SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission File Number: 0-27932
PRAEGITZER INDUSTRIES, INC.
(Exact name of registrant as specified in it's charter)
OREGON 93-0790158
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
1270 S.E. Monmouth Cut-Off Road
Dallas, Oregon 97338-9532
(503) 623-9273
(Address, including zip code, and telephone number, including area code,
of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the last 90 days.
Yes [x] No [ ]
Number of shares of Common Stock outstanding
as of November 4, 1996: 12,064,875
<PAGE>
PRAEGITZER INDUSTRIES, INC.
TABLE OF CONTENTS
PAGE NO.
--------
Part I Financial Information
Condensed Balance Sheet -
September 30, 1996 and June 30, 1996 ............................ 3
Condensed Statement of Operations -
Three months ended September 30, 1996 and 1995 .................. 4
Condensed Statement of Cash Flows -
Three months ended September 30, 1996 and 1995 .................. 5
Notes to Financial Statements ................................... 6
Management's Discussion and Analysis of Financial Condition
and Results of Operations ....................................... 9
Part II Other Information
Item 6 Exhibits and Reports on Form 8-K ........................ 11
Signatures................................................................ 12
2
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PRAEGITZER INDUSTRIES, INC.
CONDENSED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS)
-------------------
ASSETS
-------------------
SEPTEMBER 30, JUNE 30,
1996 1996
------------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash $482 $39
Accounts receivable, net 16,680 13,074
Inventories 7,123 6,211
Prepaid expenses 715 600
------------- ------------
Total Current Assets 25,000 19,924
Property, plant and equipment 55,651 46,917
Less: Accumulated depreciation and amortization (21,371) (22,121)
------------- ------------
34,280 24,796
Other Assets 14,448 8,116
------------- ------------
$73,728 $52,836
============= ============
LIABILITIES
-----------
CURRENT LIABILITIES
Bank overdraft $2,313 $531
Accounts payable 5,155 5,158
Accrued payroll and related expenses 2,525 1,623
Other current liabilities 839 998
Current portion of long-term obligations 2,190 871
------------- ------------
Total Current Liabilities 13,022 9,181
Long term obligations 24,769 7,695
Deferred Tax Liability 896 896
Other Liabilities 423 423
Common Stock 40,582 29,932
Retained earnings (accumulated deficit) (5,964) 4,709
------------- ------------
Total shareholders' equity 34,618 34,641
------------- ------------
$73,728 $52,836
============= ============
The accompanying notes are an integral part of these
condensed financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PRAEGITZER INDUSTRIES, INC. AND AFFILIATE
CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
SEPTEMBER 30,
------------ ------------
1996 1995
------------ ------------
<S> <C> <C>
Revenue $29,449 $17,951
Cost of Sales 24,363 13,997
------------ ------------
Gross Profit 5,086 3,954
Selling, general and
administrative expenses 2,993 1,414
Impairment and in-process technology
expense 11,650
Amortization of Goodwill 289
------------ ------------
Income (Loss) from Operations (9,846) 2,540
Interest Expense 343 426
Other income (expense) 101 (11)
------------ ------------
Income (Loss) before income taxes (10,088) 2,103
Income Taxes (1995 Pro forma) 585 841
------------ ------------
Net Income (Loss) (1995 Pro forma) ($10,673) $ 1,262
============ ============
Shares used in computing pro forma
net income per share 11,484,938 8,823,717
============ ============
Net Income (Loss) per share (1995 Pro forma) ($0.93) $0.14
============ ============
The accompanying notes are an integral part of these
condensed financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PRAEGITZER INDUSTRIES, INC.
CONDENSED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
------------ ------------
1996 1995
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities
Net cash provided by (used in) operating activities (8,418) 1,062
Cash Flows from Investing Activities:
Capital expenditures (6,836) (1,499)
Proceeds from sale of property, plant and equipment 1,213
Business acquisitions (5,000)
Other 15 (2)
------------ ------------
Net cash used in investing activities (10,608) (1,501)
Cash Flows from Financing Activities:
Increase in short-term borrowings 9,830 1,167
Borrowings of long-term debt 11,814
Payments on long-term debt (3,496) (860)
Increase in Bank Overdrafts 1,321 188
------------ ------------
Cash provided by financing activities 19,469 495
Increase in Cash 443 56
Cash at Beginning of Period 39 23
------------ ------------
Cash at End of Period $482 $79
============ ============
The accompanying notes are an integral part
of these condensed financial statements.
</TABLE>
5
<PAGE>
PRAEGITZER INDUSTRIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited financial
statements of Praegitzer Industries, Inc. (the "Company") contain all
adjustments necessary to present fairly the financial position of the
Company as of September 30, 1996, and the results of operations and cash
flows for the three months ended September 30, 1996 and 1995. The results
of operations for the three months ended September 30, 1996 are not
necessarily indicative of the results expected for the entire fiscal year
ended June 30, 1997.
These financial statements have been prepared by the Company pursuant
to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such regulations,
although the Company believes the disclosures provided are adequate to
prevent the information presented from being misleading.
This report on Form 10-Q for the quarter ended September 30, 1996
should be read in conjunction with the Company's Annual Report to
Shareholders and Form 10-K for the fiscal year ended June 30, 1996.
Portions of the accompanying financial statements are derived from the
audited year-end financial statements of the Company dated June 30, 1996.
NOTE 2: INVENTORIES
Inventories are stated at the lower of cost (determined on a first-in,
first-out basis) or market and consist of the following:
(In thousands)
September 30, June 30,
1996 1996
----------- -----------
Raw Materials and supplies $ 2,094 $ 1,824
Work-in-progress 5,029 4,387
----------- -----------
Total inventories $ 7,123 $ 6,211
=========== ===========
6
<PAGE>
NOTE 3: INCOME TAXES
Prior to April 1996, the Company was treated for federal income tax
purposes as an S corporation under Subchapter S of the Internal Revenue
Code of 1986, as amended, and was treated as an S corporation for state
income tax purposes under comparable state tax laws. As a result, the
Company's earnings through the day preceding the termination of the
Company's S corporation status (the "Termination Date") were, for federal
and state income tax purposes, taxed directly to the Company's
shareholders, at their individual federal and state income tax rates,
rather than to the Company. Subsequent to the Termination Date, the Company
is no longer treated as an S corporation and, accordingly, is subject to
federal and state income taxes on its earnings.
The provision for income taxes included in the statement of income for
the three months ended September 30, 1995 is shown Pro Forma to reflect the
expected federal and state income tax expense as if the Company had been
subject to income tax as a C corporation for the period presented, at the
prevailing tax rate.
NOTE 4: NOTES PAYABLE
In August 1996 the Company increased its line of credit with Key Bank
from $10.0 million to $15.0 million. At September 30, 1996 borrowings of
$10.8 million were outstanding and $3.6 million was available for
borrowings based on eligible accounts receivable and inventory. Amounts
outstanding under the line of credit bear interest at an annual rate equal
to the prime rate (8.25% at September 30, 1996). The line of credit
agreement expires in September 1998.
In connection with the acquisition of Trend Circuits, Inc., the
Company borrowed $5.0 million in August 1996 from Heller Financial secured
by real property and miscellaneous equipment at the Company's White City,
Oregon facility. The loan calls for monthly payments of $55,555 for a
period of 90 months plus accrued interest equal to the One Month LIBOR Rate
plus 2.55% (7.9875% at September 30, 1996).
An additional amount of $4.6 million was borrowed from Finova Capital,
secured by miscellaneous equipment. The principal amount is amortized over
a 36 month repayment period plus accrued interest equal to 9.93%.
NOTE 5: ACQUISITION
On August 28, 1996, the Company acquired Trend Circuits, Inc.
("Trend"), a circuit board manufacturing company. The acquisition was
accomplished by a merger of Trend with and into Praegitzer. The purchase
price included $5.0 million of cash and 1.0 million shares of Praegitzer's
common stock valued at $10.65 per share. The acquisition was accounted for
under the purchase method of accounting and, accordingly, the operating
results of Trend from the date of purchase are included in the Company's
financial statements. The estimated fair market value of assets and
liabilities acquired was approximately $9.6 million and $9.7 million,
respectively. The Company incurred a one-time, non-recurring charge of $8.0
million related to a portion of the purchase price allocated to in-process
technology which was expensed at the closing of the transaction. The
remaining excess of the aggregate purchase price over the fair market value
of net assets acquired of $9.0 million was recognized as goodwill and is
being amortized over eight years.
7
<PAGE>
The following pro forma results of operations assume the acquisition
occurred on July 1, 1995:
(In thousands,
except per share data)
THREE MONTHS
YEAR ENDED ENDED
JUNE 30, SEPTEMBER 30,
1996 1996
------------- ------------
Revenue $109,481 $33,836
Net income (loss) 7,123 (2,509)
Net income (loss) per share .70 (.22)
The pro forma financial information is not necessarily indicative of
the operating results that would have occurred had the Trend acquisition
been consummated as of July 1, 1995, nor is it necessarily indicative of
future operating results.
NOTE 6: IMPAIRMENT OF GOODWILL
In the quarter ended September 30, 1996, the Company recorded an
impairment of $3.65 million of certain goodwill associated with the Circuit
Technology, Inc. ("CTI") acquisition.
The Company periodically reviews the recoverability of goodwill.
Praegitzer's management has made the assessment that $3.65 million of the
goodwill associated with the purchase of CTI should be written off. This
assessment was due to the inability of the CTI operation (now Redmond
Division), which was purchased to serve as the quick-turn operation of the
Company, to move its product mix from 75% production 25% quick-turn.
Further, it is anticipated that turning Redmond's operation into a
quick-turnaround operation will be very costly in both time and cash-flow.
Recognizing the problem, Company management acquired Trend Circuits, Inc.
(now Fremont Division), an operation that is 80% to 90% quick turn-around.
The Company plans on utilizing Trend for the bulk of its quick-turnaround
requirements. This resulted in impairment of goodwill related to the CTI
acquisition.
In determining the amount of the impairment charge, the Company
developed its best estimate of operating cash flows over the remaining
business life cycle. Future cash flows, excluding interest charges, were
discounted using an estimated 8% incremental borrowing rate.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
- --------
The Company designs and manufactures complex, rigid multilayer printed
circuit boards. The Company's design division provides schematic capture
and design services. The Redmond facility specializes in quick-turnaround
prototypes and low volume production, the White City facility specializes
in medium volume production and the Dallas facility specializes in medium
to high volume production.
In August 1996 the Company acquired Trend Circuits, Inc., a printed
circuit board manufacturer with production facilities in Fremont,
California ("Trend"). The acquisition was accomplished by a merger of Trend
with and into the Company, and was accounted for under the purchase
accounting method. Trend is now the Fremont Division of Praegitzer
Industries and specializes in quick-turnaround prototypes and low volume
production. (See Note 5)
From time to time the Company may issue forward-looking statements
that involve a number of risks and uncertainties. The following are among
the factors that could cause actual results to differ materially from the
forward-looking statements: business conditions and growth in the
electronics industry and general economies, both domestic and
international; lower than expected customer orders; competitive factors,
including increased competition, new product offerings by competitors and
price pressures; the availability of parts and supplies at reasonable
prices; changes in product mix; receipt of a significant portion of
customer orders and product shipments in the last month of each quarter;
technological difficulties and resource constraints encountered in
developing new products; and product shipment interruptions due to
manufacturing difficulties. The forward-looking statements contained in
this document regarding industry trends, litigation, liquidity and future
business activities should be considered in light of these factors.
Results of Operations
- ---------------------
Three Months Ended September 30, 1996 Compared to
Three Months Ended September 30, 1995
- -------------------------------------------------
Revenue for the three months ended September 30, 1996 increased 64% to
$29.4 million, from $18.0 million in the three months ended September 30,
1995. The increase resulted primarily from the acquisition of Circuit
Technology, Inc. ("CTI") and Trend Circuits, Inc. ("Trend"). The balance of
the increase was due to increased sales to telecommunications OEMs.
Gross profit for the three months ended September 30, 1996 was $5.1
million or 17.3% of revenue, compared to $4.0 million or 22.0% of revenue
for the three months ended September 30, 1996. The decrease in gross margin
was primarily due to the increased demand for higher layer count circuit
boards which negatively impacted the Company's capacity utilization, and
higher technology circuit boards, which negatively impacted yields. The
rapid increase in the ratio of innerlayers to outerlayers created an
imbalance in production. As a consequence, the Company was required to
outsource some of its component production and decline some premium higher
layer count and quick-turn business. The Company believes this is a short
term situation and is realigning some of its facilities through the
purchase of additional equipment and process changes. These realignments
should be completed during the second quarter of fiscal 1997 and should
enable the Company to meet the challenges of producing the product mix of
circuit boards that its customers are requiring.
9
<PAGE>
Selling, general and administrative expense for the three months ended
September 30, 1996 was $3.3 million or 11.1% of revenue, compared to $1.4
million or 7.9% of revenue for the three months ended September 30, 1995.
The increase primarily resulted from increased personnel and fixed costs
required to support higher levels of sales and the amortization of goodwill
and other integration costs related to the acquisitions of CTI and Trend.
During the three months ended September 30, 1996, the Company took a
one time write off of $11.65 million of certain goodwill associated with
the CTI acquisition and purchased research and development costs related to
the recent Trend acquisition. (See Notes 5 and 6)
Liquidity and Capital Resources
- -------------------------------
As of September 30, 1996, the Company had cash of $482,000, compared
to $39,000 as of June 30, 1996, and working capital of $12.0 million at
September 30, 1996, compared to $10.7 million at June 30, 1996. Principal
sources of liquidity in the first three months of fiscal 1997 were net
financing of $19.5 million under the Company's various credit facilities.
Principal uses of liquidity during the three months ended September 30,
1996 were property, plant and equipment expenditures of $6.8 million
related to expansions and capacity improvements of the Company's
manufacturing operations and the acquisition of Trend Circuits, Inc. in
August 1996.
The Company increased its operating line of credit with Key Bank from
$10.0 million to $15.0 million in the first quarter of fiscal 1997. At
September 30, 1996 borrowings of $10.8 million were outstanding and $3.6
million was available for borrowings based on eligible accounts receivable
and inventory. During the period, the Company also borrowed $5.0 million
from Heller Financial, secured by real property and miscellaneous equipment
at the Company's White City, Oregon facility and $4.6 million from Finova
Capital, secured by miscellaneous equipment.
Although the Company has no commitments in material amounts, it
expects total capital expenditures for the fiscal year to range from 8% -
12% of revenues for facilities expansion and equipment.
The Company believes that currently available cash, funds generated
from operations, its credit facility with Key Bank and equipment financings
will be sufficient to fund its operations for the remainder of the fiscal
year. The Company may require additional financing for growth
opportunities, expansion and capacity enhancements to its various sites, or
strategic acquisitions.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
10.1 Borrowing Agreement between the Registrant
and Key Bank dated August 18, 1996
10.2 Borrowing Agreement between the Registrant
and Heller Financial dated August 22, 1996
10.3 Borrowing Agreement between the Registrant
and Finova Capital dated July 19, 1996
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K
During the three-month period ending September 30, 1996,
the following report was filed on Form 8-K under Item 2. Acquisition or
Disposition of Assets:
1. The report dated August 28, 1996 and filed September 11,
1996 for the acquisition of Trend Circuits, Inc.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
PRAEGITZER INDUSTRIES, INC
Date: November 14, 1996 ROBERT L. PRAEGITZER
--------------------------------
(Robert L. Praegitzer, President)
(Duly Authorized Officer)
MATTHEW J. BERGERON
--------------------------------
(Matthew J. Bergeron)
(Principal Financial Officer)
12
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit No. Description Page No.
- ----------- ----------- --------
10.1 Borrowing Agreement between the Registrant
and Key Bank dated August 18, 1996
10.2 Borrowing Agreement between the Registrant
and Heller Financial dated August 22, 1996
10.3 Borrowing Agreement between the Registrant
and Finova Capital dated July 19, 1996
27 Financial Data Schedule
13
FIRST AMENDMENT TO
CREDIT FACILITY AND SECURITY AGREEMENT ("Amendment")
WHEREAS, PRAEGITZER INDUSTRIES, INC. (herein called the "Borrower")
and KEY BANK OF WASHINGTON (herein called the "Bank") entered into a
certain Credit Facility and Security Agreement dated April 12, 1996 (herein
called the "Agreement"), and
WHEREAS, the Borrower and the Bank have agreed to increase the amount
of the revolving credit to $15,000,000, to extend the Termination Date to
September 30, 1998, and to make certain other amendments to the Agreement.
NOW, THEREFORE, for valuable consideration received to their mutual
satisfaction, the Borrower and the Bank hereby agree as follows:
1. Section 1 of the Agreement is hereby amended by deleting the
definitions of "Borrowing Base" and "Termination Date" in their entirety
and substituting the following in place thereof:
"Borrowing Base" means an amount not in excess of the sum of the
following:
(a) Eighty percent (80 %) of the amount due and owing on
Qualified Accounts Receivable, plus
(b) Fifty percent (50%) of the cost or market value (whichever
is lower) of Borrower's Qualified Inventory, up to a maximum
of $2,000,000, less
(c) Reserves for Letters of Credit.
"Termination Date" means September 30, 1998, or such earlier date on
which the commitment of the Bank to make Advances pursuant to Section
2(a) hereof shall have been terminated pursuant to Section 9 of this
Agreement.
2. Section 2(a)(i) of the Agreement is hereby amended by (a) deleting
the amount "Ten Million Dollars ($10,000,000)" from the sixth and seventh
lines and inserting the amount "Fifteen Million Dollars ($15,000,000)" in
place thereof, and (b) deleting the amount "Two Million Five Hundred
Thousand Dollars ($2,500,000)" from the eighth and ninth lines and
inserting the amount "Three Million Dollars ($3,000,000)" in place thereof.
3. Section 2(c)(iii) of the Agreement is hereby amended by deleting it
in its entirety and substituting the following in place thereof:
-1-
<PAGE>
"(iii) Borrower agrees to pay Bank a facility fee of Fifteen Thousand
Dollars ($15,000) annually, paid quarterly in arrears in
installments of Three Thousand Seven Hundred Fifty Dollars
($3,750) each on the last day of each March, July, September and
December."
4. Section 4(p) of the Agreement is hereby amended by deleting it in
its entirety and substituting the following in place thereof:
"(p) Borrower has its place of business or maintains its Inventory at
the following locations: 1270 S.E. Monmouth Cut-Off Road, Dallas,
Oregon 97338-9532; 7800 Pacific Avenue, White City, Oregon 97503;
12226 134th Court N.E., Redmond, Washington 98502; and 44358 Old
Warm Springs Blvd., Fremont, California 94538."
5. Section 5 of the Agreement is hereby amended by deleting subparts
(q),(z), (aa) and (dd) in their entirety and substituting the following in
place thereof:
"(q) shall not, without the prior written consent of Bank, borrow any
money or, directly or indirectly, create, incur, assume,
guarantee, or otherwise become or remain liable with respect to
any indebtedness for borrowed money or advances other than (1)
Borrower's Obligations, (2)Subject to the limitations provided in
Section 5 (q) (5) below, any indebtedness of Borrower existing on
the date hereof and not required by Bank to be prepaid as a
condition to execution of this Agreement, (3) Subordinated Debt,
(4) equipment leases as provided under Section 5(z) hereof, and
(5) any other indebtedness for borrowed money (including
indebtedness permitted under Section 5 (q) (2) above) in an
amount not to exceed Twenty Million Dollars ($20,000,000).
(t) shall not, without the prior written consent of Bank, mortgage,
pledge, grant a security interest, or otherwise voluntarily place
or permit to be placed any lien upon any assets of the Borrower
except any security interest granted to or in favor of Bank;
provided, however, Borrower may grant a security interest in any
asset of Borrower not constituting collateral securing the
Obligations all in connection with the indebtedness permitted in
Section 5(q)(5) hereof.
(z) shall not permit the amount of all rental and lease payments of
the Borrower for any current or future period of twelve (12)
consecutive months for real or personal property to be at any
time in excess of $4,000,000.
(aa) shall not permit the aggregate of its Tangible Net Worth to be at
any time less than the sum of (a) $21,000,000.00 plus (b) fifty
percent (50%) of the positive net income of the Borrower on a
cumulative basis beginning with its quarter ending September 30,
1996;
-2-
<PAGE>
(dd) shall not permit the ratio of the sum of its earnings before
interest, taxes, depreciation, amortization and lease payments
(before any extraordinary gains or losses) to the sum of its
interest, taxes, lease payments, current maturities and net
capital spending, calculated at the same point in time, to be at
any time, less than 1.1 to 1.0, measured on a rolling four (4)
quarter basis. The calculation for said ratio shall not include
the amount paid for the Circuit Technologies, Inc. and Trend
Circuits, Inc., acquisitions and the impact of certain real
estate transactions amounting, in the aggregate, of $7,300,000,
by and between Robert Praegitzer and Borrower, (which
transactions were consummated on or before April 30, 1996)
6. Exhibit B to the Agreement is hereby amended by deleting it in its
entirety and substituting the form attached hereto as Exhibit B-1. The
Borrower hereby agrees that it will, contemporaneously with the execution
of this Amendment, execute and deliver to the Bank a promissory note in the
form of Exhibit B-1 to replace the promissory note currently held and owned
by the Bank representing the Borrower's borrowings under the Agreement.
7. Borrower shall pay Bank an amendment fee in the amount of Six
Thousand Two Hundred Fifty Dollars ($6,250) payable on the date of
execution of this Amendment.
8. Except as herein specifically amended, directly or by reference,
all of the terms and conditions set forth in the Agreement are confirmed
and ratified and shall remain in full force and effect. This Amendment
shall be construed in accordance with the laws of the State of Oregon,
without regard to principles of conflict of laws.
9. In consideration of this Amendment, Borrower hereby releases and
discharges the Bank and its shareholders, directors, officers, employees,
attorneys, affiliates and subsidiaries from any and all claims, demands,
liability, and causes of action whatsoever, now known or unknown, arising
out of or in any way related to the extension or administration of the
Loan, the Agreement or any mortgage or security interest related thereto.
10. Borrower hereby represents and warrants to Bank that (a) Borrower
has the legal power and authority to execute and deliver this Amendment;
(b) the officials executing this Amendment have been duly authorized to
execute and deliver the same and bind Borrower with respect to the
provisions hereof; (c) the execution and delivery hereof by Borrower and
the performance and observance by Borrower of the provisions hereof do not
violate or conflict with the organizational agreements of Borrower or any
law applicable to Borrower or result in a breach of any provisions of or
constitute a default under any other agreement, instrument or document
binding upon or enforceable against Borrower; and (d) this Amendment
constitutes a valid and binding obligation upon Borrower in every respect.
-3-
<PAGE>
Under Oregon law, most agreements, promises and commitments made by a
bank after October 3, 1989 concerning loans or other credit extensions
which are not for personal, family or household purposes or secured solely
by the borrower's residence must be in writing, express consideration and
be signed by the bank to be enforceable.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this
Amendment to be executed by their duly authorized officers as of the 20th
day of August, 1996.
BANK: BORROWER:
KEY BANK OF WASHINGTON PRAEGITZER INDUSTRIES
By James A. Taylor By: Matthew J. Bergeron
------------------------------- -------------------------------
Title: Commercial Banking Officer Title Senior Vice President
--------------------------- -----------------------------
And Robert L. Praegitzer
-------------------------------
Title President
-----------------------------
-4-
<PAGE>
AMENDED AND RESTATED
MASTER PROMISSORY NOTE
$15,000,000.00 Executed at ______________________
August 20th, 1996
On September 30, 1998, undersigned (herein called "Borrower") promises to
pay to the order of KEY BANK OF WASHINGTON, (herein called `'Bank"), the
sum of Fifteen Million Dollars ($15,000,000.00) or such lesser amount of
Advances as shall have actually been borrowed by Borrower from Bank and not
previously repaid, pursuant to the terms of a certain "Credit Facility and
Security Agreement" by and between Borrower and Bank dated April 12, 1996,
including any partial or total extension, restatement, renewal, amendment,
and substitution thereof or therefor (herein called "Agreement") with
interest payable at such interest rates and at such times as are specified
in Section 2(a) of the Agreement.
Borrower has assigned to Bank all of Borrower's "Accounts Receivable" and
has granted to Bank a security interest in all of Borrower's "Accounts
Receivable", "Inventory", Cash Security", funds on deposit in the "Cash
Collateral Account", certain other assets, and all "Proceeds", products,
profits, and rents thereof, as security for the payment of this Note and
all other "Obligations", as those terms are defined in Section 1 of the
Agreement (all herein called "Obligations").
Upon the occurrence of any one or more "Events of Default", any and all
Obligations shall, at the option of Bank, immediately become due and
payable without demand, presentment, protest, or notice of any kind, all as
provided in the Agreement.
Borrower expressly waives presentment, demand, notice, protest, and all
other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note, assent to any extension
or postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral, and to the addition or
release of any other person primarily or secondarily liable. Borrower
understands and agrees that this Note is subject to and shall be construed
according to the laws of the State of Oregon.
Reference is made to the Agreement for certain provisions concerning
prepayment of this Note, rights of Bank and its successors and assigns with
respect to this Note, and related matters. This Note is the "Master
Promissory Note" referred to in the Agreement.
-1-
<PAGE>
This Note is being executed and delivered as an amendment to and
restatement of an existing Master Promissory Note executed by Borrower and
dated April 12, 1996, and the execution and delivery of this Note shall not
constitute a novation and shall not terminate or otherwise affect the first
lien and security interest of the Bank in Borrower's property.
Under Oregon law, most agreements, promises and commitments made by a
bank after October 3, 1989 concerning loans or other credit extensions
which are not for personal, family or household purpose or secured solely
by the borrower's residence must be in writing, express consideration and
be signed by the bank to be enforceable
PRAEGITZER INDUSTRIES, INC.
By: Matthew J. Bergeron
-------------------------------
Title Senior Vice President
-----------------------------
By: Robert L. Praegitzer
-------------------------------
Title: President
-----------------------------
-2-
Loan No.: 1910069-0003
------------
Heller Financial
PROMISSORY NOTE
$5,000,000.00 August 22, 1996
FOR VALUE RECEIVED, Praegitzer Industries, Inc, an Oregon corporation
("Maker"), promises to pay to the order of Heller Financial, Inc., a
Delaware corporation (together with any holder of this Note, "Payee"), at
its office located at 500 West Monroe Street, Chicago, Illinois 60661, or
at such other place as Payee may from time to time designate, the principal
sum of Five Million and 00/100 Dollars ($5,000,000.00), together with
interest thereon at a rate per annum equal to the One Month LIBOR Rate
(hereafter defined), plus two and 55/100 percent (2.55%), payable in ninety
(90) consecutive monthly installments of principal plus interest commencing
October 1, 1996, and continuing on the same day of each consecutive
calendar month thereafter until this Note is fully paid. The first
eighty-nine (89) such monthly installments shall each be in the principal
amount of Fifty-Five Thousand Five Hundred Fifty-Five and 56/100 Dollars
($55,555.56), plus accrued interest, and the final monthly installment
shall be in the principal amount of Fifty-Five Thousand Five Hundred
Fifty-Five and 16/100 Dollars ($55,555.16), plus accrued interest. All
payments shall be applied first to interest and then to principal. In
addition, Maker shall make an interest only initial payment on September 1,
1996, of all accrued interest from the date of this Note through August 31,
1996. Interest shall be computed on the basis of a 360-day year and charged
for the actual number of days elapsed.
For purposes of this Note, "One Month LIBOR Rate" means, for each
calendar month, a rate of interest equal to:
(a) the rate of interest determined by Payee at which deposits in
U.S. Dollars are offered for the one (1) month interest period based on
information presented on the Reuters Screen LIBO Page as of 11:00 A.M.
(London time) on the day which is two (2) business days (not counting
Saturdays) prior to the first day of each calendar month; provided that if
at least two such offered rates appear on the Reuters Screen LIBO Page in
respect of such interest period, the arithmetic mean of all such rates (as
determined by Payee) will be the rate used; provided further that if there
are fewer than two offered rates or Reuters ceases to provide LIBOR
quotations, such rate shall be the average rate of interest determined by
Payee at which deposits in U.S. Dollars are offered for the one (1) month
interest period by Bankers Trust Company, The Chase Manhattan Bank,
National Association and Chemical Bank (or their respective successors) to
banks with combined capital and surplus in excess of $500,000,000 in the
London interbank market as of 11:00 A.M. (London time) on the applicable
interest rate determination date, divided by
(b) a number equal to 1.0 minus the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day which is two (2) business days prior to
the beginning of each calendar month (including, without limitation, basic,
supplemental, marginal and emergency reserves under any regulations of the
Board of Governors of the Federal Reserve System or other governmental
authority having jurisdiction with respect thereto, as now and from time to
time in effect) for Eurocurrency funding (currently referred to as
"Eurocurrency liabilities" in Regulation D of such Board) which are
required to be maintained by a member bank of the Federal Reserve System;
1
<PAGE>
(such rate to be adjusted to the nearest one sixteenth of one percent
(1/16 of 1%) or, if there is no nearest one sixteenth of one percent (1/16
of 1%), to the next higher one sixteenth of one percent (1/16 of 1%)).
For the initial funding month (or any fraction thereof) under this
Note, the applicable floating rate shall be the One Month LIBOR Rate in
effect on the day of funding, with interest payable in arrears and
calculated daily on the basis of a 360 day year for the actual number of
days elapsed during such calendar month.
Notwithstanding the foregoing, if at any time implementation of any
provision hereof shall cause the interest contracted for or charged herein
or collectable hereunder to exceed the applicable lawful maximum rate, then
the interest shall be limited to such applicable lawful maximum.
This Note is secured by the collateral described in the Trust Deed,
Security Agreement, Assignment of Leases and Rents and Fixture Filing dated
August 22, 1996, made by Maker as "Grantor" in favor of Josephine-Crater
Title Companies, Inc., an Oregon corporation, as "Trustee" and Payee as
"Beneficiary" (the "Trust Deed") and in the Security Agreement dated August
22 , 1996, between Maker and Payee (the "Security Agreement;" and together
with the Trust Deed and all documents and instruments related to this Note,
the Trust Deed and/or the Security Agreement, the "Loan Documents") to
which reference is made for a statement of the nature and extent of
protection and security afforded, certain rights of Payee and certain
rights and obligations of Maker, including Maker's rights, if any, to
prepay the principal balance hereof.
Time is of the essence hereof. If payment of any installment or any
other sum due under this Note or the Loan Documents is not paid when due,
Maker agrees to pay a late charge equal to the lesser of (i) five cents (5
cents) per dollar on, and in addition to, the amount of each such payment,
or (ii) the maximum amount Payee is permitted to charge by law. In the
event of the occurrence of an Event of Default (as defined in the Security
Agreement), then the entire unpaid principal balance hereof with accrued
and unpaid interest thereon, together with all other sums payable under
this Note or the Loan Documents, shall, at the option of Payee and without
notice or demand, become immediately due and payable, such accelerated
balance bearing interest until paid at the rate of six percent (6%) per
annum above the One Month LIBOR Rate.
Maker and all endorsers, guarantors or any others who may at any time
become liable for the payment hereof hereby consent to any and all
extensions of time, renewals, waivers and modifications of, and
substitutions or release of security or of any party primarily or
secondarily liable on, or with respect to, this Note or any of the Loan
Documents or any of the terms and provisions thereof that may be made,
granted or consented to by Payee, and agree that suit may be brought and
maintained against any one or more of them, at the election of Payee,
without joinder of the others as parties thereto, and that Payee shall not
be required to first foreclose, proceed against, or exhaust any security
herefor, in order to enforce payment of this Note by any one or more of
them. Maker and all endorsers, guarantors or any others who may at any time
become liable for the payment hereof hereby severally waive presentment,
demand for payment, notice of nonpayment, protest, notice of protest,
notice of dishonor, and all other notices in connection with this Note,
filing of suit and diligence in collecting this Note or enforcing any of
the security herefor, and, without limiting any provision of any of the
Loan Documents, agree to pay, if permitted by law, all expenses incurred in
collection, including reasonable attorneys' fees, and hereby waive all
benefits of valuation, appraisement and exemption laws.
If there be more than one Maker, all the obligations, promises,
agreements and covenants of Maker under this Note are joint and several.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. AT PAYEE'S ELECTION AND
2
<PAGE>
WITHOUT LIMITING PAYEE'S RIGHT TO COMMENCE AN ACTION IN ANY OTHER
JURISDICTION, MAKER HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION AND VENUE
OF ANY COURT (FEDERAL, STATE OR LOCAL) HAVING SITUS WITHIN THE STATE OF
ILLINOIS, EXPRESSLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO
SERVICE BY CERTIFIED MAIL, POSTAGE PREPAID, DIRECTED TO THE LAST KNOWN
ADDRESS OF MAKER, WHICH SERVICE SHALL BE DEEMED COMPLETED WITHIN TEN (10)
DAYS AFTER THE DATE OF MAILING THEREOF.
MAKER HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE. THIS WAIVER IS INFORMED
AND FREELY MADE. MAKER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT IT HAS ALREADY
RELIED ON THE WAIVER IN ENTERING INTO THIS NOTE, AND THAT IT WILL CONTINUE
TO RELY ON THE WAIVER IN ITS RELATED FUTURE DEALINGS. MAKER FURTHER
WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
Witness/Attest PRAEGITZER INDUSTRIES, INC,
an Oregon corporation
ARLYCE G. BIEVER By: MATTHEW J. BERGERON
- ----------------------------- ------------------------------------
Name: Matthew J. Bergeron
Title: Senior Vice President
3
<PAGE>
Loan No.: 1910069-0003
------------
Heller Financial
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT ("Agreement") is made this 22nd day of August 1996,
by and between Praegitzer Industries, Inc., an Oregon corporation
("Debtor"), whose business address is 1270 Monmouth Cutoff, Dallas, Oregon
97338, and Heller Financial, Inc., a Delaware corporation ("Secured
Party"), whose address is Commercial Equipment Finance Division, 500 West
Monroe Street, Chicago, Illinois 60661.
WITNESSETH:
1. Secure Payment. To secure payment of indebtedness in the principal sum
of up to Five Million and 00/100 Dollars ($5,000,000.00), as evidenced by
a note or notes executed and delivered by Debtor to Secured Party (the
"Notes") and any obligations arising under this Agreement, and also to
secure any other indebtedness or liability of Debtor to Secured Party,
direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising and no matter how acquired by Secured Party,
including all future advances or loans which may be made at the option of
Secured Party (all the foregoing hereinafter called the "Indebtedness"),
Debtor hereby grants and conveys to Secured Party a first priority
continuing lien and security interest in the property described on the
Schedule(s) attached hereto (the "Schedules"), all products and proceeds
(including insurance proceeds) thereof, if any, and all substitutions,
replacements, attachments, additions, and accessions thereto, all or any of
the foregoing hereinafter called the "Collateral." The Schedules may be
supplemented from time to time to evidence the Collateral subject to this
Agreement.
2. Warranties, Representations and Covenants. Debtor warrants, represents,
covenants and agrees as follows:
(a) Perform Oligations. Debtor shall pay as and when due all of the
Indebtedness secured by this Agreement and perform all of the obligations
contained in this Agreement according to its terms. Debtor shall use the
loan proceeds primarily for business uses and not for personal, family,
household, or agricultural uses.
(b) Perfection. This Agreement creates a valid and first priority
continuing lien and security interest in the Collateral, securing the
payment and performance of the
1
<PAGE>
Indebtedness and, assuming a UCC-I financing statement describing the
Collateral in substantially the same manner as described on the attached
Schedule A is duly filed with the Secretary of State of the State of
Oregon, all actions necessary to perfect such security interest have been
duly taken.
(c) Collateral Free and Clear. Except as may be set forth on the
Schedules, Debtor shall keep the Collateral free and clear of all liens,
claims, charges, encumbrances and other security interests of any kind
(other than the security interest granted hereby and any lien securing
payment of ad valorem property taxes, fees or assessments that are not
delinquent). Debtor shall defend the title to the Collateral against all
persons and against all claims and demands whatsoever. At the request of
Secured Party, Debtor shall furnish further assurance of title, execute any
written agreement and do any other acts necessary to effectuate the
purposes and provisions of this Agreement, including in order to perfect,
continue, or terminate the security interest of Secured Party in the
Collateral, and pay all costs in connection therewith.
(d) Possession and Operating Order of the Collateral. Subject to
Secured Party's rights and remedies upon the occurrence of an Event of
Default (defined below), Debtor shall retain possession of the Collateral
at all times and shall not sell, exchange, assign, loan, deliver, lease,
mortgage, or otherwise dispose of the Collateral or any part thereof
without the prior written consent of Secured Party, provided, however, that
in each succeeding yearly period following the date of this Agreement (each
such yearly period shall begin on the date of this Agreement or an
anniversary date thereof, as the case may be, and end on the day
immediately preceding the next anniversary date of this Agreement), Debtor
shall be permitted to sell or otherwise transfer for consideration to an
unaffiliated entity items of Collateral with a fair market value, in the
aggregate, of a maximum amount of Fifty Thousand and 00/100 Dollars
($50,000.00). Debtor shall at all times keep the Collateral at the
location[s] specified on the Schedules (except for removals thereof in the
usual course of business for temporary periods). At Debtor's sole cost and
expense, Debtor shall also keep the Collateral in good repair and condition
and shall not misuse, abuse, waste or otherwise allow it to deteriorate,
except for normal wear and tear. Secured Party may verify any Collateral in
any reasonable manner which Secured Party may consider appropriate, and
Debtor shall furnish all reasonable assistance and information and perform
any acts which Secured Party may reasonably request in connection
therewith.
(e) Insurance. Debtor shall insure the Collateral against loss by fire
(including extended coverage), theft and other hazards, for its full
insurable value including replacement costs, with a deductible not to
exceed Fifty Thousand and 00/100 Dollars ($50,000.00) per occurrence and
without co-insurance. In addition, Debtor shall obtain liability insurance
covering liability for bodily injury, including death and property damage,
in an amount of at least Five Million and 00/100 Dollars ($5,000,000.00)
per occurrence or such greater amount as may comply with general industry
standards, or in such other amounts as Secured Party may otherwise require.
All policies of insurance required
2
<PAGE>
hereunder shall be in such form, amounts, and with such companies as
Secured Party may approve; shall provide for at least thirty (30) days
prior written notice to Secured Party prior to any modification or
cancellation thereof; shall name Secured Party as loss payee or additional
insured, as applicable, and shall be payable to Debtor and Secured Party as
their interests may appear; shall waive any claim for premium against
Secured Party; and shall provide that no breach of warranty or
representation or act or omission of Debtor shall terminate, limit or
affect the insurers' liability to Secured Party. Certificates of insurance
or policies evidencing the insurance required hereunder along with
satisfactory proof of the payment of the premiums therefor shall be
delivered to Secured Party who is authorized, but under no duty, to obtain
such insurance upon failure of Debtor to do so. Debtor shall give immediate
written notice to Secured Party and to insurers of loss or damage to the
Collateral and shall promptly file proofs of loss with insurers. Debtor
hereby irrevocably appoints Secured Party as Debtor's attorney-in-fact,
coupled with an interest, for the purpose of obtaining, adjusting and
canceling any such insurance and endorsing settlement drafts. Debtor hereby
assigns to Secured Party, as additional security for the Indebtedness, all
sums which may become payable under such insurance.
(f) If Collateral Attaches to Real Estate. If the Collateral or any
part thereof has been attached to or is to be attached to real estate, an
accurate description of the real estate and the name and address of the
record owner is set forth on the Schedules. Debtor shall, on demand of
Secured Party, furnish Secured Party with a disclaimer or waiver of any
interest in any such Collateral satisfactory to Secured Party and signed by
all persons having an interest in the real estate. Notwithstanding the
foregoing, the Collateral shall remain personal property and shall not be
affixed to realty without the prior written consent of Secured Party.
(g) Financial Statements. Debtor shall furnish to Secured Party, as
soon as practicable, and in any event within sixty (60) days after the end
of each fiscal quarter of Debtor and each guarantor of all or any part of
the Indebtedness (each, a "Guarantor"), respectively, Debtor's and each
Guarantor's unaudited financial statements including in each instance,
balance sheets, income statements, and statements of cash flow, on a
consolidated and consolidating basis, as appropriate, and separate profit
and loss statements as of and for the quarterly period then ended and for
the respective person's fiscal year to date, prepared in accordance with
generally accepted accounting principles, consistently applied ("GAAP").
Debtor shall also furnish to Secured Party, as soon as practicable, and in
any event within ninety (90) days after the end of each fiscal year of
Debtor and each Guarantor, respectively, Debtor's and each Guarantor's
annual audited financial statements, including balance sheets, income
statements and statements of cash flow for the fiscal year then ended, on a
consolidated and consolidating basis, as appropriate, which have been
prepared by its independent accountants in accordance with GAAP. Such
audited financial statements shall be accompanied by the independent
accountant's opinion, which opinion shall be in form generally recognized
as "unqualified."
3
<PAGE>
(h) Authorization. Debtor is now, and will at all times remain, duly
licensed, qualified to do business and in good standing in every
jurisdiction where failure to be so licensed or qualified and in good
standing would have a material adverse effect on its business, properties
or assets. Debtor has the power to authorize, execute and deliver this
Agreement, the Notes and any other documents and instruments relating
thereto (the Agreement, Notes and other documents and instruments, all as
amended from time to time, are hereafter collectively referred to as the
"Loan Documents"), to incur and perform obligations hereunder and
thereunder, and to grant the security interests created hereby. As of the
time of delivery thereof to Secured Party, the Loan Documents will have
been duly authorized, executed, and delivered by or on behalf of Debtor,
and will constitute the legal, valid, and binding obligations of Debtor,
enforceable against Debtor in accordance with their respective terms.
Debtor shall preserve and maintain its existence and shall not wind up its
affairs or otherwise dissolve. Debtor shall not, without thirty (30) days
prior written notice to Secured Party, (1) change its name or so change its
structure such that any financing statement or other record notice becomes
misleading or (2) change its principal place of business or chief executive
or accounting offices from the address stated herein.
(i) Litigation. There are no actions, suits, proceedings, or
investigations ("Litigation") pending or, to the knowledge of Debtor,
threatened against Debtor or otherwise affecting the Collateral other than
as disclosed in the Prospectus dated April 4, 1996, relating to the
offering of 2,000,000 shares of common stock of Debtor. Debtor shall
promptly notify Secured Party in writing of Litigation against it if: (1)
the outcome of such Litigation may materially or adversely affect the
finances or operations of Debtor (for purposes of this provision, Five
Hundred Thousand and 00/100 Dollars ($500,000.00) shall be deemed material)
or (2) such Litigation questions the validity of any Loan Document or any
action taken or to be taken pursuant thereto. Debtor shall furnish to
Secured Party such information regarding any such Litigation as Secured
Party shall reasonably request.
(j) No Conflicts. Debtor is not in violation of any material term or
provision of its by-laws, or of any material agreement or instrument, or of
any judgment, decree, order, or any statute, rule, or governmental
regulation applicable to it. The execution, delivery, and performance of
the Loan Documents do not and will not violate, constitute a default under,
or otherwise conflict with any such term or provision or result in the
creation of any security interest, lien, charge, or encumbrance upon any of
the properties or assets of Debtor, except for the security interest herein
created.
(k) Compliance with Laws. Debtor shall use and maintain the Collateral
in a lawful manner in accordance with all applicable laws, regulations,
ordinances, and codes and shall otherwise comply in all material respects
with all applicable laws, rules, and regulations and duly observe all valid
requirements of all governmental authorities, and all statutes, rules and
regulations relating to its business, including (i) the Internal Revenue
Code of 1986, as amended from time to time, (ii) all federal, state, and
local laws, rules,
4
<PAGE>
regulations, orders, and decrees relating to health, safety, hazardous
substances, and environmental matters, including the Resource Recovery and
Reclamation Act of 1976, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, the Toxic Substances Control Act,
the Clean Water Act of 1977, and the Clean Air Act, all as amended from
time to time (collectively, "Environmental Laws"), (iii) the Employees
Retirement Income Security Act of 1974, as amended from time to time, and
(iv) the Fair Labor Standards Act, as amended from time to time.
(l) Taxes. Debtor has timely filed all tax returns (federal, state,
local, and foreign) required to be filed by it and has paid or established
reserves for all taxes, assessments, fees, and other governmental charges
in respect of its properties, assets, income and franchises. Debtor shall
promptly pay and discharge all taxes, assessments, license fees (related to
the Collateral) and other governmental charges prior to the date on which
penalties are attached thereto, establish adequate reserves for the
payments of such taxes, assessments, and other governmental charges and
make all required withholding and other tax deposits, and, upon request,
provide Secured Party with receipts or other proof that any or all of such
taxes, assessments, license fees or governmental charges have been paid in
a timely fashion; provided, however, that nothing contained herein shall
require the payment of any tax, assessment, or other governmental charge so
long as its validity is being diligently contested in good faith and by
appropriate proceedings diligently conducted and Debtor has established
cash reserves therefor in accordance with GAAP. Should any stamp, excise,
or other tax, including mortgage, conveyance, deed, intangible, or
recording taxes become payable in connection with or respect of any of the
Loan Documents, Debtor shall pay the same (including interest and
penalties, if any) and shall hold Secured Party harmless with respect
thereto.
(m) Environmental Laws. Except as disclosed by Debtor (or Debtor's
representative or agent) in writing to Secured Party's counsel (including
internal counsel) on or prior to the date hereof, Debtor has (1) not
received any summons, complaint, order, or other notice that it is not in
compliance with, or that any public authority is investigating its
compliance with, any Environmental Laws and (2) no knowledge of any
material violation of any Environmental Laws on or about its assets or
property. Debtor shall provide Secured Party, promptly following receipt,
copies of any correspondence, notice, complaint, order, or other document
that it receives asserting or alleging a circumstance or condition which
requires or may require a cleanup, removal, remedial action or other
response by or on the part of Debtor under any Environmental Laws, or which
seeks damages or civil, criminal or punitive penalties from Debtor for an
alleged violation of any Environmental Laws.
(n) Regulations. No proceeds of the loans or any other financial
accommodation hereunder will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security, as that term is
defined in Regulations G, T, U, X of the Board of Governors of the Federal
Reserve System.
5
<PAGE>
(o) Books and Records. Debtor shall maintain, at all times, true and
complete books and records in accordance with GAAP and consistent with
those applied in the preparation of Debtor's financial statements. At all
reasonable times, upon reasonable notice, and during normal business hours,
Debtor shall permit Secured Party or its agents to audit, examine and make
extracts from or copies of any of its books, ledgers, reports,
correspondence, and other records relating to the Collateral.
(p) Setoff. Without limiting any other right of Secured Party,
whenever Secured Party has the right to declare any Indebtedness to be
immediately due and payable (whether or not it has so declared), Secured
Party is hereby authorized at any time and from time to time to the fullest
extent permitted by law, to set off and apply against any and all of the
Indebtedness, any and all monies then or thereafter owed to Debtor by
Secured Party in any capacity, whether or not the obligation to pay such
monies owed by Secured Party is then due. Secured Party shall be deemed to
have exercised such right of setoff immediately at the time of such
election even though any charge therefor is made or entered on Secured
Party's records subsequent thereto.
(q) Standard of Care; Notice of Claims. Debtor acknowledges and agrees
that Secured Party shall not be liable for any acts or omissions nor for
any error of judgment or mistake of fact or law other than as a sole and
direct result of Secured Party's gross negligence or willful misconduct.
Debtor shall give Secured Party written notice of any action or inaction by
Secured Party or any agent or attorney of Secured Party that may give rise
to a claim against Secured Party or any agent or attorney of Secured Party
or that may be a defense to payment or performance of and of the
Indebtedness for any reason, including commission of a tort (subject, in
any event, to the first sentence of this paragraph) or violation of any
contractual duty or duty implied by law. Debtor agrees that unless such
notice is fully given as promptly as possible (and in any event within
thirty (30) days) after the Chairman of the Board, Chief Executive Officer,
President, Chief Financial Officer, Secretary, any Senior or Executive Vice
President or internal counsel of Debtor, or any Vice President of Business
and/or Technical Operations of Debtor's White City, Oregon operations, has
knowledge, or with the exercise of reasonable diligence should have had
knowledge, of any such action or inaction, Debtor shall not assert, and
Debtor shall be deemed to have waived, any claim or defense arising
therefrom.
(r) Indemnity. Debtor shall indemnify, defend and hold Secured Party,
its parent, affiliates, officers, directors, agents, employees, and
attorneys harmless from and against any loss, expense (including reasonable
attorneys' fees and costs), damage or liability arising directly or
indirectly out of (i) any breach of any representation, warranty or
covenant contained in any Loan Document, (ii) any claim or cause of action
that would deny Secured Party the full benefit or protection of any
provision in any Loan Document, or (iii) the ownership, possession, lease,
operation, use, condition, sale, return, or other disposition of the
Collateral, except to the extent the loss, expense, damage or liability
arises solely and directly from Secured Party's gross negligence or willful
misconduct. If after receipt of any payment of all or any part of the
Indebtedness, Secured Party is for any
6
<PAGE>
reason compelled to surrender such payment to any person or entity, because
such payment is determined to be void or voidable as a preference,
impermissible set-off, or a diversion of trust funds, or for any other
reason, the Loan Documents shall continue in full force and effect and
Debtor shall be liable to Secured Party for the amount of such payment
surrendered. The provisions of the preceding sentence shall be and remain
effective notwithstanding any contrary action which may have been taken by
Secured Party in reliance upon such payment, and any such contrary action
so taken shall be without prejudice to Secured Party's rights under this
Agreement and shall be deemed to have been conditioned upon such payment
having become final and irrevocable. Additionally, Debtor shall be liable
for all charges, costs, expenses and attorneys' fees incurred by Secured
Party (including a reasonable allocation of the compensation, costs and
expenses of internal counsel, based upon time spent): (i) in perfecting,
defending or protecting its security interest in the Collateral, or any
part thereof; (ii) in the negotiation, execution, delivery, administration,
amendment or enforcement of the Loan Documents or the collection of any
amounts due under any Note or other Loan Document; (iii) in any lawsuit or
other legal proceeding in any way connected with any of the Loan Documents,
including any contract or tort or other actions, any arbitration or other
alternative dispute resolution proceeding, all appeals and judgment
enforcement actions and any bankruptcy proceeding (including any relief
from stay and/or adequate protection motions, cash collateral disputes,
assumption/rejection motions and disputes or objections to any proposed
disclosure statement or reorganization plan). Debtor acknowledges and
agrees that the preceding sentence shall survive and not be merged with any
judgment in connection with any exercise of any right or remedy by Secured
Party provided under this Agreement. The provisions of this paragraph shall
survive the termination of this Agreement and the other Loan Documents.
(s) Complete Information. No representation or warranty made by Debtor
in any Loan Document and no other document or statement furnished to
Secured Party by or on behalf of Debtor contains any material misstatement
of a material fact or omits to state any material fact necessary in order
to make the statements contained therein not misleading. Except as
expressly set forth in the Schedules, there is no fact known to Debtor that
will or could have a materially adverse affect on the business, operation,
condition (financial or otherwise), performance, properties or prospects of
Debtor or Debtor's ability to timely pay all of the Indebtedness and
perform all of its other obligations contained in or secured by this
Agreement. Each representation and warranty made by Debtor in this
Agreement shall be deemed to have been made as of the date of this
Agreement and as of the date of each advance of funds under a Note.
(t) Collateral Documentation. Debtor shall deliver to Secured Party
prior to any advance or loan, satisfactory documentation regarding the
Collateral to be financed, including such invoices, canceled checks
evidencing payments, or other documentation as may be reasonably requested
by Secured Party. Additionally, Debtor shall satisfy Secured Party that
Debtor's business and financial information is as has been represented and
there has been no material change in Debtor's business, financial
condition, or operations.
7
<PAGE>
3. Prepayment. Upon forty-five (45) days prior written notice to Secured
Party, Debtor may prepay in whole, but not in part (except as set forth
below), the then entire unpaid principal balance of any Note, together with
all accrued and unpaid interest thereon to the date of such prepayment,
provided that along with and in addition to such prepayment, Debtor shall
pay (i) any and all other sums then due under any of the Loan Documents,
and (ii) a prepayment fee as liquidated damages and not as a penalty, in a
sum equal to three percent (3%) of the principal balance being prepaid for
any prepayment on or before the second anniversary of the date of the Note
and one percent (1%) of the principal balance being prepaid for any
prepayment after the second anniversary of the date of the Note and before
the seventh anniversary date of the Note. The prepayment fee described in
clause (ii) above shall also be due upon the acceleration of the maturity
date of any Note following the occurrence of any Event of Default.
Notwithstanding anything to the contrary set forth above, provided no Event
of Default has occurred and is continuing, in each yearly period following
the date of this Agreement (each such yearly period shall begin on the date
of this Agreement or an anniversary date thereof, as the case may be, and
end on the day immediately preceding the next anniversary date of this
Agreement), Debtor shall be permitted to prepay (without paying any fee,
liquidated damages or other penalties) principal outstanding under the Note
in the amount of One Hundred Thousand and 00/100 Dollars ($100,000.00), or
less, together with all accrued and unpaid interest thereon to the date of
such prepayment, provided, however, that each such prepayment shall be made
on a regularly scheduled payment date under the Note.
4. Events of Default. If any one of the following events (each of which is
herein called an "Event of Default") shall occur: (a) Debtor fails to pay
any part of the Indebtedness within ten (10) calendar days of its due date,
or (b) any warranty or representation of Debtor in any Loan Document is
materially untrue, misleading or inaccurate, or (c) Debtor breaches or
defaults in the performance of any of its obligations under Paragraphs (c)
through (e) of Section 2, above, or (d) Debtor or any Guarantor breaches or
defaults in the performance of any other agreement or covenant under any
Loan Document and fails to cure such breach or default within thirty (30)
days after written notice of the breach or default from Secured Party, or
(e) Debtor or any Guarantor breaches or defaults in the payment or
performance of any debt or other obligation owed by it to Secured Party or
any affiliate of Secured Party and fails to cure such breach or default
within the applicable cure period, if any, or (f) Debtor breaches or
defaults in the payment or performance of any debt or other obligation,
whether now or hereafter existing, with an outstanding principal balance in
excess of One Million and 00/100 Dollars ($1,000,000.00), and the same is
subsequently accelerated, or (g) there shall be a change in the beneficial
ownership and control, directly or indirectly, of the majority of the
outstanding voting securities or other interests entitled (without regard
to the occurrence of any contingency) to elect or appoint members of the
board of directors or other managing body of Debtor or any Guarantor other
than any such change as the result of the death of Robert L. Praegitzer or
Sally E. Praegitzer, or as the result of a transfer for estate planning
purpose of any shares of Debtor owned by Robert L. Praegitzer or Sally E.
Praegitzer to a trust for the benefit of
8
<PAGE>
his or her heirs, as to which Robert L. Praegitzer or Sally E. Praegitzer,
or both, are the sole trustee(s) (a "change of control"), or there is any
merger, consolidation, dissolution, liquidation, winding up or sale or
other transfer of all or substantially all of the assets of Debtor or any
Guarantor pursuant to which there is a change of control or cessation of
Debtor or the Guarantor or the business of either, or (h) Debtor or any
Guarantor shall file a voluntary petition in bankruptcy, shall apply for or
permit the appointment by consent or acquiescence of a receiver,
conservator, administrator, custodian or trustee for itself or all or a
substantial part of its property, shall make an assignment for the benefit
of creditors or shall be unable, fail or admit in writing its inability to
pay its debts generally as such debts become due, or (i) there shall have
been filed against Debtor or any Guarantor an involuntary petition in
bankruptcy or Debtor or any Guarantor shall suffer or permit the
involuntary appointment of a receiver, conservator, administrator,
custodian or trustee for all or a substantial part of its property or the
issuance of a warrant of attachment, diligence, execution or similar
process against all or any substantial part of its property; unless, in
each case, such petition, appointment or process is fully bonded against,
vacated or dismissed within forty-five (45) days from its effective date,
but not later than ten (10) days prior to any proposed disposition of any
assets pursuant to any such proceeding, or (j) if there is a material
adverse change in the business or financial condition or prospects of
Debtor, then, and in any such event, Secured Party shall have the right to
exercise any one or more of the remedies hereinafter provided.
5. Remedies. If an Event of Default shall occur, in addition to all rights
and remedies of a secured party under the Uniform Commercial Code, Secured
Party may, at its option, at any time (a) declare the entire unpaid
Indebtedness to be immediately due and payable; (b) without demand or legal
process, enter into the premises where the Collateral may be found and take
possession of and remove the Collateral, all without charge to or liability
on the part of Secured Party; or (c) require Debtor to assemble the
Collateral, render it unusable, and crate, pack, ship, and deliver the
Collateral to Secured Party in such manner and at such place as Secured
Party may require, all at Debtor's sole cost and expense. DEBTOR HEREBY
EXPRESSLY WAIVES ITS RIGHTS, IF ANY, TO (1) PRIOR NOTICE OF REPOSSESSION
AND (2) A JUDICIAL OR ADMINISTRATIVE HEARING PRIOR TO SUCH REPOSSESSION.
Secured Party may, at its option, ship, store and repair the Collateral so
removed and sell any or all of it at a public or private sale or sales.
Unless the Collateral is perishable or threatens to decline speedily in
value or is of a type customarily sold on a recognized market, Secured
Party will give Debtor reasonable notice of the time and place of any
public sale thereof or of the time after which any private sale or any
other intended disposition thereof is to be made, it being understood and
agreed that Secured Party may be a buyer at any such sale and Debtor may
not, either directly or indirectly, be a buyer at any such sale. The
requirements, if any, for reasonable notice will be met if such notice is
mailed postage prepaid to Debtor at its address shown above, at least ten
(10) days before the time of sale or disposition. In accordance with
Section 2(r), Debtor shall also be liable for and shall upon demand pay to
Secured Party all expenses incurred by Secured Party in connection with the
undertaking or enforcement by Secured Party of any of its rights or
remedies hereunder or at law, all of
9
<PAGE>
which costs and expenses shall be additional Indebtedness hereby secured.
After such sale or disposition, Debtor shall be liable for any deficiency
of the Indebtedness remaining unpaid, with interest thereon at the rate set
forth in the related Notes.
6. Cumulative Remedies. All remedies of Secured Party hereunder are
cumulative, are in addition to any other remedies provided for by law or in
equity and may, to the extent permitted by law, be exercised concurrently
or separately, and the exercise of any one remedy shall not be deemed an
election of such remedy or to preclude the exercise of any other remedy. No
failure on the part of Secured Party to exercise, and no delay in
exercising any right or remedy, shall operate as a waiver thereof or in any
way modify or be deemed to modify the terms of this Agreement or any other
Loan Document or the Indebtedness, nor shall any single or partial exercise
by Secured Party of any right or remedy preclude any other or further
exercise of the same or any other right or remedy.
7. Assignment. Secured Party may transfer or assign all or any part of the
Indebtedness and the Loan Documents without releasing Debtor or the
Collateral, and upon such transfer or assignment the assignee or holder
shall be entitled to all the rights, powers, privileges and remedies of
Secured Party to the extent assigned or transferred. The obligations of
Debtor shall not be subject, as against any such assignee or transferee, to
any defense, set-off, or counter-claim available to Debtor against Secured
Party and any such defense, set-off, or counter-claim may be asserted only
against Secured Party.
8. Time is of the Essence. Time and manner of performance by Debtor of its
duties and obligations under the Loan Documents is of the essence. If
Debtor shall fail to comply with any provision of any of the Loan
Documents, Secured Party shall have the right, but shall not be obligated,
to take action to address such non-compliance, in whole or in part, and all
moneys spent and expenses and obligations incurred or assumed by Secured
Party shall be paid by Debtor upon demand and shall be added to the
Indebtedness. Any such action by Secured Party shall not constitute a
waiver of Debtor's default.
9. ENFORCEMENT. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. AT SECURED PARTY'S
ELECTION AND WITHOUT LIMITING SECURED PARTY'S RIGHT TO COMMENCE AN ACTION
IN ANY OTHER JURISDICTION, DEBTOR HEREBY SUBMITS TO THE EXCLUSIVE
JURISDICTION AND VENUE OF ANY COURT (FEDERAL, STATE OR LOCAL) HAVING SITUS
WITHIN THE STATE OF ILLINOIS, EXPRESSLY WAIVES PERSONAL SERVICE OF PROCESS
AND CONSENTS TO SERVICE BY CERTIFIED MAIL, POSTAGE PREPAID, DIRECTED TO THE
LAST KNOWN ADDRESS OF DEBTOR, WHICH SERVICE SHALL BE DEEMED COMPLETED
WITHIN TEN (10) DAYS AFTER THE DATE OF MAILING THEREOF.
10. Further Assurance: Notice. Debtor shall, at its expense, do, execute
and deliver such further acts and documents as Secured Party may from time
to time reasonably require to assure and confirm the rights created or
intended to be created hereunder, to carry out the intention or facilitate
the performance of the terms of the Loan Documents or to assure
10
<PAGE>
the validity, perfection, priority or enforceability of any security
interest created hereunder. Debtor agrees to execute any instrument or
instruments necessary or expedient for filing, recording, perfecting,
notifying, foreclosing, and/or liquidating of Secured Party's interest in
the Collateral upon request of, and as determined by, Secured Party, and
Debtor hereby specifically authorizes Secured Party to prepare and file
Uniform Commercial Code financing statements and other documents and to
execute same for and on behalf of Debtor as Debtor's attorney-in-fact,
irrevocably and coupled with an interest, for such purposes. All notices
required or otherwise given by either party shall be in writing and shall
be delivered by hand, by registered or certified first class United States
mail, return receipt requested, or by overnight courier to the other party
at its address stated herein or at such other address as the other party
may from time to time designate by written notice. All notices shall be
deemed given when received, when delivery is refused or when the returned
for failure to be called for.
11. Waiver of Jury Trial. DEBTOR AND SECURED PARTY HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING IN CONNECTION WITH ANY OF THE LOAN DOCUMENTS. THIS WAIVER
IS INFORMED AND FREELY MADE. DEBTOR AND SECURED PARTY ACKNOWLEDGE THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT
EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THE LOAN DOCUMENTS,
AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE
DEALINGS. DEBTOR AND SECURED PARTY FURTHER WARRANT AND REPRESENT THAT EACH
HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.
12. Complete Agreement. The Loan Documents are intended by Debtor and
Secured Party to be the final, complete, and exclusive expression of the
agreement between them. The Loan Documents may not be altered, modified or
terminated in any manner except by a writing duly signed by the parties
thereto. Debtor and Secured Party intend the Loan Documents to be valid and
binding and no provisions hereof and thereof which may be deemed
unenforceable shall in any way invalidate any other provisions of the Loan
Documents, all of which shall remain in full force and effect. The Loan
Documents shall be binding upon the respective successors, legal
representatives, and assigns of the parties. The singular shall include the
plural, the plural shall include the singular, and the use of any gender
shall be applicable to all genders. The use in any of the Loan Documents of
the word "including," or words of similar import, when following any
general term, statement or matter shall not be construed to limit such
term, statement or matter to any specific item or matters, whether or not
language of nonlimitation, such as "without limitation" or "but not limited
to," or words of similar import, are used with reference thereto, but
rather shall be deemed to refer to all other items or matters that could
reasonably fall within the broadest possible scope of such term, statement
or matter. If there be more than one Debtor, the warranties,
representations and agreements contained herein and in the other Loan
Documents shall be joint and several. The Schedules on the following
page[s] are incorporated herein by this reference and made a part hereof.
11
<PAGE>
Sections and subsections headings are included for convenience of reference
only and shall not be given any substantive effect.
IN WITNESS WHEREOF, Secured Party and Debtor have each signed this
Agreement as of the day and year first above written.
HELLER FINANCIAL, INC., PRAEGITZER INDUSTRIES, INC.,
a Delaware corporation an Oregon corporation
By: CLIFFORD A. LEHMAN By: MATTHEW J. BERGERON
------------------------- --------------------------
Name: Clifford A. Lehman Name: Matthew J. Bergeron
----------------------- ------------------------
Title: Vice President Title: Senior-Vice President
---------------------- -----------------------
12
<PAGE>
Loan No. 1910069-0003
------------
AFTER RECORDING RETURN TO:
Heller Financial, Inc.
Commercial Equipment Finance Division
One Montgomery Street, Suite 2250
San Francisco,California 94104
BE ADVISED THAT THE PROMISSORY NOTE SECURED BY THIS TRUST DEED
PROVIDES FOR A VARIABLE RATE OF INTEREST.
TRUST DEED, SECURITY AGREEMENT,
ASSIGNMENT OF LEASES AND RENTS
AND FIXTURE FILING
THIS TRUST DEED, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS
AND FIXTURE FILING ("Trust Deed"), is made this 22 day of August, 1996
among PRAEGITZER INDUSTRIES, INC. the address of which is 1270 Monmouth
Cutoff, Dallas, Oregon 97338 ("Grantor"); JOSEPHINE-CRATER TITLE INSURANCE
COMPANIES, INC., an Oregon corporation, the address of which is 300 West
Main, Medford, Oregon 97501, and its successors in trust and assigns
("Trustee"), and HELLER FINANCIAL, INC., a Delaware corporation, the
address of which is Commercial Equipment Finance Division, 500 West Monroe
Street, Chicago, Illinois 60661 ("Beneficiary").
1. GRANTING CLAUSE. Grantor, in consideration of the acceptance by
Trustee of the trust hereunder, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, and in order to secure the payment of the indebtedness
evidenced by the Note (as hereinafter defined, with interest thereon, and
any other sums payable thereunder and hereunder, and to secure the
performance of the obligations contained herein, grants, bargains, sells,
and conveys to Trustee and its successors in trust and assigns, forever, in
trust, with power of sale, all of Grantor's estate, right, title, interest,
claim and demand in and to the property in the county of Jackson, state of
Oregon, described as follows, whether now existing or hereafter acquired
(all of the property described in all parts of this Section 1 and all
additional property, if any, described in Section 2 is herein called the
"Property"):
1.1 Land and Appurtenances. The land described on Exhibit A hereto
and incorporated herein by this reference, and all tenements,
hereditaments, rights-of-way, easements, appendages and appurtenances
thereto belonging or in any way appertaining, including without limitation
all of the right, title and interest of Grantor in and to any avenues,
streets, ways, alleys,
1
<PAGE>
vaults, strips or gores of land adjoining that property, and all claims or
demands of Grantor either in law or in equity in possession or expectancy
of, in and to that property; and
1.2 Improvements and Fixtures. All buildings, structures and
other improvements now or hereafter erected on the property described in
1.1 above, and all facilities, fixtures, machinery, apparatus,
installations, goods, equipment, furniture and other properties of
whatsoever nature (including without limitation all heating, ventilating,
air conditioning, plumbing and electrical equipment, all elevators and
escalators, all sprinkler systems, all engines and motors, all lighting,
laundry, cleaning, fire prevention and fire extinguishing equipment, all
ducts and compressors, all refrigerators, stoves and other appliances,
attached cabinets, partitions, rugs, carpets and draperies, all building
materials and supplies, and all construction forms and equipment), now or
hereafter located in or used or procured for use in connection with that
property, it being the intention of the parties that all property of the
character hereinabove described which is now owned or hereafter acquired by
Grantor and which is affixed or attached to or used in connection with the
property described in 1.1 above shall be, remain or become a portion of
that property and shall be covered by and subject to the lien of this Trust
Deed, together with all contracts, agreements, permits, plans,
specifications, drawings, surveys, engineering reports and other work
products relating to the construction of the existing or any future
improvements on the Property, any and all rights of Grantor in, to or under
any architect's contracts or construction contracts relating to the
construction of the existing or any future improvements on the Property,
and any performance and/or payment bonds issued in connection therewith;
and
1.3 Machinery and Equipment All of Grantor's right, title and
interest in and to the following property and interests in property,
whether now owned or hereafter acquired or arising and wheresoever located:
all of the goods described on Schedule A attached hereto and incorporated
herein by this reference.
1.4 Enforcement and Collection. Any and all rights of Grantor
without limitation to make claim for, collect, receive and receipt for any
and all rents, income, revenues, issues, royalties, and profits, including
mineral, oil and gas rights and profits, insurance proceeds, condemnation
awards and other moneys, payable or receivable from or on account of any of
the Property, including interest thereon, or to enforce all other
provisions of any other agreement (including those described in Section 1.2
above) affecting or relating to any of the Property, to bring any suit in
equity, action at law or other proceeding for the collection of such moneys
or for the specific or other enforcement of any such agreement, award or
judgment, in the name of Grantor or otherwise, and to do any and all things
which Grantor is or may be or become entitled to do with respect thereto,
provided, however, that no obligation of Grantor under the provisions of
any such agreements, awards or judgments shall be impaired or diminished by
virtue hereof, nor shall any such obligation be imposed upon Trustee or
Beneficiary; and
1.5 [INTENTIONALLY OMITTED.]
1.6 Leases. All of Grantor's rights as landlord in and to all
existing and future Leases (defined below) and tenancies, whether written
or oral and whether for a definite term or
2
<PAGE>
month to month, now or hereafter demising all or any portion of the
property described in 1.1 and 1.2 above, including all renewals and
extensions thereof and all rents and deposits and other amounts received or
receivable thereunder, provided, however that in accepting this Trust Deed
neither Beneficiary nor Trustee assumes any liability for the performance
of any such Lease.
2. SECURITY AGREEMENT. To the extent any of the property described in
Section 1 is personal property, Grantor, as debtor, grants to Beneficiary,
as secured party, a security interest therein together with a security
interest in all other personal property of whatsoever nature which is
located on or used or to be used in connection with any of the property
described in Section 1, and any products or proceeds of any thereof,
pursuant to the Uniform Commercial Code of the state of Oregon (the "UCC"),
on the terms and conditions contained herein except that where any
provision hereof is in conflict with that certain Security Agreement dated
August 22 , 1996, between Grantor and Beneficiary (the "Security
Agreement"), or the UCC, the Security Agreement or UCC, as the case may be,
shall control. Beneficiary hereby assigns such security interest, together
with the security interest granted to Beneficiary under the Security
Agreement to Trustee, in trust, for the benefit of Beneficiary to be dealt
with as a portion of the "Property" except as otherwise specified herein.
3. OBLIGATIONS SECURED. This Trust Deed is given for the purpose of
securing:
3.1 Performance and Payment. The performance of the obligations
contained herein and the payment of Five Million and 00/100 DOLLARS
($5,000,000.00) with interest thereon, according to the terms of a
promissory note dated August 22 , 1996, made by Grantor and payable to
Beneficiary or order, having a maturity date of March 1, 2004, and any and
all extensions, renewals, modifications or replacements thereof, whether
the same be in greater or lesser amounts (the "Note"), which Note contains
provision for a variable rate of interest; and
3.2 Future Advances. The repayment of any and all sums advanced
or expenditures made by Beneficiary subsequent to the execution of this
Trust Deed for the maintenance or preservation of the Property or advanced
or expended by Beneficiary pursuant to any provision of this Trust Deed
subsequent to its execution or pursuant to any provision of the Security
Agreement subsequent to its execution, in either case together with
interest thereon at the Default Rate (defined below).
4. WARRANTIES AND COVENANTS OF GRANTOR. Grantor warrants, covenants,
and agrees:
4.1 Warranties.
(a) Grantor has full power and authority to grant the Property to
Trustee and warrants the Property to be free and clear of all liens,
charges, and other encumbrances except Permitted Liens (defined in Section
4.13 below) and those, if any, noted on Exhibit B hereto and incorporated
herein by this reference.
3
<PAGE>
(b) The Property is free from damage and no matter has come to
Grantor's attention (including, but not limited to, knowledge of any
construction defects or nonconforming work) that would materially impair
the value of the Property as security.
4.2 Preservation of Lien. Grantor will preserve and protect the
priority of this Trust Deed as a first lien on the Property.
4.3 Repair and Maintenance of Property. Grantor will keep the
Property in good condition and repair, which duty shall include but is not
limited to continual cleaning, painting, landscaping, repairing and
refurbishing of the Property; will complete and not remove or demolish,
alter, or make additions to any building or other improvement which is part
of the Property without the express written consent of Beneficiary; will
underpin and support when necessary any such building or other improvement
and protect and preserve the same; will complete or restore promptly and in
good and workmanlike manner any such building or other improvement which
may be damaged or destroyed and pay when due all claims for labor performed
and materials furnished therefor; will not commit, suffer or permit any act
upon the Property in violation of law; and will do all other acts which
from the character or use of the Property may be reasonably necessary for
the continued operation of the Property in a safe and legal manner, the
specific enumerations herein not excluding the general.
4.4 Insurance.
4.4.1 Hazard. Grantor will provide, maintain and deliver to
Beneficiary, as further security for the faithful performance of this Trust
Deed, insurance covering fire, casualty and such other hazards as may be
specified by Beneficiary (including insurance against flood, if the
Property is situated in a designated flood zone) in an amount equal to one
hundred percent (100%) of the replacement cost of the Property and naming
Beneficiary as first loss payee pursuant to a loss-payee form acceptable to
Beneficiary, with such deductibles as approved by Beneficiary but that are,
in any event, not more than $50,000. Grantor shall be responsible for any
uninsured losses and any deductibles. All existing and future policies for
such insurance, and the proceeds thereof, are hereby assigned to
Beneficiary, but no such assignment shall be effective to invalidate or
impair any insurance policy. Should the Property or any part thereof be
damaged by reason of any cause covered by insurance, Beneficiary may, at
its option, commence, appear in and prosecute, in its own name, any action
or proceeding, or make any reasonable compromise or settlement in
connection with such damage, and obtain all proceeds, or other relief
therefor, and Grantor agrees to pay Beneficiary's costs and reasonable
attorneys' fees in connection therewith. No insurance proceeds at any time
assigned to or held by Beneficiary shall be deemed to be held in trust, and
Beneficiary may commingle such proceeds with its general assets and shall
not be liable for the payment of any interest thereon. The amount collected
under any insurance policies required to be maintained by Grantor pursuant
to this Section 4.4.1 may be applied by Beneficiary upon any indebtedness
secured hereby and in such order as Beneficiary may determine, or at the
option of Beneficiary, the entire amount so collected or any part thereof
may be released to Grantor. Beneficiary shall in no case be obligated to
see to the proper application of any amount
4
<PAGE>
paid over to Grantor. Such application or release shall not cure or waive
any default or notice of default hereunder or invalidate any act done
pursuant to such notice.
4.4.2 Liability. Grantor will maintain comprehensive general
liability insurance covering the legal liability of Grantor against claims
for bodily injury, death, or property damage occurring on, in, or about the
Property with coverage of Five Million Dollars ($5,000,000) per occurrence,
and naming Beneficiary an additional insured.
4.4.3 Rental Interruption. In the event the portion of the
Property leased, licensed or otherwise set aside for occupancy by any
person other than Grantor under the Leases is at any time twenty thousand
(20,000) square feet or more, Grantor shall maintain rental or business
interruption insurance in an amount equal to at least twelve (12) months'
gross rental income from the Property, and naming Beneficiary as first loss
payee, provided that Grantor may collect and retain any payments under said
policies so long as it is not in default hereunder.
4.4.4 Intentionally Omitted.
4.4.5 General Provisions. All policies of insurance required to
be maintained by Grantor pursuant to this Section 4.4 shall be in form and
substance and with companies acceptable to Beneficiary. All policies and
renewals thereof shall contain provision for thirty (30) days' written
notice to Beneficiary prior to any cancellation or modification thereof.
Notwithstanding any of the foregoing, neither Trustee nor Beneficiary shall
be responsible for any such insurance or for the collection of any
insurance moneys, or for any insolvency of any insurer or insurance
underwriter. Any and all unexpired insurance shall inure to the benefit of
and pass to the purchaser of the Property at any trustee's or sheriff's sale
held hereunder.
4.4.6 Warning Regarding Insurance. Unless Grantor provides
Beneficiary with evidence of the insurance coverage as required by this
Trust Deed, Beneficiary may purchase insurance at Grantor's expense to
protect Beneficiary's interest. This insurance may, but need not, also
protect Grantor's interest. If the collateral becomes damaged, the coverage
Beneficiary purchases may not pay any claim Grantor makes or any claim made
against Grantor. Grantor may later cancel this coverage by providing
evidence that Grantor has obtained property coverage elsewhere. Grantor is
responsible for the cost of any insurance purchased by Beneficiary. The
cost of any insurance may be added to the sums secured by this Trust Deed.
If the cost is added to Grantor's loan balance, interest at the Default
Rate on the loan will apply to this added amount. The effective date of
coverage may be the date Grantor's prior coverage lapsed or the date
Grantor failed to provide proof of coverage.
The coverage Beneficiary purchases may be considerably more expensive than
insurance Grantor can obtain on Grantor's own and may not satisfy any need
for property damage coverage or any mandatory liability insurance
requirements imposed by applicable law.
5
<PAGE>
4.5 Right of Inspection. Grantor shall permit Beneficiary or its
agents, at all reasonable times, to enter upon and inspect the Property.
4.6 Preservation of Licenses, Etc. Grantor shall observe and
comply with all requirements necessary to the continued existence and
validity of all rights, licenses, permits, privileges, franchises and
concessions relating to any existing or presently contemplated use of the
Property, including but not limited to any zoning variances, special
exceptions and nonconforming use permits.
4.7 Further Assurances. Grantor will, at its expense, from time
to time execute and deliver any and all such instruments of further
assurance and other instruments and do any and all such acts, or cause the
same to be done, as Trustee or Beneficiary deems necessary or advisable to
grant to Trustee the Property or to carry out more effectively the purposes
of this Trust Deed.
4.8 Legal Actions. Grantor will appear in and defend any action
or proceeding before any court or administrative body purporting to affect
the security hereof or the rights or powers of Beneficiary or Trustee; and
will pay all costs and expenses, including cost of evidence of title and
any attorneys' fees, incurred by Beneficiary and Trustee, in a reasonable
sum, in any such action or proceeding in which Beneficiary or Trustee may
appear, and in any suit brought by Beneficiary or Trustee to foreclose this
Trust Deed.
4.9 Taxes, Assessments and Other Liens. Grantor will pay before
delinquency all taxes, assessments, encumbrances, charges, and liens with
interest, on the Property or any part thereof, which at any time appear to
be or are alleged to be prior and superior hereto, including but not
limited to any tax on or measured by rents of the Property, the Note, this
Trust Deed, or any obligation or part thereof secured hereby.
4.10 Trust Expenses. Grantor will pay all costs, fees and
expenses of this trust including all such costs, fees and expenses incident
to any default hereunder, including reasonable attorneys' fees.
4.11 Repayment of Expenditures. Grantor will pay immediately and
without demand all sums expended hereunder by Beneficiary or Trustee with
interest from date of expenditure at the default rate of interest specified
in the Note (the "Default Rate") and the repayment thereof shall be secured
hereby.
4.12 Financial & Operating Information. Grantor shall comply with
Section 2(g) of the Security Agreement.
4.13 Sale, Transfer, or Encumbrance of Prorperty. Except as
permitted in the Security Agreement and Permitted Liens (defined below),
Grantor will not, without the prior written consent of Beneficiary (which
consent shall be subject to the conditions set forth below) sell, transfer
or otherwise convey the Property or any interest therein, further encumber
the Property or any interest therein or agree to do any of the foregoing
without first repaying in full
6
<PAGE>
the Note and all other sums secured hereby. As used herein, the term
"Permitted Liens" means any lien arising after the date hereof that is (i)
a mechanic's, materialmen's, carrier's, repairer's or other non-consensual
statutory lien, arising in the ordinary course of Grantor's business and
securing obligations either not delinquent or (A) being contested in good
faith by appropriate proceedings promptly and diligently instituted and
conducted, (B) with prompt written notice to Beneficiary of the
commencement of and any material developments in such proceedings, and (C)
as to which (1) the sum necessary to discharge the lien plus all costs and
other charges that could accrue as a result of a foreclosure or sale under
the lien is less than One Hundred Thousand and 00/100 Dollars
($100,000.00), or (2) an undertaking sufficient under the internal laws of
the state of Oregon to discharge the lien plus all costs and other charges
that could accrue as a result of a foreclosure or sale under the lien, or
(ii) a lien arising out of a judgment against Grantor for the payment of
money not exceeding One Hundred Thousand and 00/100 Dollars ($100,000.00),
so long as (A) prompt written notice is furnished to Beneficiary of the
entry of the judgment and any further material developments in the
proceedings, and (1) such lien has been outstanding not more than ten (10)
business days, or (2) execution thereof has been effectively stayed and
bonded against (by an undertaking sufficient under the internal laws of the
state of Oregon) pending and through appeal of the judgment, or (iii) a
lien on any items of the Property to secure payment of ad valorem property
taxes, fees or assessments which are not delinquent.
4.14 Information for Participants. Grantor agrees to furnish such
information and confirmation as may be required from time to time by
Beneficiary on request of potential loan participants and agrees to make
adjustments in this Trust Deed, the Note, and the other documents
evidencing or securing the loan secured hereby to accommodate such
participant's requirements, provided that such requirements do not vary the
economic terms of the loan secured hereby.
4.15 Grantor Existence. Beneficiary is making this loan in
reliance on Grantor's continued existence, ownership and control in its
present corporate form. Grantor will not cause, permit, acquiesce in or
suffer any change of control (as defined in Section 4(g) of the Security
Agreement) nor any merger, consolidation, dissolution, liquidation, winding
up or sale or other transfer of all or substantially all of its assets
pursuant to which there is a change of, control or cessation of its
business, and will do all things necessary to preserve and maintain said
corporate existence and to insure its continuous right to carry on its
business, including but not limited to, filing within the prescribed time
all corporate tax returns and reports, and paying when due all such taxes.
4.16 Tax and Insurance Reserves. In addition to the payments
required by the Note, Grantor agrees to pay Beneficiary, at Beneficiary's
request following and during the continuance of the occurrence of an Event
of Default (defined below), such sums as Beneficiary may from time to time
estimate will be required to pay, at least 30 days before due, the next due
taxes, assessments, insurance premiums, and similar charges affecting the
Property, less all sums already paid therefor divided by the number of
months to elapse before one month prior to the date when such taxes,
assessments and premiums will become delinquent, such sums to be held by
Beneficiary without interest or other income to the Grantor to pay such
taxes, assessments and premiums Should this estimate as to taxes,
assessments and premiums prove insufficient, the
7
<PAGE>
Grantor upon demand agrees to pay Beneficiary such additional sums as may
be required to pay them before delinquent.
If the total of the above-described payments in any one year shall
exceed the amounts actually paid by Beneficiary for taxes, assessments and
premiums, such excess may be credited by Beneficiary on subsequent payments
under this section. If an Event of Default occurs for which Beneficiary
elects to realize upon this Trust Deed, then at the time of the Trustee's
sale or final decree of foreclosure, Beneficiary shall apply any balance of
funds it may hold pursuant to this Section 4.16 first to interest on and
then to the principal of the Note. If Beneficiary acquires the Property in
lieu of realizing on this Trust Deed, the balance of funds it holds shall
become the property of Beneficiary.
Any transfer in fee of all or a part of the Property shall
automatically transfer to the grantee all or a proportionate part of
Grantor's rights and interest in the fund accumulated hereunder.
4.17 Leases.
(a) Grantor will in all respects promptly and faithfully keep,
perform and comply with all of the terms, provisions, covenants, conditions
and agreements in each of the agreements pursuant to which any tenant or
licensee of any part of the Property is occupying the Property (the
"Leases") to be kept, performed and complied with by the lessor therein,
and will require, demand and strictly enforce, by all available means, the
prompt and faithful performance of and compliance with all of the terms,
provisions, covenants, conditions and agreements in the Leases to be
performed and complied with by the lessees therein.
(b) Grantor shall not receive or collect any rents from any
present or future tenant of the Property or any part thereof in advance in
excess of five percent (5.00%) of gross annual rental income from the
Property or collect a security deposit in excess of two (2) months' rent.
(c) [Intentionally Omitted.]
(d) In the event any tenant or licensee under the Leases should
be the subject of any proceeding under the Federal Bankruptcy Act or any
other federal, state or local statute that provides for the possible
termination or rejection of the Leases, Grantor covenants and agrees that
in the event any of the Leases is so rejected, no damages settlement shall
be made without the prior written consent of Beneficiary; and further that
any check in payment of damages for rejection of any such Lease shall be
made payable both to Grantor and Beneficiary; and Grantor hereby assigns
any such payment to Beneficiary and further covenants and agrees that upon
request of Beneficiary it will duly endorse to the order of Beneficiary any
such check, the proceeds of which will be applied to any portion of the
indebtedness secured by this Trust Deed as Beneficiary may elect.
8
<PAGE>
4.18 Hazardous Waste.
(a) For purposes of this Trust Deed, "hazardous substance" means
any hazardous or toxic substances, materials or wastes, including, but not
limited to, those substances, materials, and wastes listed in the United
States Department of Transportation Hazardous Materials Table (49 CFR
172.101) or by the Environmental Protection Agency as hazardous substances
(40 CFR Part 302) and amendments thereto, or such substances, materials and
wastes which are or become regulated under any applicable local, state or
federal law including, without limitation, any material, waste or substance
which is (i) petroleum, (ii) asbestos, (iii) polychlorinated biphenyls,
(iv) defined as a "hazardous waste", "extremely hazardous waste",
"restricted hazardous waste" or "hazardous substance" under Hazardous
Substances, Radiation Sources, ORS Chapters 453.001, et seq., Solid Waste
Control, ORS Chapters 459.005, et seq., Hazardous Waste and Hazardous
Materials, ORS Chapters 466.005, et seq., Pollution Control, ORS Chapters
468.005, et. seq., Oregon Drinking Water Quality Act, ORS Chapters 448.123,
et seq., and Ground Water Act of 1955, ORS Chapters 537.505, et seq., (v)
designated as a "hazardous substance" pursuant to Section 311 of the Clean
Water Act, 33 U.S.C. ss. 1251 et seq. (33 U.S.C. ss. 1321) or listed
pursuant to Section 307 of the Clean Water Act (33 U.S.C. ss. 1317), (vi)
defined as a "hazardous waste" pursuant to Section 1004 of the Resource
Conservation and Recovery Act, 42 U.S.C. ss. 6903), or (vii) defined as a
"hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C.
ss. 9601, et seq. (42 U.S.C. ss. 9601), all as amended, replaced or
succeeded, and any other substance or matter defined as a toxic or
hazardous substance or material or pollutant or contaminant under any other
federal, state or local laws, ordinances or regulations or under any
reported decision of a state or federal court, or any substance or matter
imposing liability for clean-up costs or expenses on any person or entity
under any statutory or common law theory.
(b) Grantor hereby represents, warrants, covenants and agrees
that all operations and activities upon, and all uses and occupancies of,
the Property, or any portion thereof, by Grantor, any tenant, occupant or
other user of the Property, or any part thereof, are presently and, so long
as any indebtedness secured hereby is outstanding, shall be in all material
respects in compliance with all federal, state and local laws, regulations,
rules and orders governing or any way relating to the generating, handling,
manufacturing, treatment, storage, use, transportation, spillage, leakage,
dumping, discharge or disposal of any hazardous substance; that there is
not now, nor, to the best knowledge of Grantor after due and diligent
inquiry, has there ever been any underground tank on, under or at the
Property which contain or contained any materials which, if known to be
present in soils or groundwater, would require cleanup, removal or some
other remedial action under any of those federal, state or local laws,
regulations, rules or orders. To the best of Grantor's knowledge after due
and diligent inquiry, there is not present in the soils or groundwater on,
under or at the Property any hazardous material which require cleanup,
removal or other remedial action under an federal, state or local law,
regulation, rule or order.
(c) If the presence, release, threat of release, placement on or
in the Property, or the generation, transportation, storage, treatment or
disposal at the Property of any hazardous substance: (i) gives rise to
liability (including but not limited to, a response action,
9
<PAGE>
remedial action or removal action) under RCRA, CERCLA, state toxic waste
laws, or otherwise, or (ii) causes a significant public health effect, or
(iii) pollutes or threatens to pollute the environment, Grantor shall, at
its sole expense, promptly take any and all remedial and removal action
necessary to clean up the Property and mitigate exposure to liability
arising from the hazardous substance, whether or not required by law. Any
provision of this Trust Deed to the contrary notwithstanding, if Grantor
fails to perform its obligations under this subsection 4.18(c), any funds
advanced by Beneficiary to pay for any and all remedial and removal action
to clean up the Property and mitigate exposure to liability from the
hazardous substance shall not be secured by the lien of this Trust Deed but
rather shall be covered by the separate Certificate and Indemnity Agreement
Regarding Hazardous Substances executed concurrently herewith.
(d) Grantor shall promptly give Beneficiary: (i) written notice
and a copy of any notice or correspondence it receives from any federal,
state or other government authority regarding hazardous substances on the
Property or hazardous substances which materially and adversely affect or
will affect the Property, and (ii) written notice of any knowledge or
information Grantor obtains regarding hazardous substances in a material
amount on or released from the Property or hazardous substances which will
otherwise materially and adversely affect the Property or material expenses
or losses incurred or expected to be incurred by Grantor or any government
agency to study, assess, contain or remove any hazardous substances on or
near the Property.
(e) In the event Beneficiary requires, from time to time
following the occurrence of an Event of Default, Grantor to implement an
operations and maintenance plan because of the presence or potential
presence of asbestos, or lead containing paint or other hazardous
substances on the Property, Grantor shall implement and follow the
requirements of any such operations and maintenance plan, maintain records
of such compliance at the Property and make such records immediately
available to Beneficiary upon request by Beneficiary.
5. DEFAULT.
5.1 Definition. Any of the following shall constitute an "Event
of Default" as that term is hereinafter used:
(a) Any representation or warranty made by or for the benefit of
Grantor herein or elsewhere in connection with the loan secured hereby,
including but not limited to any representations in connection with the
security there for, shall prove to have been incorrect or misleading in
any material respect;
(b) Grantor or any other person or entity liable therefor shall
fail to pay within ten (10) calendar days of its due date any part of the
indebtedness secured hereby;
(c) Grantor or any other signatory thereto shall default in the
performance of any of its obligations under Sections 4.3, 4.4, 4.9 or 4.13
of this Trust Deed;
10
<PAGE>
(d) Grantor or any other signatory thereto shall default in the
performance of any covenant or agreement contained in this Trust Deed and
such default is not cured within thirty (30) days after written notice
thereof from Beneficiary or Trustee; or
(e) Any Event of Default (as defined in the security Agreement)
shall occur.
5.2 Beneficiary's and Trustee's Right to Perform. Upon the
occurrence of any Event of Default, Beneficiary or Trustee, but without the
obligation so to do and without notice to or demand upon Grantor and
without releasing Grantor from any obligations hereunder, may: make any
payments or do any acts required of Grantor hereunder in such manner and to
such extent as either may deem necessary to protect the security hereof,
Beneficiary or Trustee being authorized to enter upon the Property for such
purposes; commence, appear in and defend any action or proceeding
purporting to affect the security hereof or the rights or powers of
Beneficiary or Trustee; pay, purchase, contest or compromise any
encumbrance, charge or lien in accordance with the following paragraph; and
in exercising any such powers, pay necessary expenses, employ counsel and
pay a reasonable fee therefor. All sums so expended shall be payable on
demand by Grantor, be secured hereby (except as otherwise provided in
Section 4.18) and bear interest at the Default Rate from the date advanced
or expended until repaid. Beneficiary or Trustee in making any payment
herein and hereby authorized, in the place and stead of the Grantor, in the
case of a payment of taxes, assessments, water rates, sewer rentals and
other governmental or municipal charges, fines, impositions or liens
asserted against the Property, may make such payment in reliance on any
bill, statement or estimate procured from the appropriate public office
without inquiry into the accuracy of the bill, statement or estimate or
into the validity of any tax, assessment, sale, forfeiture, tax lien or
title or claim thereof; in the case of any apparent or threatened adverse
claim of title, lien, statement of lien, encumbrance, deed of trust, claim
or charge Beneficiary or Trustee, as the case may be, shall be the sole
judge of the legality or validity of same; and in the case of a payment for
any other purpose herein and hereby authorized, but not enumerated in this
paragraph, such payment may be made whenever, in the sole judgment and
discretion of Trustee or Beneficiary, as the case may be, such advance or
advances shall seem necessary or desirable to protect the full security
intended to be created by this instrument, provided further, that in
connection with any such advance, Beneficiary at its option may and is
hereby authorized to obtain a continuation report of title prepared by a
title insurance company, the cost and expenses of which shall be repayable
by the Grantor without demand and shall be secured hereby.
5.3 Remedies on Default. Upon the occurrence of any Event of
Default all sums secured hereby shall become immediately due and payable,
without notice or demand, at the option of Beneficiary and Beneficiary may
(a) Have a receiver appointed as a matter of right, without
regard to the suffciency of the Property or any other security for the
indebtedness secured hereby;
11
<PAGE>
(b) Foreclose this Trust Deed as a mortgage or otherwise realize
upon the Property;
(c) Cause Trustee to exercise its power of sale; or
(d) Sue on the Note according to law.
5.4 No Waiver. By accepting payment of any sum secured hereby
after its due date, Beneficiary does not waive its right either to require
prompt payment when due of all other sums so secured or to declare an Event
of Default for failure to do so.
6. CONDEMNATION. Any award of damages, whether paid as a result of
judgment or prior settlement, in connection with any condemnation or other
taking of any portion of the Property, for public or private use, or for
injury to any portion of the Property is hereby assigned and shall be paid
to Beneficiary which may apply such moneys received by it in the same
manner and with the same effect as provided in Section 4.4.1 above for
disposition of proceeds of hazard insurance. Should the Property or any
part or appurtenance thereof or right or interest therein be taken or
threatened to be taken by reason of any public or private improvement,
condemnation proceeding (including change of grade), or in any other
manner, Beneficiary may, at its option, commence, appear in and prosecute,
in its own name, any action or proceeding, or make any reasonable
compromise or settlement in connection with such taking or damage, and
obtain all compensation, awards or other relief therefor, and Grantor
agrees to pay Beneficiary's costs and reasonable attorneys" fees incurred
in connection therewith. No condemnation award at any time assigned to or
held by Beneficiary shall be deemed to be held in trust, and Beneficiary
may commingle such award with its general assets and shall not be liable
for the payment of any interest thereon.
7. TRUSTEE.
7.1 General Powers and Duties of Trustee. At any time or from
time to time, without liability therefor and without notice and without
affecting the liability of any person for the payment of the indebtedness
secured hereby, upon written request of Beneficiary, payment of its own
fees and presentation of this Trust Deed and the Note for endorsement (in
case of full reconveyance, for cancellation or retention), Trustee may:
(a) Consent to the making of any map or plat of the Property;
(b) Join in granting any easement or creating any restriction
thereon;
(c) Join in any subordination or other agreement affecting this
Trust Deed or the lien or charge thereof; or
(d) Reconvey, without warranty, all or any part of the Property.
12
<PAGE>
7.2 Reconvevance. Upon written request of Beneficiary stating
that all sums secured hereby have been paid, and upon surrender of this
Trust Deed and the Note to Trustee for cancellation and retention and upon
payment of its fees, Trustee shall reconvey, without warranty, the Property
then held hereunder. The recitals in any reconveyance executed under this
Trust Deed of any matters of fact shall be conclusive proof of the
truthfulness thereof. The grantee in such reconveyance may be described as
"the person or persons legally entitled thereto".
7.3 Powers and Duties on Default. Upon written request therefor
by Beneficiary specifying the nature of the default, or the nature of the
several defaults, and the amount or amounts due and owing, Trustee shall
execute a written notice of breach and of its election to cause the
Property to be sold to satisfy the obligation secured hereby, and shall
cause such notice to be recorded and otherwise given according to law.
Notice of sale having been given as then required by law and not less than
the time then required by law having elapsed after recordation of such
notice of breach, Trustee, without demand on Grantor, shall sell the
Property at the time and place of sale specified in the notice, as provided
by statute, either as a whole or in separate parcels and in such order as
it may determine, at public auction to the highest and best bidder for cash
in lawful money of the United States, payable at time of sale. Grantor
agrees that such a sale (or a sheriffs sale pursuant to judicial
foreclosure) of all the Property as real estate constitutes a commercially
reasonable disposition thereof, but that with respect to all or any part of
the Property which may be personal property Trustee shall have and
exercise, at Beneficiary's sole election, all the rights and remedies of a
secured party under the UCC. Whenever notice is permitted or required
hereunder or under the UCC, ten (10) days shall be deemed reasonable.
Trustee may postpone sale of all or any portion of the Property, and from
time to time thereafter may postpone such sale, as provided by statute.
Trustee shall deliver to the purchaser its deed and bill of sale conveying
the Property so sold, but without any covenant or warranty, express or
implied. The recital in such deed and bill of sale of any matters or facts
shall be conclusive proof of the truthfulness thereof. Any person other
than Trustee, including Grantor or Beneficiary, may purchase at such sale.
After deducting all costs, fees and expenses of Trustee and of this
trust, including the cost of evidence of title search and reasonable
counsel fees in connection with sale, Trustee shall apply the proceeds of
sale to payment of: all sums expended under the terms hereof not then
repaid, with accrued interest at the Default Rate; all other sums then
secured hereby; and the remainder, if any, to Grantor.
7.4 Reassignment of Security Interest. At the request of
Beneficiary, Trustee shall reassign to Beneficiary the security interest
created hereby and assigned hereby and after such reassignment Beneficiary
shall have the right, upon the occurrence or continuance of any Event of
Default, to realize upon the personal property subject to this Trust Deed,
independent of any action of Trustee, pursuant to the UCC.
7.5 Acceptance of Trust. Trustee accepts this trust when this
Trust Deed, duly executed and acknowledged, is made a public record as
provided by law. Trustee is not obligated to notify any party hereto except
Beneficiary of pending sale under any other deed of
13
<PAGE>
trust or of any action or proceeding in which Grantor, Beneficiary or
Trustee shall be a party unless brought by Trustee.
7.6 Reliance. Trustee, upon presentation to it of an affidavit
signed by Beneficiary setting forth facts showing a default by Grantor
under this Trust Deed, is authorized to accept as true and conclusive all
facts and statements therein, and to act thereon hereunder.
7.7 Replacement of Trustee. Beneficiary may, from time to time,
as provided by statute, appoint another trustee in place and stead of
Trustee herein named, and thereupon Trustee herein named shall be
discharged and the trustee so appointed shall be substituted as Trustee
hereunder, with the same effect as if originally named Trustee herein.
8. APPLICATION OF RENTS. Grantor hereby gives to and confers upon
Beneficiary the right, power and authority during the continuance of this
Trust Deed to collect the rents, issues and profits of the Property,
reserving unto Grantor the right, prior to any default in payment of any
indebtedness secured hereby or hereunder, to collect and retain such rents,
issues and profits as they become due and payable. Upon any such default,
Beneficiary may at any time and without notice, either in person, by agent,
or by a receiver to be appointed by a court, without regard to the adequacy
of any security for the indebtedness hereby secured, enter upon and take
possession of the Property or any part thereof, or in its own name sue for
or otherwise collect such rents, issues, and profits, including those past
due and unpaid, and apply the same, less costs and expenses of operation
and collection, including reasonable attorneys' fees, upon any indebtedness
secured hereby, and in such order as Beneficiary may determine. The
entering upon and taking possession of the Property, the collection of such
rents, issues and profits and the application thereof as aforesaid, shall
not cure or waive any default or notice of default hereunder or invalidate
any act done pursuant to such notice.
9. NOTICES.
9.1 Trustee. Any notice or demand upon Trustee may be given or
made at:
Josephine-Crater Title Companies, Inc.
300 West Main
Medford, Oregon 97501
Attention: Collections Department
9.2 Grantor and Beneficiary. Any notice to or demand upon Grantor
(including any notice of default or notice of sale) or notice to or demand
upon Beneficiary shall be deemed to have been suffciently made for all
purposes when deposited in the United States mails, postage prepaid,
registered or certified, return receipt requested, addressed as follows:
Grantor: Praegitzer Industries, Inc.
1270 Monmouth Cutoff
Dallas, Oregon 97338
Attention: Chief Financial Officer
14
<PAGE>
Beneficiary: Heller Financial, Inc.
Commercial Equipment Finance Division
One Montgomery Street, Suite 2250
San Francisco, California 94104
Attention: Region Credit Manager
or to such other address as may be filed in writing by Grantor or
Beneficiary with Trustee.
9.3 Waiver of Notice. The giving of notice may be waived in
writing by the person or persons entitled to receive such notice, either
before or after the time established for the giving of such notice.
10. MODIFICATIONS. Upon written request of any party then liable for
any sum secured hereby, Beneficiary reserves the right to extend the term,
or otherwise modify the terms, hereof or of the Note as Beneficiary and
such person may from time to time deem appropriate and any such change
shall not operate to release, in any manner, the liability of the original
Grantor or Grantor's successors in interest.
11. SUCCESSORS AND ASSIGNS. All provisions herein contained shall be
binding upon and inure to the benefit of the respective successors and
assigns of the parties.
12. GOVERNING LAW; SEVERABILITY. This Trust Deed shall be governed by
the law of the state of Oregon. In the event that any provision or clause
of this Trust Deed or the Note conflicts with applicable law, the conflict
shall not affect other provisions of this Trust Deed or the Note which can
be given effect without the conflicting provision and to this end the
provisions of this Trust Deed and the Note are declared to be severable.
13. GRANTOR'S RIGHT TO POSSESSION. Grantor may be and remain in
possession of the Property for so long as it is not in default hereunder or
under the terms of the Note and Grantor may, while it is entitled to
possession of the Property, use the same.
14. MAXIMUM INTEREST. No provision of this Trust Deed or of the Note
shall require the payment or permit the collection of interest in excess of
the maximum permitted by law. If any excess of interest in such respect is
herein or in the Note provided for, neither Grantor nor its successors or
assigns shall be obligated to pay that portion of such interest which is in
excess of the maximum permitted by law, and the right to demand the payment
of any such excess shall be and is hereby waived and this Section 14 shall
control any provision of this Trust Deed or the Note which is inconsistent
herewith.
15. ATTORNEYS' FEES. In the event any action or proceeding is brought
to enforce or interpret the provisions of this Trust Deed, the prevailing
party shall be entitled to recover, as a part of the prevailing party's
costs, a reasonable attorneys' fee at trial, in bankruptcy proceedings and
on appeal, the amount of which shall be fixed by the court and made a part
of any judgment rendered.
15
<PAGE>
16. PREPAYMENT PROVISIONS. If at any time after default and
acceleration of the indebtedness secured hereby there shall be a tender of
payment of the amount necessary to satisfy such indebtedness by or on
behalf of the Grantor, its successors or assigns, the same shall be deemed
to be a voluntary prepayment such that the sum required to satisfy such
indebtedness in full shall include, to the extent permitted by law, the
additional payment required under the prepayment privilege as stated in the
Note. Similarly, should the Property at any time be destroyed or be the
subject of any successful condemnation proceeding, the portion of any
insurance proceeds or condemnation award, as the case may be, due the
Beneficiary shall include the additional pa,vrnent required under the
prepayment privilege as stated in the Note.
17. TIME OF ESSENCE. Time is of the essence under this Trust Deed and
in the performance of every term, covenant and obligation contained herein.
18. MISCELLANEOUS.
18.1 Whenever the context so requires the singular number
includes the plural herein, and the impersonal includes the personal.
18.2 The headings to the various sections have been inserted for
convenient reference only and shall not modify, define, limit or expand the
express provisions of this Trust Deed.
THIS TRUST DEED WILL NOT ALLOW USE OF THE PROPERTY DESCRIBED IN THIS
TRUST DEED IN VIOLATION OF APPLICABLE LAND USE LAWS AND REGULATIONS.
BEFORE SIGNING OR ACCEPTING THIS INSTRUMENT, THE PERSON ACQUIRING
FEE TITLE TO THE PROPERTY SHOULD CHECK WITH THE APPROPRIATE CITY OR
COUNTY PLANNING DEPARTMENT TO VERIFY APPROVED USES, AND TO DETERMINE
ANY LIMITS OR LAWSUITS AGAINST FARMING OR FOREST PRACTICES AS DEFINED
IN ORS 30.390.
DATED as of the day and year first above written.
GRANTOR: PRAEGITZER INDUSTRIES, INC.
. By: MATTHEW J. BERGERON
------------------------------------
Its: Senior Vice President
-----------------------------------
[Acknowledgment follows]
16
FINOVA
Loan and Security Agreement
Borrower: Praegitzer Industries, Inc.
Address: 1270 Monmouth Cut-off
Dallas, Oregon 97338
Date: September 19, 1996
THIS LOAN AND SECURITY AGREEMENT ("Agreement") dated the date set forth
above, is entered into by and between the borrower named above (the
"Borrower"), whose address is set forth above and FINOVA Capital
Corporation ("FINOVA"), whose address is 355 S. Grand Ave, Suite 2400, Los
Angeles, California 90071.
1. LOANS.
1.1 Total Facility. Upon the terms and conditions set forth herein and
provided that no Event of Default or event which, with the giving of notice
or the passage of time, or both, would constitute an Event of Default,
shall have occurred and be continuing, FINOVA shall, on the Closing Date,
make an advance to Borrower (the "Loan") in an aggregate outstanding
principal amount not to exceed the Total Facility amount (the "Total
Facility") set forth on the schedule hereto (the "Schedule"), subject to
deduction of reserves for accrued interest and such other reserves as
FINOVA deems proper from time to time, and less amounts FINOVA may be
obligated to pay in the future on behalf of Borrower. The Schedule is an
integral part of this Agreement and all references to "herein", "herewith"
and words of similar import shall for all purposes be deemed to include the
Schedule.
1.2 Intentionally Omitted.
1.3 Over1ines. If at any time or for any reason the outstanding amount of
advances made pursuant hereto exceeds any of the dollar limitations
contained in the Schedule (any such excess, an "Overline"), then Borrower
shall, upon FINOVA's demand, immediately pay to FINOVA, in cash, the full
amount of such Overline. Without limiting Borrower's obligation to repay to
FINOVA on demand the amount of any Overline, Borrower agrees to pay FINOVA
interest on the outstanding principal amount of any Overline, on demand, at
the rate set forth on the Schedule.
1.4 Intentionallv Omitted.
1.5 Loan Account. All advances made hereunder shall be added to and deemed
part of the Obligations when made. FINOVA may from time to time charge all
Obligations of Borrower to Borrower's loan account with FINOVA..
2. CONDITIONS PRECEDENT. The obligation of FINOVA to make the Loan
hereunder is subject to the fulfillment, to the satisfaction of FINOVA and
its counsel, of each of the following conditions on or prior to the date
set forth on the Schedule:
(a) Loan Documents. FINOVA shall have received each of the following Loan
Documents: (i) The Secured Promissory Note in the amount of the Total
Facility and on such terms and conditions as FINOVA shall specify, executed
by Borrower; (ii) such security agreements as FINOVA may require with
respect to this Agreement, executed by each of the parties thereto; (iii)
Subordination Agreements on FINOVA's standard form, executed by each of the
Subordinating Creditors, together with copies of all instruments subject
thereto showing a legend indicating such subordination; and (iv) such other
documents, instruments and agreements in connection herewith as FINOVA
shall require,
<PAGE>
executed, certified and/or acknowledged by such parties as FINOVA shall
designate;
(b) Terminations by Existing Lender. Borrower's existing lender(s)
(including, without limitation, the lender(s) to Borrower's Trend Circuits
division) shall have executed and delivered UCC termination statements and
other documentation evidencing the termination of its liens and security
interests in the Collateral or a subordination agreement in form and
substance satisfactory to FINOVA;
(c) Charter Documents. FINOVA shall have received copies of Borrower's
By-laws and Articles or Certificate of Incorporation, as amended, modified,
or supplemented to the Closing Date, certified by the Secretary of
Borrower;
(d) Good Standing. FINOVA shall have received a certificate of corporate
status with respect to Borrower, dated within ten (10) days of the Closing
Date, by the Secretary of State of the state of incorporation of Borrower,
which certificate shall indicate that Borrower is in good standing in such
state;
(e) Foreign Qualification. FINOVA shall have received certificates of
corporate status with respect to Borrower and each other Loan Party, each
dated within ten (10) days of the Closing Date, issued by the Secretary of
State of each state in which such party's failure to be duly qualified or
licensed would have a material adverse effect on its financial condition or
assets, indicating that such party is in good standing;
(f) Authorizing Resolutions and Incumbency. FINOVA shall have received a
certificate from the Secretary of Borrower attesting to (i) the authority
of specific officers of Borrower to execute and deliver this Agreement and
the other Loan Documents to which Borrower is a party, and (ii) the
authenticity of original specimen signatures of such officers;
(g) Insurance. FINOVA shall have received the insurance certificates and
certified copies of policies required by Section 4.4 hereof, in form and
substance satisfactory to FINOVA and its counsel;
(h) Searches: Certificates of Title. FINOVA shall have received searches
reflecting the filing of its financing statements and fixture filings in
such jurisdictions as it shall determine, and shall have received
certificates of title with respect to the Collateral which shall have been
duly executed in a manner sufficient to perfect all of the security
interests granted to FINOVA;
(i) Landlord and Mortgagee Waivers. FINOVA shall have received a landlord
and/or mortgagee waiver from the lessor and mortgagee of Borrower's
Fremont, California location;
(j) Fees. Borrower shall have paid all fees payable by it on the Closing
Date pursuant to this Agreement;
(k) Opinion of Counsel. FINOVA shall have received an opinion of Borrower's
counsel covering such matters as FINOVA shall determine in its sole
discretion;
(1) Officer Certificate. FINOVA shall have received a certificate of the
President and the Chief Financial Officer or similar official of Borrower,
attesting to the accuracy of each of the representations and warranties of
Borrower set forth in this Agreement and the fulfillment of all conditions
precedent to the initial advance hereunder;
(m) Solvency Certificate. If requested by FINOVA, a signed certificate of
the Borrower's duly elected Chief Financial Officer concerning the solvency
and financial condition of Borrower, on FINOVA's standard form;
(n) Environmental Assessment. FINOVA shall have reviewed and approved in
its sole discretion the Phase I Environmental Assessment conducted, at
Borrower's expense, at Borrower's Fremont, California facility. Such
assessment shall have included, in FINOVA's discretion, core samplings, and
shall have been conducted by an environmental engineer acceptable to
FINOVA;
(o) Environmental Certificate. FINOVA shall have received an Environmental
Certificate from Borrower, in form and substance satisfactory to FINOVA in
its discretion, with respect to all of Borrower's locations;
(p) Trend Acquisition and Merger. Borrower shall have acquired 100% of the
issued and outstanding stock of Trend Circuits, Inc., ("Trend"), and
Borrower and Trend shall have merged with Borrower being the surviving
corporation of such merger, all on terms satisfactory to FINOVA in its sole
discretion, and FINOVA shall have received such evidence of the foregoing
as it shall require; and
2
<PAGE>
(q) Other Matters. All other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered,
executed or recorded and shall be in form and substance satisfactory to
FINOVA and its counsel.
3. INTEREST RATE AND OTHER CHARGES.
3.1 Interest: Fees. Borrower shall pay FINOVA interest on the daily
outstanding balance of Borrower's loan account at the per annum rate set
forth on the Schedule. Borrower shall also pay FINOVA the fees set forth on
the Schedule.
3.2 Default Interest Rate. Upon the occurrence and during the continuation
of an Event of Default, Borrower shall pay FINOVA interest on the daily
outstanding balance of Borrower's loan account at a rate per annum which is
two percent (2%) in excess of the rate which would otherwise be applicable
thereto pursuant to the Schedule.
3.3 Intentionally Omitted.
3.4 Excess Interest. The contracted for rate of interest of the loan
contemplated hereby, without limitation, shall consist of the following:
(i) the interest rate set forth on the Schedule, calculated and applied to
the principal balance of the Obligations in accordance with the provisions
of this Agreement; (ii) interest after an Event of Default, calculated and
applied to the amount of the Obligations in accordance with the provisions
hereof; and (iii) all Additional Sums (as herein defined), if any. Borrower
agrees to pay an effective contracted for rate of interest which is the sum
of the above referenced elements. The examination fees, attorneys fees,
expert witness fees, letter of credit fees, collateral monitoring fees,
closing fees, facility fees, Termination Fees, Minimum Interest Charges,
other charges, goods, things in action or any other sums or things of value
paid or payable by Borrower (collectively, the "Additional Sums"), whether
pursuant to this Agreement or any other documents or instruments in any way
pertaining to this lending transaction, or otherwise with respect to this
lending transaction, that under any applicable law may be deemed to be
interest with respect to this lending transaction, for the purpose of any
applicable law that may limit the maximum amount of interest to be charged
with respect to this lending transaction, shall be payable by Borrower as,
and shall be deemed to be, additional interest and for such purposes only,
the agreed upon and "contracted for rate of interest" of this lending
transaction shall be deemed to be increased by the rate of interest
resulting from the inclusion of the Additional Sums.
It is the intent of the parties to comply with the usury laws of the State
of Arizona (the "applicable Usury Law"). Accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Agreement, or in any
of the documents securing payment hereof or otherwise relating hereto, in
no event shall this Agreement or such documents require the payment or
permit the collection of interest in excess of the maximum contract rate
permitted by the Applicable Usury Law (the "Maximum Interest Rate"). In the
event (a) any such excess of interest otherwise would be contracted for,
charged or received from Borrower or otherwise in connection with the loan
evidenced hereby, (b) the maturity of the Obligations is accelerated in
whole or in part, or (c) all or part of the Obligations shall be prepaid,
so that under any of such circumstances the amount of interest contracted
for, shared or received in connection with the loan evidenced hereby, would
exceed the Maximum Interest Rate, then in any such event (1) the provisions
of this paragraph shall govern and control, (2) neither Borrower nor any
other person or entity now or hereafter liable for the payment of the
Obligations shall be obligated to pay the amount of such interest to the
extent that it is in excess of the Maximum Interest Rate, (3) any such
excess which may have been collected shall be either applied as a credit
against the then unpaid principal amount of the Obligations or refunded to
Borrower, at FINOVA's option, and (4) the effective rate of interest shall
be automatically reduced to the Maximum Interest Rate. It is further
agreed, without limiting the generality of the foregoing, that to the
extent permitted by the Applicable Usury Law; (x) all calculations of
interest which are made for the purpose of determining whether such rate
would exceed the Maximum Interest Rate shall be made by amortizing,
prorating, allocating and spreading during the period of the full stated
term of the loan evidenced hereby, all interest at any time contracted for,
charged or received from Borrower or otherwise in connection with such
loan; and (y) in the event that the effective rate of interest on the loan
should at any time exceed the Maximum Interest Rate, such excess interest
that would otherwise have been collected had there been no ceiling imposed
by the Applicable Usury Law shall be paid to FINOVA from time to time, if
and when the effective interest rate on the loan otherwise falls below the
Maximum Interest Rate, to the extent that interest paid to the date of
calculation does not exceed the
3
<PAGE>
Maximum Interest Rate, until the entire amount of interest which would
otherwise have been collected had there been no ceiling imposed by the
Applicable Usury Law has been paid in full. Borrower further agrees that
should the Maximum Interest Rate be increased at any time hereafter because
of a change in the Applicable Usury Law, then to the extent not prohibited
by the Applicable Usury Law, such increases shall apply to all indebtedness
evidenced hereby regardless of when incurred; but, again to the extent not
prohibited by the Applicable Usury Law, should the Maximum Interest Rate be
decreased because of a change in the Applicable Usury Law, such decreases
shall not apply to the indebtedness evidenced hereby regardless of when
incurred.
4. COLLATERAL.
4.1 Security Interest in the Collateral. To secure the payment and
performance of the Obligations when due, Borrower hereby grants to FINOVA a
security interest in all of the equipment set forth on Exhibit A hereto,
and all proceeds (including proceeds of any insurance policies, proceeds of
proceeds and claims against third parties), all replacements of such
equipment, all products and all books and records related to any of the
foregoing (all of the foregoing, together with all other property in which
FINOVA may be granted a lien or security interest, is referred to herein,
collectively, as the "Collateral").
4.2 Perfection and Protection of Security Interest. Borrower shall, at its
expense, take all actions requested by FINOVA at any time to perfect,
maintain, protect and enforce FlNOVA's security interest and other rights
in the Collateral and the priority thereof from time to time, including,
without limitation, executing and filing financing or continuation
statements and amendments thereof and executing and delivering such
documents and titles in connection with motor vehicles, to the extent
included in the Collateral, as FINOVA shall require, all in form and
substance satisfactory to FINOVA. FINOVA may file, without Borrower's
signature, one or more financing statements disclosing FINOVA's security
interest under this Agreement. Borrower agrees that a carbon, photographic,
photostatic or other reproduction of this Agreement or of a financing
statement is sufficient as a financing statement. If any Collateral is at
any time in the possession or control of any warehouseman, bailee or any
of Borrower's agents or processors, Borrower shall notify such Person of
FINOVA's security interest in such Collateral and, upon FINOVA's request,
instruct them to hold all such Collateral for FlNOVA's account subject to
FINOVA's instructions. From time to time, Borrower shall, upon FINOVA's
request, execute and deliver confirmatory written instruments pledging the
Collateral to FINOVA, but Borrower's failure to do so shall not affect or
limit FINOVA's security interest or other rights in and to the Collateral.
Until the Obligations have been fully satisfied and this Agreement has
terminated in accordance with its terms, FINOVA's security interest in the
Collateral shall continue in full force and effect.
4.3 Preservation of Collateral. FINOVA may, in its sole discretion, at any
time discharge any lien or encumbrance on the Collateral or bond the same,
pay any insurance, maintain guards, pay any service bureau, obtain any
record or take any other action to preserve the Collateral and charge the
cost thereof to Borrower's loan account as an Obligation.
4.4 Insurance. Borrower will maintain and deliver evidence to FINOVA of
such insurance reasonably required by FINOVA, written by insurers and in
amounts satisfactory to FINOVA. All premiums shall be paid by Borrower as
and when due. Accurate and complete copies of the policies shall be
delivered by Borrower to FINOVA. If Borrower fails to do so, FINOVA may
(but shall not be required to) procure such insurance at Borrower's expense
and charge the cost thereof to Borrower's loan account as an Obligation.
5. EXAMINATION OF RECORDS; FINANCIAL REPORTING.
5.1 Examinations. FINOVA shall at all reasonable times have full access to
and the right to examine, audit, make abstracts and copies from and inspect
Borrower's records, files, books of account and all other documents,
instruments and agreements relating to the Collateral and the right to
check, test and appraise the Collateral. Borrower shall deliver to FINOVA
any instrument necessary for FINOVA to obtain records from any service
bureau maintaining records for Borrower. All instruments and certificates
prepared by Borrower showing the value of any of the Collateral shall be
accompanied, upon FINOVA's request, by copies of related purchase orders
and invoices. FINOVA may, at any time after the occurrence of an Event of
Default, remove from Borrower's premises Borrower's books and records (or
copies thereof) or require Borrower to deliver such books and records or
copies to FINOVA. FINOVA may, without expense to
4
<PAGE>
FINOVA, use such of Borrower's personnel, supplies and premises as may be
reasonably necessary for maintaining or enforcing FINOVA's security
interest.
5.2 Reporting Requirements. Borrower shall furnish FINOVA, upon request,
such information and statements as FINOVA shall request from time to time
regarding Borrower's business affairs, financial condition and the results
of its operations. Without limiting the generality of the foregoing,
Borrower shall provide FINOVA with (i) on or prior to the date set forth on
the Schedule, monthly unaudited financial statements with respect to the
prior month prepared on a basis consistent with such statements prepared in
prior months and otherwise in accordance with generally accepted accounting
principles, consistently applied; (ii) quarterly 10-Qs, annual 10-Ks and
all other public disclosure information as mandated by or delivered to the
United States Securities Exchange Commission ("SEC") concurrently with the
delivery thereof to the SEC, along with copies of all other publicly
released material information about Borrower, whether or not disclosure is
mandated by the SEC, promptly after release; and (iii) such certificates
relating to the foregoing as FINOVA may reasonably request. Borrower shall
promptly notify FINOVA in writing of the occurrence of any Event of Default
or the occurrence of any event which, with the passage of time or the
giving of notice, or both, would constitute an Event of Default.
6. INTENTIONALLY OMITTED.
7. PRINCIPAL PAYMENTS; PROCEEDS OF COLLATERAL.
7.1 Principal Payments. Principal and interest shall be payable as set
forth in the Secured Promissory Note. In addition, FINOVA shall have the
option of causing Borrower to repay the Loan, without premium, in an amount
equal to 50% of Borrower's Excess Cash Flow. Such Excess Cash Flow
prepayments shall be applied by FINOVA to the Loan in the inverse order of
maturity of payments. The Excess Cash Flow recapture amount shall be
determined and paid by Borrower concurrently with the delivery of
Borrower's monthly financial statement required pursuant to Section 5.2
hereof for the last month of the fiscal year. If the year-end audited
financial statements reflect a greater sum owing to FINOVA under this
Section 7.1, Borrower will pay such additional sum on demand.
7.2 Payments Without Deductions. Borrower shall pay principal, interest,
and all other amounts payable hereunder, or under any related agreement,
without any deduction whatsoever, including, but not limited to, any
deduction for any setoff or counterclaim.
7.3 Monthly Accountings. FINOVA shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by FINOVA), unless
Borrower notifies FINOVA in writing to the contrary within thirty (30) days
after each account is rendered, describing the nature of any alleged errors
or admissions.
8. POWER OF ATTORNEY.
Borrower appoints FINOVA and its designees as Borrower's attorney, with the
power, after the occurrence of any Event of Default, to notify the post
office authorities to change the address for delivery of Borrower's mail to
an address designated by FINOVA and to open and dispose of all mail
addressed to Borrower; and to do all other things FINOVA deems necessary or
desirable to carry out the terms of this Agreement. Borrower hereby
ratifies and approves all acts of such attorney. Neither FINOVA nor any of
its designees shall be liable for any acts or omissions nor for any error
of judgment or mistake of fact or law while acting as Borrower's attorney.
This power, being coupled with an interest, is irrevocable until the
Obligations have been fully satisfied and FINOVA's obligation to provide
loans hereunder shall have terminated.
9. RECEIVABLES.
9.1 Bona Fide Sale.
Borrower represents and warrants that each Receivable covers and shall
cover a bona fide sale or lease and delivery by it of goods or the
rendition by it of services in the ordinary course of its business, and
shall be for a liquidated amount.
10. EQUIPMENT.
Borrower shall keep and maintain the Collateral in good operating condition
and repair and make all necessary replacements thereto to maintain and
preserve the value and operating efficiency thereof at all times consistent
with Borrower's past practice, ordinary wear and tear
5
<PAGE>
excepted. Borrower shall not permit any item of Collateral to become a
fixture (other than a trade fixture) to real estate or an, accession to
other property.
11. OTHER LIENS; NO DISPOSITION OF COLLATERAL.
Borrower represents, warrants and covenants that (a) all Collateral is and
shall continue to be owned by it free and clear of all liens, claims and
encumbrances whatsoever (except for FlNOVA's security interest, Permitted
Encumbrances, and such other liens, claims and encumbrances as may be
permitted by FINOVA in its sole discretion from time to time in writing),
and (b) Borrower shall not, without FINOVA's prior written approval, sell,
encumber or dispose of or permit the sale, encumbrance or disposal of any
Collateral or any interest of Borrower therein; provided that Borrower may
sell or trade in equipment in an aggregate amount not in excess of $100,000
in any calendar year.
12. GENERAL REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants that:
12.1 Due Organization. It is a corporation duly organized, validly existing
and in good standing under the laws of the State set forth on the Schedule,
is qualified and authorized to do business and is in good standing in all
states in which such qualification and good standing are necessary in order
for it to conduct its business and own its property, and has all requisite
power and authority to conduct its business as presently conducted, to own
its property and to execute and deliver each of the Loan Documents to which
it is a party and perform all of its Obligations thereunder, and has not
taken any steps to wind-up, dissolve or otherwise liquidate its assets;
12.2 Other Names. Borrower has not, during the preceding five (5) years,
been known by or used any other corporate or fictitious name except as set
forth on the Schedule, nor has Borrower been the surviving corporation of a
merger or consolidation or acquired all or substantially all of the assets
of any person during such time, other than the 1995 mergers of Circuit
Technology, Inc. and Praegitzer Design, Inc. into Borrower and the 1996
mergers of Praegitzer Property Group and Trend Circuits, Inc. into
Borrower;
12.3 Due Authorization. The execution, delivery and performance by Borrower
of the Loan Documents to which it is a party have been authorized by all
necessary corporate action and do not and shall not constitute a violation
of any applicable law or of Borrower's Articles or Certificate of
Incorporation or By-Laws or any other document, agreement or instrument to
which Borrower is a party or by which Borrower or its assets are bound;
12.4 Binding Obligation. Each of the Loan Documents to which Borrower is a
party is the legal, valid and binding obligation of Borrower enforceable
against Borrower in accordance with its terms;
12.5 Intangible Property. Borrower possesses adequate assets, licenses,
patents, patent applications, copyrights, trademarks, trademark
applications and trade names for the present and planned future conduct of
its business without any known conflict with the rights of others, and each
is valid and has been duly registered or filed with the appropriate
governmental authorities;
12.6 Capital. Borrower has capital sufficient to conduct its business, is
able to pay its debts as they mature and owns property having a fair
salable value greater than the amount required to pay all of its debts
(including contingent debts);
12.7 Material Litigation. Borrower has no pending or overtly threatened
litigation, actions or proceedings which would materially and adversely
affect its [Remainder of this page intentionally left blank]
6
<PAGE>
business, assets, operations, prospects or condition, financial or
otherwise, or the Collateral or any of FINOVA's interests therein;
12.8 Title; Security Interests of FINOVA. Borrower has good, indefeasible
and merchantable title to the Collateral and, upon the filing of UCC-1
Financing Statements in the appropriate offices, this Agreement and such
documents shall create valid and perfected first priority liens in the
Collateral, subject only to Permitted Encumbrances;
12.9 Restrictive Agreements; Labor Contracts. Borrower is not a party or
subject to any contract or subject to any charge, corporate restriction,
judgment, decree or order materially and adversely affecting its business,
assets, operations, prospects or condition, financial or otherwise, or
which restricts its right or ability to incur Indebtedness, and it is not
party to any labor dispute. In addition, no labor contract is scheduled to
expire during the Initial Term of this Agreement, except as disclosed to
FINOVA in writing prior to the date hereof;
12.10 Laws. Borrower is not in violation of any applicable statute,
regulation, ordinance or any order of any court, tribunal or governmental
agency, in any respect materially and adversely affecting the Collateral or
its business, assets, operations, prospects or condition, financial or
otherwise;
12.11 Consents. Borrower has obtained or caused to be obtained or issued
any required consent of a governmental agency or other Person in connection
with the financing contemplated hereby;
12.12 Defaults. Borrower is not in default with respect to any note,
indenture, loan agreement, mortgage, lease, deed or other agreement to
which it is a party or by which it or its assets are bound, nor has any
event occurred which, with the giving of notice or the lapse of time, or
both, would cause such a default;
12.13 Financial Condition. The Prepared Financials fairly present
Borrower's financial condition and results of operations and those of such
other Persons described therein as of the date thereof; there are no
material omissions from the Prepared Financials or other facts or
circumstances not reflected in the Prepared Financials; and there has been
no material and adverse change in such financial condition or operations
since the date of the initial Prepared Financials delivered to FINOVA
hereunder;
12.14 ERISA. None of Borrower, any ERISA Affiliate, or any Plan is or has
been in violation of any of the provisions of ERISA, any of the
qualification requirements of IRC Section 401(a) or any of the published
interpretations thereunder, nor has Borrower or any ERISA Affiliate
received any notice to such effect. No notice of intent to terminate a Plan
has been filed under Section 4041 of ERISA, nor has any Plan been
terminated under ERISA. The PBGC has not instituted proceedings to
terminate, or appointed a trustee to administer, a Plan. No lien upon the
assets of Borrower has arisen with respect to a Plan. No prohibited
transaction or Reportable Event has occurred with respect to a Plan.
Neither Borrower nor any ERISA Affiliate has incurred any withdrawal
liability with respect to any Multiemployer Plan. Borrower and each ERISA
Affiliate have made all contributions required to be made by them to any
Plan or Multiemployer Plan when due. There is no accumulated funding
deficiency in any Plan, whether or not waived;
12.15 Taxes. Borrower has filed all tax returns and such other reports as
it is required by law to file and has paid or made adequate provision for
the payment on or prior to the date when due of all taxes, assessments and
similar charges that are due and payable;
12.16 Locations. Borrower's chief executive office and the offices and
locations where it keeps the Collateral are at the locations set forth on
the Schedule, except to the extent that such locations may have been
changed after notice to FINOVA in accordance with Section 13.5 below;
12.17 Business Relationships. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change
in, the business relationship between Borrower and any customer or any
group of customers whose purchases individually or in the aggregate are
material to the business of Borrower, or with any material supplier, and
there exists no present condition or state of facts or circumstances which
would materially and adversely affect Borrower or prevent Borrower from
conducting such business after the consummation of the transactions
contemplated by this Agreement in substantially the same manner in which it
has heretofore been conducted; and
13. AFFIRMATIVE COVENANTS.
Borrower covenants that, so long as any Obligation remains outstanding and
this Agreement is in effect, it shall:
7
<PAGE>
13.1 Expenses. Promptly reimburse FINOVA for all reasonable costs, fees and
expenses incurred by FINOVA in connection with the negotiation,
preparation, execution, delivery, administration and enforcement of each of
the Loan Documents, including, but not limited to, the attorneys' and
paralegals' fees of in-house and outside counsel, expert witness fees,
lien, title search and insurance fees, appraisal fees, all charges and
expenses incurred in connection with any and all environmental reports and
environmental remediation activities, and all other costs, expenses, taxes
and filing or recording fees payable in connection with the transactions
contemplated by this Agreement, including without limitation all such
costs, fees and expenses as FINOVA shall incur or for which FINOVA shall
become obligated in connection with (i) any inspection or verification of
the Collateral, (ii) any proceeding relating to the Loan Documents or the
Collateral, (iii) actions taken with respect to the Collateral and FINOVA's
security interest therein, including, without limitation, the defense or
prosecution of any action involving FINOVA and Borrower or any third party,
(iv) enforcement of any of FINOVA's rights and remedies with respect to the
Obligations or Collateral, and (v) consultation with FINOVA's attorneys and
participation in any workout, bankruptcy or other insolvency or other
proceeding involving any Loan Party or any Affiliate, whether or not suit
is filed. Borrower shall also pay all FINOVA charges in connection with
bank wire transfers, forwarding of loan proceeds, deposits of checks and
other items of payment, returned checks, and all other bank and
administrative matters, in accordance with FINOVA's schedule of bank and
administrative fees and charges in effect from time to time;
13.2 Taxes. File all tax returns and pay or make adequate provision for the
payment of all taxes, assessments and other charges on or prior to the date
when due;
13.3 Notice of Litigation. Promptly notify FINOVA in writing of any
litigation, suit or administrative proceeding which may materially and
adversely affect the Collateral or Borrower's business, assets, operations,
prospects or condition, financial or otherwise, whether or not the claim is
covered by insurance;
13.4 ERISA. Notify FINOVA in writing (i) promptly upon the occurrence of
any event described in Paragraph 4043 of ERISA, other than a termination,
partial termination or merger of a Plan or a transfer of a Plan's assets
and (ii) prior to any termination, partial termination or merger of a Plan
or a transfer of a Plan's assets;
13.5 Change in Location. Notify FINOVA in writing forty-five (45) days
prior to any change in the location of Borrower's chief executive office or
the location of any Collateral, or Borrower's opening or closing of any
other place of business;
13.6 Corporate Existence. Maintain its corporate existence and its
qualification to do business and good standing in all states necessary for
the conduct of its business and the ownership of its property and maintain
adequate assets, licenses, patents, copyrights, trademarks and trade names
for the conduct of its business;
13.7 Labor Disputes. Promptly notify FINOVA in writing of any labor dispute
to which Borrower is or may become subject and the expiration of any labor
contract to which Borrower is a party or bound;
13.8 Violations of Law. Promptly notify FINOVA in writing of any violation
of any law, statute, regulation or ordinance of any governmental entity, or
of any agency thereof, applicable to Borrower which may materially and
adversely affect the Collateral or Borrower's business, assets, prospects,
operations or condition, financial or otherwise;
13.9 Defaults. Notify FINOVA in writing within five (5) Business Days of
Borrower's default under any note, indenture, loan agreement, mortgage,
lease or other agreement to which Borrower is a party or by which Borrower
is bound, or of any other default under any Indebtedness of Borrower;
13.10 Capital Expenditures. Promptly notify FINOVA in writing of the making
of any Capital Expenditure materially affecting Borrower's business,
assets, prospects, operations or condition, financial or otherwise;
13.11 Books and Records. Keep adequate records and books of account with
respect to its business activities in which proper entries are made in
accordance with generally accepted accounting principles consistently
applied, reflecting all of its financial transactions;
13.12 Leases; Warehouse Agreements. Provide FINOVA with (i) copies of all
agreements between Borrower and any landlord or warehouseman which
8
<PAGE>
owns any premises at which any Collateral may, from time to time, be
located, and (ii) without limiting the landlord and mortgagee waivers to be
provided pursuant to Section 2(j) above, landlord and mortgagee waivers in
form acceptable to FINOVA with respect to all locations where any
Collateral is hereafter located;
13.13 Additional Documents. At FINOVA's request, promptly execute or cause
to be executed and delivered to FINOVA any and all documents, instruments
or agreements reasonably deemed necessary by FINOVA to facilitate the
collection of the Obligations or the Collateral or otherwise to give effect
to or carry out the terms or intent of this Agreement or any of the other
Loan Documents; and
13.14 Financial Covenants. Comply with the financial covenants set forth on
the Schedule.
14. NEGATIVE COVENANTS.
Without FINOVA's prior written consent, which consent FlNOVA may withhold
in its sole discretion, so long as any Obligation remains outstanding and
this Agreement is in effect, Borrower shall not:
14.1 Mergers. Make any material change in its capital structure or in its
business or operations which might adversely affect the repayment of the
Obligations; provided, however, that Borrower may acquire the stock or
assets of another Person, and may merge with another Person (so long as
Borrower is the surviving entity of such merger) if (i) no Event of Default
has occurred and is then continuing or would be caused by such acquisition
or merger, and (ii) neither the perfection nor the priority of FINOVA's
liens and security interests in the Collateral would be impaired by such
acquisition or merger;
14.2 Loans. Make advances, loans or extensions of credit to, or invest in,
any Person, except for trade credit extended by Borrower in the normal
course of its business and loans to employees of Borrower not exceeding
$50,000 outstanding in the aggregate at any time;
14.3 Movement of Collateral. Except as otherwise expressly permitted in
this Agreement, move or permit the movement of any of the Collateral from
44358 Old Warm Springs Blvd., Fremont, California.
14.4 Adverse Transactions. Enter into any transaction which materially and
adversely affects the Collateral or Borrower's ability to repay the
Obligations in full as and when due;
14.5 Indebtedness of Others. Become directly or contingently liable for the
Indebtedness of any Person, except by endorsement of instruments for
deposit and except in connection with acquisitions otherwise permitted by
Section 14.1 hereof (provided that the Indebtedness incurred does not
exceed the fair value of the assets acquired);
14.6 intentionally Omitted.
14.7 Intentionally Omitted.
14.8 Intentionally Omitted.
14.9 Intentionally Omitted.
14.10 Intentionally Omitted.
14.11 Intentionally Omitted.
14.12 Affiliate Transactions. During the continuation of an Event of
Default, except as set forth below, sell, transfer, distribute or pay any
money or property to any Affiliate, or invest in (by capital contribution
or otherwise) or purchase or repurchase any stock or Indebtedness, or any
property, of any Affiliate, or become liable on any guaranty of the
indebtedness, dividends or other obligations of any Affiliate.
Notwithstanding the foregoing, Borrower may during the continuation of an
Event of Default pay reasonable compensation to employees who are
Affiliates and Borrower may engage in transactions with Affiliates in the
normal course of business, in amounts and upon terms which are fully
disclosed to FINOVA and which are no less favorable to Borrower than would
be obtainable in a comparable arm's length transaction with a Person who is
not an Affiliate;
14.13 Nature of Business. Enter into any new business or make any material
change in any of Borrower's business objectives, purposes or operations;
14.14 FINOVA's Name. Use the name of FINOVA in connection with any of
Borrower's business or activities, except in connection with internal
business matters or as required in dealings with governmental agencies and
financial institutions or with trade creditors of Borrower, solely for
credit reference purposes; or
9
<PAGE>
14.15 Margin security. Own, purchase or acquire (or enter into any contract
to purchase or acquire) any "margin security" as defined by any regulation
of the Federal Reserve Board as now in effect or as the same may hereafter
be in effect.
15. ENVIRONMENTAL MATTERS.
15.1 Definitions. The following definitions apply to the provisions of this
Section 15:
(a) the term "Applicable Law" shall include, but shall not be limited to,
each statute named or referred to in this Section 15.1 and all rules and
regulations thereunder, and any other local, state and/or federal laws,
rules, regulations or ordinances, whether currently in existence or
hereafter enacted, which govern, to the extent applicable to the Property
or to Borrower, (i) the existence, cleanup and/or remedy of contamination
on real property; (ii) the protection of the environment from soil, air or
water pollution, or from spilled, deposited or otherwise emplaced
contamination; (iii) the emission or discharge of hazardous substances into
the environment; (iv) the control of hazardous wastes; or (v) the use,
generation, transport, treatment, removal or recovery of Hazardous
Substances; provided, however, that "Applicable Law" for purposes of a
Property outside the State of California shall mean any Federal, state or
local law, rule, regulation or ordinance now or hereafter in effect in or
applicable to properties situated in such state.
(b) The term "Hazardous Substance" shall mean (i) any oil, flammable
substance, explosives, radioactive materials, hazardous wastes or
substances, toxic wastes or substances or any other wastes, materials or
pollutants which either pose a hazard to the Property or to persons on or
about the Property or cause the Property to be in violation of any
Applicable Law; (ii) asbestos in any form which is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment which
contain dielectric fluid containing levels of polychlorinated biphenyls, or
radon gas; (iii) any chemical, material or substance defined as or included
in the definition of "hazardous substances, " "waste," hazardous wastes,"
"hazardous materials," "extremely hazardous waste," "restricted hazardous
waste," or "toxic substances" or words of similar import under any
Applicable Law, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 USC
ss. 9601 et seq .; the Resource Conservation and Recovery Act ("RCRA"),
42 USC ss. 6901 et seq.; the Hazardous Materials Transportation Act, 49
USC ss. 1801 et seq.; the Federal Water Pollution Control Act, 33 USC
ss. 1251 et seq.; the California Hazardous Waste Control Law ("HWCL"),
Cal. Health & Safety ss. 25100 et seq.; the Underground Storage of
Hazardous Substances Act (Cal. Health & Safety ss. 25280 et seq.;
Hazardous Substance Account Act ("HSAA"), Cal. Health & Safety Code ss.
25300 et seq.; the Porter-Cologne Water Quality Control Act (the
"Porter-Cologne Act"), Cal. Water Code ss. 13000 et seq.; the Safe
Drinking Water and Toxic Enforcement Act of 1986 (Proposition 65); Title 22
of the California Code of Regulations, Division 4, Chapter 30; (iv) any
other chemical, material or substance, exposure to which is prohibited,
limited or regulated by any governmental authority which may or could pose
a hazard to the health or safety of the occupants of the Property or the
owners and/or occupants of property adjacent to or surrounding the
Property, or any other person coming upon the Property or adjacent
property; and (v) any other chemical, materials or substance which may or
could pose a hazard to the environment; and
(c) the term "Property" shall mean all real property, wherever located, in
which Borrower or any Affiliate of Borrower has any right, title or
interest, whether now existing or hereafter arising, and including, without
Iimitation, as owner, lessor or lessee.
15.2 Covenants and Representations.
(a) Borrower represents and warrants that there have not been during the
period of Borrower's possession of any interest in the Property and, to the
best of its knowledge after reasonable inquiry, there have not been at any
other times, any activities on the Property involving, directly or
indirectly, the use, generation, treatment, storage or disposal of any
Hazardous Substances except in compliance with Applicable Law, as described
in the Disclosure Schedule provided to FINOVA by Borrower, or de minimis
amounts of Hazardous Substances (i) under, on or in the land included in
the Property, whether contained in soil, tanks, bumps, ponds, lagoons,
barrels, cans or other containment, structures or equipment, (ii)
incorporated in the buildings, structures or improvements included in the
Property, including any building material containing asbestos, or (iii)
used in connection with any operations on or in the Property.
(b) Without limiting the generality of the foregoing and to the extent not
included within the scope of this
10
<PAGE>
Section 15.2, Borrower represents and warrants that it is in material
compliance with Applicable Law and has received no notice from any person
or any governmental agency or other entity of any violation by Borrower or
its Affiliates of any Applicable Law.
(c) Borrower shall be solely responsible for and agrees to indemnify
FINOVA, protect and defend FINOVA with counsel reasonably acceptable to
FINOVA, and hold FINOVA harmless from and against any claims, actions,
administrative proceedings, judgments, damages, punitive damages,
penalties, fines, costs, liabilities (including sums paid in settlements of
claims), interest or losses, reasonable attorneys' fees (including any fees
and expenses incurred in enforcing this indemnity), reasonable consultant
fees, reasonable expert fees, and other reasonable out-of-pocket costs or
expenses actually incurred by FINOVA (collectively, the "Environmental
Cost"), that may, at any time or from time to time, arise directly or
indirectly from or in connection with: (i) the presence, suspected
presence, release or suspected release of any Hazardous Substance whether
into the air, soil, surface water or groundwater of or at the Property, or
any other violation of Applicable Law, or (ii) any breach of the foregoing
representations and covenants; except to the extent any of the foregoing
result from the actions of FINOVA, its employees, agents and
representatives. All Environmental Costs incurred or advanced by FINOVA
shall be deemed to be made by FINOVA in good faith and shall constitute
Obligations hereunder.
16. TERM; TERMINATION.
16.1 Term. The initial term of this Agreement shall be as set forth on the
Schedule (the "Initial Term"), unless earlier terminated as provided
herein.
16.2 Intentionally Omitted.
16.3 Payment in Full. Upon the effective date of termination, the
Obligations shall become immediately due and payable in full in cash.
16.4 Early Termination: Termination Fee.
Borrower may terminate this Agreement at any time but only upon sixty (60)
days' prior written notice and prepayment of the Obligations. Upon any such
early termination by Borrower, any partial prepayment of the Obligations by
Borrower, or any termination of this Agreement by FINOVA upon the
occurrence of an Event of Default, then, and in any such event, Borrower
shall pay to FINOVA, except as specifically provided herein, upon the
effective date of such termination a fee (the "Termination Fee") in an
amount equal to the amount shown on the Schedule.
17. DEFAULT.
17.1 Events of Default. Any one or more of the following events shall
constitute an Event of Default under this Agreement:
(a) Borrower fails to pay when due and payable any portion of the
Obligations; provided that not more than two (2) times in any calendar year
FINOVA shall give Borrower written notice of Borrower's non-payment, and
Borrower shall have ten (10) days from the date of such notice to make such
payment;
(b) Borrower or any other Loan Party fails or neglects to perform, keep, or
observe any Obligation including, but not limited to, any term, provision,
condition, covenant or agreement contained in any Loan Document to which
Borrower or such other Loan Party is a party;
(c) Any material adverse change occurs in Borrower's business, assets,
operations, prospects or condition, financial or otherwise;
(d) The prospect of repayment of any portion of the Obligations or the
value or priority of FINOVA's security interest in the Collateral is
materially impaired;
(e) Any material portion of Borrower's assets is seized, attached,
subjected to a writ or distress warrant, is levied upon or comes into the
possession of any judicial officer;
(f) Borrower shall generally not pay its debts as they become due or shall
enter into any agreement (whether written or oral), or offer to enter into
any agreement, with all or a significant number of its creditors regarding
any moratorium or other indulgence with respect to its debts or the
participation of such creditors or their representatives in the
supervision, management or control of the business of Borrower;
(g) Any bankruptcy or other insolvency proceeding is commenced by Borrower,
or any such proceeding is commenced against Borrower and remains
undischarged or unstayed for forty-five (45) days;
11
<PAGE>
(h) Any notice of lien, levy or assessment is filed of record with respect
to any of Borrower's assets, in excess of $50,000 and is not discharged
within thirty (30) days, so long as during such 30-day period the priority
of FINOVA's security interest in the Collateral is not impaired;
(i) Any judgments are entered against Borrower in an aggregate amount
exceeding $50,000 and are not discharged within thirty (30) days, so long
as during such 30-day period the priority of FINOVA's security interest in
the Collateral is not impaired;
(1) Any default shall occur under any agreement between Borrower and any
third party if such default would result in a right by such third party to
accelerate the maturity of Indebtedness in excess of $250,000 of Borrower
to such third party, or any default under any agreement entered into after
the date hereof between Borrower and any third party not affecting or
encumbering assets owned by Borrower as of the Closing Date, if such
default would result in a right by such third party to accelerate the
maturity of Indebtedness in excess of $500,000 of Borrower to such third
party.
(k) Any representation or warranty made or deemed to be made by Borrower,
any Affiliate or any other Loan Party in any Loan Document or any other
statement, document or report made or delivered to FINOVA in connection
therewith shall prove to have been misleading in any material respect;
(l) Any Prohibited Transaction or Reportable Event shall occur with respect
to a Plan which could have a material adverse effect on the financial
condition of Borrower; any lien upon the assets of Borrower in connection
with any Plan shall arise and is not discharged within thirty (30) days, so
long as during such 30-day period the priority of FINOVA's security
interest in the Collateral is not impaired; Borrower or any of its ERISA
Affiliates shall fail to make full payment when due of all amounts which
Borrower or any of its ERISA Affiliates may be required to pay to any Plan
or any Multiemployer Plan as one or more contributions thereto; Borrower or
any of its ERISA Affiliates creates or permits the creation of any
accumulated funding deficiency, whether or not waived; or
(m) There shall be a change in the beneficial ownership and control,
directly or indirectly, of the majority of the outstanding voting
securities or other interests entitled (without regard to the occurrence of
any contingency) to elect or appoint members of the board of directors or
other managing body of Borrower other than any such change as the result of
the death or disability of Robert L. Praegitzer or Sally E. Praegitzer, or
as the result of a transfer for estate planning purposes of any shares of
Borrower owned by Robert L. Praegitzer or Sally E. Praegitzer to a trust
for the benefit of his or her heirs, provided that except for death or
disability, Robert L. Praegitzer shall continue to control the voting of
the shares in the trust.
17.2 Remedies. Upon the occurrence of an Event of Default, FINOVA may, at
its option and in its sole discretion and in addition to all of its other
rights under the Loan Documents, terminate this Agreement and declare all
of the Obligations to be immediately payable in full. FINOVA shall also
have all of its rights and remedies under applicable law, including,
without limitation, the default rights and remedies of a secured party
under the Code. Further, FINOVA may, at any time, take possession of the
Collateral and keep it on Borrower's premises, at no cost to FINOVA, or
remove any part of it to such other place(s) as FINOVA may desire, or
Borrower shall, upon FINOVA's demand, at Borrower's sole cost, assemble the
Collateral and make it available to FINOVA at a place reasonably convenient
to FINOVA. FINOVA may sell and deliver any Collateral at public or private
sales, for cash, upon credit or otherwise, at such prices and upon such
terms as FINOVA deems advisable, at FINOVA's discretion, and may, if FINOVA
deems it reasonable, postpone or adjourn any sale of the Collateral by an
announcement at the time and place of sale or of such postponed or
adjourned sale without giving a new notice of sale. Borrower agrees that
FINOVA has no obligation to preserve rights to the Collateral or marshall
any Collateral for the benefit of any Person. FINOVA is hereby granted a
license or other right to use, without charge, Borrower's labels, patents,
copyrights, name, trade secrets, trade names, trademarks and advertising
matter, or any similar property, in advertising or selling any Collateral
and Borrower's rights under all licenses and all franchise agreements shall
inure to FINOVA's benefit. Any requirement of reasonable notice shall be
met if such notice is mailed postage prepaid to Borrower at its address set
forth in the heading to this Agreement at least five (5) days before sale
or other disposition. The proceeds of sale shall be applied, first, to all
attorneys fees and other expenses of sale, and second, to the Obligations
in such order as FINOVA shall elect, in its sole discretion. FINOVA shall
return any excess to Borrower or deliver such excess to such other Person
as directed by a court of competent jurisdiction, and
12
<PAGE>
Borrower shall remain liable for any deficiency to the fullest extent
permitted by law.
17.3 Standards for Determining Commercial Reasonableness. Borrower and
FINOVA agree that the following conduct by FINOVA with respect to any
disposition of Collateral shall conclusively be deemed commercially
reasonable (but other conduct by FINOVA, including, but not limited to,
FINOVA's use in its sole discretion of other or different times, places and
manners of noticing and conducting any disposition of Collateral shall not
be deemed unreasonable): Any public or private disposition: (i) as to which
on no later than the fifth calendar day prior thereto written notice
thereof is mailed or personally delivered to Borrower and, with respect to
any public disposition, on no later than the fifth calendar day prior
thereto notice thereof describing in general non-specific terms, the
Collateral to be disposed of is published once in a newspaper of general
circulation in the county where the sale is to be conducted (provided that
no notice of any public or private disposition need be given to the
Borrower or published if the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market); (ii) which is conducted at any place designated by FINOVA, with or
without the Collateral being present; and (iii) which commences at any time
between 8:00 a.m. and 5:00 p.m.
18. DEFINITIONS.
18.1 Defined Terms. As used in this Agreement, the following terms have the
definitions set forth below:
"Affiliate" means any Person controlling, controlled by or under common
control with Borrower. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause
direction of the management and policies of any Person, whether through
ownership of common or preferred stock or other equity interests, by
contract or otherwise. Without limiting the generality of the foregoing,
each of the following shall be an Affiliate: any officer, director,
employee or other agent of Borrower, any shareholder owning 15% or more of
the voting stock of Borrower (a "Material Shareholder") or any subsidiary
of Borrower, and any other Person with whom or which Borrower has common
Material Shareholders, officers or directors.
"Business Day" means any day on which commercial banks in both Los Angeles,
California and Phoenix, Arizona are open for business.
"Capital Expenditure" means all expenditures made and liabilities incurred
for the acquisition of any fixed asset or improvement, replacement,
substitution or addition thereto which has a useful life of more than one
year and including, without limitation, those arising in connection with
Capital Leases.
"Capital Lease" means any lease of property by Borrower that, in accordance
with generally accepted accounting principles, should be capitalized for
financial reporting purposes and reflected as a liability on the balance
sheet of Borrower.
"Closing Date" means the date of the initial advance made by FINOVA
pursuant to this Agreement.
"Code" means the Uniform Commercial Code as adopted and in effect in the
State of Arizona from time to time.
"Collateral" has the meaning set forth in Section 4.1 above.
"EBITDA" for any fiscal year means net income of Borrower as calculated in
accordance with generally accepted accounting principles, consistently
applied plus (to the extent deducted in determining net income) interest
expense incurred, federal and state income taxes accrued (whether paid or
unpaid), depreciation and amortization expense.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"ERISA Affiliate" means each trade or business (whether or not incorporated
and whether or not foreign) which is or may hereafter become a member of a
group of which Borrower is a member and which is treated as a single
employer under ERISA Section 4001(b)(1), or IRC Section 414.
"Event of Default" means any of the events set forth in Section 17.1 of
this Agreement.
"Excess Cash Flow" for any fiscal year of Borrower means EBITDA less the
sum of Capital Expenditures except to the extent financed with any Person
other than FINOVA, federal and state income taxes (paid in cash), interest
expense, principal payments paid to FINOVA
13
<PAGE>
(other than a cash sweep pursuant to Section 7.1), other term Indebtedness
and payments made under capitalized leases; Provided, however, any
prepayments of term Indebtedness (other than to FINOVA) or capitalized
leases shall only be deducted for purposes of this definition to the extent
Excess Cash Flow shall not be reduced to less than $2,000,000.
"Indebtedness" means all of Borrower's present and future obligations,
liabilities, debts, claims and indebtedness, contingent, fixed or
otherwise, however evidenced, created, incurred, acquired, owing or
arising, whether under written or oral agreement, operation of law or
otherwise, and includes, without limiting the foregoing (i) the
Obligations, (ii) obligations and liabilities of any Person secured by a
lien, claim, encumbrance or security interest upon property owned by
Borrower, even though Borrower has not assumed or become liable therefor,
(iii) obligations and liabilities created or arising under any lease
(including Capital Leases) or conditional sales contract or other title
retention agreement with respect to property used or acquired by Borrower,
even though the rights and remedies of the lessor, seller or lender are
limited to repossession, (iv) all unfunded pension fund obligations and
liabilities and (v) deferred taxes.
"Initial Term" has the meaning set forth on the Schedule.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Loan" has the meaning set forth in Section 1.1 hereof.
"Loan Documents" means, collectively, this Agreement, any note or notes
executed by Borrower and payable to FINOVA, and any other agreement entered
into in connection with this Agreement, together with all alterations,
amendments, changes, extensions, modifications, refinancings, refundings,
renewals, replacements, restatements, or supplements, of or to any of the
foregoing.
"Loan Party" means Borrower, each Subordinating Creditor and each other
party (other than FINOVA) to any Loan Document.
"Multiemployer Plan" means a "multiemployer plan" as defined in ERISA
Sections 3(37) or 4001(a)(3) or IRC Section 414(f) which covers employees
of Borrower or any ERISA Affiliate.
"Obligations" means all present and future loans, advances, debts,
liabilities, obligations, covenants, duties and indebtedness at any time
owing by Borrower to FINOVA, whether evidenced by this Agreement, any note
or other instrument or document, whether arising from an extension of
credit, opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including,
without limitation, those acquired by assignment and any participation by
FINOVA in Borrower's debts owing to others), absolute or contingent, due or
to become due, including, without limitation, all interest, charges,
expenses, fees, attorney's fees, expert witness fees, examination fees,
letter of credit fees, collateral monitoring fees, closing fees, facility
fees, Termination Fees, Minimum Interest Charges and any other sums
chargeable to Borrower hereunder or under any other agreement with FINOVA..
"Overlines" has the meaning set forth in Section 1.3 hereof.
"PBGC" means the Pension Benefit Guarantee Corporation.
"Permitted Encumbrance" means each of the liens, mortgages and other
security interests on the Collateral set forth on the Schedule and
incorporated herein by this reference.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other
entity.
"Plan" means any plan described in ERISA Section 3(2) maintained for
employees of Borrower or any ERISA Affiliate, other than a Multiemployer
Plan.
"Prepared Financial" means the balance sheets of Borrower as of the date
set forth in the Schedule, and as of each subsequent date on which audited
balance sheets are delivered to FINOVA from time to time hereunder, and the
related statements of operations, changes in stockholder's equity and
changes in cash flow for the periods ended on such dates.
"Prohibited Transaction" means any transaction described in Section 406 of
ERISA which is not exempt by reason of Section 408 of ERISA, and any
transaction
14
<PAGE>
described in Section 4975(c) of the IRC which is not exempt by reason of
Section 4975(c)(2) of the IRC.
"Reportable Event" means a reportable event described in Section 4043 of
ERISA or the regulations thereunder, a withdrawal from a Plan described in
Section 4063 of ERISA, or a cessation of operations described in Section
4068(f) of ERISA.
"Subordinated Debt" means liabilities of Borrower the repayment of which is
subordinated, to the payment and performance of the Obligations, pursuant
to a subordination agreement on FlNOVA's standard form.
"Subordinating Creditor" means the persons set forth on the Schedule.
"Total Facility" has the meaning set forth on the Schedule.
18.2 Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in
accordance with generally accepted accounting principles, consistently
applied. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings provided by the Code, to the extent such
terms are defined therein.
19. MISCELLANEOUS.
19.1 Recourse to Security; Certain Waivers. All Obligations shall be
payable by Borrower as provided for herein and, in full, at the termination
of this Agreement; recourse to security shall not be required at any time.
Borrower waives presentment and protest of any instrument and notice
thereof, notice of default and, to the extent permitted by applicable law,
all other notices to which Borrower might otherwise be entitled.
19.2 No Waiver by FINOVA. Neither FlNOVA's failure to exercise any right,
remedy or option under this Agreement, any supplement, the Loan Documents
or other agreement between FINOVA and Borrower nor any delay by FINOVA in
exercising the same shall operate as a waiver. No waiver by FINOVA shall be
effective unless in writing and then only to the extent stated. No waiver
by FINOVA shall affect its right to require strict performance of this
Agreement. FINOVA's rights and remedies shall be cumulative and not
exclusive.
19.3 Binding on Successor and Assigns. All terms, conditions, promises,
covenants, provisions and warranties shall inure to the benefit of and bind
FlNOVA's and Borrower's respective representatives, successors and assigns.
19.4 Serverability.. If any provision of this Agreement shall be prohibited
or invalid under applicable law, it shall be ineffective only to such
extent, without invalidating the remainder of this Agreement.
19.5 Amendments: Assignments. This Agreement may not be modified, altered
or amended, except by an agreement in writing signed by Borrower and
FINOVA. Borrower may not sell, assign or transfer any interest in this
Agreement or any other Loan Document, or any portion thereof, including,
without limitation, any of Borrower's rights, title, interests, remedies,
powers and duties hereunder or thereunder. Borrower hereby consents to
FlNOVA's participation, sale, assignment, transfer or other disposition, at
any time or times hereafter, of this Agreement and any of the other Loan
Documents, or of any portion hereof or thereof, including, without
limitation, F1NOVA's rights, title, interests, remedies, powers and duties
hereunder or thereunder. In connection therewith, FINOVA may disclose all
documents and information which FINOVA now or hereafter may have relating
to Borrower or Borrower's business. To the extent that FINOVA assigns its
rights and obligations hereunder to a third party, FINOVA shall thereafter
be released from such assigned obligations to Borrower and such assignment
shall effect a novation between Borrower and such third party.
19.6 Integration. This Agreement, together with the Schedule (which is a
part hereof) and the other Loan Documents, reflect the entire understanding
of the parties with respect to the transactions contemplated hereby.
19.7 Governing Law: Waivers. THIS AGREEMENT SHALL BE INTERPRETED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE CONFLICT OF LAWS RULES) OF
THE STATE OF ARIZONA GOVERNING CONTRACTS TO BE PERFORMED ENTIRELY WITHIN
SUCH STATE. BORROWER HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF MARICOPA, THE STATE OF
ARIZONA OR, AT THE SOLE OPTION OF FINOVA, IN ANY OTHER COURT IN WHICH
FINOVA SHALL INITIATE LEGAL OR EQUITABLE
15
<PAGE>
PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN
CONTROVERSY. BORROWER WAIVES ANY OBJECTION OF FORUM NON CONVENIENS AND
VENUE. BORROWER WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE IN THE MANNER SET FORTH
IN SECTION 19.13 HEREOF FOR THE GIVING OF NOTICE. BORROWER FURTHER WAIVES
ANY RIGHT IT MAY OTHERWISE HAVE TO COLLATERALLY ATTACK ANY JUDGMENT ENTERED
AGAINST IT.
19.8 Survival. All of the representations and warranties of Borrower
contained in this Agreement shall survive the execution, delivery and
acceptance of this Agreement by the parties. No termination of this
Agreement or of any guaranty of the Obligations shall affect or impair the
powers, obligations, duties, rights, representations, warranties or
liabilities of the parties hereto and all shall survive any such
termination.
19.9 Evidence of Obligations. Each Obligation may, in FINOVA's discretion,
be evidenced by notes or other instruments issued or made by Borrower to
FINOVA. If not so evidenced, such Obligation shall be evidenced solely by
entries upon FINOVA's books and records.
19.10 Collateral Security. The Obligations shall constitute one loan
secured by the Collateral. FINOVA may, in its sole discretion, (i)
exchange, enforce, waive or release any of the Collateral, (ii) apply
Collateral and direct the order or manner of sale thereof as it may
determine, and (iii) settle, compromise, collect or otherwise liquidate any
Collateral in any manner without affecting its right to take any other
action with respect to any other Collateral.
19.11 Application of Collateral. FINOVA shall have the continuing and
exclusive right to apply or reverse and re-apply any and all payments to
any portion of the Obligations. To the extent that Borrower makes a payment
or FINOVA receives any payment or proceeds of the Collateral for Borrower's
benefit which is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or any other party under any bankruptcy law, common
law or equitable cause, then, to such extent, the Obligations or part
thereof intended to be satisfied shall be revived and continue as if such
payment or proceeds had not been received by FINOVA.
19.12 Intentionally Omitted.
19.13 Notices. Any notice required hereunder shall be in writing and
addressed to the Borrower and FINOVA at their addresses set forth at the
beginning of this Agreement provided that a copy of any notice to FINOVA
shall also be sent as follows:
FINOVA Capital Corporation
1850 N. Central Ave
P.O. Box 2209
Phoenix, Arizona 85002
Attn: Joseph R. D'Amore Esq.
Notices hereunder shall be deemed received on the earlier of receipt,
whether by mail, personal delivery, facsimile, or otherwise, or upon
deposit in the United States mail, postage prepaid.
19.14 Brokerage Fees. Borrower represents and warrants to FINOVA that, with
respect to the financing transaction herein contemplated, no Person is
entitled to any brokerage fee or other commission and Borrower agrees to
indemnify and hold FINOVA harmless against any and all such claims.
19.15 Disclosure. No representation or warranty made by Borrower in this
Agreement, or in any financial statement, report, certificate or any other
document furnished in connection herewith contains any untrue statement of
a material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to
Borrower or which reasonably should be known to Borrower which Borrower has
not disclosed to FINOVA in writing with respect to the transactions
contemplated by this Agreement which materially and adversely affects the
business, assets, operations, prospects or condition (financial or
otherwise), of Borrower.
19.16 Publicity. FINOVA is hereby authorized to issue appropriate press
releases and to cause a tombstone to be published announcing the
consummation of this transaction and the aggregate amount thereof.
19.17 Captions. The Section titles contained in this Agreement are without
substantive meaning and are not part of this Agreement.
19.18 Injunctive Relief. Borrower recognizes that, in the event Borrower
fails to perform, observe or
16
<PAGE>
discharge any of its Obligations under this Agreement, any remedy at law
may prove to be inadequate relief to FINOVA. Therefore, FINOVA, if it so
requests, shall be entitled to temporary and permanent injunctive relief in
any such case without the necessity of proving actual damages.
19.19 Counterparts. This Agreement may be executed in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
19.20 Construction. The parties acknowledge that each party and its counsel
have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of this Agreement or any
amendments or exhibits hereto.
19.21 Time of Essence. Time is of the essence for the performance by
Borrower of the Obligations set forth in this Agreement.
19.22 Limitation of Actions. Borrower agrees that any claim or cause of
action by Borrower against FINOVA, or any of FINOVA's directors, officers,
employees, agents, accountants or attorneys, based upon, arising from, or
relating to this Agreement, or any other present or future agreement, or
any other transaction contemplated hereby or thereby or relating hereto or
thereto, or any other matter, cause or thing whatsoever, whether or not
relating hereto or thereto, occurred, done, omitted or suffered to be done
by FINOVA, or by FlNOVA's directors, officers, employees, agents,
accountants or attorneys, whether sounding in contract or in tort or
otherwise, shall be barred unless asserted by Borrower by the commencement
of an action or proceeding in a court of competent jurisdiction by the
filing of a complaint within one year after the first act, occurrence or
omission upon which such claim or cause of action, or any part thereof, is
based and service of a summons and complaint on an officer of FINOVA or
any other person authorized to accept service of process on behalf of
FINOVA, within 30 days thereafter. Borrower agrees that such one-year
period of time is a reasonable and sufficient time for Borrower to
investigate and act upon any such claim or cause of action. The one-year
period provided herein shall not be waived, tolled, or extended except by a
specific written agreement of FINOVA. This provision shall survive any
termination of this Loan Agreement or any other agreement.
19.23 Liability. Neither FINOVA nor any FINOVA Affiliate shall be liable
for any indirect, special, incidental or consequential damages in
connection with any breach of contract, tort or other wrong relating to
this Agreement or the Obligations or the establishment, administration or
collection thereof (including without limitation damages for loss of
profits, business interruption, or the like), whether such damages are
foreseeable or unforeseeable, even if FINOVA has been advised of the
possibility of such damages. Neither FINOVA, nor any FINOVA Affiliate shall
be liable for any claims, demands, losses or damages, of any kind
whatsoever, made, claimed, incurred or suffered by the Borrower through the
ordinary negligence of FINOVA, or any FINOVA Affiliate. "FINOVA Affiliate"
shall mean FINOVA's directors, officers, employees, agents, attorneys or
other person or entity affiliated with or representing FINOVA.
19.24 Notice of Breach by FINOVA. Borrower agrees to give FINOVA written
notice of (i) any action or inaction by FINOVA or any attorney of FINOVA in
connection with any Loan Documents that may be actionable against FINOVA or
any attorney of FINOVA or (ii) any defense to the payment of the
Obligations for any reason, including, but not limited to, commission of a
tort or violation of any contractual duty or duty implied by law. Borrower
agrees that unless such notice is fully given as promptly as possible (and
in any event within thirty (30) days) after the Chief Executive Officer,
Chief Financial Officer or any other senior officer of Borrower has
knowledge, or with the exercise of reasonable diligence should have had
knowledge, of any such action, inaction or defense, Borrower shall not
assert, and Borrower shall be deemed to have waived, any claim or defense
arising therefrom.
17
<PAGE>
19.25 MUTUAL WAIVER OF RIGHT TO JURY TRIAL. FINOVA AND BORROWER EACH
HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED
UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO: (i) THIS AGREEMENT; (ii)
ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN FINOVA AND
BORROWER; OR (iii) ANY CONDUCT, ACTS OR OMISSIONS OF FINOVA OR BORROWER OR
ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER
PERSONS AFFILIATED WITH FINOVA OR BORROWER; IN EACH OF THE FOREGOING CASES,
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
Borrower:
Tax Identification No.: 93-0790158
PRAEGITZER INDUSTRIES, INC.
By: /s/ Matthew Bergeron
--------------------------------
President or Vice President
/s/ Karen L. Harris (witness)
- -----------------------------------
Name: Karen L. Harris
FINOVA:
FINOVA CAPITAL CORPORATION
By /s/
---------------------------------
Title Vice President
18
<PAGE>
FINOVA
Schedule to
Loan and Security Agreement
Borrower: Praegitzer Industries, Inc.
Address: 1270 Monmouth Cutoff
Dallas, Oregon 97338
Date: September 19, 1996
This Schedule forms an integral part of the Loan and Security Agreement
between the above Borrower and FINOVA Capital Corporation dated the above
date, and all references herein and therein to "this Agreement" shall be
deemed to refer to said Agreement and to this Schedule.
TOTAL FACILITY (Section 1.1):
$4,614,800
LOANS (Section 1.2):
A term loan against the value of the Collateral in an aggregate outstanding
principal amount not to exceed Four Million Six Hundred Fourteen Thousand
Eight Hundred Dollars ($4,614,800); provided, that the Loan shall be on
such terms as are set forth on a separate promissory note (the "Secured
Promissory Note") of Borrower in form and substance satisfactory to FINOVA
in its sole discretion.
<PAGE>
CONDITIONS PRECEDENT (Section 2.1):
The obligation of FINOVA to make the Loan hereunder is subject to the
fulfillment, to the satisfaction of FINOVA and its counsel, of each of the
following conditions, in addition to the conditions set forth in Sections
2.1 and 2.2 above: (a) there shall have been no material adverse change in
the business, operations, profits or prospects of Borrower, or in the
condition of the assets of Borrower, between June 30, 1996 and the date
hereof. Borrower shall cause the conditions precedent set forth in Section
2.1 of this Agreement and set forth above in this Schedule to be satisfied
on or before September 30, 1996.
INTEREST AND FEES (Section 3.1):
Interest. Borrower shall pay FINOVA interest on the daily outstanding
balance of Borrower's loan account at a per annum rate equal to, at
Borrower's election not less than five (5) days prior to the Closing Date,
either (i) 1.0% in excess of the rate of interest announced publicly by
Citibank, N.A., from time to time as its "base rate" (or any successor
thereto), which may not be such institution's lowest rate (the "Base
Rate"), or (ii) the rate of interest on a United States treasury bond of
the same amount and term as the Loan, plus 3.5% (the "Treasury Option"), as
more fully set forth in the Secured Promissory Note of even date. If
Borrower elects an interest rate based upon the Base Rate, the interest
rate chargeable hereunder shall be increased or decreased, as the case may
be, without notice or demand of any kind, upon the announcement of any
change in the Base Rate. Each change in the Base Rate shall be
effective hereunder on the first day following the announcement of such
change, provided, that a cumulative change of less than one-fourth of one
percent (0.25 %) shall not be considered. The Treasury Option shall be a
fixed interest rate for the term of the Loan. Interest charges and all
other fees and charges herein shall be computed on the basis of a year of
360 days and actual days elapsed and shall be payable to FINOVA in arrears
on the first day of each month.
Collateral Monitoring Fee. At the closing of this transaction and on the
first day of each anniversary thereafter, Borrower shall pay FINOVA a
collateral monitoring fee of Twelve Thousand Five Hundred Dollars ($12,500)
which shall be deemed fully earned at the time of each payment.
Closing Fee. At the closing of this transaction, Borrower shall pay to
FINOVA a closing fee in an amount equal to one-half of one percent (0.50%)
of the amount of the Total Facility, which shall be deemed fully earned at
the time of payment.
REPORTING REQUIREMENTS (Section 5.2):
1. Borrower shall provide FINOVA with monthly unaudited financial
statements within thirty (30) days after the end of each month.
<PAGE>
2. Borrower shall provide FINOVA with annual operating budgets (including
income statements, balance sheets and cash flow statements, by month) for
the upcoming fiscal year of Borrower within ninety (90) days prior to the
end of each fiscal year of Borrower.
BORROWER INFORMATION:
Borrower's State of Incorporation (Section 12.1): Oregon
Fictitious Names/Prior Corporate Names (Section 12.2): Trend Circuits,
Praegitzer Design.
Borrower Locations (Section 12.16): 1270 Monmouth Cut-off
Dallas, Oregon 97338
(Chief Executive Office)
44358 Old Warm Springs
Bled. Fremont, CA 94538
(location of Collateral)
Permitted Encumbrances (Section 18.1): None other than
junior liens but
only to the extent
permitted by FINOVA
in writing.
FINANCIAL COVENANTS (Section 13.14):
Borrower shall comply with the debt to cash flow and minimum tangible net
worth covenants set forth in Borrower's loan agreement with Key Bank, a
copy of which is attached hereto as Exhibit B, and with any amendments to
such covenants provided that no waiver, forbearance or termination of
either or both such covenants by Key Bank shall be binding upon FINOVA.
TERM (Section 16.1):
The initial term of this Agreement shall be until September 1, 1999 (the
"Initial Term"), unless earlier terminated as provided in Section 16 or 17
above or elsewhere in this Agreement.
<PAGE>
TERMINATION FEE (Section 16.4):
The Termination Fee provided in Section 16.4 shall be an amount equal to
the following percentage of the amount prepaid average daily outstanding
balance of the Obligations for the 180-day period (or lesser period if
applicable) preceding the date of termination:
(i) three percent (3%), if such early termination occurs on or prior to the
first anniversary of this Agreement;
(ii) two percent (2%), if such early termination occurs after the first
anniversary of this Agreement, but on or prior to the second anniversary of
this Agreement;
(iii) one percent (1%), if such early termination occurs after the second
anniversary of this Agreement.
ADDITIONAL DEFINITIONS (Section 18.1):
"Prepared Financials" means the balance sheets of Borrower as of
June 30, 1996, and as of each subsequent date
on which audited balance sheets are delivered
to FINOVA from time to time hereunder, and
the related statements of operations, changes
in stockholder's equity and changes in cash
flow for the periods ended on such dates.
"Subordinating Creditor" means ( N/A)
<PAGE>
DISBURSEMENT (Section 19.12):
The Loan shall be wired to the following operating account of Borrower: Key
Bank Account No. 370211003451, ABA No. 123002011
Borrower: FINOVA:
PRAEGITZER INDUSTRIES, INC. FINOVA CAPITAL CORPORATION
By /s/ Matthew J Bergeron By /s/
------------------------------- -------------------------------
President or Vice President Vice President
/s/ Karen L Harris (Witness)
- -----------------------------------
Name
Karen L Harris
3
<PAGE>
FINOVA
SECURED PROMISSORY NOTE
$4,614,800 As of September 19, 1996
FOR VALUE RECEIVED, the undersigned, PRAEGlTZER INDUSTRIES, INC.,
an Oregon corporation, hereby promises to pay to FlNOVA CAPITAL CORPORATION
("FINOVA"), or order, at 355 South Grand Avenue, Suite 2400, Los Angeles,
California 90071, or at such other address as the holder may specify in
writing, the principal sum of Four Million Six Hundred Fourteen Thousand
Eight Hundred Dollars ($4,614,800) plus interest in the manner and upon the
terms and conditions set forth below. This Secured Promissory Note ("note")
is made pursuant to that certain Loan and Security Agreement of even date
between the undersigned and FINOVA (the "Agreement"), the provisions of
which are incorporated herein by this reference. Capitalized terms herein,
unless otherwise noted, shall have the meaning set forth in the Agreement.
1.0 Rate And Payment Of Interest.
1.1 The principal balance of this Note shall bear interest at a per
annum rate equal to either the "Fixed Rate" or the "Floating Rate" set
forth below, as elected by Borrower as of the Closing Date:
a. Fixed Rate. Three and one-half percent (3.50%) in excess of
the rate of interest, as quoted in The Wall Street Journal (or, if such
publication shall cease to publish such rate or shall cease to be
published, as quoted in another source selected and deemed reliable by
Lender) five (5) days prior to the Closing Date, payable on the United
State Treasury bonds that have a maturity closest to (but not extending
beyond) the date that is exactly three (3) years after the date of
determination; or
b. Floating Rate. One (1%) in excess of the reference (or
equivalent) rate of interest announced publicly by Citibank, N.A., New
York, New York, from time to time as its "base rate" (or any successor
thereto), which may not be such institution's lowest rate (the "Base
Rate"). The interest rate chargeable hereunder shall be increased or
decreased, as the case may be, without notice or demand of any [kind, upon
the announcement of any change in the Base Rate. Each change in the Base
Rate shall be effective hereunder on the first day following the
announcement of such change, provided, that a cumulative change of less
than one-fourth of one percent (0.25%) shall not be considered.
Interest charges and all other fees and charges herein shall be computed on
the basis of a year of 360 days and actual days elapsed and shall be
payable to FlNOVA in arrears on the first day of each month hereafter at
its address set forth above. Accrued but unpaid interest under this Note
shall be due and payable on the first day of each month, commencing October
1, 1996, and at maturity, on which date all interest remaining unpaid shall
be due and payable.
2.0 Schedule Of Principal and Interest Payments.
Principal and Interest under this Note shall be due and payable
in accordance with the schedule attached hereto as Schedule 1, and shall be
due and payable on the first Business Day of each calendar month,
commencing October 1, 1996. A final installment of all remaining principal,
accrued and unpaid interest and all other sums payable pursuant to the Loan
Documents shall be due and payable on September 1, 1999.
In addition to the foregoing, Borrower shall make the payments
based on its Excess Cash Flow as set forth in Section 7.1 of the Agreement.
<PAGE>
3.0 Prepayment.
Prepayment may be made under this Note in whole or in part,
subject to the Termination Fee, as applicable, as set forth in the
Agreement.
4.0 Holder's Right Of Acceleration.
If the Agreement is terminated for any reason whatsoever, or if
there shall occur an Event of Default or if this Note is not paid when due,
the entire remaining principal balance and all accrued and unpaid interest
and other fees and charges with respect to this Note shall, at FINOVA's
option, become immediately due and payable.
5.0 Holder's Rights Upon Default.
If any Event of Default occurs, then from the date such Event of
Default occurs until it is cured or waived in writing, in addition to any
agreed upon charges, the principal balance of this Note shall thereafter,
at FINOVA's option, bear interest at two (2.00) percentage points per annum
in addition to the rate set forth in Section 1 above, calculated over a
year of three hundred sixty (360) days.
6.0 Additional Rights Of Holder.
If any installment of principal or interest hereunder is not paid
when due, the holder shall have, in addition to the rights set forth
herein, in the Agreement and under law, the right to compound interest by
adding the unpaid interest to principal, with such amount thereafter
bearing interest at the rate provided in this Note.
7.0 General Provisions.
7.1 If this Note is not paid when due or upon the occurrence of
an Event of Default, the undersigned further promises to pay all costs of
collection, foreclosure fees, reasonable attorneys' fees and expert witness
fees incurred by the holder, whether or not suit is filed hereon, and the
fees, costs and expenses as provided in the Agreement.
7.2 The undersigned hereby consents to any and all renewals,
replacements and/or extensions of time for payment of this Note before, at
or after maturity.
7.3 The undersigned hereby consents to the acceptance, release or
substitution of security for this Note.
7.4 Presentment for payment, notice of dishonor, protest and
notice of protest are hereby expressly waived.
7.5 The contracted for rate of interest of the loan contemplated
hereby, without limitation, shall consist of the following: (i) the
interest rate set forth on the Schedule, calculated and applied to the
principal balance of this Note in accordance with the provisions of this
Note; (ii) interest after an Event of Default, calculated and applied to any
amounts due under this Note in accordance with the provisions hereof; and
(iii) all Additional Sums (as herein defined), if any. Borrower agrees to
pay an effective contracted for rate of interest which is the sum of the
above-referenced elements. All examination fees, attorneys fees, expert
witness fees, letter of credit fees, collateral monitoring fees, closing
fees, facility fees, Termination
2
<PAGE>
Fees, Minimum Interest Charges, other charges, goods, things in action or
any other sums or things of value paid or payable by Borrower
(collectively, the "Additional Sums"), whether pursuant to this Note, the
Agreement or any other documents or instruments in any way pertaining to
this lending transaction, or otherwise with respect to this lending
transaction, that under any applicable law may be deemed to be interest
with respect to this lending transaction, for the purpose of any applicable
law that may limit the maximum amount of interest to be charged with
respect to this lending transaction, shall be payable by Borrower as, and
shall be deemed to be, additional interest and for such purposes only, the
agreed upon and "contracted for rate of interest" of this lending
transaction shall be deemed to be increased by the rate of interest
resulting from the inclusion of the Additional Sums.
It is the intent of the parties to comply with the usury law of the State
of Arizona (the "Applicable Usury Law"). Accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Note, or in any of
the documents securing payment hereof or otherwise relating hereto, in no
event shall this Note or such documents require the payment or permit the
collection of interest in excess of the maximum contract rate permitted by
the Applicable Usury Law (the "Maximum Interest Rate.). In the event (a)
any such excess of interest otherwise would be contracted for, charged or
received from Borrower or otherwise in connection with the loan evidenced
hereby, (b) the maturity of the indebtedness evidenced by this Note is
accelerated in whole or in part, or (c) all or part of the principal or
interest of this Note shall be prepaid, so that under any of such
circumstances the amount of interest contracted for, shared or received in
connection with the loan evidenced hereby, would exceed the Maximum
Interest Rate, then in any such event (1) the provisions of this paragraph
shall govern and control, (2) neither Borrower nor any other person or
entity now or hereafter liable for the payment here of shall be obligated
to pay the amount of such interest to the extent that it is in excess of
the Maximum Interest Rate, (3) any such excess which may have been
collected shall be either applied as a credit against the then unpaid
principal amount hereof or refunded to Borrower, at FINOVA's option, and
(4) the effective rate of interest shall be automatically reduced to the
Maximum Interest Rate. It is further agreed, without limiting the
generality of the foregoing, that to the extent permitted by the Applicable
Usury Law; (x) all calculations of interest which are made for the purpose
of determining whether such rate would exceed the Maximum Interest Rate
shall be made by amortizing, prorating, allocating and spreading during the
period of the full stated term of the loan evidenced hereby, all interest
at any time contracted for, charged or received from Borrower or otherwise
in connection with such loan; and (y) in the event that the effective
rate of interest on the loan should at any time exceed the Maximum Interest
Rate, such excess interest that would otherwise have been collected had
there been no ceiling imposed by the Applicable Usury Law shall be paid to
FINOVA from time to time, if and when the effective interest rate on the
loan otherwise falls below the Maximum Interest Rate, to the extent that
interest paid to the date of calculation does not exceed the Maximum
Interest Rate, until the entire amount of interest which would otherwise
have been collected had there been no ceiling imposed by the Applicable
Usury Law has been paid in full. Borrower further agrees that should the
Maximum Interest Rate be increased at any time hereafter because of a
change in the Applicable Usury Law, then to the extent not prohibited by
the Applicable Usury Law, such increases shall apply to all indebtedness
evidenced hereby regardless of when incurred; but, again to the extent not
prohibited by the Applicable Usury Law, should the Maximum Interest Rate be
decreased because of a change in the Applicable Usury Law, such decreases
shall not apply to the indebtedness evidenced hereby regardless of when
incurred.
7.6 No delay or omission on the part of the holder of this Note in
exercising any right shall operate as a waiver thereof or of any other
right.
7.7 No waiver by the holder of this Note upon any one occasion shall
be effective unless in writing nor shall it be construed as a bar or waiver
of any right or remedy on any future occasion.
7.8 Time is of the essence for the performance by the undersigned of
the oblige ons set forth in this Note.
3
<PAGE>
7.9 Should any one or more of the provisions of this Note be
determined illegal or unenforceable, all other provisions shall
nevertheless remain effective.
7.10 This Note cannot be changed, modified, amended or terminated
orally.
7.11 This Note shall be governed by, construed and enforced in
accordance with the laws of the State of Arizona, without reference to the
principles of conflicts of laws thereof.
7.12 THE UNDERSIGNED HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS
NOTE, AND ACKNOWLEDGES THAT LENDER ALSO WAIVES SUCH RIGHT.
8.0 Security For This Note.
This Note is secured pursuant to the Agreement and is subject to all
of the terms and conditions thereof, including, but not limited to, the
remedies specified therein.
IN WITNESS WHEREOF, this Note has been executed and delivered as of
the date first set forth above.
PRAEGITZER INDUSTRIES, INC.
/s/
Its Senior Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 482
<SECURITIES> 0
<RECEIVABLES> 17,224
<ALLOWANCES> 544
<INVENTORY> 7,123
<CURRENT-ASSETS> 25,000
<PP&E> 55,651
<DEPRECIATION> 21,371
<TOTAL-ASSETS> 73,728
<CURRENT-LIABILITIES> 13,022
<BONDS> 24,769
0
0
<COMMON> 40,582
<OTHER-SE> (5,964)
<TOTAL-LIABILITY-AND-EQUITY> 73,728
<SALES> 29,449
<TOTAL-REVENUES> 29,449
<CGS> 24,363
<TOTAL-COSTS> 27,356
<OTHER-EXPENSES> 11,939
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 343
<INCOME-PRETAX> (10,088)
<INCOME-TAX> 585
<INCOME-CONTINUING> (10,673)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,673)
<EPS-PRIMARY> (.93)
<EPS-DILUTED> (.93)
</TABLE>
