loan Documents constitute the entire
agreement between Borrower and Bank with respect to any
extension of credit by Bank subject hereto and supersede all
prior negotiations, communications, discussions and
correspondence concerning the subject matter hereof. This
Agreement may be amended or modified only in writing signed
by each party hereto.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This
Agreement is made and entered into for the sole protection
and benefit of the parties hereto and their respective
permitted successors and assigns, and no other person or
entity shall be a third party beneficiary of, or have any
direct or indirect cause of action or claim in connection
with, this Agreement or any other of the Loan Documents to
which it is not a party.
SECTION 7.7. TIME. Time is of the essence of
each and every provision of this Agreement and each other of
the Loan Documents.
SECTION 7.8. SEVERABILITY OF PROVISIONS. If any
provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or
invalidity without invalidating the remainder of such
provision or any remaining provisions of this Agreement.
SECTION 7.9. COUNTERPARTS. This Agreement may be
executed in any number of counterparts, each of which when
executed and delivered shall be deemed to be an original,
and all of which when taken together shall constitute one
and the same Agreement.
SECTION 7.10. GOVERNING LAW. This Agreement shall
be governed by and construed in accordance with the laws of
the State of California.
SECTION 7.11. ARBITRATION.
(a) Arbitration. Upon the demand of any party, any
Dispute shall be resolved by binding arbitration (except as
set forth in (e) below) in accordance with the terms of this
Agreement. A "Dispute" shall mean any action, dispute,
claim or controversy of any kind, whether in contract or
tort, statutory or common law, legal or equitable, now
existing or hereafter arising under or in connection with,
or in any way pertaining to, any of the Loan Documents, or
any past, present or future extensions of credit and other
activities, transactions or obligations of any kind related
directly or indirectly to any of the Loan Documents,
including without limitation, any of the foregoing arising
in connection with the exercise of any self-help, ancillary
or other remedies pursuant to any of the Loan Documents.
Any party may by summary proceedings bring an action in
court to compel arbitration of a Dispute. Any party who
fails or refuses to submit to arbitration following a lawful
demand by any other party shall bear all costs and expenses
incurred by such other party in compelling arbitration of
any Dispute.
(b) Governing Rules. Arbitration proceedings shall
be administered by the American Arbitration Association
("AAA") or such other administrator as the parties shall
mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration
shall be resolved in accordance with the Federal Arbitration
Act (Title 9 of the United States Code), notwithstanding any
conflicting choice of law provision in any of the Loan
Documents. The arbitration shall be conducted at a location
in California selected by the AAA or other administrator.
If there is any inconsistency between the terms hereof and
any such rules, the terms and procedures set forth herein
shall control. All statutes of limitation applicable to any
Dispute shall apply to any arbitration proceeding. All
discovery activities shall be expressly limited to matters
directly relevant to the Dispute being arbitrated. Judgment
upon any award rendered in an arbitration may be entered in
any court having jurisdiction; provided however, that
nothing contained herein shall be deemed to be a waiver by
any party that is a bank of the protections afforded to it
under 12 U.S.C. 91 or any similar applicable state law.
(c) No Waiver; Provisional Remedies, Self-Help and
Foreclosure. No provision hereof shall limit the right of
any party to exercise self-help remedies such as setoff,
foreclosure against or sale of any real or personal property
collateral or security, or to obtain provisional or
ancillary remedies, including without limitation injunctive
relief, sequestration, attachment, garnishment or the
appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any
arbitration or other proceeding. The exercise of any such
remedy shall not waive the right of any party to compel
arbitration or reference hereunder.
(d) Arbitrator Qualifications and Powers; Awards.
Arbitrators must be active members of the California State
Bar or retired judges of the state or federal judiciary of
California, with expertise in the substantive laws
applicable to the subject matter of the Dispute.
Arbitrators are empowered to resolve Disputes by summary
rulings in response to motions filed prior to the final
arbitration hearing. Arbitrators (i) shall resolve all
Disputes in accordance with the substantive law of the State
of California, (ii) may grant any remedy or relief that a
court of the State of California could order or grant within
the scope hereof and such ancillary relief as is necessary
to make effective any award, and (iii) shall have the power
to award recovery of all costs and fees, to impose sanctions
and to take such other actions as they deem necessary to the
same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the California Rules of Civil Procedure or
other applicable law. Any Dispute in which the amount in
controversy is $5,000,000 or less shall be decided by a
single arbitrator who shall not render an award of greater
than $5,000,000 (including damages, costs, fees and
expenses). By submission to a single arbitrator, each party
expressly waives any right or claim to recover more than
$5,000,000. Any Dispute in which the amount in controversy
exceeds $5,000,000 shall be decided by majority vote of a
panel of three arbitrators; provided however, that all three
arbitrators must actively participate in all hearings and
deliberations.
(e) Judicial Review. Notwithstanding anything herein
to the contrary, in any arbitration in which the amount in
controversy exceeds $25,000,000, the arbitrators shall be
required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the
arbitrators shall not have the power to make any award which
is not supported by substantial evidence or which is based
on legal error, (ii) an award shall not be binding upon the
parties unless the findings of fact are supported by
substantial evidence and the conclusions of law are not
erroneous under the substantive law of the State of
California, and (iii) the parties shall have in addition to
the grounds referred to in the Federal Arbitration Act for
vacating, modifying or correcting an award the right to
judicial review of (A) whether the findings of fact rendered
by the arbitrators are supported by substantial evidence,
and (B) whether the conclusions of law are erroneous under
the substantive law of the State of California. Judgment
confirming an award in such a proceeding may be entered only
if a court determines the award is supported by substantial
evidence and not based on legal error under the substantive
law of the State of California.
(f) Real Property Collateral; Judicial Reference.
Notwithstanding anything herein to the contrary, no Dispute
shall be submitted to arbitration if the Dispute concerns
indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the
mortgage, lien or security interest specifically elects in
writing to proceed with the arbitration, or (ii) all parties
to the arbitration waive any rights or benefits that might
accrue to them by virtue of the single action rule statute
of California, thereby agreeing that all indebtedness and
obligations of the parties, and all mortgages, liens and
security interests securing such indebtedness and
obligations, shall remain fully valid and enforceable. If
any such Dispute is not submitted to arbitration, the
Dispute shall be referred to a referee in accordance with
California Code of Civil Procedure Section 638 et seq., and
this general reference agreement is intended to be
specifically enforceable in accordance with said Section
638. A referee with the qualifications required herein for
arbitrators shall be selected pursuant to the AAA's
selection procedures. Judgment upon the decision rendered
by a referee shall be entered in the court in which such
proceeding was commenced in accordance with California Code
of Civil Procedure Sections 644 and 645.
(g) Miscellaneous. To the maximum extent
practicable, the AAA, the arbitrators and the parties shall
take all action required to conclude any arbitration
proceeding within 180 days of the filing of the Dispute with
the AAA. No arbitrator or other party to an arbitration
proceeding may disclose the existence, content or results
thereof, except for disclosures of information by a party
required in the ordinary course of its business, by
applicable law or regulation, or to the extent necessary to
exercise any judicial review rights set forth herein. If
more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration
provision most directly related to the Loan Documents or the
subject matter of the Dispute shall control. This
arbitration provision shall survive termination, amendment
or expiration of any of the Loan Documents or any
relationship between the parties.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed as of the day and year first
written above.
XXXXX FARGO BANK,
BEI TECHNOLOGIES, INC. NATIONAL ASSOCIATION
By: ______________________ By: _______________________
Xxxxxx Xxxxx
Title: ___________________ Relationship Manager
BEI SENSORS & SYSTEMS COMPANY, INC.
By: ______________________
Title: ___________________
