CREDIT AGREEMENT
among
XXXXXXXXXX INDUSTRIES, INC.
and
KEYBANK NATIONAL ASSOCIATION,
TOTAL COMMITMENT -- $40,000,000
March 31, 1998
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is entered into as of March 31, 1998, by and between
XXXXXXXXXX INDUSTRIES, INC., an Oregon corporation, ("Borrower"), and KEYBANK
NATIONAL ASSOCIATION ("Bank").
RECITALS
Borrower has requested the credit facilities described herein, and Bank has
agreed to provide said credit facilities to Borrower on the terms and conditions
contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and promises of
the parties contained herein, Borrower and Bank hereby agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.1. DEFINED TERMS
All terms defined above shall have the meanings set forth above. Any
accounting term used in this Agreement that is not specifically defined herein
shall have the meaning customarily given to it under GAAP, and all other terms
contained in this Agreement that are not defined herein shall, unless the
context indicates otherwise, have the meanings provided in the Code to the
extent such terms are defined therein. The following terms shall have the
meanings set forth below (with all such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Accounts" shall have the meaning attributed to the term "accounts" in the
Code and shall include, without limitation, all presently existing and hereafter
arising rights to payment for goods sold or leased or for services rendered,
which are not evidenced by instruments or chattel paper, whether or not they
have been earned by performance.
"Agreement" means this Credit Agreement as amended, modified or
supplemented from time to time.
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"Authorized Representative" means a person designated by Borrower on the
most current Notice of Authorized Representatives delivered by Borrower to Bank
as being authorized to request any borrowing or make any interest rate selection
on behalf of Borrower hereunder, or to give Bank any other notice hereunder
which is required by the terms hereof to be made through an Authorized
Representative.
"Available Credit" means, at any time, the amount by which the aggregate of
the outstanding principal amount of the Loans at such time and the Letter of
Credit Obligations at such time is less than the lesser of (a) $40,000,000 or
(b) the Borrowing Base.
"Bankruptcy Code" means the Bankruptcy Reform Act, Title 11 of the United
States Code, as amended or recodified from time to time, including (unless the
context otherwise requires) any rules or regulations promulgated thereunder.
"Borrowing Base" means, as of any date of determination, an amount equal to
the following amount:
(a) 85% of an amount equal to (i) the face amount of the most recently
reported outstanding Eligible Accounts less (ii) sales, excise or similar
taxes included in the amount thereof and less (iii) returns, discounts,
claims, credits and allowances of any nature at any time issued, owing,
granted, outstanding, available or claimed with respect thereto;
(b) plus the lesser of (i) $4,000,000 or (ii) 50% of the most recently
reported amount of Eligible Inventory valued at the lower of cost
(determined on a "first in, first out" basis) or market value;
(c) plus, until the earlier of (i) January 1, 1999 or (ii) the date
the subordinated debt referred to in Section 7.17 is issued, $11,600,000;
(d) less all outstanding Letter of Credit Obligations; and
(e) less all Borrowing Base Reserves.
"Borrowing Base Certificate" means a certificate substantially in the form
of Exhibit A attached hereto.
"Borrowing Base Reserves" means, as of any date of determination, such
amounts (expressed as either a specified amount or as a percentage of a
specified category or item) as Bank, in its Good Faith discretion, may from time
to time establish in determining the Borrowing Base to reflect contingencies or
risks which
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may affect the Collateral, the business, business prospects or financial
condition of Borrower, or the security of the loans made hereunder.
"Business Day" means (a) for all purposes other than as covered by clause
(b) below, any day other than a Saturday, Sunday or other day on which
commercial banks are authorized or required to be closed in Portland, Oregon,
Seattle, Washington or Cleveland, Ohio, and (b) with respect to all notices,
determinations, fundings and payments in connection with any LIBOR interest
selection or LIBOR Loan, any day that is a Business Day described in clause (a)
above and that also is a day for trading by and between banks in U.S. dollar
deposits in the London interbank eurocurrency market.
"Capitalized Lease" means, as to any Person, any lease of property by such
Person as lessee that would be capitalized on a balance sheet of such Person
prepared in accordance with GAAP.
"Capitalized Lease Obligations" means, as to any Person, the capitalized
amount of all obligations of such Person and its subsidiaries under Capitalized
Leases, as determined on a consolidated basis in accordance with GAAP.
"Cash Collateral Account" has the meaning set forth in Section 3.1.
"Change of Law" means the adoption of any Governmental Rule, any change in
any Governmental Rule or the application or requirements thereof (whether such
change occurs in accordance with the terms of such Governmental Rule as enacted,
as a result of amendment or otherwise), any change in the interpretation or
administration of any Governmental Rule by any Governmental Authority, or
compliance by Bank (or any entity controlling Bank) with any request, guideline
or directive (whether or not having the force of law) of any Governmental
Authority.
"Closing Date" means the date of this Agreement.
"Code" means the Uniform Commercial Code of the State of Oregon as amended
from time to time.
"Collateral" means (a) all of Borrower's property and rights in and to
property, including, without limitations, all Rights to Payment, Inventory,
General Intangibles, Equipment, Records, money, instruments, chattel paper,
deposit accounts, documents and investment property; (b) all products, proceeds,
rents and profits of the foregoing; and (c) all of the foregoing, whether now
owned or existing or hereafter acquired or arising or in which any Borrower now
has or hereafter acquires any rights.
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"Commodity Contracts" means commodity options, futures, swaps, and other
similar agreements and arrangements designed to provide protection against
fluctuations in commodity prices.
"Contaminant" means any pollutant, hazardous substance, toxic substance,
hazardous waste or other substance regulated or forming the basis of liability
under any Environmental Law.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of such Person with respect to any
Indebtedness or Contractual Obligation of another Person, if the purpose or
intent of such Person in incurring the Contingent Obligation is to provide
assurance to the obligee of such Indebtedness or Contractual Obligation that
such Indebtedness or Contractual Obligation will be paid or discharged, or that
any agreement entered into by such other Person relating to such Indebtedness or
Contingent Obligation will be complied with, or that any holder of such
Indebtedness or Contractual Obligation will be protected against loss in respect
thereof. Contingent Obligations of a Person include, without limitation, (a) the
direct or indirect guarantee, endorsement (other than for collection or deposit
in the ordinary course of business), co-making, discounting with recourse or
sale with recourse by such Person of an obligation of another Person, and (b)
any liability of such Person for an obligation of another Person through any
agreement (contingent or otherwise) (i) to purchase, repurchase or otherwise
acquire such obligation or any security therefor, or to provide funds for the
payment or discharge of such obligation (whether in the form of a loan, advance,
stock purchase, capital contribution or otherwise), (ii) to maintain the
solvency or any balance sheet item, level of income or financial condition of
another Person, (iii) to make take-or-pay or similar payments, if required,
regardless of non-performance by any other party or parties to an agreement,
(iv) to purchase, sell or lease (as lessor or lessee) property, or to purchase
or sell services, primarily for the purpose of enabling the debtor to make
payment of such obligation or to assure the holder of such obligation against
loss, or (v) to supply funds to or in any other manner invest in such other
Person (including, without limitation, to pay for property or services
irrespective of whether such property is received or such services are
rendered), if in the case of any agreement or liability described under
subclauses (i) through (v) of this sentence the primary purpose or intent
thereof is as described in the preceding sentence. The amount of any Contingent
Obligation shall be equal to the lesser of (A) the amount payable under such
Contingent Obligation (if quantifiable), or (B) the portion of the obligation so
guaranteed or otherwise supported.
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"Contractual Obligation" of any Person means any obligation, agreement,
undertaking or similar provision of any security issued by such Person or of any
agreement, undertaking, contract, lease, indenture, mortgage, deed of trust or
other instrument to which such Person is a party or by which it or any of its
property is bound or to which any of its property is subject.
"Default" means an Event of Default or an event or condition that with the
giving of notice or the passage of time, or both, would constitute an Event of
Default.
"Disclosure Schedule" means Schedule II attached hereto.
"EBITDA" means, as of the end of a fiscal quarter of Borrower, Borrower's
consolidated net income for the four fiscal quarters ending with such quarter,
after deducting all expenses other than interest, taxes, option expenses,
depreciation, depletion and amortization and after eliminating all positive
extraordinary items (as determined in accordance with GAAP) and all positive
charges characterized as unusual charges by Borrower's independent certified
public accountants.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended or recodified from time to time, including (unless the context otherwise
requires) any rules or regulations promulgated thereunder.
"Eligible Accounts" means those Accounts that Bank determines to be
eligible in the Good Faith exercise of its discretion pursuant to Section 2.1(e)
hereof.
"Eligible Inventory" means Inventory that Bank determines to be eligible in
the Good Faith exercise of its discretion pursuant to Section 2.1(f) hereof.
"Environmental Law" means all applicable federal, state and local laws,
statutes, ordinances and regulations, and any applicable judicial or
administrative interpretation, order, consent decree or judgment, relating to
the regulation and protection of the environment. Environmental Laws include but
are not limited to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. ss. 9601 et seq.); the Hazardous
Material Transportation Act, as amended (49 U.S.C. ss. 180 et seq.); the Federal
Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. ss. 136 et
seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. ss.
6901 et seq.); the Toxic Substance Control Act, as amended (42 U.S.C. ss. 7401
et seq.); the Clean Air Act, as amended (42 U.S.C. ss. 740 et seq.); the Federal
Water Pollution Control Act, as amended (33 U.S.C. ss. 1251 et seq.); and the
Safe Drinking Water Act, as amended (42 U.S.C. ss. 300f et seq.), and
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their state and local counterparts or equivalents and any applicable transfer of
ownership notification or approval statutes.
"Environmental Liabilities and Costs" means, as to any Person, all
liabilities, obligations, responsibilities, Remedial Actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including, without limitation, all fees, disbursements and expenses of counsel,
experts and consultants and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any claim or
demand by any other Person, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute, including, without
limitation, any thereof arising under any Environmental Law, Permit, order or
agreement with any Governmental Authority or other Person, and which relate to
any violation or alleged violation of an Environmental Law or a Permit, or a
Release or threatened Release.
"Equipment" means the goods listed in Exhibit H and all attachments,
accessions and property now or hereafter affixed thereto or used in connection
therewith, and substitutions and replacements thereof, wherever located.
"Event of Default" has the meaning set forth in Section 9.1 hereof.
"Fixed Change Coverage Ratio" means the ratio of EBITDA to "Fixed Charges."
As used in this definition, "Fixed Charges" means, as of the end of a fiscal
quarter, the total of the following for the four fiscal quarters ending with
such quarter: (i) Borrower's consolidated scheduled or required principal
repayments of long term debt; (ii) Borrower's consolidated scheduled or required
payments of Capitalized Lease Obligations; and (iii) Borrower's consolidated
interest expense.
"Fixed Rate Term" means a period of one (1), two (2), or three (3) months,
as designated by Borrower, during which a Loan bears interest determined in
relation to LIBOR; provided however, that no Fixed Rate Term may extend beyond
the Maturity Date, and if the last day of a Fixed Rate Term is not a Business
Day, such term shall be extended to the next succeeding Business Day, or if the
next succeeding Business Day falls in another calendar month, such term shall
end on the next preceding Business Day.
"Funded Debt" means, as of the end of a fiscal quarter, the total on a
consolidated basis of all indebtedness of Borrower for borrower money, plus the
amount of all liability, whether contingent or otherwise, for standby letters of
credit, other than standby letters of credit supporting indebtedness for
borrowed money, plus the amount of all Capitalized Lease Obligations of Borrower
plus the present value
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(determined by a discount equal to the Prime Rate) of total payments due under
all Other Leases.
"Funded Debt Ratio" means the ratio of Borrower's Funded Debt to EBITDA.
"GAAP" means generally accepted accounting principles as in effect in the
United States from time to time, consistently applied.
"General Intangibles" shall have the meaning attributed to the term
"general intangible" in the Code, and shall include, without limitation, all tax
and duty refunds, registered and unregistered patents, trademarks, service
marks, copyrights, trade names, applications for the foregoing, trade secrets,
goodwill, processes, drawings, blueprints, customer lists, licenses, whether as
licensor or licensee, choses in action and other claims and existing and future
leasehold interests in equipment.
"Good Faith" means honesty in fact in the conduct or transaction concerned,
without regard to whether standards that might be deemed commercially reasonable
have been observed.
"Governmental Authority" means any domestic or foreign national, state or
local government, any political subdivision thereof, any department, agency,
authority or bureau of any of the foregoing, or any other entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including the Federal Deposit Insurance Corporation,
the Federal Reserve Board, the Comptroller of the Currency, any central bank or
any comparable authority.
"Governmental Rule" means any applicable law, rule, regulation, ordinance,
order, code interpretation, judgment, decree, directive, guidelines, policy or
similar form of decision of any Governmental Authority.
"Indebtedness" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money (including, without limitation,
reimbursement and all other obligations with respect to surety bonds, letters of
credit and bankers' acceptances, whether or not matured) or for the deferred
purchase price of property or services, (b) all obligations of such Person
evidenced by notes, bonds, debentures or similar instruments, (c) all
indebtedness of such Person created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such Person
(even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (d) all Capitalized Lease Obligations of such Person, (e) all
Obligations of such
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Person under Other Leases, (f) all Contingent Obligations of such Person, (g)
all obligations of such Person to purchase, redeem, retire, defease or otherwise
acquire for value any Stock or Stock Equivalents of such Person with a mandatory
repurchase or redemption date of less than ten years from the date of issuance
thereof, (h) all obligations of such Person under Interest Rate Contracts and
Commodity Contracts, (i) all Indebtedness referred to in clauses (a) through (h)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien upon or in property
(including, without limitation, Accounts and General Intangibles) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness, (j) in the case of Borrower, its obligations under the
Loan Documents, (k) all liabilities of such Person that would be shown on a
balance sheet of such Person prepared in accordance with GAAP, and (l) all
liabilities of such Person in connection with the failure to make when due any
contribution or payment pursuant to or under any Plan.
"Indemnitees" has the meaning set forth in Section 10.4 hereof.
"Interest Rate Contracts" means interest rate swap agreements, interest
rate cap agreements, interest rate collar agreements, interest rate insurance,
and other agreements or arrangements designed to provide protection against
fluctuations in interest rates.
"Intergraph Transaction" means Borrower's purchase of the printed circuit
board facility of Intergraph Corporation consisting of the purchase of land,
equipment, buildings, work in process and inventory for a total of approximately
$16,000.000.
"Inventory" shall have the meaning attributed to the term "inventory" in
the Code and, in addition, means all now owned and hereafter acquired inventory,
goods, merchandise and other personal property wherever located, while in the
possession of Borrower, a bailee, or other Person, furnished under any contract
of service or intended for sale or lease, including, without limitation, raw
materials, work in process, spare parts, component parts, finished goods and
materials and supplies of any kind, nature or description which are or might be
used or consumed in Borrower's business or are or might be used in connection
with the manufacture, packing, shipping, advertising, selling or finishing of
such goods, merchandise and other personal property and all documents of title
or documents representing the same.
"Letter of Credit" means a standby letter of credit issued by Bank pursuant
to Section 2.2 hereof.
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"Letter of Credit Agreement" means Bank's standard letter of credit
application and documentation modified to such extent, if any, as Bank deems
necessary.
"Letter of Credit Obligations" means, at any time, all liabilities at such
time of Borrower to Bank with respect to Letters of Credit, whether or not any
such liability is contingent.
"Letter of Credit Request" has the meaning set forth in Section 2.2(d)
hereof.
"LIBOR" means, for each Fixed Rate Term, the rate per annum (rounded upward
if necessary to the nearest whole 1/16 of 1%) and determined pursuant to the
following formula:
LIBOR = Base LIBOR
-----------------------------------
100% - LIBOR Reserve Percentage
As used herein, (a) "Base LIBOR" means the average of the rates per annum
at which U.S. dollar deposits are offered to Bank in the London interbank
eurocurrency market on the second Business Day prior to the commencement of a
Fixed Rate Term at or about 11:00 A.M. (London time), for delivery on the first
day of such Fixed Rate Term, for a term comparable to the number of days in such
Fixed Rate Term and in an amount approximately equal to the principal amount to
which such Fixed Rate Term shall apply, and (b) "LIBOR Reserve Percentage" means
the reserve percentage prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for "Eurocurrency Liabilities" (as defined in
Regulation D of the Federal Reserve Board, as amended), adjusted by Bank for
changes in such reserve percentage during the applicable Fixed Rate Term.
"LIBOR Loan" means any Loan that bears interest with reference to LIBOR.
"LIBOR Margin" means the number of basis points determined in accordance
with Schedule I.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
security interest, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever, including, without limitation, any
conditional sale or other title retention agreement or the interest of a lessor
under a Capitalized Lease Obligation or any Other Lease.
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"Loan" means an advance made by Bank to Borrower pursuant to any of Section
2.1.
"Loan Documents" means this Agreement, the Letter of Credit Agreements, and
each other agreement, note, notice, document, contract or instrument required by
or at any time delivered to Bank in connection with this Agreement.
"Material Adverse Effect" means a material adverse effect on (a) the
condition (financial or otherwise), business, performance, prospects, operations
or properties of Borrower, (b) the ability of Borrower to perform its
obligations under the Loan Documents, or (c) the rights and remedies of Bank
under the Loan Documents.
"Maturity Date" means March 31, 2000.
"Notice of Authorized Representatives" has the meaning set forth in Section
2.1(g) hereof.
"Notice of Borrowing" has the meaning set forth in Section 2.1(d) hereof.
"Notice of Conversion or Continuation" has the meaning set forth in Section
2.4(c) hereof.
"Obligations" means all of Borrower's obligations under the Loan Documents,
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising.
"Other Lease" means any synthetic lease or any financing lease having
substantially the same economic effect as a conditional sale, title retention
agreement or similar arrangement.
"PBGC" means the Pension Benefit Guaranty Corporation established pursuant
to Title IV of ERISA.
"Permit" means any permit, approval, authorization, license, variance or
permission required from a Governmental Authority under an applicable
Governmental Rule.
"Permitted Liens" means
(a) Liens arising by operation of law for taxes, assessments or
governmental charges not yet due;
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(b) statutory Liens of mechanics, materialmen, shippers, warehousemen,
carriers, and other similar persons for services or materials arising in the
ordinary course of business for which payment is not yet due;
(c) non-consensual Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment insurance and
other types of social security;
(d) Liens for taxes or statutory Liens of mechanics, materialmen, shippers,
warehousemen, carriers and other similar persons for services or materials that
are due but are being contested in good faith and by appropriate and lawful
proceedings promptly initiated and diligently conducted and for which reserves
satisfactory to Bank have been established;
(e) Liens listed on the Disclosure Schedule;
(f) Liens in favor of Bank;
(g) purchase money Liens upon or in any property of Borrower and used by
Borrower in the ordinary course of business, which Liens secure the obligation
to pay the purchase price of such property, related payment and performance
obligations and the obligation to pay the cost of services in respect of such
property or to secure Indebtedness and related payment and performance
obligations incurred solely for the purpose of financing the acquisition of such
property or such services, and Liens existing on such property at the time of
its acquisition; provided, however, that the aggregate principal amount of
outstanding Indebtedness secured by the Liens referred to in this clause (g)
shall not at any time exceed the sum of $2,000,000;
(h) zoning restrictions, easements, rights of way, survey exceptions,
encroachments, covenants, licenses, reservations, leasehold interests,
restrictions on the use of real property or minor irregularities incident
thereto which do not in the aggregate materially detract from the value or use
of the property or assets of Borrower or impair, in any material manner, the use
of such property for the purposes for which such property is held by Borrower;
(i) Liens to secure Capitalized Lease Obligations and Other Leases and any
related payment and performance obligations if the incurrence of such
Indebtedness is permitted by Section 8.2; provided, however, that: (i) any such
Lien is created solely for the purpose of securing Indebtedness representing, or
incurred to finance, refinance or refund, the cost (including, without
limitation, the cost of construction and the reasonable fees and expenses
relating to such Indebtedness) of the property
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subject thereto, (ii) the principal amount of the Indebtedness secured by such
Lien does not exceed 100% of such cost, and (iii) such Lien does not extend to
or cover any other property other than such item of property and any
improvements on such item; and
(j) the interests of lessors or lessees of property leased pursuant to
leases permitted hereunder.
"Person" means an individual, partnership, corporation (including, without
limitation, a business trust), joint stock company, limited liability company,
trust, unincorporated association, joint venture or other entity, or a
Governmental Authority.
"Plan" means an employee benefit plan, as defined in Section 3(3) of ERISA,
which Borrower maintains, contributes to or has an obligation to contribute to
on behalf of participants who are or were employed by any of them.
"Prime Rate" means, for any day, an interest rate per annum equal to the
rate of interest most recently announced within Bank at its principal office, as
its prime rate, with any change in the prime rate to be effective as of the day
such change is announced within Bank and with the understanding that the prime
rate is one of Bank's base rates used to price some loans and may not be the
lowest rate at which Bank makes any loan, and is evidenced by the recording
thereof in such internal publication or publications as Bank may designate.
"Prime Rate Loan" means any Loan that bears interest at the Prime Rate.
"Records" means all of Borrower's present and future records and books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other Person).
"Release" means, as to any Person, any unpermitted spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration of a Contaminant into the environment.
"Remedial Action" means all actions required to clean up, remove, prevent
or minimize a Release or threat of Release or to perform pre-remedial studies
and investigations and post-remedial monitoring and care.
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"Rights to Payment" means all Accounts, General Intangibles, contract
rights, chattel paper, documents, instruments, letters of credit, bankers
acceptances and guaranties, and all present and future liens, security
interests, rights, remedies, title and interest in, to and in respect of
Accounts and other Collateral, and shall include without limitation, (a) rights
and remedies under or relating to guaranties, contracts of suretyship, letters
of credit and credit and other insurance related to the Collateral, (b) rights
of stoppage in transit, replevin, repossession, reclamation and other rights and
remedies of an unpaid vendor, lienor or secured party, (c) goods described in
invoices, documents, contracts or instruments with respect to, or otherwise
representing or evidencing, Accounts or other Collateral, including without
limitation, returned, repossessed and reclaimed goods, and (d) deposits by and
property of account debtors or other persons securing the obligations of account
debtors, monies, securities, credit balances, deposits, deposit accounts and
other property of Borrower now or hereafter held or received by or in transit to
Bank or any of its affiliates or at any other depository or other institution
from or for the account of Borrower, whether for safekeeping, pledge, custody,
transmission, collection or otherwise.
"Stock" means shares of capital stock, beneficial or partnership interests,
participations or other equivalents (regardless of how designated) of or in a
corporation or other entity, whether voting or non-voting, and includes, without
limitation, common stock and preferred stock.
"Stock Equivalents" means all securities convertible into or exchangeable
for Stock and all warrants, options or other rights to purchase or subscribe for
any Stock, whether or not presently convertible, exchangeable or exercisable.
"Subsidiary" means any corporation, association, partnership, joint venture
or other business entity of which more than fifty percent (50%) of the voting
stock or other equity interest is owned directly or indirectly by Borrower.
"Tranche" means a collective reference to LIBOR Loans, the then current
Fixed Rate Term with respect to all of which begin on the same date and end on
the same later date (whether or not such LIBOR Loans shall have originally been
made on the same day).
SECTION 1.2. HEADINGS
Headings in the Loan Documents are for convenience of reference only and
are not part of the substance hereof or thereof.
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ARTICLE II. THE CREDITS
SECTION 2.1. REVOLVING CREDITS
(a) On the terms and subject to the conditions contained in this Agreement,
Bank agrees to make loans (each a "Loan") to Borrower from time to time until
the Maturity Date in an aggregate amount not to exceed at any time outstanding
the lesser of (i) $40,000,000 or (ii) the Borrowing Base. Borrower may from time
to time borrow, partially or wholly repay its outstanding Loans, and reborrow,
subject to all the limitations, terms and conditions contained herein.
(b) If at any time the Available Credit is negative, Borrower, without
demand or notice, shall immediately repay that portion of the Loans necessary to
cause the Available Credit to be zero. Borrower shall repay the outstanding
principal balance of the Loans, together with all accrued and unpaid interest
and related fees on the earlier of the Maturity Date or the due date determined
pursuant to Section 9.2.
(c) The Loans shall be evidenced by a promissory note payable to the order
of Bank and substantially in the form attached hereto as Exhibit B.
(d) Borrower, through an Authorized Representative, shall request an
advance under Section 2.1(a) by giving Bank irrevocable written notice or
telephonic notice (confirmed promptly in writing), in the form of Exhibit C
attached hereto (each, a "Notice of Borrowing"), which specifies, among other
things:
(i) the principal amount of the requested advance;
(ii) the proposed date of borrowing, which shall be a Business Day;
(iii) whether such advance is to be a Prime Rate Loan or a LIBOR Loan;
and
(iv) if such advance is to be a LIBOR Loan, the length of the Fixed
Rate Term applicable thereto.
Each such Notice of Borrowing must be received by Bank not later than (A)
11:00 a.m. (Seattle time) on the date of borrowing if a Prime Rate Loan, or (B)
at least three (3) Business Days prior to the date of borrowing if a LIBOR Loan.
In addition to advances requested by Borrower, advances of Loans may be made
automatically pursuant to certain cash management arrangements made by Borrower
with Bank and each such advance shall be a Prime Rate Loan.
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(e) Bank shall have the right in its discretion to determine in Good Faith
which Accounts are eligible for the purpose of determining the Borrowing Base.
General criteria for Eligible Accounts may be established and revised from time
to time by Bank in Good Faith. Without limiting such discretion as to other
Accounts, the following Accounts shall not be Eligible Accounts:
(i) Accounts that do not consist of ordinary trade accounts receivable
owned by Borrower, payable in cash in United States dollars and arising out
of the final sale of Inventory or provision of services in the ordinary
course of Borrower's business as presently conducted by it;
(ii) Accounts with respect to which the services covered thereby have
not been rendered or the goods covered thereby have not been delivered to
the account debtor or its designee or with respect to which Borrower failed
to issue an original invoice at the agreed-upon purchase price to the
account debtor promptly after rendering such services or delivering such
goods to the account debtor;
(iii) Accounts that are not due and payable, absolutely and
unconditionally, within sixty (60) days from the date of the original
invoice applicable thereto;
(iv) Accounts with respect to which more than ninety (90) days have
elapsed since the date of the original invoice applicable thereto;
(v) Accounts with respect to which the account debtor is an affiliate
of Borrower or any officer, employee or agent of the account debtor is an
officer, employee or agent of or affiliated with Borrower directly or
indirectly by virtue of family membership, ownership, control, management
or otherwise;
(vi) Accounts with respect to which the account debtor is a
Governmental Authority, except for those Accounts as to which Borrower has
assigned its right to payment thereof to Bank, and the assignment has been
acknowledged, pursuant to the Assignment of Claims Act of 1940, as amended
(31 U.S.C. ss. 3727);
(vii) the chief executive office of the account debtor with respect to
such Account is not located in the United States of America, unless (A) the
account debtor has delivered to Borrower an irrevocable letter of credit
issued or confirmed by a bank satisfactory to Bank, sufficient to cover
such Account, in form and substance satisfactory to Bank and, if required
by Bank, the
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original of such letter of credit has been delivered to Bank or Bank's
agent and the issuer thereof notified of the assignment of the proceeds of
such letter of credit to Bank, (B) such Account is subject to credit
insurance payable to Bank issued by an insurer and on terms and in an
amount acceptable to Bank, (C) the account debtor resides in a province of
Canada that recognizes Bank's perfection and enforcement rights as to
Accounts by reason of the filing of a UCC-1 in Oregon, or (D) such Account
is otherwise acceptable in all respects to Bank (subject to such lending
formula with respect thereto as Bank may determine);
(viii) Accounts for which the prospect of payment or performance by
the account debtor is or will be impaired in the Good Faith determination
of Bank;
(ix) Accounts with respect to which Bank does not have a valid and
prior, fully perfected lien or which are not free of all liens or other
claims of all other Persons (except Permitted Liens);
(x) Accounts with respect to which the account debtor is the subject
of bankruptcy or a similar insolvency proceeding, or has made an assignment
for the benefit of creditors, or whose assets have been conveyed to a
receiver or trustee, or who has failed or suspended or gone out of
business;
(xi) Accounts with respect to which the account debtor's obligation to
pay the Accounts is conditional upon the account debtor's approval;
(xii) Accounts from an account debtor to the extent that the account
debtor's indebtedness to Borrower (whether evidenced by such Accounts or
otherwise) exceeds an amount which is greater than 15% (25% with respect to
Compaq, Hewlett Packard and Xerox) of the face amount (less maximum
discounts, credits and allowances which may be taken by or granted to
account debtors in connection therewith) of the then outstanding Eligible
Accounts;
(xiii) Accounts owed by a particular account debtor if less than 75%
of the aggregate Accounts then owed to Borrower by that account debtor and
its affiliates constitute Eligible Accounts;
(xiv) Accounts of a particular account debtor in excess of a credit
limit established as to that account debtor by Borrower or by Bank;
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(xv) Accounts that represent a prepayment or progress payment or a
partial payment under an installment contract;
(xvi) Accounts that are evidenced by a promissory note or other
instrument;
(xvii) Accounts with respect to which the terms or conditions prohibit
or restrict assignment or collection rights;
(xviii) Accounts with respect to which the account debtor is located
in any jurisdiction requiring the timely filing by Borrower of a report or
document before such Account is created in order to bring suit or otherwise
enforce its remedies against such account debtor in the courts or through
any judicial process of such jurisdiction, unless Borrower has filed, or is
exempt from filing, such a report; and
(xix) Accounts with respect to which the account debtor is also a
creditor of Borrower, but only to the extent of the amount owed by Borrower
to such account debtor if such amount is less than the amount of all
Accounts with respect to such account debtor that otherwise would be
Eligible Accounts.
Bank shall have the right, but not the duty, to declare particular accounts
ineligible. The fact that Bank has not declared a particular account ineligible
shall not be deemed to be a determination or representation by Bank as to the
creditworthiness or financial condition of any account debtor. Because of
banking relationships between account debtors of Borrower and Bank, Bank may
have information about the creditworthiness of such account debtors; however,
Bank shall have no duty to Borrower to disclose information it may have about
any Borrower's account debtors and Borrower shall have no right to rely upon any
action or inaction of Bank concerning the creditworthiness or financial
condition of Borrower's account debtors. BORROWER HEREBY COVENANTS NOT TO XXX
AND TO HOLD HARMLESS BANK, ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
SUCCESSORS AND ASSIGNS FOR AND FROM ANY AND ALL DAMAGES, LIABILITY, OR CLAIMS OF
LIABILITY, WHETHER KNOWN OR UNKNOWN, OF WHATSOEVER NATURE ARISING OUT OF OR
BASED IN WHOLE OR IN PART UPON BANK'S FAILURE TO DISCLOSE UNFAVORABLE
INFORMATION ABOUT AN ACCOUNT DEBTOR OF BORROWER'S TO BORROWER, OR BANK'S FAILURE
TO TREAT AS INELIGIBLE THE ACCOUNT OF AN ACCOUNT DEBTOR OF BORROWER ABOUT WHOM
BANK HAS UNFAVORABLE INFORMATION.
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(f) Bank shall have the right in its discretion to determine in Good Faith
which Inventory is eligible for the purpose of determining the Borrowing Base.
Without limiting such discretion as to other Inventory, the following Inventory
shall in any event not constitute Eligible Inventory:
(i) finished goods that are not held by Borrower for sale as Inventory
in the ordinary course of Borrower's business as presently conducted by it
or that are obsolete, not in good condition, not of merchantable quality or
not salable in the ordinary course of Borrower's business or that are
subject to defects that would affect their market value;
(ii) Inventory that Bank, in the Good Faith exercise of its
discretion, determines to be unacceptable due to age, type, category or
quantity;
(iii) Inventory in transit or otherwise in the possession of any
Person other than Borrower, except (subject to any additional requirements
imposed by Bank, in the Good Faith exercise of its discretion, to protect
Borrower's title thereto or Bank's Lien therein) goods held in storage
solely for the account of Borrower (subject to Bank's Lien), if the Person
in possession has acknowledged in writing Bank's Lien thereon and has not
issued a negotiable document of title as to the goods;
(iv) Inventory with respect to which Bank, does not have a valid and
prior, fully perfected Lien and that is not free of all other Liens, other
than Permitted Liens;
(v) Inventory in the possession of a warehouseman or other bailee if
Bank has not received a bailee letter acceptable to Bank from such
warehouseman or bailee; and
(vi) Inventory located on premises leased by Borrower if Bank has not
received a landlord's waiver acceptable to Bank with respect to such
premises.
(g) On the Closing Date, and from time to time subsequent thereto at
Borrower's option, Borrower shall deliver to Bank a written notice in the form
of Exhibit D attached hereto, which designates by name one or more Authorized
Representatives and includes each of their respective specimen signatures (each,
a "Notice of Authorized Representatives"). Bank shall be entitled to rely
conclusively on the authority of each person designated as an Authorized
Representative in the most current Notice of Authorized Representatives
delivered by Borrower to Bank, to
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request borrowings and select interest rate options hereunder, and to give to
Bank such other notices as are specified herein as being made through an
Authorized Representative, until such time as Borrower has delivered to Bank,
and Bank has actual receipt of, a new Notice of Authorized Representatives. Bank
shall have no duty or obligation to Borrower to verify the authenticity of any
signature appearing on any Notice of Borrowing or any other written notice from
an Authorized Representative or to verify the authenticity of any person
purporting to be an Authorized Representative giving any telephonic notice
permitted hereby.
SECTION 2.2. LETTER OF CREDIT FACILITY
(a) On the terms and subject to the conditions contained in this Agreement,
Bank agrees promptly to issue one or more Letters of Credit at the request of
Borrower for the account of Borrower from time to time until thirty (30) days
prior to the Maturity Date; provided, however, that Bank shall not issue any
Letter of Credit if:
(i) any order, judgment or decree of any Governmental Authority or
arbitrator of which Bank is aware shall purport by its terms to enjoin or
restrain Bank from issuing such Letter of Credit or any Governmental Rule
applicable to Bank or any request or directive (whether or not having the
force of law) from any Governmental Authority with jurisdiction over Bank
shall prohibit, or request that Bank refrain from, the issuance of letters
of credit generally or such Letter of Credit in particular or shall impose
upon Bank with respect to such Letter of Credit any restriction or reserve
or capital requirement (for which Bank is not otherwise compensated) not in
effect on the date hereof or result in any loss, cost or expense that (A)
was not applicable, in effect or known to Bank on the Closing Date and
which Bank in Good Xxxxx xxxxx material to it, and (B) the reimbursement of
which is not provided for hereunder;
(ii) any of the applicable conditions contained in Article VI is not
then satisfied;
(iii) after giving effect to the issuance of such Letter of Credit,
the Letter of Credit Obligations exceed $5,000,000;
(iv) the amount of the Letter of Credit requested exceeds the
Available Credit; or
(v) fees due in connection with a requested issuance have not been
paid.
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(b) In no event shall the expiry date of any Letter of Credit be more than
one year or fall after ten (10) days prior to the Maturity Date.
(c) Prior to the issuance of each Letter of Credit, Borrower shall have
delivered to Bank, if requested by Bank, a Letter of Credit Agreement, signed by
Borrower, and such other documents or items as Bank may require pursuant to the
terms thereof.
(d) In connection with the issuance of each Letter of Credit, Borrower,
through an Authorized Representative, shall give Bank at least four (4) Business
Days' prior written notice (a "Letter of Credit Request"), in substantially the
form of Exhibit E, of the requested issuance of such Letter of Credit. Such
notice shall be irrevocable and binding on Borrower and shall specify (i) the
stated amount of the Letter of Credit requested, (ii) the date of issuance of
such requested Letter of Credit (which day shall be a Business Day), (iii) the
date on which such Letter of Credit is to expire (which date shall be a Business
Day), (iv) the Person for whose benefit the requested Letter of Credit is to be
issued, and (v) such other terms and conditions of the proposed Letter of Credit
as are requested by Borrower and acceptable to Bank. Such notice, to be
effective, must be received by Bank not later than 11:00 a.m. (Seattle time) on
the last Business Day on which notice can be given under the immediately
preceding sentence.
(e) Subject to the terms and conditions of this Section 2.2 and provided
that the applicable conditions set forth in Article VI have been satisfied, Bank
shall, on the requested date, issue a Letter of Credit on behalf of Borrower in
accordance with the applicable Letter of Credit Request and Bank's usual and
customary business practices and in a final form reasonably satisfactory to
Borrower.
(f) If Bank makes any payment under any Letter of Credit, such payment
shall be deemed to be and shall constitute a Prime Rate Loan made by Bank to
Borrower pursuant to Section 2.1(a).
SECTION 2.3. INTEREST/FEES
(a) Interest. The outstanding principal balance of each Prime Rate Loan
shall bear interest at a fluctuating rate per annum equal to the Prime Rate in
effect from time to time. The outstanding principal balance of each LIBOR Loan
shall bear interest at a fixed rate per annum determined by Bank to be equal to
the aggregate of (i) LIBOR in effect on the first day of the Fixed Rate Term for
such Loan plus (ii) the applicable LIBOR Margin in effect on the second Business
Day before the first day of such Fixed Rate Term. The foregoing notwithstanding,
the rate of interest applicable
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at all times during the continuation of an Event of Default shall be a
fluctuating rate per annum equal to the Prime Rate in effect from time to time,
plus 200 basis points. All fees, expenses and other amounts not paid when due
shall bear interest (from the date due until paid) at the rate set forth in the
preceding sentence.
(b) Letter of Credit Fees. With respect to each Letter of Credit, Borrower
shall pay to Bank a fee, payable upon issuance, equal to the face amount thereof
multiplied by a rate per annum equal to the LIBOR Margin applied for a period
equal to the term of such Letter of Credit. In addition, Borrower shall pay to
Bank upon the occurrence of any activity with respect to any Letter of Credit,
including without limitation, amendment, extension, transfer or cancellation of
any Letter of Credit, a fee determined in accordance with Bank's standard fees
and charges then in effect for such activity.
(c) Closing Fee. On the Closing Date, Borrower shall pay Bank a closing fee
of $188,000.
(d) Facility Fee. Borrower shall pay Bank a facility fee of $10,000 per
quarter payable in arrears on the first day of each January, April, July and
October.
(e) Computation and Payment. All interest and per annum fees shall be
computed on the basis of a 360-day year, actual days elapsed. Interest on Prime
Rate Loans shall be payable quarterly, in arrears, on the first day of each
January, April, July and October and upon the conversion of a Prime Rate Loan to
a LIBOR Loan. Interest on LIBOR Loans shall be paid on the last day of each
Fixed Rate Term.
SECTION 2.4. INTEREST OPTIONS
(a) Election. Subject to the requirement that each LIBOR Loan be in a
minimum amount of $250,000 and in integral multiples of $100,000 and the
limitation in Section 2.4(b) regarding the number of Tranches outstanding at any
time, (i) except as otherwise provided herein, at any time when a Default is not
continuing Borrower may convert all or any portion of a Prime Rate Loan to a
LIBOR Loan for a Fixed Rate Term designated by Borrower, and (ii) at any time
Borrower may convert all or a portion of a LIBOR Loan at the end of the Fixed
Rate Term applicable thereto to a Prime Rate Loan or, if no Default is
continuing, to a LIBOR Loan for a new Fixed Rate Term designated by Borrower. If
Borrower has not made the required interest rate conversion or continuation
election prior to the last day of any Fixed Rate Term, Borrower shall be deemed
to have elected to convert such LIBOR Loan to a Prime Rate Loan.
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(b) Maximum Number of Tranches. At no time shall there be more than three
Tranches outstanding at any time.
(c) Notice to Bank. Borrower, through an Authorized Representative, shall
request each interest rate conversion or continuation by giving Bank irrevocable
written notice or telephonic notice (confirmed promptly in writing), in the form
of Exhibit F attached hereto (a "Notice of Conversion or Continuation"), that
specifies, among other things: (i) the Loan to which such Notice of Conversion
or Continuation applies; (ii) the principal amount that is the subject of such
conversion or continuation; (iii) the proposed date of such conversion or
continuation, which shall be a Business Day; and (iv) if such Notice pertains to
a LIBOR interest selection, the length of the applicable Fixed Rate Term. Any
such Notice of Conversion or Continuation must be received by Bank not later
than (A) 11:00 a.m. (Seattle time) on the effective date of any Prime Rate
interest selection, and (B) at least three (3) Business Days prior to the
effective date of any LIBOR interest selection.
SECTION 2.5. OTHER PAYMENT TERMS
(a) Automatic Debit. Bank may, and Borrower hereby authorizes Bank to,
debit any deposit account of Borrower with Bank for all payments of principal,
interest and fees as they become due, provided that Bank shall first debit
Borrower's account no. 370211003436 with Bank before debiting any other account.
(b) Place and Manner. Borrower shall make all payments due to Bank by
payment to Bank at Bank's office, in lawful money of the United States and in
same day or immediately available funds not later than 12:00 noon (Seattle time)
on the date due.
(c) Date. Whenever any payment due hereunder shall fall due on a day other
than a Business Day, such payment shall be made on the next succeeding Business
Day, and such extension of time shall be included in the computation of interest
or fees, as the case may be.
(d) Application of Payments. All payments under the Loan Documents
(including prepayments) shall be applied first to unpaid fees, costs and
expenses then due and payable under the Loan Documents, second to accrued
interest then due and payable under the Loan Documents, third to reduce the
principal of the Loans. If an Event of Default has occurred and is continuing,
Bank shall apply such payments as determined by it in its discretion.
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SECTION 2.6. CHANGE OF CIRCUMSTANCES
(a) Inability to Determine Rate. If Bank at any time shall determine that
adequate and reasonable means do not exist for ascertaining LIBOR, then Bank
shall give telephonic notice (promptly confirmed in writing) to Borrower of such
determination. If such notice is given and until such notice has been withdrawn
in writing by Bank, then no LIBOR interest option may be selected by Borrower.
(b) LIBOR Illegality; Termination of Commitment. Notwithstanding any other
provisions herein, if any Change of Law shall make it unlawful for Bank (i) to
make a LIBOR interest rate available, or (ii) to maintain LIBOR interest rates
hereunder, then, in the former event, any obligation of Bank hereunder to make
available such unlawful LIBOR interest rate shall forthwith be canceled, and in
the latter event, any such unlawful LIBOR interest rate then outstanding shall
at the option of Bank be converted so that interest is determined in relation to
the Prime Rate pursuant to the terms of this Agreement; provided however, if any
such Change in Law shall permit a LIBOR interest rate until the expiration of
the Fixed Rate Term relating thereto, then such permitted LIBOR interest rate
shall continue as such until the end of such Fixed Rate Term. If as a result of
this Section a LIBOR interest rate is converted to a lower interest rate,
Borrower shall pay to Bank immediately upon demand such amount or amounts as may
be necessary to compensate Bank for any loss in connection therewith.
(c) Illegality; Compensation. Upon the occurrence of any event described in
Section 2.6(b) hereof, Borrower shall pay to Bank, immediately upon demand, such
amount or amounts as may be necessary to compensate Bank for any fines, fees,
charges, penalties or other amounts payable by Bank as a result thereof and that
are attributable to LIBOR interest rates made available to Borrower hereunder.
In determining which amounts payable by Bank and/or losses incurred by Bank are
attributable to LIBOR interest rates made available to Borrower hereunder, any
reasonable allocation made by Bank among its operations shall, in the absence of
manifest error, be conclusive and binding upon Borrower.
(d) Change of Law; Compensation. If any Change of Law (i) shall subject
Bank to any tax, duty or other charge with respect to any LIBOR interest rate,
or shall change the basis of taxation of payments by Borrower to Bank of
principal, interest, fees or any other amount payable hereunder (except for
changes in the rate of taxation on the overall net income of imposed by the
jurisdiction of Bank's incorporation or by any jurisdiction in which its
applicable lending office is located); (ii) shall impose, modify or hold
applicable any reserve, special deposit, compulsory loan or similar requirement
against assets held by, deposits or other liabilities in or for
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the account of, advances or loans by, or any other acquisition of funds by Bank;
or (iii) shall impose on Bank any other condition; and the effect of any of the
foregoing is to increase the cost to Bank of making, renewing or maintaining any
LIBOR Loan hereunder or to reduce any amount receivable by Bank in connection
therewith, then Borrower shall, immediately upon demand, pay to Bank such amount
or amounts as may be necessary to reimburse Bank for such increased costs or to
compensate Bank for such reduced amounts. A certificate as to the amount of such
increased costs or reduced amounts, delivered by Bank to Borrower shall, in the
absence of manifest error, be conclusive and binding on Borrower for all
purposes.
(e) Capital Requirements; Compensation. If Bank shall have determined that
any Change of Law regarding capital adequacy has or shall have the effect of
reducing the rate of return on the capital of Bank (or any entity controlling
Bank) as a consequence of Bank's obligations hereunder to a level below that
which Bank or such entity would have achieved but for such Change of Law (taking
into consideration Bank's or such entity's policies with respect to capital
adequacy), by an amount deemed by Bank to be material, then from time to time,
within fifteen (15) days after demand by Bank, Borrower shall pay to Bank or
such entity such additional amounts as shall compensate Bank or such entity for
such reduction. Any such request by Bank under this Section shall set forth the
basis of the calculation of such additional amounts and shall, in the absence of
manifest error, be conclusive and binding on Borrower for all purposes.
SECTION 2.7. LIBOR PAYMENTS; FUNDING LOSS INDEMNIFICATION
(a) Borrower may prepay the principal of any portion of a Tranche at any
time and in the minimum amount of $250,000, or, if less, the entire principal
amount of such Tranche. In consideration of Bank providing this prepayment
option to Borrower or if any such portion of a LIBOR Loan shall become due and
payable at any time prior to the last day of the Fixed Rate Term applicable
thereto by acceleration or otherwise, Borrower shall pay to Bank immediately
upon demand a fee which is the sum of the discounted monthly difference for each
month from the month of prepayment through the month in which such Fixed Rate
Term matures, calculated as follows for each such month: (i) determine the
amount of interest which would have accrued each month on the amount prepaid at
the interest rate applicable to such amount had it remained outstanding until
the last day of the Fixed Rate Term applicable thereto; (ii) subtract from the
amount determined in (i) above the amount of interest which would have accrued
for the same month on the amount prepaid for the remaining term of such Fixed
Rate Term at LIBOR in effect on the date of
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prepayment for new loans made for such term and in a principal amount equal to
the amount prepaid; and (iii) if the result obtained in (ii) for any month is
greater than zero, discount that difference by LIBOR used in (ii) above.
Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Borrower, therefore, agrees to pay the above-described prepayment
fee and agree that said amount represents a reasonable estimate of the
prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay
any prepayment fee when due, the amount of such prepayment fee shall thereafter
bear interest until paid at a rate per annum equal to the Prime Rate plus 200
basis points.
(b) If Borrower shall (i) fail to borrow the full amount set forth in any
Notice of Borrowing that has been delivered to Bank (whether as a result of the
failure to satisfy any applicable conditions or otherwise), or (ii) fail to
convert or continue at the LIBOR interest option any portion of a Loan in
accordance with a Notice of Conversion or Continuation delivered to Bank
(whether as a result of the failure to satisfy any applicable conditions or
otherwise), Borrower shall, upon demand by Bank, reimburse Bank and hold Bank
harmless for all costs and losses incurred by Bank as a result of such
repayment, prepayment or failure. Borrower understands that such costs and
losses may include, without limitation, losses incurred by Bank as a result of
funding and other contracts entered into by Bank to fund any LIBOR Loan. Bank
shall deliver to Borrower a certificate setting forth the amount of costs and
losses for which demand is made. Such certificate shall, in the absence of
manifest error, be conclusive and binding on Borrower as to the amount of such
loss for all purposes. This Section 2.7(b) shall survive the termination of this
Agreement.
ARTICLE III. COLLECTION AND ADMINISTRATION
SECTION 3.1. CASH COLLATERAL ACCOUNT
(a) Cash Collateral Account. Borrower shall, at Borrower's expense and in
the manner requested by Bank from time to time, direct that remittances and all
other collections and proceeds of Accounts and other Collateral shall be
deposited into a lock box account maintained in Bank's name. In connection
therewith, Borrower shall execute such lockbox agreement(s) as Bank shall
require. Borrower shall maintain with Bank, and Borrower hereby grants to Bank a
security interest in, a non-interest bearing deposit account over which Borrower
shall have no control
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("Cash Collateral Account") and into which the proceeds of all Borrower's Rights
to Payment shall be deposited immediately upon their receipt.
(b) Immediate Deposit. Borrower and all of its affiliates, subsidiaries,
shareholders, directors, employees or agents shall, acting as trustee for Bank,
receive, as the property of Bank, any monies, checks, notes, drafts, or any
other payment relating to and/or proceeds of Accounts or other Collateral which
come into their possession or under their control and immediately upon receipt
thereof, shall deposit or cause the same to be deposited in the Cash Collateral
Account, or remit the same or cause the same to be remitted, in kind, to Bank.
In no event shall the same be commingled with Borrower's own funds.
SECTION 3.2. STATEMENTS
Bank shall render to Borrower each month a statement setting forth the
balance in the loan account(s) maintained by Bank for Borrower pursuant to this
Agreement, including principal, interest, fees, costs and expenses. Each such
statement shall be subject to subsequent adjustment by Bank but shall, absent
manifest errors or omissions, be considered correct and deemed accepted by
Borrower and conclusively binding upon Borrower as an account stated except to
the extent that Bank receives a written notice from Borrower of any specific
exceptions thereto within thirty (30) days after the date such statement has
been mailed by Bank. Until such time as Bank shall have rendered to Borrower a
written statement as provided above, the balance in the loan account(s) shall be
presumptive evidence of the amounts due and owing to Bank by Borrower.
SECTION 3.3. PAYMENTS
All amounts due under any of the Loan Documents shall be payable to the
Cash Collateral Account as provided in Section 3.1 hereof or such other place as
Bank may designate from time to time. Whenever any payment due hereunder shall
fall due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall be included in
the computation of interest or fees, as the case may be. Bank may apply payments
received or collected from Borrower or for the account of Borrower (including,
without limitation, the monetary proceeds of collections or of realization upon
any Collateral) to such of the Loans, whether or not then due, in such order and
manner as Bank determines. At Bank's option, all principal, interest, fees,
costs, expenses and other charges provided for in this Agreement or the other
Loan Documents may be charged directly to the loan account(s) of Borrower.
Borrower shall make all payments due Bank free and clear of, and without
deduction or withholding for or on account of, any setoff,
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counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, restrictions or conditions of any kind. If after receipt of any
payment of, or proceeds of Collateral applied to the payment of, any of the
Obligations Bank is required to surrender or return such payment or proceeds to
any person or entity for any reason, then the Obligations intended to be
satisfied by such payment or proceeds shall be reinstated and continue and this
Agreement shall continue in full force and effect as if such payment or proceeds
had not been received by Bank. Borrower shall be liable to pay to Bank, and does
hereby indemnify and hold Bank harmless for the amount of any payments or
proceeds surrendered or returned. This Section 3.3 shall remain effective
notwithstanding any contrary action which may be taken by Bank in reliance upon
such payment or proceeds. This Section 3.3 shall survive the payment of the
Obligations and the termination of this Agreement.
SECTION 3.4. USE OF PROCEEDS
Borrower shall use the initial proceeds of the Loans provided by Bank to
Borrower hereunder only for: (a) payments to each of the Persons listed in the
initial borrowing request delivered on the Closing Date; and (b) costs, expenses
and fees in connection with the preparation, negotiation, execution and delivery
of this Agreement and the other Loan Documents. All other Loans made or Letters
of Credit provided by Bank to Borrower pursuant to the provisions hereof shall
be used by Borrower only for general operating, working capital and other proper
corporate purposes of Borrower not otherwise prohibited by the terms of this
Agreement. None of the proceeds will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security or for the purposes of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for the any other purpose which might cause any
of the Loans to be considered a "purpose credit" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System, as
amended.
ARTICLE IV. SECURITY
SECTION 4.1. GRANT OF SECURITY INTEREST
Borrower hereby grants to Bank a security interest in all of the Collateral
as security for the full and prompt payment in cash and performance of the
Obligations.
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SECTION 4.2. PERFECTION; DUTY OF CARE
(a) Until all the Obligations have been fully satisfied and paid in cash,
Borrower shall perform all steps requested by Bank to perfect, maintain and
protect Bank's security interest in the Collateral, including, without
limitation, (i) executing and filing financing and continuation statements in
form and substance satisfactory to Bank, and (ii) delivering all Collateral in
which Bank's security interest may be perfected by possession together with such
endorsements as Bank may request.
(b) Bank shall have the right at all times, and from time to time, to
contact Borrower's account debtors to verify Rights to Payment.
(c) Borrower shall pay or cause to be paid all taxes, assessments and
governmental charges levied or assessed or imposed upon or with respect to the
Collateral or any part thereof; provided, however, Borrower shall not be
required to pay any tax if the validity and/or amount thereof is being contested
in good faith and by appropriate and lawful proceedings promptly initiated and
diligently conducted of which Borrower has given prior notice to Bank and for
which appropriate reserves have been established and so long as levy and
execution have been and continue to be stayed. If Borrower fails to pay or so
contest and reserve for such taxes, assessments and governmental charges, Bank
may (but shall not be required to) pay the same and add the amount of such
payment to the principal of the Loan.
(d) In order to protect or perfect the security interest which Bank is
granted hereunder, Bank may discharge any Lien that is not a Permitted Lien or
bond the same, pay for any insurance that Borrower has failed to maintain as
required by this Agreement, maintain guards, pay any service bureau, or obtain
any record and add the same to the principal of the Loan.
(e) Bank shall have no duty of care with respect to the Collateral, except
that Bank shall exercise reasonable care with respect to the Collateral in
Bank's custody, but shall be deemed to have exercised reasonable care if such
property is accorded treatment substantially equal to that which Bank accords
its own property, or if Bank takes such action with respect to the Collateral as
Borrower shall request in writing, provided that no failure to comply with any
such request nor any omission to do any such act requested by Borrower shall be
deemed a failure to exercise reasonable care. Bank's failure to take steps to
preserve rights against any parties or property shall not be deemed to be a
failure to exercise reasonable care with respect to the Collateral in Bank's
custody.
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ARTICLE V. REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Bank,
subject to the exceptions set forth on the Disclosure Schedule, 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 in cash
and satisfaction and discharge of all Obligations.
SECTION 5.1. LEGAL STATUS
It is a corporation, duly organized and existing and in good standing under
the laws of the jurisdiction of its incorporation, 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 have a Material
Adverse Effect. It is not and has not, during the preceding five (5) years, been
known as or used any other corporate or fictitious name and has not acquired any
of its assets in a bulk transfer.
SECTION 5.2. AUTHORIZATION AND VALIDITY
The Loan Documents have been duly authorized and the performance by it of
its obligations under the Loan Documents constitute a proper corporate purpose
under all applicable law. The Loan Documents upon their execution and delivery
in accordance with the provisions hereof will constitute legal, valid and
binding agreements and obligations of it enforceable against it in accordance
with their respective terms.
SECTION 5.3. NO VIOLATION
The execution, delivery and performance by it of each of the Loan Documents
does not violate or contravene any provision of its Articles of Incorporation or
By-Laws and does not violate any Governmental Rule or result in a breach of or
constitute a default under any contract, obligation, indenture or other
instrument to which it or any subsidiary of it is a party or by which it may be
bound, which violation, breach or default would have a Material Adverse Effect.
SECTION 5.4. LITIGATION
There are no pending, or to its knowledge threatened, actions, claims,
investigations, suits or proceedings, by or before any governmental authority,
arbitrator, court or administrative agency that could have a Material Adverse
Effect.
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SECTION 5.5. CORRECTNESS OF FINANCIAL STATEMENT
The consolidated financial statements of Borrower dated as of December 31,
1997, heretofore delivered by Borrower to Bank, (a) present fairly the financial
condition of Borrower and its affiliates; (b) disclose all liabilities of
Borrower that are required to be reflected or reserved against under GAAP,
whether liquidated or unliquidated, fixed or contingent; and (c) have been
prepared in accordance with GAAP. Except as disclosed to Bank pursuant to
Section 7.3, since the date of such financial statements there has been no
change or changes which have resulted in a Material Adverse Effect.
SECTION 5.6. TAXES
It has filed, or caused to be filed, all federal, state, local and foreign
tax returns required to be filed by it, and has paid, or caused to be paid, all
taxes as are shown on such returns, or on any assessment received by it, to the
extent that such taxes have become due, except as otherwise contested in good
faith. It has set aside proper amounts on its books, determined in accordance
with GAAP, for the payment of all taxes for the years that have not been audited
by the respective tax authorities and for taxes being contested by it.
SECTION 5.7. NO SUBORDINATION
There is no agreement, indenture, contract or instrument to which it or any
Subsidiary is a party or by which it or any Subsidiary may be bound that
requires the subordination in right of payment of any of its obligations subject
to this Agreement to any other obligation of it or such Subsidiary.
SECTION 5.8. ERISA
It is in compliance in all material respects with the applicable provisions
of ERISA. It has not violated any provision of any Plan maintained or
contributed to by it in a manner that could result in a Material Adverse Effect.
No "reportable event" (as defined in Title IV of ERISA) has occurred and is
continuing with respect to any Plan initiated by it.
SECTION 5.9. OTHER OBLIGATIONS
It is not in default with respect to any of its Indebtedness or any of its
material Contractual Obligations.
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SECTION 5.10. ENVIRONMENTAL MATTERS
It and each Subsidiary of it is in compliance in all material respects with
all Environmental Laws applicable to it, other than such noncompliance as in the
aggregate will not have a Material Adverse Effect. Neither it nor any Subsidiary
of it has received notice that it is the subject of any federal or state
investigation evaluating whether any Remedial Action is needed, except for such
notices received that in the aggregate do not refer to Remedial Actions that
would reasonably be expected to result in a Material Adverse Effect. There have
been no Releases by it or a Subsidiary of it that could reasonably be expected
to result in a Material Adverse Effect.
SECTION 5.11. LIENS
It has good, indefeasible, and merchantable title to and ownership of the
Collateral, free and clear of all Liens, except Permitted Liens. There are no
Liens of any nature whatsoever on any of its properties other than Permitted
Liens.
SECTION 5.12. NO BURDENSOME RESTRICTIONS; NO DEFAULTS
(a) It is not is a party to any Contractual Obligation the compliance with
which would have a Material Adverse Effect or the performance of which, either
unconditionally or upon the happening of an event, will result in the creation
of a Lien (other than Permitted Liens) on the property or assets of Borrower.
(b) No Default has occurred and is continuing.
(c) There is no Governmental Rule the compliance with which by it is
reasonably likely to have a Material Adverse Effect.
SECTION 5.13. NO OTHER VENTURES
It is not engaged in any joint venture or partnership with any other
Person.
SECTION 5.14. INVESTMENT COMPANY ACT
It is not an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company", as such
terms are defined in the Investment Company Act of 1940, as amended.
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SECTION 5.15. INSURANCE
All current policies of insurance of any kind or nature owned by or issued
to it, including, without limitation, policies of fire, theft, product
liability, public liability, property damage, other casualty, employee fidelity,
workers' compensation and employee health and welfare insurance, are in full
force and effect and are of a nature and provide such coverage as is sufficient
and as is customarily carried by companies of its size and character. It has no
reason to believe that it will be unable to comply with Section 7.5.
SECTION 5.16. LABOR MATTERS
(a) There are no strikes, work stoppages, slowdowns or lockouts pending or,
to its knowledge, threatened, against or involving it, other than those which in
the aggregate have no reasonable likelihood of having a Material Adverse Effect.
(b) There are no arbitrations or grievances pending against or involving
it, nor to its knowledge are there any arbitrations or grievances threatened
involving it, other than those which, in the aggregate, have no reasonable
likelihood of having a Material Adverse Effect.
(c) As of the date hereof it is not a party to, and has no obligations
under, any collective bargaining agreement.
(d) There is no organizing activity involving it pending or, to its
knowledge, threatened, by any labor union or group of employees, other than
those which in the aggregate have no reasonable likelihood of having a Material
Adverse Effect. There are no representation proceedings pending against it or,
to its knowledge, threatened with the National Labor Relations Board, and no
labor organization or group of its employees has made a pending demand on it for
recognition, other than those which in the aggregate have no reasonable
likelihood of having a Material Adverse Effect.
(e) There are no unfair labor practice charges, grievances or complaints
pending or in process or, to its knowledge, threatened, by or on behalf of any
employee or group of employees of it, other than those which in the aggregate
have no reasonable likelihood of having a Material Adverse Effect.
(f) There are no complaints or charges against it pending or, to its
knowledge, threatened to be filed with any federal, state or local court,
governmental agency or arbitrator based on, arising out of, in connection with,
or otherwise relating
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to the employment by it of any individual, other than those which in the
aggregate have no reasonable likelihood of having a Material Adverse Effect.
(g) It is in material compliance with all laws, and all orders of any
court, Governmental Authority or arbitrator, relating to the employment of labor
including all such laws relating to wages, hours, collective bargaining,
discrimination, civil rights, and the payment of withholding and/or social
security and similar taxes, other than those the non-compliance with which in
the aggregate would have no Material Adverse Effect.
SECTION 5.17. FORCE MAJEURE
Neither its business nor its properties are currently suffering from the
effects of any fire, explosion, accident, strike, lockout or other labor
dispute, drought, storm, hail, earthquake, embargo, act of God or of the public
enemy or other casualty (whether or not covered by insurance), other than those
the consequences of which in the aggregate would have no Material Adverse
Effect.
SECTION 5.18. INTELLECTUAL PROPERTY
It owns or licenses or otherwise has the right to use all material
licenses, Permits, patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, copyright applications,
franchises, authorizations and other intellectual property rights that are
necessary for the operation of its businesses, without infringement upon or
conflict with the rights of any other Person with respect thereto, including,
without limitation, all trade names. No slogan or other advertising device,
product, process, method, substance, part or other material now employed, or now
contemplated to be employed, by it infringes upon or conflicts with any rights
owned by any other Person, which infringement or conflict is reasonably likely
to have a Material Adverse Effect, and no claim or litigation regarding any of
the foregoing is pending or, to its knowledge, threatened, the existence of
which is reasonably likely to have a Material Adverse Effect. No patent,
invention, device, application, principle or any statute, law, rule, regulation,
standard or code is pending or, to its knowledge, proposed, other than those the
consequences of which in the aggregate have no reasonable likelihood of having a
Material Adverse Effect.
SECTION 5.19. CERTAIN INDEBTEDNESS
The Disclosure Schedule identifies as of the Closing Date all Indebtedness
of it which is either (a) for borrowed money or (b) incurred outside of the
ordinary course of the business.
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SECTION 5.20. SOLVENCY
It has received consideration which is the reasonable equivalent value of
the obligations and liabilities that it has incurred to Bank. It is not
insolvent as defined in any applicable state or federal statute, nor will it be
rendered insolvent by the execution and delivery of this Agreement or the other
Loan Documents. It does not intend to, nor does it believe that it will, incur
debts beyond its ability to pay them as they mature.
SECTION 5.21. TRUTH, ACCURACY OF INFORMATION
All financial and other information furnished to Bank in connection with
this Agreement is accurate in all material respects and does not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the information furnished, in light of the circumstances under
which furnished, not misleading.
SECTION 5.22. CHIEF EXECUTIVE OFFICE AND OTHER LOCATIONS
Its chief executive office and principal place of business is 0000 X.X.
Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxx 00000-0000. Its books and records are located at
its chief executive office, and the only other offices and/or locations where it
keeps the Collateral (except for Inventory which is in transit) or conducts any
of its business are set forth in Section 5.22 of the Disclosure Schedule.
SECTION 5.23. ACCOUNTS
Unless otherwise noted by it, each Right to Payment listed or referred to
on its trial balance, balance sheet or the books or records, or referred to in
any report to Bank (other than Rights to Payment which are proceeds of letters
of credit, insurance proceeds, contract rights, chattel paper, instruments and
documents not arising directly out of a sale or lease of goods or services) is
and will be free and clear of Liens in favor of any Person other than Bank, will
cover a bona fide sale or lease and delivery of goods usually dealt in by it in
the ordinary course of its business or will cover the rendition of services by
it to customers of a kind ordinarily rendered in the ordinary course of its
business, and will be for a liquidated amount from a customer competent to
contract therefor and maturing as stated by it.
SECTION 5.24. FISCAL YEAR
Borrower's fiscal year ends on June 30.
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ARTICLE VI. CONDITIONS
SECTION 6.1. 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's Counsel. All legal matters incidental to the
extension of credit hereunder shall be reasonably satisfactory to counsel for
Bank.
(b) Documentation. Bank shall have received, in form and substance
satisfactory to Bank, each of the following duly executed:
(i) this Agreement, a Letter of Credit Agreement for any Letter of
Credit to be issued on the Closing Date and the Note;
(ii) corporate borrowing resolution from Borrower;
(iii) a good standing certificate and certified copy of the Articles
of Incorporation for Borrower;
(iv) a copy of the bylaws of Borrower certified by its secretary as
correct and complete;
(v) certificate of incumbency from Borrower;
(vi) Notice of Authorized Representatives;
(vii) an opinion of Xxxxxx & Xxxxxxx, PC, counsel to Borrower, as to
such matters as Bank shall reasonably require;
(viii) a Borrowing Base Certificate; and
(ix) such other documents as Bank may require.
(c) Financial Condition. There is no event or circumstance that can
reasonably be expected to have a Material Adverse Effect.
(d) Fees and Expenses. Borrower shall have paid all fees and invoiced costs
and expenses then due pursuant to the terms of this Agreement.
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(e) Insurance. Borrower shall have delivered to Bank evidence of the
insurance coverage, including loss payable endorsements, required pursuant to
Section 7.5.
(f) Xxxxxx Financial.
(i) Borrower shall have entered into a new financing arrangement with
Xxxxxx Financial, Inc. for not less than $15,200,000 for the purpose of
financing the Intergraph Transaction.
(ii) Xxxxxx Financial, Inc. shall have entered into a Lien Priority
Agreement with Bank on terms satisfactory to Bank.
SECTION 6.2. CONDITIONS OF EACH EXTENSION OF CREDIT
The obligation of Bank to make any Loan (including any Loan being made by
Bank on the Closing Date) and of Bank to issue any Letter of Credit shall be
subject to the further conditions precedent that:
(a) the following statements shall be true on the date of such Loan or
issuance, both before and after giving effect thereto and to the application of
the proceeds therefrom (and the acceptance by Borrower of the proceeds of such
Loan or by the beneficiary thereof or its designee of such Letter of Credit
shall constitute a representation and warranty by Borrower that on the date of
such Loan or such issuance such statements are true):
(i) the representations and warranties of Borrower contained in the
Loan Documents are correct in all material respects on and as of such date
as though made on and as of such date or, as to those representations and
warranties limited by their terms to a specified date, were correct in all
material respects on and as of such date; and
(ii) no Default is continuing or would result from the Loans being
made or the Letter of Credit being issued on such date;
(b) the making of the Loans or the issuance of such Letter of Credit on
such date does not violate any Governmental Rule and is not enjoined,
temporarily, preliminarily or permanently;
(c) Bank shall have received a Borrowing Base Certificate and such
additional documents, information and materials as Bank may reasonably request;
and
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(d) no event or circumstance exists that can reasonably be expected to have
a Material Adverse Effect.
ARTICLE VII. AFFIRMATIVE COVENANTS
Borrower covenants that so long as Bank remains committed to extend credit
to Borrower pursuant to the terms hereof or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower under any of the Loan
Documents remain outstanding, and until payment in full, in cash, of all
Obligations, Borrower shall, unless Bank otherwise consents in writing:
SECTION 7.1. PUNCTUAL PAYMENTS
Punctually pay all principal, interest, fees and other liabilities due
under any of the Loan Documents at the times and place and in the manner
specified therein.
SECTION 7.2. ACCOUNTING RECORDS
Keep accurate books and records of the financial affairs of it and its
Subsidiaries sufficient to permit the preparation of financial statements
therefrom in accordance with GAAP.
SECTION 7.3. FINANCIAL STATEMENTS AND REPORTS
Provide to Bank all of the following, in form and detail reasonably
satisfactory to Bank:
(a) not later than 90 days after the end of each fiscal year, a copy of its
Form 10K filed with the Securities and Exchange Commission, together with its
accountant's unqualified opinion with respect to the annual audited financial
statements included within the Form 10K;
(b) not later than twenty (20) days after and as of the end of each month,
a copy of its monthly management package distributed to its directors;;
(c) not later than forty-five (45) days and as of the end of each fiscal
quarter, a copy of its Form 10Q filed with the Securities and Exchange
Commission;
(d) contemporaneously with the delivery of each financial statement
required hereby, a certificate of Borrower's chief financial officer or
treasurer
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substantially in the form of Exhibit G attached hereto (i) stating that no
default existed at any time during the period covered by such statement, except
for those events or conditions, if any, described in such certificate in
reasonable detail together with a statement of any action taken or proposed to
be taken with respect thereto and (ii) setting forth the calculations required
to establish compliance by Borrower with the covenants set forth in Section
7.16;
(e) not later than twenty (20) days after and as of the end of each month:
(i) a Borrowing Base Certificate; (ii) a report of Borrower's inventory, valued
at cost determined on the first-in, first-out basis as of the end of the
preceding month, which report shall separately identify, by category, raw
materials, work in process and finished goods; (iii) a report of the aging of
Borrower's accounts payable as of the end of the preceding month in the
following categories: 0-30 days, 31-60 days, 61-90 days and over 90 days; and
(iv) a report of the aging of Borrower's accounts receivable as of the end of
the preceding month in the following categories: 0-30 days, 31-60 days, 61-90
days and over 90 days;
(f) except as otherwise provided above, within twenty (20) days after the
sending or filing thereof, copies of all reports and statements sent to or filed
by Borrower with the Securities and Exchange Commission; and
(e) from time to time such other information as Bank may reasonably
request.
SECTION 7.4. COMPLIANCE
Preserve and maintain all licenses, Permits, governmental approvals,
rights, privileges and franchises necessary for the conduct of its business and
comply in all material respects, with all Governmental Rules, Contractual
Obligations, commitments, instruments, licenses, Permits and franchises, other
than such failure to preserve or maintain or non-compliance the consequences of
which in the aggregate are not reasonably likely to have a Material Adverse
Effect.
SECTION 7.5. INSURANCE
(a) At all times, Borrower shall maintain property insurance insuring all
Collateral which is tangible property against loss or damage by fire, theft,
burglary, pilferage, loss in transit and such other hazards as Bank shall
specify in an amount equal to the full insurable value of the Collateral with
reasonable deductible amounts. Such insurance shall contain extra expense and
business interruption endorsements, shall contain a lender's loss payable
endorsement acceptable to Bank, shall be
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evidenced by policies containing terms reasonably acceptable to Bank and shall
be provided by insurers acceptable to Bank. The policies or a certificate
thereof signed by the insurer shall be delivered to Bank within five (5)
Business Days after the issuance or renewal of the policies to Borrower. Each
such policy shall provide that such policy may not be amended or canceled
without thirty (30) days prior written notice to Bank. At least fifteen (15)
days before the expiration of a policy, Borrower shall deliver to Bank a binder
(or other evidence reasonably acceptable to Bank) indicating that such policy
has been renewed or that a substitute for such policy will be issued effective
upon the expiration of such policy. If Borrower fails to do so, Bank may (but
shall not be required to) procure such insurance and add the cost thereof to the
Loan.
(b) At all times, Borrower shall maintain in full force and effect such
liability and other insurance with respect to its activities as may be
reasonably required by Bank. Such liability insurance shall name Bank as an
additional insured with respect to the activities of Borrower and shall be
provided by insurer(s) acceptable to Bank.
(c) OREGON STATUTORY NOTICE. The following is inserted pursuant to ORS
746.201:
WARNING
Unless Borrower provides Bank with evidence of the insurance
coverage as required by this Agreement, Bank may purchase insurance at
Borrower's expense to protect Bank's interest. This insurance may, but
need not, also protect Borrower's interest. If the collateral becomes
damaged, the coverage Bank purchases may not pay any claim Borrower
makes or any claim made against Borrower. Borrower may later cancel
this coverage by providing evidence that Borrower has obtained
property coverage elsewhere.
Borrower is responsible for the cost of any insurance purchased
by Bank. The cost of this insurance may be added to Borrower's
contract or loan balance. If the cost is added to Borrower's contract
or loan balance, the interest rate on the underlying contract or loan
will apply to this added amount. The effective date of coverage may be
the date Borrower's prior coverage lapsed or the date Borrower failed
to provide proof of coverage.
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The coverage Bank purchases may be considerably more expensive
than insurance Borrower can obtain on its own and may not satisfy any
need for property damage coverage or any mandatory liability insurance
requirements imposed by applicable law.
SECTION 7.6. FACILITIES
Keep all properties useful or necessary to its business in good repair and
condition, and from time to time make necessary repairs, renewals and
replacements thereto so that such property shall be fully and efficiently
preserved and maintained.
SECTION 7.7. 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 as a Borrower may in good faith contest or as to which
a bona fide dispute may arise, and for which Borrower has made provision for
adequate reserves in accordance with GAAP.
SECTION 7.8. LITIGATION
Promptly give notice in writing to Bank of any litigation pending or
threatened against Borrower or any Subsidiary with a claim in excess of $250,000
in the aggregate for Borrower and all Subsidiaries.
SECTION 7.9. NOTICE TO BANK
(a) Promptly (but in no event more than three (3) Business Days after the
occurrence of each such event or matter) give written notice to Bank in
reasonable detail of: (i) the occurrence of any Default; (ii) any termination or
cancellation of any insurance policy which Borrower is required to maintain,
unless such policy is replaced without any break in coverage with an equivalent
or better policy; (iii) any uninsured or partially uninsured loss or losses
through liability or property damage, or through fire, theft or any other cause
affecting the property of Borrower in excess of an aggregate of $500,000 during
any twelve-month period; or (iv) any change in the name or the organizational
structure of Borrower or any Subsidiary.
(b) As soon as possible and in any event within ten (10) days after
Borrower knows or has reason to know that any "reportable event" (as defined in
Title IV of ERISA) that triggers an obligation to file a notice with the PBGC
with respect to any Plan has occurred, deliver to Bank a statement of the
President or chief financial
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officer of Borrower setting forth details as to such reportable event and the
action which Borrower proposes to take with respect thereto, together with a
copy of the notice of such reportable event to the PBGC.
(c) Promptly, upon receipt (but in no event more than three (3) Business
Days after receipt) of a notice by Borrower, any affiliate of Borrower or any
administrator of any Plan that the PBGC has instituted proceedings to terminate
a Plan or to appoint a trustee to administer a Plan, provide to Bank a copy of
such notice.
SECTION 7.10. CONDUCT OF BUSINESS
Except as otherwise permitted by this Agreement, (a) conduct its business
in a regular manner and (b) use its reasonable efforts in the ordinary course
and consistent with past practice to (i) preserve its business and the goodwill
and business of the customers, advertisers, suppliers and others with whom it
has business relations, (ii) keep available the services and goodwill of its
present employees, and (iii) preserve all rights, Permits, licenses, approvals,
privileges, registered patents, trademarks, trade names, copyrights and service
marks and other intellectual property with respect to its business.
SECTION 7.11. PRESERVATION OF CORPORATE EXISTENCE, ETC.
Preserve and maintain its corporate existence, rights (charter and
statutory) and material franchises, unless the failure to so preserve and
maintain is not reasonably likely to have a Material Adverse Effect.
SECTION 7.12. ACCESS
(a) At any reasonable time and from time to time upon at least two (2)
Business Days' prior notice from Bank (unless a Default shall have occurred and
be continuing, in which case no prior notice is necessary), permit Bank, or any
agents or representatives thereof, to (i) examine and make copies of and
abstracts from the records and books of account of Borrower, (ii) visit the
properties of Borrower, (iii) discuss the affairs, finances and accounts of
Borrower with any of its officers or directors who may then be reasonably
available, (iv) communicate directly with Borrower's independent certified
public accountants, (v) arrange for verification of Borrower's Rights to Payment
under reasonable procedures directly with the obligors thereon or by other
methods, and (vi) examine and inspect Borrower's Inventory and the Equipment
wherever located. Borrower shall authorize its independent certified public
accountants to disclose to Bank any and all financial statements and other
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information of any kind, including, without limitation, copies of any management
letter, or the substance of any oral information that such accountants may have
with respect to the business, financial condition, results of operations or
other affairs of Borrower and each of its Subsidiaries.
(b) Borrower shall execute and deliver at the request of Bank such
instruments as may be necessary for Bank to obtain such information concerning
the business of Borrower as Bank may require from accountants, service bureaus
or others having custody of or maintaining records or assets of Borrower.
Borrower shall furnish Bank at reasonable intervals with such statements and
reports regarding the Collateral, Borrower's financial condition and the results
of Borrower's operations, in addition to those otherwise herein required, as
Bank may request from time to time.
SECTION 7.13. PERFORMANCE AND COMPLIANCE WITH OTHER COVENANTS
Perform and observe all the terms, covenants and conditions required to be
performed and observed by it under its Contractual Obligations (including,
without limitation, to pay all rent and other charges payable under any lease
and all debts and other obligations as the same become due), and do all things
necessary to preserve and to keep unimpaired its rights under such Contractual
Obligations, other than such failures the consequences of which in the aggregate
are not reasonably likely to have a Material Adverse Effect.
SECTION 7.14. FISCAL YEAR; ACCOUNTING PRACTICES
Notify Bank of any material change in its accounting practices.
SECTION 7.15. ENVIRONMENTAL
(a) Promptly give notice to Bank upon obtaining knowledge of (i) any claim,
injury, proceeding, investigation or other action, including a request for
information or a notice of potential environmental liability, by or from any
Governmental Authority or any third-party claimant that could result in Borrower
or any Subsidiary incurring Environmental Liabilities and Costs or (ii) the
discovery of any Release at, on, under or from any real property, facility or
equipment owned or leased by Borrower or a Subsidiary in excess of reportable or
allowable standards or levels under any applicable Environmental Law, or in any
manner or amount that could reasonably be expected to result in Borrower or any
Subsidiary incurring Environmental Liabilities and Costs.
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(b) Upon discovery of the presence on any property owned or leased by
Borrower or a Subsidiary of any Contaminant that reasonably could be expected to
result in Environmental Liabilities and Costs, take all Remedial Action required
by applicable Environmental Law.
SECTION 7.16. FINANCIAL CONDITION
Maintain Borrower's financial condition on a consolidated basis as follows
using GAAP consistently with prior practices, except to the extent modified by
the definitions herein:
(a) The Fixed Change Coverage Ratio shall not at any time be less than
1.5:1.
(b) Beginning March 31, 1999, the ratio of (i) EBITDA plus rent expense for
the same four quarters as EBITDA to (ii) "Interest and Rent Expense" shall not
at any time to be less than 2.5:1. "Interest and Rent Expense" means, as of the
end of a fiscal quarter, Borrower's consolidated interest expense and rent
expense for Borrower's four fiscal quarters ending with such quarter.
(c) Consolidated net worth shall not at any time be less than $31,690,000
plus an amount equal to (i) 50% of Borrower's consolidated net income after
taxes from January 1, 1998 through and including the month most recently ended
(provided, however, that such aggregate amount shall not be reduced by the
amount of any consolidated net loss after taxes of Borrower for any month) and
(ii) 90% of the proceeds of additional equity raised by Borrower after the
Closing Date.
(d) The ratio of Borrower's current assets (less Inventory) to current
liabilities as measured at the end of any fiscal quarter shall not at any time
be less than 1.1:1.
(e) The Funded Debt Ratio shall not, at any time before the earlier of (i)
January 1, 1999 or (ii) the date the subordinated debt referred to in Section
7.17 is issued, exceed 4.5:1 and thereafter shall not exceed 4:1.
(f) The ratio of Funded Debt (exclusive of all debt subordinated to the
Obligations in a manner satisfactory to Bank in its sole discretion) to EBITDA
shall not exceed 3:1 at any time after the earlier of (i) December 31, 1998 or
(ii) the date the subordinated debt referred to in Section 7.17 is issued.
(g) Beginning with Borrower's fiscal quarter ending December 31, 1998, make
any capital expenditures (including Capitalized Lease Obligations) in any fiscal
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quarter in excess of EBITDA as of the end of such quarter less the amount of all
capital expenditures made by Borrower during the three preceding fiscal
quarters.
SECTION 7.17. ADDITIONAL SUBORDINATED DEBT
During the period after the Closing Date and before January 1, 1999,
Borrower shall issue not less than $40,000,000 of unsecured subordinated debt on
terms satisfactory to Bank in its sole discretion, and the first $20,000,000 of
the net proceeds thereof will be dispersed as follows: (i) to Xxxxxx Financial,
Inc., the least of 76% of such proceeds, $15,200,000 or the balance owed by
Borrower on its secured indebtedness to Xxxxxx Financial, Inc.; and (ii) the
balance to Bank in reduction of the Obligations.
SECTION 7.18. LIENS
Keep the Collateral free and clear of all Liens, except Permitted Liens.
SECTION 7.19. FURTHER ASSURANCES
At the request of Bank at any time and from time to time, duly execute and
deliver, or cause to be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such further acts as may
be necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise effectuate
the provisions or purposes of this Agreement or any of the other Loan Documents,
at Borrower's expense. Bank may at any time and from time to time request a
certificate from an officer of Borrower representing that all conditions
precedent to the making of Loans and issuing Letters of Credit contained herein
are satisfied. In the event of such request by Bank, Bank may, at its option,
cease to make any further Loans or provide any further Letters of Credit until
Bank has received such certificate and, in addition, Bank has determined that
such conditions are satisfied. Where permitted by law, Borrower hereby
authorizes Bank to execute and file one or more UCC financing statements signed
only by Bank.
ARTICLE VIII. NEGATIVE COVENANTS
Borrower covenants that so long as Bank remains committed to extend credit
to Borrower pursuant to the terms hereof or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower under any of the Loan
Documents remain
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outstanding, and until payment in full, in cash of all Obligations, Borrower
will not, without the prior written consent of Bank:
SECTION 8.1. LIENS
Create or suffer to exist any Lien upon or with respect to any of its
properties, whether now owned or hereafter acquired, or assign any right to
receive income, except Permitted Liens.
SECTION 8.2. INDEBTEDNESS
Borrower and Subsidiaries, on a consolidated basis, create or suffer to
exist any Indebtedness except:
(a) the Obligations;
(b) current liabilities in respect of taxes, assessments and governmental
charges or levies incurred, or liabilities for labor, materials, inventory,
services, supplies and rentals incurred, or for goods or services purchased, in
the ordinary course of business consistent with industry practice in respect of
arm's length transactions and the past practice of Borrower
(c) Indebtedness of Borrower outstanding on the Closing Date and reflected
on Section 5.19 of the Disclosure Schedule and all renewals, extensions,
refinancing or refunding of such Indebtedness in a principal amount which does
not exceed the then outstanding principal amount, together with all prepayment
fees, penalties and expenses in respect of the Indebtedness being renewed,
extended, refinanced or refunded, provided each such renewal, extension,
refinancing or refunding is on terms and conditions no less favorable to the
creditors than the Indebtedness being renewed, extended, refinanced or refunded;
(d) Indebtedness of the type and in the amount contemplated by item (g) of
the definition of "Permitted Liens;
(e) Indebtedness in an aggregate principal amount at any time outstanding
not in excess of an amount which, after giving pro forma effect to the
incurrence thereof and the application of the proceeds thereof, would not cause
a breach of the covenants in Section 7.16; and
(f) the Indebtedness described in Section 7.17.
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SECTION 8.3. LEASE OBLIGATIONS
Create or suffer to exist any obligations as lessee for the rental or hire
of real or personal property of any kind under other leases or agreements to
lease (other than Capitalized Leases and Other Leases) having an original term
of one (1) year or more which would cause the aggregate direct or contingent
liabilities of Borrower and Subsidiaries in respect of all such obligations to
exceed $6,000,000 payable in any period of twelve (12) consecutive months
(exclusive of the leases with KeyCorp terminated on the Closing Date).
SECTION 8.4. RESTRICTED PAYMENTS, REDEMPTIONS
(a) Declare or make any dividend payment or other distribution of assets,
properties, cash, rights, obligations or securities on account or in respect of
any of its Stock or Stock Equivalents except (i) dividends paid to Borrower and
(ii) dividends paid by Borrower solely in Stock or Stock Equivalents of
Borrower;
(b) purchase, redeem or otherwise acquire for value any of Borrower's Stock
or Stock Equivalents; or
(c) make any change in its capital structure, including, without
limitation, the creation of new classes or types of Stock or Stock Equivalents.
SECTION 8.5. MERGERS, STOCK ISSUANCES, SALE OF ASSETS, ETC.
(a) Merge or consolidate with any Person;
(b) Acquire all or substantially all of (i) the Stock or Stock Equivalents
of any Person, (ii) the assets of any Person or (iii) the assets constituting
the business of a division, branch or other unit operation of any Person, except
for the Intergraph Transaction or any transaction involving consideration from
Borrower of less than $3,000,000, in either event provided that no Default
results from such transaction; or
(c) Sell, convey, transfer, lease or otherwise dispose of any of its assets
(including, without limitation, the Stock of a Subsidiary) or any interest
therein to any Person, or permit or suffer any other Person to acquire any
interest in any of the assets of Borrower, except (i) Permitted Liens, (ii) the
sale or disposition of inventory in the ordinary course of business and/or
assets which have become obsolete or are replaced in the ordinary course of
business, (iii) during any fiscal year of Borrower, the sale or other
disposition of equipment having an aggregate book value of less than $1,000,000
and (iv) real property having an aggregate net book value of $3,500,000.
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SECTION 8.6. INVESTMENTS IN OTHER PERSONS
Directly or indirectly, make or maintain any loan or advance to any other
Person or own, purchase or otherwise acquire any Stock, Stock Equivalents, other
equity interest, obligations or other securities of, or otherwise invest in, any
other Person (any such transaction being an "Investment"), except:
(a) Investments in Accounts, contract rights and chattel paper, notes
receivable and similar items arising or acquired in the ordinary course of
business consistent with Borrower's past practice;
(b) incidental advances to employees of Borrower in the ordinary course of
business;
(c) Investments in direct obligations to the United States of America or
any agency thereof, banker's acceptances and certificates of deposit issued by
any commercial bank in the United States of America; and
(d) loans to others not exceeding $250,000 in the aggregate outstanding at
any time.
SECTION 8.7. CHANGE IN NATURE OF BUSINESS
Directly or indirectly engage in any business activity other than its
current business activity.
SECTION 8.8. GUARANTIES
Except for up to $5,000,000 of guaranties of the obligations of its
Malaysian Subsidiary, 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 any Subsidiary as security for,
any liabilities or obligations of any other Person except any of the foregoing
required by this Agreement.
SECTION 8.9. PLANS
(a) Adopt or become obligated to contribute to any Title IV Plan or any
multiemployer Plan or any other Plan subject to Section 412 of the Internal
Revenue Code (except for any such Plan listed on the Disclosure Schedule on the
Closing Date), (b) establish or become obligated with respect to any new welfare
benefit Plan, or modify any existing welfare benefit Plan, which is reasonably
likely to result in an
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increase of the present value of future liabilities for post-retirement life
insurance and medical benefits, or (c) establish or become obligated to
contribute to any new unfunded pension Plan, or modify any existing unfunded
pension Plan, which is reasonably likely to result in an increase in the present
value of future unfunded liabilities under all such plans.
SECTION 8.10. [INTENTIONALLY OMITTED]
SECTION 8.11. CANCELLATION OF INDEBTEDNESS OWED TO IT
Cancel any claim or Indebtedness owed to it except for legitimate business
purposes in the reasonable judgment of Borrower and in the ordinary course of
business.
SECTION 8.12. MARGIN REGULATIONS
Use the proceeds of any Loans to purchase or carry any margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System).
SECTION 8.13. ENVIRONMENTAL
Permit any lessee or any other Person to dispose of any Contaminant by
placing it in or on the ground or waters of any property owned or leased by
Borrower or any of its Subsidiaries, except in material compliance with
Environmental Law or the terms of any Permit or other than those which in the
aggregate have no reasonable likelihood of having a Material Adverse Effect.
SECTION 8.14. TRANSACTIONS WITH AFFILIATES
Enter into any transaction directly or indirectly with or for any affiliate
except in the ordinary course of business on a basis no less favorable to such
affiliate than would be obtained in a comparable arm's length transaction with a
Person not an affiliate involving assets that are not material to the business
and operations of Borrower.
SECTION 8.15. NEW COLLATERAL LOCATION; NAME CHANGE
Open any new location or change its name unless (i) Borrower gives Bank (a)
thirty (30) days prior written notice of the intended name change, (b) thirty
(30) days prior written notice of the intended opening of such new location if
the assets of Borrower to be located at such location will be, or are expected
to be, in excess of
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$250,000 or (c) written notice of such new location within ten (10) days after
the opening thereof if advance notice is not required under item (b) above and
if the location is not in a state in which Bank has previously filed a UCC-1
financing statement, and (ii) Borrower executes and delivers to Bank such
agreements, documents and instruments as Bank may deem reasonably necessary or
desirable to protect its interests in the Collateral, including, without
limitation, UCC-1 financing statements.
ARTICLE IX. EVENTS OF DEFAULT
SECTION 9.1. EVENTS OF DEFAULT
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 amount 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 under any of the Loan
Documents shall prove to be false or misleading in any material respect when
furnished or made;
(c) Borrower shall fail to provide any certificate, report or other
information which it is required to provide pursuant to Section 7.3 or Section
7.9 on the date specified in Section 7.3 or Section 7.9; provided that unless
Borrower has previously failed to provide any required certificate, report or
other information by the required date on two prior occasions within the
preceding twelve (12) months, such failure shall be considered an Event of
Default only if Borrower fails to provide such certificate, report or other
information within five (5) Business Days (two (2) Business Days with respect to
Section 7.9(a)) of the earlier of (i) the date Borrower has knowledge of its
failure to so provide such certificate, report or other information, or (ii) the
date Bank, notifies Borrower of such failure;
(d) any default by Borrower in the performance of or compliance with any
obligation, agreement or other provision contained in Sections 7.5,7.10, 7.11,
7.12, 7.14, 7.16, 7.17, 8.2, 8.3, 8.4, 8.5, 8.6, 8.8 and 8.15;
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(e) any default by Borrower in the performance of or compliance with any
obligation, agreement or other provision contained in any Loan Document (other
than those referred to in subsections (a), (b), (c) and (d) above) for ten (10)
days after notice thereof by Bank to Borrower;
(f) any default by Borrower in the payment or performance of obligation(s),
or any defined event of default, under the terms of any contract or instrument
(other than any of the Loan Documents) evidencing Indebtedness in excess of
$100,000;
(g) any judgment(s), order(s) or writ(s) in excess of an aggregate of
$100,000 is/are rendered or entered against Borrower and/or one or more
Subsidiaries, except any judgment for which Borrower is fully insured and with
respect to which the insurer has admitted in writing its liability for the full
amount thereof or except if the enforcement of such judgment, order or writ has
been stayed or the liability thereon bonded in a manner and on terms reasonably
satisfactory to Bank; or the service of notice(s) of levy and/or of writ(s) of
attachment or execution, or other like process, against any of the assets of
Borrower and/or one or more Subsidiaries with respect to obligations in excess
of an aggregate of $100,000;
(h) 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 be unable to or 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 seek to
effect a plan or other arrangement with creditors or any other relief under the
Bankruptcy Code, or under any state or other 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
other Federal law relating to bankruptcy, reorganization or other relief for
debtors is filed or commenced against Borrower and is not dismissed, stayed or
vacated within sixty (60) days thereafter; 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 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; as used herein;
(i) any tax lien (other than a Permitted Lien) greater than $50,000 shall
have been filed against Borrower or any of its property by any federal, state,
or municipal authority;
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(j) if any of the following events occur: (a) any Plan incurs any
"accumulated funding deficiency" (as defined in ERISA) whether waived or not,
(b) Borrower or any affiliate engages in any "prohibited transaction" (as
defined in ERISA), (c) any Plan is terminated, (d) a trustee is appointed by an
appropriate United States district court to administer any Plan, or (e) the PBGC
institutes proceedings to terminate any Plan or to appoint a trustee to
administer any Plan;
(k) the dissolution or liquidation of Borrower, or Borrower or its
directors or stockholders shall take action seeking to effect the dissolution or
liquidation of Borrower; or
(l) there shall exist or occur any event or condition that Bank in Good
Faith believes impairs, or is substantially likely to impair, the prospect of
payment or performance by Borrower of its obligations under any of the Loan
Documents.
SECTION 9.2. REMEDIES
(a) Upon the occurrence or existence of any Event of Default (other than an
Event of Default referred to in Section 9.1(h) hereof) and at any time
thereafter during the continuance of such Event of Default, Bank may, by written
notice to Borrower, (i) terminate Bank's obligation to extend any further credit
under any of the Loan Documents, and/or (ii) declare all indebtedness of
Borrower under the Loan Documents to be immediately due and payable without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by Borrower. Upon the occurrence or existence of any
Event of Default described in Section 9.1(h) hereof, immediately and without
notice, (A) the obligations, if any, of Bank to extend any further credit under
any of the Loan Documents shall automatically cease and terminate, and (B) all
indebtedness of Borrower under the Loan Documents shall automatically become
immediately due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived by Borrower. In
addition to the foregoing remedies, upon the occurrence or existence of any
Event of Default, Bank may exercise any other right, power or remedy granted to
it under any Loan Document or permitted to it by law, either by suit in equity
or by action at law, or both.
(b) Upon the occurrence of an Event of Default, Bank, in addition to any
other rights and remedies contained in the Loan Documents, shall have all of the
rights and remedies of a secured party under the Code and all other applicable
law, all of which rights and remedies shall be cumulative and nonexclusive to
the extent permitted by law. Bank may cause the Collateral to remain on
Borrower's premises, at Borrower's expense, pending sale or other disposition
thereof. Bank shall have the
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right to conduct such sales on Borrower's premises or elsewhere, at Borrower's
expense, on such occasion(s) as Bank may see fit, and Borrower, at Bank's
request, will, at Borrower's expense, assemble the Collateral and make it
available to Bank at such place(s) as Bank may reasonably designate from time to
time. Any sale, lease or other disposition by Bank of the Collateral, or any
part thereof, may be for cash or other value. Borrower shall execute and
deliver, or cause to be executed and delivered, such instruments, documents,
assignments, deeds, waivers, certificates and affidavits and take such further
action as Bank shall reasonably require in connection with such sale, and
Borrower hereby constitutes Bank as its attorney-in-fact to execute any such
instrument, document, assignment, deed, waiver, certificate or affidavit on
behalf of Borrower and in its name. Borrower acknowledges that portions of the
Collateral may be difficult to preserve and dispose of and may be subject to
complex maintenance and management; accordingly, Bank shall have the widest
possible latitude in the exercise of its rights and remedies hereunder.
(c) Bank is hereby granted a license and right to use, without charge upon
the occurrence and during the continuance of an Event of Default and until the
Obligations are fully and finally paid in cash, Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names, trademarks,
service marks, advertising material or any property of a similar nature in
completing the production, advertising for sale and sale of any Collateral.
(d) Any notice required to be given by Bank with respect to any of the
Collateral which notice is given pursuant to Section 10.2 and deemed received
pursuant to Section 10.2 at least five (5) days before a sale, lease,
disposition or other intended action by Bank with respect to any of the
Collateral shall constitute fair and reasonable notice to Borrower of any such
action. A public sale in the following fashion shall be conclusively presumed to
be reasonable: (i) the sale is held in a county where any part of the Collateral
is located or in which Borrower has a place of business; (ii) the sale is
conducted by auction, but it need not be by a professional auctioneer; and (iii)
any Collateral is sold as is and without any preparation for sale; and (iv)
Borrower is given notice of such public sale pursuant to the preceding sentence.
(e) Upon the occurrence and during the continuance of an Event of Default,
Bank shall have, with respect to Rights to Payment, all rights and powers to:
(i) direct any and all account debtors to make all payments in respect of the
Rights to Payment directly to Bank or otherwise demand payment of any or all of
the Rights to Payment; (ii) enforce payment of any or all of the Rights to
Payment by legal proceedings or otherwise; (iii) exercise Borrower's rights and
remedies with respect to any actions or
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proceedings brought to collect a Right to Payment; (iv) sell or assign any Right
to Payment upon such terms, for such amount and at such time or times as Bank
deems advisable; (v) settle, adjust, compromise, extend or renew a Right to
Payment; (vi) discharge or release any Right to Payment; and (vii) prepare, file
and sign Borrower's name on any proof of claim in bankruptcy or any similar
document against an account debtor, and to otherwise exercise the rights granted
herein.
(f) Bank shall have no obligation to preserve any rights to the Collateral
against any Person. Bank shall be under no obligation to make any demand upon or
pursue or exhaust any rights or remedies against Borrower or others with respect
to payment of the Obligations, or to pursue or exhaust any rights or remedies
with respect to any of the Collateral or any other security for the Obligations,
or to marshal any assets in favor of Borrower or any other Person against or in
payment of any or all of the Obligations.
(g) In addition to the Liens granted to Bank and any rights now or
hereafter granted under applicable law and not by way of limitation of any such
Liens and rights, upon the occurrence and during the continuance of any Event of
Default, Bank is hereby irrevocably authorized by Borrower at any time or from
time to time, without notice to Borrower or to any other Person, any such notice
being hereby expressly waived, to set-off, appropriate and apply against the
Obligations any and all deposits (general or special, including, but not limited
to, indebtedness evidenced by certificates of deposit, whether matured or
unmatured, but not including trust accounts) and any other indebtedness at any
time held or owing by Bank or any affiliate of Bank to or for the credit of
Borrower.
(h) Borrower shall pay to Bank, on demand and as part of the Obligations,
all costs and expenses, including court costs and costs of sale, incurred by
Bank in exercising any of its rights or remedies hereunder, and all costs and
expenses incurred in connection with any review of any part of the Collateral by
a collateral analyst employed by Bank (including, without limitation, Bank's
then customary per diem charges for such analysts) if such review was conducted
at any time during the continuation of an Event of Default.
SECTION 9.3. BANK AS BORROWER'S ATTORNEY
Borrower hereby appoints Bank or any other Person whom Bank may designate,
as Borrower's attorney, with power during the continuation of an Event of
Default: to indorse Borrower's name on any checks, notes, acceptances, money
orders, drafts or other forms of payment or security that may come into Bank's
possession; to sign Borrower's name on any invoice or xxxx of lading relating to
any
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Right to Payment, on drafts against customers, on schedules and assignments of
Rights to Payment, on notices of assignment, financing statements and other
public records, and on notices to customers; to notify the post office
authorities to change the address for delivery of Borrower's mail to an address
designated by Bank; to receive, open and process all mail addressed to Borrower;
and to do all things necessary to perfect Bank's security interest in the
Collateral, to preserve and protect the Collateral and to otherwise carry out
this Agreement. Provided Bank acts in a reasonable manner, Borrower ratifies and
approves all acts of such attorney, and neither Bank nor the attorney will be
liable for any acts or omissions nor for any error of judgment or mistake of
fact or law. This power being coupled with an interest is irrevocable until the
Obligations have been fully paid in cash or the financing arrangements between
Bank and Borrower are terminated, whichever shall later occur.
ARTICLE X. MISCELLANEOUS
SECTION 10.1. 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 10.2. 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: Xxxxxxxxxx Industries, Inc.
0000 X.X. Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Vice President, Finance
Telecopy No.: (000) 000-0000
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With a copy to: Xxxxxxx X. Xxxxxxx
Xxxxxx & Xxxxxxx, PC
Suite 600
0000 X.X. Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Bank: KeyBank National Association
Large Corporate Group
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxx Xxxxx
Telecopy No.: (000) 000-0000
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 days after deposit in the
U.S. mail, first class and postage prepaid; and (c) if sent by telecopy, upon
receipt and the sender will endeavor to send a hard copy of such telecopied
notice to the recipient by mail.
SECTION 10.3. 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 (whether incurred at the trial or appellate level, in an arbitration
proceeding, in bankruptcy, including, without limitation, any adversary
proceeding, contested matter or motion), incurred by Bank in connection with (a)
the negotiation and preparation of the Loan Documents, (b) the enforcement,
preservation or protection (or attempted enforcement, preservation or
protection) of Bank's rights, including, without limitation, periodic collateral
examinations, 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, and including any of the
foregoing incurred in connection with any bankruptcy proceeding relating to
Borrower.
SECTION 10.4. INDEMNIFICATION
To the fullest extent permitted by law, Borrower hereby agrees to protect,
indemnify, defend and hold harmless Bank and its officers, directors,
shareholders,
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employees, agents, attorneys and affiliates, together with respective heirs,
beneficiaries, executors, administrators, trustees, predecessors, successors and
assigns (collectively, "Indemnitees") from and against any liability, loss,
damage or expense of any kind or nature and from any suit, claim or demand
(including in respect of or for reasonable attorneys' fees (whether incurred at
the trial or appellate level, in an arbitration proceeding, in bankruptcy
(including, without limitation, any adversary proceeding, contested matter or
motion) or otherwise) and other expenses, including the allocated costs and
expenses of internal counsel) arising on account of or in connection with any
matter or thing or action or failure to act by Indemnitees, or any of them,
arising out of relating to any Loan Document, except to the extent such
liability arises from the willful misconduct or gross negligence of the
Indemnitees. Upon receiving knowledge of any suit, claim or demand asserted by a
third party that Bank believes is covered by this indemnity, Bank shall give
Borrower notice of the matter and an opportunity to defend it, at Borrower's
sole cost and expense, with legal counsel satisfactory to Bank. Bank may also
require Borrower to defend the matter. Any failure or delay of Bank to notify
Borrower of any suit, claim or demand shall not relieve Borrower of its
obligations of this Section, but shall reduce such obligations to the extent of
any increase in those obligations caused solely by an unreasonable failure or
delay in providing such notice. The obligations of Borrower under this Section
shall survive the payment in full and performance of the other Obligations.
SECTION 10.5. RELEASE
In consideration for Bank entering into the Loan Documents, Borrower hereby
releases and forever discharges Indemnitees from any and all liability or claims
of liability, whether known or unknown, of whatever nature arising out of or
based in whole or in part upon any agreement, act or omission of any Indemnitee
or any Person acting, or purporting to act, on behalf of any Indemnitee,
occurring before the Closing Date.
SECTION 10.6. SUCCESSORS, ASSIGNMENT
This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties; provided, however, that Borrower may not
assign or transfer its interest hereunder. 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. 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, any guarantor hereunder or the business of
such guarantor, or the Collateral.
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SECTION 10.7. ENTIRE AGREEMENT; AMENDMENT
This Agreement and the other Loan Documents constitute the entire agreement
among Borrower and Bank with respect to any extension of credit by Bank and
supersede all prior negotiations, communications, discussions and correspondence
concerning the subject matter hereof. This Agreement may be amended or modified
only by a written instrument executed by each party hereto.
SECTION 10.8. 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 10.9. TIME
Time is of the essence of each and every provision of this Agreement and
each other of the Loan Documents.
SECTION 10.10. TERMINATION OF EXISTING AGREEMENT
All of Bank's obligations pursuant to the Credit Facility and Security
Agreement dated April 12, 1996, as amended ("Prior Agreement"), between Borrower
and Bank are hereby terminated and Bank shall have no further obligations or
duties with respect thereto. The initial proceeds of the Loans provided by Bank
to Borrower hereunder will be used, in part, for the payment of Borrower's
obligations under the Prior Agreement, and upon the payment in full of such
obligations, the Amended and Restated Master Promissory Note issued in
connection with the Prior Agreement will be marked "PAID" by Bank and returned
to Borrower.
SECTION 10.11. 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.
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SECTION 10.12. 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 10.13. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Oregon.
SECTION 10.14. WAIVER OF JURY TRIAL
EACH OF BORROWER AND BANK, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION IN ANY WAY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS OR EVENTS REFERENCED HEREIN OR THEREIN OR CONTEMPLATED HEREBY OR
THEREBY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND/OR ANY OTHER OF THE LOAN DOCUMENTS. A COPY
OF THIS SECTION MAY BE FILED WITH ANY COURT AS WRITTEN EVIDENCE OF THE WAIVER OF
THE RIGHT TO TRIAL BY JURY AND THE CONSENT TO TRIAL BY COURT.
SECTION 10.15. OREGON STATUTORY NOTICE
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY BANK
AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY BORROWER'S
RESIDENCE MUST BE IN
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[INTENTIONALLY LEFT BLANK]
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WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY BANK TO BE ENFORCEABLE.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
XXXXXXXXXX INDUSTRIES, INC.
By: /s/
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Title:
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KEYBANK NATIONAL ASSOCIATION
By: /s/
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Title:
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