LINE OF CREDIT AGREEMENT
This Line of Credit Agreement ("Agreement") is made and entered into
this 30th day of March 1998 by and between SANWA BANK CALIFORNIA (the
"Bank") and APPLIED SIGNAL TECHNOLOGY, INC. (the "Borrower").
SECTION I
DEFINITIONS
1.01. Certain Defined Terms. Unless elsewhere defined in this
Agreement the following terms shall have the following meanings (such
meanings to be generally applicable to the singular and plural forms of
the terms defined):
A. "Advance" shall mean an advance to the Borrower under any line
of credit facility or similar facility provided for in Section II of
this Agreement which provides for draws by the Borrower against an
established credit line.
B. "Business Day" shall mean a day, other than a Saturday or
Sunday, on which commercial banks are open for business in
California.
C. "Collateral" shall mean any personal or real property in which
the Bank may be granted a lien or security interest to secure
payment of the Obligations.
D. "Debt" shall mean all liabilities of the Borrower less
Subordinated Debt.
E. "Effective Tangible Net Worth" shall mean the Borrower's stated
net worth plus Subordinated Debt but less all intangible assets of
the Borrower (i.e., goodwill, trademarks, patents, copyrights,
organization expense and similar intangible items).
F. "Environmental Claims" shall mean all claims, however asserted,
by any governmental authority or other person alleging potential
liability or responsibility for violation of any Environmental Law
or for release or injury to the environment or threat to public
health, personal injury (including sickness, disease or death),
property damage, natural resources damage, or otherwise alleging
liability or responsibility for damages (punitive or otherwise),
cleanup, removal, remedial or response costs, restitution, civil or
criminal penalties, injunctive relief, or other type of relief,
resulting from or based upon (i) the presence, placement, discharge,
emission or release (including intentional and unintentional,
negligent and non-negligent, sudden or non-sudden, accidental or
non-accidental placement, spills, leaks, discharges, emissions or
releases) of any Hazardous Materials at, in, or from property owned,
operated or controlled by the Borrower, or (ii) any other
circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law.
G. "Environmental Laws" shall mean all federal, state or local
laws, statutes, common law duties, rules, regulations, ordinances
and codes, together with all administrative orders, directed duties,
requests, licenses, authorizations and permits of, and agreements
with, any governmental authorities, in each case relating to
environmental, health, safety and land use matters; including the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980 ("CERCLA"), the Clean Air Act, the Federal Water Pollution
Control Act of 1972, the Solid Waste Disposal Act, the Federal
Resource Conservation and Recovery Act, the Toxic Substances Control
Act, the Emergency Planning and Community Right-to-Know Act, the
California Hazardous Waste Control Law, the California Solid Waste
Management, Resource, Recovery and Recycling Act, the California
Water Code and the California Health and Safety Code.
H. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, including (unless the context
otherwise requires) any rules or regulations promulgated thereunder.
I. "Event of Default" shall have the meaning set forth in the
section herein entitled "Events of Default".
J. "Hazardous Materials" shall mean all those substances which are
regulated by, or which may form the basis of liability under any
Environmental Law, including all substances identified under any
Environmental Law as a pollutant, contaminant, hazardous waste,
hazardous constituent, special waste, hazardous substance, hazardous
material, or toxic substance, or petroleum or petroleum derived
substance or waste.
K. "Indebtedness" shall mean, with respect to the Borrower, (i) all
indebtedness for borrowed money or for the deferred purchase price
of property or services in respect of which the Borrower is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or in
respect of which the Borrower otherwise assures a creditor against
loss and (ii) obligations under leases which shall have been or
should be, in accordance with generally accepted accounting
principles, reported as capital leases in respect of which the
Borrower is liable, contingently or otherwise, or in respect of
which the Borrower otherwise assures a creditor against loss.
L. "Obligations" shall mean all amounts owing by the Borrower to
the Bank pursuant to this Agreement including, but not limited to,
the unpaid principal amount of Advances.
M. "Permitted Liens" shall mean: (i) liens and security interests
securing indebtedness owed by the Borrower to the Bank; (ii) liens
for taxes, assessments or similar charges either not yet due or
being contested in good faith, provided proper reserves are
maintained therefor in accordance with generally accepted accounting
procedure; (iii) liens of materialmen, mechanics, warehousemen, or
carriers or other like liens arising in the ordinary course of
business and securing obligations which are not yet delinquent;
(iv) purchase money liens or purchase money security interests upon
or in any property acquired or held by the Borrower in the ordinary
course of business to secure Indebtedness outstanding on the date
hereof or permitted to be incurred pursuant to this Agreement; (v)
liens and security interests which, as of the date hereof, have been
disclosed to and approved by the Bank in writing; and (vi) those
liens and security interests which in the aggregate constitute an
immaterial and insignificant monetary amount with respect to the net
value of the Borrower's assets.
N. "Reference Rate" shall mean an index for a variable interest
rate which is quoted, published or announced from time to time by
the Bank as its reference rate and as to which loans may be made by
the Bank at, below or above such reference rate.
O. "Subordinated Debt" shall mean such liabilities of the Borrower
which have been subordinated to those owed to the Bank in a manner
acceptable to the Bank.
1.02. Accounting Terms. All references to financial statements,
assets, liabilities, and similar accounting items not specifically
defined herein shall mean such financial statements or such items
prepared or determined in accordance with generally accepted accounting
principles consistently applied and, except where otherwise specified,
all financial data submitted pursuant to this Agreement shall be
prepared in accordance with such principles.
1.03. Other Terms. Other terms not otherwise defined shall have the
meanings attributed to such terms in the California Uniform Commercial
Code.
SECTION II
CREDIT FACILITIES
2.01. Commitment to Lend. Subject to the terms and conditions of this
Agreement and so long as no Event of Default occurs, the Bank agrees to
extend to the Borrower the credit accommodations that follow.
2.02. Line of Credit Facility. The Bank agrees to make loans and
Advances to the Borrower, upon the Borrower's request therefor made
prior to the Expiration Date (as defined below in this Section 2.02), up
to a total principal amount from time to time outstanding of not more
than $3,000,000.00. Within the foregoing limits, the Borrower may
borrow, partially or wholly prepay, and reborrow under this Line of
Credit facility.
A. Purpose. Advances made under this Line of Credit shall be used
for working capital purposes.
B. Interest Rate. Interest shall accrue on the outstanding
principal balance of Advances under this Line of Credit at a
variable rate equal to the Bank's Reference Rate, per annum, as it
may change from time to time. (Such rate is referred to in this
Section 2.02 as the "Variable Rate".) The Variable Rate shall be
adjusted concurrently with any change in the Reference Rate.
Interest shall be calculated on the basis of 360 days per year but
charged on the actual number of days elapsed.
C. Payment of Interest. The Borrower hereby promises and agrees to
pay interest monthly on the first day of each month, commencing on
April 1, 1998.
D. Repayment of Principal. Unless sooner due in accordance with
the terms of this Agreement, on March 15, 1999 the Borrower hereby
promises and agrees to pay to the Bank in full the aggregate unpaid
principal balance of all Advances then outstanding, together with
all accrued and unpaid interest thereon.
Any payment received by the Bank shall, at the Bank's option, first
be applied to pay any late fees or other fees then due and unpaid,
and then to interest then due and unpaid and the remainder thereof
(if any) shall be applied to reduce principal.
E. Late Fee. If any regularly scheduled payment of principal
and/or interest (exclusive of the final payment upon maturity), or
any portion thereof, under this Line of Credit is not paid within
ten (10) calendar days after it is due, a late payment charge equal
to five percent (5%) of such past due payment may be assessed and
shall be immediately payable.
F. Making Line Advances/Notice of Borrowing. Each Advance made
hereunder shall be conclusively deemed to have been made at the
request of and for the benefit of the Borrower (i) when credited to
any deposit account of the Borrower maintained with the Bank or (ii)
when paid in accordance with the Borrower's written instructions.
Subject to any other requirements set forth in this Agreement,
Advances shall be made by the Bank upon telephonic or written notice
received from the Borrower in form acceptable to the Bank, which
notice shall be received not later than 2:00 p.m. (California Time)
on the date specified for such Advance, which date shall be a
Business Day. Requests for Advances received after such time may,
at the Bank's option, be deemed to be a request for an Advance to be
made on the next succeeding Business Day.
G. Non-Usage Fee. The Borrower hereby promises and agrees to pay
the following fees in connection with this facility: The Borrower
shall be assessed and shall pay to the Bank each quarter in arrears,
a fee in an amount equal to 0.25% of the difference (if any) between
$3,000,000.00 and the average daily outstanding principal balance of
Advances under this Line of Credit Facility, and the total face
amount of all Letters of Credit outstanding under the Letter of
Credit Facility contained in section 2.03 of this Agreement during
the preceding quarter.
H. Expiration of the Line of Credit Facility. Unless earlier
terminated in accordance with the terms of this Agreement, the
Bank's commitment to make Advances to the Borrower hereunder shall
automatically expire on March 15, 1999 (the "Expiration Date"), and
the Bank shall be under no further obligation to advance any monies
thereafter.
I. Line Account. The Bank shall maintain on its books a record of
account in which the Bank shall make entries for each Advance and
such other debits and credits as shall be appropriate in connection
with the Line of Credit facility (the "Line Account"). The Bank
shall provide the Borrower with a monthly statement of the
Borrower's Line Account, which statement shall be considered to be
correct and conclusively binding on the Borrower unless the Bank is
notified by the Borrower to the contrary within thirty (30) days
after the Borrower's receipt of any such statement which is deemed
to be incorrect.
J. Amounts Payable on Demand. If the Borrower fails to pay on
demand any amount so payable under this Agreement, the Bank may, at
its option and without any obligation to do so and without waiving
any default occasioned by the Borrower's failure to pay such amount,
create an Advance in an amount equal to the amount so payable, which
Advance shall thereafter bear interest as provided under this Line
of Credit facility.
In addition, the Borrower hereby authorizes the Bank, if and to the
extent payment owed to the Bank under this Line of Credit facility
is not made when due, to charge, from time to time, against any or
all of the deposit accounts maintained by the Borrower with the Bank
any amount so due.
2.03. Letter of Credit Facility. The Bank agrees to issue standby
letters of credit (each a "Letter of Credit") on behalf of the Borrower;
provided however, that at no time shall the total face amount of all
Letters of Credit outstanding, including the aggregate outstanding
amount of those Letters of Credit issued under Section 2.02 of the Line
of Credit Agreement dated June 10, 1993 and under Section 2.03 of the
Line of Credit Agreement dated March 3, 1997, and any and all addenda
and riders thereto, (the Prior Agreements") less any partial draws paid
by the Bank, exceed the sum of $2,000,000.00; and provided further, that
this Letter of Credit facility is a sub-facility of the above
$3,000,000.00 Line of Credit facility and at no time shall the total
amount outstanding under such facility together with the total face
amount of all Letters of Credit outstanding, including those issued
under the Prior Agreements, less any partial draws paid by the Bank,
(plus any amounts outstanding under any other sub-facilities of the
above main facility) exceed the sum of $3,000,000.00.
A. Issuance Fees, Costs and Commissions. Upon the Bank's request,
the Borrower shall promptly pay to the Bank issuance fees and such
other fees, commissions, costs and any out-of-pocket expenses
charged or incurred by the Bank with respect to any Letter of
Credit.
B. Expiration of Facility. The commitment by the Bank to issue
Letters of Credit shall, unless earlier terminated in accordance
with the terms of this Agreement, automatically terminate on March
15, 1999 and no Letter of Credit shall expire on a date which is
more than 90 days after such date.
C. Limitations on Letters of Credit. Each Letter of Credit shall
be in form and substance and in favor of beneficiaries satisfactory
to the Bank, provided that the Bank may refuse to issue a Letter of
Credit due to the nature of the transaction or its terms or in
connection with any transaction where the Bank, due to the
beneficiary or the nationality or residence of the beneficiary,
would be prohibited by any applicable law, regulation or order from
issuing such Letter of Credit.
D. Issuance of Letters of Credit. Prior to the issuance of each
Letter of Credit but in no event later than 10:00 a.m. (California
time) on the day such Letter of Credit is to be issued (which shall
be a Business Day), the Borrower shall deliver to the International
Department of the Bank a duly executed form of the Bank's standard
form of application for issuance of a letter of credit with proper
insertions.
SECTION III
CONDITIONS PRECEDENT
3.01. Conditions Precedent to the Initial Extension of Credit and/or
First Advance. The obligation of the Bank to make the initial extension
of credit and/or the first Advance hereunder is subject to the
conditions precedent that the Bank shall have received before the date
of such extension of credit and/or the first Advance all of the
following, in form and substance satisfactory to the Bank:
A. Authority to Borrow. Evidence relating to the duly given
approval and authorization of the execution, delivery and
performance of this Agreement, all other documents, instruments and
agreements required under this Agreement and all other actions to be
taken by the Borrower hereunder or thereunder.
B. Loan Fees. Evidence that any required loan fees and expenses as
set forth above with respect to each credit facility have been paid
or provided for by the Borrower.
C. Audit. The opportunity to conduct an audit of the Borrower's
books, records and operations and the Bank shall be satisfied as to
the condition thereof.
D. Miscellaneous Documents. Such other documents, instruments,
agreements and opinions as are necessary, or as the Bank may
reasonably require, to consummate the transactions contemplated
under this Agreement, all fully executed.
3.02. Conditions Precedent to All Extensions of Credit and/or Advances.
The obligation of the Bank to make any extensions of credit and/or each
Advance to or on account of the Borrower (including the initial
extension of credit and/or the first Advance) shall be subject to the
further conditions precedent that, as of the date of each extension of
credit or Advance and after the making of such extension of credit or
Advance:
A. Representations and Warranties. The representations and
warranties set forth in the Section entitled "Representations and
Warranties" herein and in any other document, instrument, agreement
or certificate delivered to the Bank hereunder are true and correct.
B. Event of Default. No event has occurred and is continuing which
constitutes, or, with the lapse of time or giving of notice or both,
would constitute an Event of Default.
C. Subsequent Approvals, Etc. The Bank shall have received such
supplemental approvals, opinions or documents as the Bank may
reasonably request.
3.03. Reaffirmation of Statements. For the purposes hereof, the
Borrower's acceptance of the proceeds of any extension of credit and the
Borrower's execution of any document or instrument evidencing or
creating any Obligation hereunder shall each be deemed to constitute the
Borrower's representation and warranty that the statements set forth
above in this Section are true and correct.
SECTION IV
REPRESENTATIONS AND WARRANTIES
The Borrower hereby makes the following representations and warranties
to the Bank, which representations and warranties are continuing:
4.01. Status. The Borrower is a corporation duly organized and validly
existing under the laws of the State of California and is properly
licensed, qualified to do business and in good standing in, and, where
necessary to maintain the Borrower's rights and privileges, has complied
with the fictitious name statute of every jurisdiction in which the
Borrower is doing business.
4.02. Authority. The execution, delivery and performance by the
Borrower of this Agreement and any instrument, document or agreement
required hereunder have been duly authorized and do not and will not:
(i) violate any provision of any law, rule, regulation, writ, judgment
or injunction presently in effect affecting the Borrower; (ii) require
any consent or approval of the stockholders of the Borrower or violate
any provision of the articles of incorporation or by-laws of the
Borrower; or (iii) result in a breach of or constitute a default under
any material agreement to which the Borrower is a party or by which it
or its properties may be bound or affected.
4.03. Legal Effect. This Agreement constitutes, and any document,
instrument or agreement required hereunder when delivered will
constitute, legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective
terms.
4.04. Fictitious Trade Styles. The Borrower currently uses no
fictitious trade styles in connection with its business operations. The
Borrower shall notify the Bank within thirty (30) days of the use of any
fictitious trade style at any future date, indicating the trade style
and state(s) of its use.
4.05. Financial Statements. All financial statements, information and
other data which may have been and which may hereafter be submitted by
the Borrower to the Bank are true, accurate and correct and have been
and will be prepared in accordance with generally accepted accounting
principles consistently applied and accurately represent the Borrower's
financial condition and, as applicable, the other information disclosed
therein. Since the most recent submission of any such financial
statement, information or other data to the Bank, the Borrower
represents and warrants that no material adverse change in the
Borrower's financial condition or operations has occurred which has not
been fully disclosed to the Bank in writing.
4.06. Litigation. Except as have been disclosed to the Bank in
writing, there are no actions, suits or proceedings pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower
or the Borrower's properties before any court or administrative agency
which, if determined adversely to the Borrower, would have a material
adverse effect on the Borrower's financial condition or operations.
4.07. Title to Assets. The Borrower has good and marketable title to
all of its assets and the same are not subject to any security interest,
encumbrance, lien or claim of any third person except for Permitted
Liens.
4.08. ERISA. If the Borrower has a pension, profit sharing or
retirement plan subject to ERISA, such plan has been and will continue
to be funded in accordance with its terms and otherwise complies with
and continues to comply with the requirements of ERISA.
4.09. Taxes. The Borrower has filed all tax returns required to be
filed and paid all taxes shown thereon to be due, including interest and
penalties, other than taxes which are currently payable without penalty
or interest or those which are being duly contested in good faith.
4.10. Environmental Compliance. The operations of the Borrower comply,
and during the term of this Agreement will at all times comply, in all
respects with all Environmental Laws; the Borrower has obtained
licenses, permits, authorizations and registrations required under any
Environmental Law ("Environmental Permits") and necessary for its
ordinary operations, all such Environmental Permits are in good
standing, and the Borrower is in compliance with all material terms and
conditions of such Environmental Permits; neither the Borrower nor any
of its present properties or operations are subject to any outstanding
written order from or agreement with any governmental authority nor
subject to any judicial or docketed administrative proceeding,
respecting any Environmental Law, Environmental Claim or Hazardous
Material; there are no Hazardous Materials or other conditions or
circumstances existing, or arising from operations prior to the date of
this Agreement, with respect to any property of the Borrower that would
reasonably be expected to give rise to Environmental Claims; provided
however, that with respect to property leased from an unrelated third
party, the foregoing representation is made to the best knowledge of the
Borrower. In addition, (i) the Borrower does not have or maintain any
underground storage tanks which are not properly registered or permitted
under applicable Environmental Laws or which are leaking or disposing of
Hazardous Materials off-site, and (ii) the Borrower has notified all of
its employees of the existence, if any, of any health hazard arising
from the conditions of their employment and have met all notification
requirements under Title III of CERCLA and all other Environmental Laws.
SECTION V
COVENANTS
The Borrower covenants and agrees that, during the term of this
Agreement, and so long thereafter as the Borrower is indebted to the
Bank under this Agreement, the Borrower shall, unless the Bank otherwise
consents in writing:
5.01. Preservation of Existence; Compliance with Applicable Laws.
Maintain and preserve its existence and all rights and privileges now
enjoyed; not liquidate or dissolve, merge or consolidate with or into,
or acquire any other business organization; and conduct its business in
accordance with all applicable laws, rules and regulations.
5.02. Maintenance of Insurance. Maintain insurance in such amounts and
covering such risks as is usually carried by companies engaged in
similar businesses and owning similar properties in the same general
areas in which the Borrower operates and maintain such other insurance
and coverages as may be required by the Bank. All such insurance shall
be in form and amount and with companies satisfactory to the Bank. With
respect to insurance covering properties in which the Bank maintains a
security interest or lien, such insurance shall be in an amount not less
than the full replacement value thereof, at the Bank's request, shall
name the Bank as loss payee pursuant to a loss payable endorsement
satisfactory to the Bank and shall not be altered or canceled except
upon ten (10) days' prior written notice to the Bank. Upon the Bank's
request, the Borrower shall furnish the Bank with the original policy or
binder of all such insurance.
5.03. Maintenance of Properties. The Borrower shall maintain and
preserve all its properties in good working order and condition in
accordance with the general practice of other businesses of similar
character and size, ordinary wear and tear excepted.
5.04. Payment of Obligations and Taxes. Make timely payment of all
assessments and taxes and all of its liabilities and obligations
including, but not limited to, trade payables, unless the same are being
contested in good faith by appropriate proceedings with the appropriate
court or regulatory agency. For purposes hereof, the Borrower's
issuance of a check, draft or similar instrument without delivery to the
intended payee shall not constitute payment.
5.05. Inspection Rights. At any reasonable time and from time to time
permit the Bank or any representative thereof to examine and make copies
of the records and visit the properties of the Borrower and to discuss
the business and operations of the Borrower with any employee or
representative thereof. If the Borrower now or at any time hereafter
maintains any records (including, but not limited to, computer generated
records and computer programs for the generation of such records) in the
possession of a third party, the Borrower hereby agrees to notify such
third party to permit the Bank free access to such records at all
reasonable times and to provide the Bank with copies of any records it
may request, all at the Borrower's expense, the amount of which shall be
payable immediately upon demand.
5.06. Reporting Requirements. Deliver or cause to be delivered to the
Bank in form and detail satisfactory to the Bank:
A. Annual Statements. Not later than 100 days after the end of
each of the Borrower's fiscal years, a copy of the annual financial
report of the Borrower for such year, which report shall be CPA
audited and certified by an officer of the corporation.
B. Annual 10K Reports. Not later than 10 days after filing with
the Securities Exchange Commission ("SEC"), a copy of the Borrower's
annual 10K report.
C. Interim Statements. Not later than 55 days after the end of
each first, second and third fiscal quarter, the Borrower's
financial statement as of the end of such quarter, certified by an
officer of the corporation.
D. Quarterly 10Q Reports. Not later than 10 days after filing with
the SEC, a copy of the Borrower's quarterly 10Q report.
E. Other Information. Promptly upon the Bank's request, such other
information pertaining to the Borrower or any Guarantor as the Bank
may reasonably request.
5.07. Payment of Dividends. The Borrower shall not declare or pay any
dividends on any class of its stock now or hereafter outstanding except
dividends payable solely in the corporation's capital stock.
5.08. Redemption or Repurchase of Stock. The Borrower shall not redeem
or repurchase any class of its corporate stock now or hereafter
outstanding in excess of $4,000,000.00 in any one fiscal year.
5.09. Liens and Encumbrances. Not create, assume or permit to exist
any security interest, encumbrance, mortgage, deed of trust or other
lien (including, but not limited to, a lien of attachment, judgment or
execution) affecting any of the Borrower's properties, or execute or
allow to be filed any financing statement or continuation thereof
affecting any such properties, except for Permitted Liens or as
otherwise provided in this Agreement.
5.10. Transfer Assets. Not sell, contract for sale, transfer, convey,
assign, lease or sublet any assets of the Borrower except in the
ordinary course of business as presently conducted by the Borrower, and
then, only for full, fair and reasonable consideration.
5.11. Change in the Nature of Business. Not make any material change
in the Borrower's financial structure or in the nature of the Borrower's
business as existing or conducted as of the date of this Agreement.
5.12. Financial Condition. Maintain at all times:
A. Net Worth. A minimum Effective Tangible Net Worth of not less
than $40,000,000.00.
B. Current Ratio. A ratio of current assets to current liabilities
of not less than 2.00 to 1.00.
C. Minimum Net Income. A minimum net profit after tax of $1.00 on
a quarterly basis.
5.13. Environmental Compliance. The Borrower shall:
A. Conduct the Borrower's operations and keep and maintain all of
its properties in compliance with all Environmental Laws.
B. Give prompt written notice to the Bank, but in no event later
than 10 days after becoming aware, of the following: (i) any
enforcement, cleanup, removal or other governmental or regulatory
actions instituted, completed or threatened against the Borrower or
any of its affiliates or any of its respective properties pursuant
to any applicable Environmental Laws, (ii) all other Environmental
Claims, and (iii) any environmental or similar condition on any real
property adjoining or in the vicinity of the property of the
Borrower or its affiliates that could reasonably be anticipated to
cause such property or any part thereof to be subject to any
restrictions on the ownership, occupancy, transferability or use of
such property under any Environmental Laws.
C. Upon the written request of the Bank, the Borrower shall submit
to the Bank, at its sole cost and expense, at reasonable intervals,
a report providing an update of the status of any environmental,
health or safety compliance, hazard or liability issue identified in
any notice required pursuant to this Section.
D. At all times indemnify and hold harmless the Bank from and
against any and all liability arising out of any Environmental
Claims.
5.14. Notice. Give the Bank prompt written notice of any and all (i)
Events of Default; (ii) litigation, arbitration or administrative
proceedings to which the Borrower is a party and in which the claim or
liability exceeds $1,000,000.00; and (iii) other matters which have
resulted in, or might result in a material adverse change in the
financial condition or business operations of the Borrower.
SECTION VI
EVENTS OF DEFAULT
Any one or more of the following described events shall constitute an
event of default under this Agreement:
6.01. Non-Payment. The Borrower shall fail to pay any Obligations
within 10 days of when due.
6.02. Performance Under This and Other Agreements. The Borrower shall
fail in any material respect to perform or observe any term, covenant or
agreement contained in this Agreement or in any document, instrument or
agreement evidencing or relating to any indebtedness of the Borrower
(whether owed to the Bank or third persons), and any such failure
(exclusive of the payment of money to the Bank under this Agreement or
under any other document, instrument or agreement, which failure shall
constitute and be an immediate Event of Default if not paid when due or
when demanded to be due) shall continue for more than 30 days after
written notice from the Bank to the Borrower of the existence and
character of such Event of Default.
6.03. Representations and Warranties; Financial Statements. Any
representation or warranty made by the Borrower under or in connection
with this Agreement or any financial statement given by the Borrower or
any Guarantor shall prove to have been incorrect in any material respect
when made or given or when deemed to have been made or given.
6.04. Insolvency. The Borrower or any Guarantor shall: (i) become
insolvent or be unable to pay its debts as they mature; (ii) make an
assignment for the benefit of creditors or to an agent authorized to
liquidate any substantial amount of its properties or assets; (iii)
file a voluntary petition in bankruptcy or seeking reorganization or to
effect a plan or other arrangement with creditors; (iv) file an answer
admitting the material allegations of an involuntary petition relating
to bankruptcy or reorganization or join in any such petition; (v) become
or be adjudicated a bankrupt; (vi) apply for or consent to the
appointment of, or consent that an order be made, appointing any
receiver, custodian or trustee for itself or any of its properties,
assets or businesses; or (vii) any receiver, custodian or trustee shall
have been appointed for all or a substantial part of its properties,
assets or businesses and shall not be discharged within 30 days after
the date of such appointment.
6.05. Execution. Any writ of execution or attachment or any judgment
lien shall be issued against any property of the Borrower and shall not
be discharged or bonded against or released within 30 days after the
issuance or attachment of such writ or lien.
6.06. Revocation or Limitation of Guaranty. Any Guaranty shall be
revoked or limited or its enforceability or validity shall be contested
by any Guarantor, by operation of law, legal proceeding or otherwise or
any Guarantor who is a natural person shall die.
6.07. Suspension. The Borrower shall voluntarily suspend the
transaction of business or allow to be suspended, terminated, revoked or
expired any permit, license or approval of any governmental body
necessary to conduct the Borrower's business as now conducted.
6.08. Change in Ownership. There shall occur a sale, transfer,
disposition or encumbrance (whether voluntary or involuntary), or an
agreement shall be entered into to do so, with respect to more than 10%
of the issued and outstanding capital stock of the Borrower.
SECTION VII
REMEDIES ON DEFAULT
Upon the occurrence of any Event of Default, the Bank may, at its sole
election, without demand and upon only such notice as may be required by
law:
7.01. Acceleration. Declare any or all of the Borrower's indebtedness
owing to the Bank, whether under this Agreement or under any other
document, instrument or agreement, immediately due and payable, whether
or not otherwise due and payable.
7.02. Cease Extending Credit. Cease making Advances or otherwise
extending credit to or for the account of the Borrower under this
Agreement or under any other agreement now existing or hereafter entered
into between the Borrower and the Bank.
7.03. Termination. Terminate this Agreement as to any future
obligation of the Bank without affecting the Borrower's obligations to
the Bank or the Bank's rights and remedies under this Agreement or under
any other document, instrument or agreement.
7.04. Letters of Credit. In addition to any other remedies available
to the Bank under this Agreement or otherwise, the Bank may require the
Borrower to pay immediately to the Bank, for application against any
drawings under any outstanding Letters of Credit, the outstanding
principal amount of any such Letters of Credit which have not expired.
Any portion of the amount so paid to the Bank which is not applied to
satisfy draws under any such Letters of Credit or any other obligations
of the Borrower to the Bank shall be repaid to the Borrower without
interest.
7.05. Non-Exclusivity of Remedies. Exercise one or more of the Bank's
rights set forth herein or seek such other rights or pursue such other
remedies as may be provided by law, in equity or in any other agreement
now existing or hereafter entered into between the Borrower and the
Bank, or otherwise.
SECTION VIII
MISCELLANEOUS PROVISIONS
8.01. Default Interest Rate. If an Event of Default has occurred and
is continuing, the Bank, at its option, may require the Borrower to pay
to the Bank interest on any Indebtedness or amount payable under this
Agreement at a rate which is 3% in excess of the rate or rates otherwise
then in effect under this Agreement.
8.02. Reimbursement of Certain Costs in Connection With Letters of
Credit. The Borrower shall, upon the Bank's request, promptly pay to
and reimburse the Bank for all costs incurred and payments made by the
Bank by reason of any future assessment, reserve, deposit or similar
requirement or any surcharge, tax or fee imposed upon the Bank or as a
result of the Bank's compliance with any directive or requirement of any
regulatory authority pertaining or relating to any Letters of Credit.
8.03. Reliance. Each warranty, representation, covenant and agreement
contained in this Agreement shall be conclusively presumed to have been
relied upon by the Bank regardless of any investigation made or
information possessed by the Bank and shall be cumulative and in
addition to any other warranties, representations, covenants or
agreements which the Borrower shall now or hereafter give, or cause to
be given, to the Bank.
8.04. Dispute Resolution.
A. Disputes. It is understood and agreed that, upon the request of
any party to this Agreement, any dispute, claim or controversy of
any kind, whether in contract or in tort, statutory or common law,
legal or equitable, now existing or hereinafter arising between the
parties in any way arising out of, pertaining to or in connection
with: (i) this Agreement, or any related agreements, documents or
instruments, (ii) all past and present loans, credits, accounts,
deposit accounts (whether demand deposits or time deposits), safe
deposit boxes, safekeeping agreements, guarantees, letters of
credit, goods or services, or other transactions, contracts or
agreements of any kind, (iii) any incidents, omissions, acts,
practices, or occurrences causing injury to any party whereby
another party or its agents, employees or representatives may be
liable, in whole or in part, or (iv) any aspect of the past or
present relationships of the parties, shall be resolved through a
two-step dispute resolution process administered by the Judicial
Arbitration & Mediation Services, Inc. ("JAMS") as follows:
B. Step I - Mediation. At the request of any party to the dispute,
claim or controversy, the matter shall be referred to the nearest
office of JAMS for mediation, which is an informal, non-binding
conference or conferences between the parties in which a retired
judge or justice from the JAMS panel will seek to guide the parties
to a resolution of the case.
C. Step II - Arbitration (Contracts Not Secured By Real Property).
Should any dispute, claim or controversy remain unresolved at the
conclusion of the Step I Mediation Phase, then (subject to the
restriction at the end of this subparagraph) all such remaining
matters shall be resolved by final and binding arbitration before a
different judicial panelist, unless the parties shall agree to have
the mediator panelist act as arbitrator. The hearing shall be
conducted at a location determined by the arbitrator in Los Angeles,
California (or such other city as may be agreed upon by the parties)
and shall be administered by and in accordance with the then
existing Rules of Practice and Procedure of JAMS and judgement upon
any award rendered by the arbitrator may be entered by any State or
Federal Court having jurisdiction thereof. The arbitrator shall
determine which is the prevailing party and shall include in the
award that party's reasonable attorneys' fees and costs. This
subparagraph shall apply only if, at the time of the submission of
the matter to JAMS, the dispute or issues involved do not arise out
of any transaction which is secured by real property collateral or,
if so secured, all parties consent to such submission.
As soon as practicable after selection of the arbitrator, the
arbitrator, or the arbitrator's designated representative, shall
determine a reasonable estimate of anticipated fees and costs of the
arbitrator, and render a statement to each party setting forth that
party's pro-rata share of said fees and costs. Thereafter, each
party shall, within 10 days of receipt of said statement, deposit
said sum with the arbitrator. Failure of any party to make such a
deposit shall result in a forfeiture by the non-depositing party of
the right to prosecute or defend the claim which is the subject of
the arbitration, but shall not otherwise serve to xxxxx, stay or
suspend the arbitration proceedings.
D. Step II - Trial By Court Reference (Contracts Secured By Real
Property). If the dispute, claim or controversy is not one required
or agreed to be submitted to arbitration, as provided in the above
subparagraph, and has not been resolved by Step I mediation, then
any remaining dispute, claim or controversy shall be submitted for
determination by a trial on Order of Reference conducted by a
retired judge or justice from the panel of JAMS appointed pursuant
to the provisions of Section 638(1) of the California Code of Civil
Procedure, or any amendment, addition or successor section thereto,
to hear the case and report a statement of decision thereon. The
parties intend this general reference agreement to be specifically
enforceable in accordance with said section. If the parties are
unable to agree upon a member of the JAMS panel to act as referee,
then one shall be appointed by the Presiding Judge of the county
wherein the hearing is to be held. The parties shall pay in
advance, to the referee, the estimated reasonable fees and costs of
the reference, as may be specified in advance by the referee. The
parties shall initially share equally, by paying their proportionate
amount of the estimated fees and costs of the reference. Failure of
any party to make such a fee deposit shall result in a forfeiture by
the non-depositing party of the right to prosecute or defend any
cause of action which is the subject of the reference, but shall not
otherwise serve to xxxxx, stay or suspend the reference proceeding.
E. Provisional Remedies, Self Help and Foreclosure. No provision
of, or the exercise of any rights under any portion of this Dispute
Resolution provision, shall limit the right of any party to exercise
self help remedies such as set off, foreclosure against any real or
personal property collateral, or the obtaining of provisional or
ancillary remedies, such as injunctive relief or the appointment of
a receiver, from any court having jurisdiction before, during or
after the pendency of any arbitration. At the Bank's option,
foreclosure under a deed of trust or mortgage may be accomplished
either by exercise of power of sale under the deed of trust or
mortgage, or by judicial foreclosure. The institution and
maintenance of an action for provisional remedies, pursuit of
provisional or ancillary remedies or exercise of self help remedies
shall not constitute a waiver of the right of any party to submit
the controversy or claim to arbitration.
8.05. Waiver of Jury. The Borrower and the Bank hereby expressly and
voluntarily waive any and all rights, whether arising under the
California constitution, any rules of the California Code of Civil
Procedure, common law or otherwise, to demand a trial by jury in any
action, matter, claim or cause of action whatsoever arising out of or in
any way related to this Agreement or any other agreement, document or
transaction contemplated hereby.
8.06. Restructuring Expenses. In the event the Bank and the Borrower
negotiate for, or enter into, any restructuring, modification or
refinancing of the Indebtedness under this Agreement for the purposes of
remedying an Event of Default, The Bank, may require the Borrower to
reimburse all of the Bank's costs and expenses incurred in connection
therewith, including, but not limited to reasonable attorneys' fees and
the costs of any audit or appraisals required by the Bank to be
performed in connection with such restructuring, modification or
refinancing.
8.07. Attorneys' Fees. In the event of any suit, mediation,
arbitration or other action in relation to this Agreement or any
document, instrument or agreement executed with respect to, evidencing
or securing the indebtedness hereunder, the prevailing party, in
addition to all other sums to which it may be entitled, shall be
entitled to reasonable attorneys' fees.
8.08. Notices. All notices, payments, requests, information and
demands which either party hereto may desire, or may be required to give
or make to the other party shall be given or made to such party by hand
delivery or through deposit in the United States mail, postage prepaid,
or by Western Union telegram, addressed to the address set forth below
such party's signature to this Agreement or to such other address as may
be specified from time to time in writing by either party to the other.
8.09. Waiver. Neither the failure nor delay by the Bank in exercising
any right hereunder or under any document, instrument or agreement
mentioned herein shall operate as a waiver thereof, nor shall any single
or partial exercise of any right hereunder or under any document,
instrument or agreement mentioned herein preclude other or further
exercise thereof or the exercise of any other right; nor shall any
waiver of any right or default hereunder or under any other document,
instrument or agreement mentioned herein constitute a waiver of any
other right or default or constitute a waiver of any other default of
the same or any other term or provision.
8.10. Conflicting Provisions. To the extent that any of the terms or
provisions contained in this Agreement are inconsistent with those
contained in any other document, instrument or agreement executed
pursuant hereto, the terms and provisions contained herein shall
control. Otherwise, such provisions shall be considered cumulative.
8.11. Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Bank and their
respective successors and assigns, except that the Borrower shall not
have the right to assign its rights hereunder or any interest herein
without the Bank's prior written consent. The Bank may sell, assign or
grant participations in all or any portion of its rights and benefits
hereunder. The Borrower agrees that, in connection with any such sale,
grant or assignment, the Bank may deliver to the prospective buyer,
participant or assignee financial statements and other relevant
information relating to the Borrower and any guarantor.
8.12. Jurisdiction. This Agreement, any notes issued hereunder, and
any documents, instruments or agreements mentioned or referred to herein
shall be governed by and construed according to the laws of the State of
California, to the jurisdiction of whose courts the parties hereby
submit.
8.13. Headings. The headings set forth herein are solely for the
purpose of identification and have no legal significance.
8.14. Entire Agreement. This Agreement and all documents, instruments
and agreements mentioned herein constitute the entire and complete
understanding of the parties with respect to the transactions
contemplated hereunder. All previous conversations, memoranda and
writings between the parties or pertaining to the transactions
contemplated hereunder that are not incorporated or referenced in this
Agreement or in such documents, instruments and agreements are
superseded hereby.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the date first hereinabove written.
BANK:
SANWA BANK CALIFORNIA
By:
_______________________
__________
Xxxxxxx Xxxxxx,
Authorized Officer
Address:
San Xxxx Commercial
Banking Center
000 Xxxxxxx Xxxx.
Xxx Xxxx, XX 00000
BORROWER:
APPLIED SIGNAL
TECHNOLOGY, INC.
By:
_______________________
__________
Xxxx X. Xxxxxx,
Chief Executive Officer
and President
By:
_______________________
__________
Xxxxx Offi, Chief
Financial Officer
Address:
000 X. Xxxxxxxxxx
Xxxxxx
Xxxxxxxxx, XX 00000
