SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
{x} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1998
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 its 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) 623-1000
(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 May 11, 1998: 12,750,214
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PRAEGITZER INDUSTRIES, INC.
Table of Contents
Page No.
--------
Part I Financial Information
Condensed Balance Sheet-
March 31, 1998 and June 30, 1997 ................................. 3
Condensed Statement of Operations-
Three months and nine months ended
March 31, 1998 and 1997 ............................... 4
Condensed Statement of Cash Flows-
Nine months ended March 31, 1998 and 1997 ........................ 5
Notes to Condensed Financial Statements .......................... 6
Management's Discussion and Analysis of Financial Condition
and Results of Operations ........................................ 9
Part II Other Information
Item 1 Legal Proceedings........................................11
Item 6 Exhibits and Reports on Form 8-K ........................11
Signatures.................................................................12
2
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PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
PRAEGITZER INDUSTRIES, INC.
CONDENSED BALANCE SHEET
(Unaudited)
(In Thousands)
ASSETS
March 31, June 30,
1998 1997
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 390 $ 442
Accounts receivable, net 26,880 24,453
Inventories 15,331 8,534
Prepaid expenses 1,409 1,083
------------ ------------
Total current assets 44,010 34,512
Property, plant and equipment 108,574 65,818
Less: Accumulated depreciation and amortization (29,742) (25,782)
------------ ------------
78,832 40,036
Other assets 13,549 12,738
------------ ------------
$ 136,391 $ 87,286
============ ============
LIABILITIES
CURRENT LIABILITIES
Bank overdraft $ 4,506 $ 2,042
Accounts payable 9,959 8,504
Accrued payroll and related expenses 4,003 2,879
Other current liabilities 1,199 491
Current portion of long-term obligations 4,642 3,565
------------ ------------
Total current liabilities 24,309 17,481
Long-term obligations 65,106 29,785
Deferred tax liability 2,899 2,306
Other liabilities 71 73
Common stock 42,324 41,233
Retained Earnings (accumulated deficit) 1,682 (3,592)
------------ ------------
Total shareholders' equity 44,006 37,641
------------ ------------
$ 136,391 $ 87,286
============ ============
The accompanying notes are an integral part of these condensed
financial statements.
</TABLE>
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<TABLE>
<CAPTION>
PRAEGITZER INDUSTRIES, INC.
CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
(In Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended
March 31, March 31,
---------------------------- -----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue $ 44,713 $ 38,303 $ 133,339 $ 102,542
Cost of sales 35,940 33,095 106,528 85,285
------------- ------------- ------------- -------------
Gross profit 8,773 5,208 26,811 17,257
Selling, general and
administrative expenses 5,394 5,258 17,166 13,334
Impairment and in-process technology
expense - - - 11,650
------------- ------------- ------------- -------------
Income (loss) from operations 3,379 (50) 9,645 (7,727)
Interest expense 837 606 2,288 1,596
Other income (expense) 3 (145) 166 331
------------- ------------- ------------- -------------
Income (loss) before income taxes 2,545 (801) 7,523 (8,992)
Income tax provision (benefit) 813 (255) 2,417 1,045
------------- ------------- ------------- -------------
Net income (loss) $ 1,732 $ (546) $ 5,106 $ (10,037)
============= ============= ============= =============
Basic and diluted net income (loss)
per share (Note 2) $ 0.14 $ (0.04) $ 0.40 $ (0.83)
============= ============= ============= =============
The accompanying notes are an integral part of these condensed
financial statements.
</TABLE>
4
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<TABLE>
<CAPTION>
PRAEGITZER INDUSTRIES, INC
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
(In Thousands)
Nine Months
Ended march 31,
-----------------------------
1998 1997
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net cash provided by operating activities $ 9,412 $ 439
Cash Flows from Investing Activities:
Capital expenditures (32,968) (17,335)
Proceeds from sale of property, plant and equipment 841 9,031
Business acquisitions (17,073) (6,356)
Other (171) 100
------------- -------------
Net cash used in investing activities (49,371) (14,560)
------------- -------------
Cash Flows from Financing Activities:
Increase in line of credit 17,901 13,602
Borrowings of long-term debt 21,298 11,814
Payments on long-term debt and capital leases (2,847) (12,583)
Increase in bank overdrafts 2,464 1,685
Issuances of common stock 1,091 231
------------- -------------
Net Cash provided by financing activities 39,907 14,749
------------- -------------
Increase (Decrease) in Cash and Cash Equivalents (52) 628
Cash and Cash Equivalents at Beginning of Period 442 39
------------- -------------
Cash and Cash Equivalents at End of Period $ 390 $ 667
============= =============
Supplemental disclosure of cash flow information: Cash paid during the
respective periods for:
Interest $ 2,526 $ 1,253
Income Taxes $ 1,987 $ 2,189
The accompanying notes are an integral part of these
condensed financial statements.
</TABLE>
5
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PRAEGITZER INDUSTRIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1: Basis of Presentation
In the opinion of management, the accompanying unaudited condensed
financial statements of Praegitzer Industries, Inc. (the "Company") contain all
adjustments necessary to present fairly the financial position of the Company as
of March 31, 1998, and the results of operations and cash flows for the three
months ended March 31, 1998 and 1997 and the results of operations and cash
flows for the nine months ended March 31, 1998 and 1997. The results of
operations for the three and nine months ended March 31, 1998 are not
necessarily indicative of the results expected for the entire fiscal year ending
June 30, 1998.
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 March 31, 1998, should be
read in conjunction with the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1997. Portions of the accompanying financial statements are
derived from the audited year-end financial statements of the Company for the
year ended June 30, 1997.
Note 2: Earnings per share
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, Earnings per Share. SFAS 128
specifies new standards for computing and disclosing earnings per share and is
effective for periods ending after December 15, 1997. The Company has adopted
this standard and has restated its earnings per share ("EPS") for prior periods
presented. The basic EPS has been computed by dividing net income by the
weighted average number of shares outstanding during each period. Diluted EPS
has been computed by dividing net income by the weighted average common and
common equivalent shares outstanding during each period using the treasury stock
method, if the common equivalent shares were not anti-dilutive. The difference
between the Basic and Diluted weighted average shares is due to common stock
equivalent shares resulting from outstanding stock options. Net income for the
calculation of both basic and diluted EPS is the same for all periods presented.
The calculation of the weighted average outstanding shares is as follows:
6
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<TABLE>
<CAPTION>
Average Shares
---------------------------------------------------------------
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
March 31, March 31,
------------------------------ ------------------------------
1998 1997 1998 1997
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Weighted average shares outstanding 12,718,129 12,206,389 12,675,399 12,050,425
Common stock equivalents - - 222,688 -
------------------------------ ------------------------------
Weighted average shares and
equivalent shares outstanding 12,718,129 12,206,389 12,898,087 12,050,425
============================== ==============================
</TABLE>
Note 3: 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)
March 31, June 30,
1998 1997
----------- -----------
Raw Materials and supplies $ 5,151 $ 3,117
Work-in-progress 10,180 5,417
=========== ===========
Total inventory $ 15,331 $ 8,534
=========== ===========
Note 4: Notes Payable
The Company has a $40 million bank line of credit, under which $30.3
million was outstanding at March 31, 1998 and $5.7 million was available for
borrowings based on eligible accounts receivable and inventory. Amounts
outstanding under the line of credit bear interest at various rates ranging from
7.9375% to 8.5% at March 31, 1998. The line of credit agreement expires March
31, 2000.
In March 1998 an additional amount of $15.2 million was borrowed from
Heller Financial, Inc., and is secured a by building and miscellaneous equipment
located in Huntsville, Alabama. The principal amount is payable in 51 monthly
payments beginning February 1, 1999, plus accrued interest equal to the one
month LIBOR rate + 4.25% (10% at March 31, 1998).
Note 5: Future Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income.
SFAS No. 130 establishes requirements for disclosure of comprehensive income and
becomes effective for the Company's fiscal year ending June 30, 1999.
Reclassification of prior year financial statements for comparative purposes is
required.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information. SFAS No. 131 establishes standards for
disclosure about operating segments in annual financial statements and selected
information in interim financial
7
<PAGE>
reports. It also establishes standards for related disclosures about products
and services, geographic areas, and major customers. The new standard becomes
effective for the Company's fiscal year ending June 30, 1999.
Implementation of SFAS No. 130 and SFAS No. 131 is not expected to have a
material effect on the Company's financial statements. The effects of
implementation if any, will be disclosure only.
Note 6: Aquisition
On March 31,1998 the Company aquired certain assets and certain liabilities
of Intergraph Printed Circuit ("IPC"), the printed circuits division of
Intergraph Corporation. The purchase price was $17.375 million, which was paid
in cash and assumed liabilities. The acquisition was accounted for under the
purchase method of accounting and, accordingly the operating results of IPC from
the date of purchase are included in the Company's financial statements. There
was no goodwill resulting from the acquisition.
The following pro forma results of operations assume the acquisition
occurred on July 1, 1996:
(In thousands, except per share data)
Nine Month Ended Year Ended
March 31, 1998 June 30, 1997
---------------- ----------------
Revenue $ 145,761 $ 164,509
Net income (loss) 4,238 (9,505)
Net income (loss) per share 0.33 (0.78)
The pro forma financial information is not necessarily indicative of
operating results that would have occurred had the IPC acquisition been
consummated as of July 1, 1996, nor is it necessarily indicative of future
operating results.
In April 1998 the Company completed the acquisition of 51% of the
outstanding capital stock of printed circuit board manufacturer located in
Malaysia, Likom PCB Sdn. Bhd. ("Likom"). The purchase price for the assets is up
to $5.2 million Malaysian Ringgit ($1,432,500) based on the currency exchange
rate on April 27, 1998, which will consist of the transfer and contribution to
Likom over an eighteen-month period ending in October, 1999 of third-party
software license rights, machinery and equipment currently owned by Praegitzer.
At its option, Praegitzer may contribute cash in lieu of this property. The
acquisition will be accounted for under the purchase method of accounting and,
accordingly Praegitzer's portion of the operating results of Likom from the date
of purchase will be included in the Company's financial statements.
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 ("PCB"). The Company's design division provides schematic capture
and PCB layout services. The Fremont facility specializes in quick-turnaround
prototype production, the Redmond facility specializes in high technology 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 March 1998 the Company aquired Intergraph Printed Circuit ("IPC"), the
printed circuits division of Intergraph Corporation. The acquisition was
accounted for under the purchase method of accounting. IPC is now the Huntsville
Division of Praegitzer Industries and specializes in low volume production and
quick-turnaround prototype production.
This discussion and analysis is designed to be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations set forth in the Company's Form 10-K for the fiscal year ended June
30, 1997.
Results of Operations
- ---------------------
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
- -------------------------------------------------------------------------------
Revenue for the three months ended March 31, 1998 increased 16.7% to $44.7
million from $38.3 million for the three months ended March 31, 1997. The
increase resulted primarily from increased sales volumes made possible by
several factors including capacity expansions in the Dallas and White City
facilities completed in fiscal year ended June 30, 1997.
Gross profit for the three months ended March 31, 1998 was $8.8 million or
19.6% of revenue, compared to $5.2 million or 13.6% of revenue for the three
months ended March 31, 1997. The increase in gross margin was primarily due to
improved yields in inner layer production at the Company's Dallas facility.
Selling, general and administrative expenses for the three months ended
March 31, 1998 were $5.4 million or 12.1% of revenue, compared to $5.3 million
or 13.7% of revenue for the three months ended March 31, 1997. The percentage
decrease is primarily the result of increased revenue.
Interest expense for the quarter ended March 31, 1998 was $837,000, an
increase of $231,000 or 38% from the quarter ended March 31, 1997. The increase
was the result of increased borrowings to finance equipment purchases.
Nine Months Ended March 31, 1998 Compared to Nine Months Ended March 31, 1997
- -----------------------------------------------------------------------------
Revenue for the nine months ended March 31, 1998 increased 30.0% to $133.3
million from $102.5 million for the nine months ended March 31, 1997. The
increase resulted primarily
9
<PAGE>
from increased sales volumes made possible by several factors including capacity
expansions in the Dallas and White City facilities completed in the fiscal year
ended June 30, 1997 and the acquisition of five design centers during calendar
year 1997.
Gross profit for the nine months ended March 31, 1998 was $26.8 million or
20.1% of revenue, compared to $17.3 million or 16.9% of revenue for the nine
months ended March 31, 1997. The increase in gross margin as a percent of
revenue was primarily due to improved yields in inner layer production at the
Company's Dallas facility. During the first quarter of fiscal 1997, the Company
had relied on outsourcing of inner layer production to overcome capacity
restraints that resulted in higher costs. During the second and third quarters
of fiscal year 1997, the Company realigned some of its facilities through the
purchase of additional equipment and process changes that resulted in
temporarily elevated production costs.
Selling, general and administrative expense for the nine months ended March
31, 1998 was $17.2 million or 12.9% of revenue, compared to $13.3 million or
13.0% of revenue for the nine months ended March 31, 1997. The $3.9 million
increase was primarily the result of increased administrative and sales
personnel required to support the Company's growth.
During the first quarter of fiscal year 1997, the Company took a one-time
write-off of $11.65 million of certain goodwill associated with the Circuit
Technology, Inc. acquisition and purchased research and development costs
related to the acquisition of Trend Circuits, Inc.
The effective income tax rate for the nine months ended March 31, 1998 was
32.1%. The Company had a positive tax expense for the nine months ended March
31, 1997 on a pre-tax book loss primarily due to the addback of goodwill and the
write-off of in-process research and development tax credits which are not tax
deductible. However, federal and state research and experimental tax credits
partially offset the effect of these addbacks.
Liquidity and Capital Resources
- -------------------------------
As of March 31, 1998, the Company had cash of $390,000, compared to
$442,000 as of June 30, 1997, and working capital of $19.7 million at March 31,
1998, compared to $17.0 million at June 30, 1997. Principal sources of liquidity
in the first nine months of fiscal 1998 were operations and net financing of
$39.9 million under the Company's various credit facilities. Principal uses of
liquidity during the nine months ended March 31, 1998 were property, plant and
equipment expenditures of $33.0 million related to expansions and capacity
improvements of the Company's manufacturing operations. Of the $33.0 million in
fixed asset additions approximately $11.5 million were previously financed on
operating lease agreements which were bought out in March 1998. In addition, the
Company used $15.95 million for the acquisition of IPC in March 1998. During the
first nine months of fiscal 1998 inventories incresed approximately $7 million.
The increase is due primarily to increased production volumes in all
manufacturing facilities which have resulted in increased raw materials
requirements and work-in-process. Approximately $1 million of the increase is
due to acquisitions.
At March 31, 1998 borrowings of $30.3 million were outstanding on the
Company's $40 million bank line of credit and $5.7 million was available for
borrowings based on eligible accounts receivable and inventory. The Company's
bank line of credit provides that it may not, without the bank's consent, borrow
more than $20 million unless such borrowings are
10
<PAGE>
subordinated to the bank debt. Under the line of credit, the Company must also
maintain a consolidated net worth of at least $31.69 million plus 50% of its net
income and 90% of any additional equity raised, and certain financial ratios,
including an assets to liabilities ratio of 1.1 to 1. The Company was in
compliance with all loan covenants at March 31, 1998.
As of March 31, 1998 the Company had $34.2 million of outstanding notes
payable to Heller Financial, Inc. bearing interest at annual rates ranging from
a 7.80% fixed rate to LIBOR plus 4.25% (10% at March 31, 1998) and secured by
real property and miscellaneous equipment at the Company's Dallas and White
City, Oregon and Huntsville, Alabama facilities. The Company had a $3.5 million
note payable to Finova Capital outstanding at March 31, 1998. The note is
secured by miscellaneous equipment and bears interest at an annual rate of
9.93%.
Although the Company has no commitments in material amounts, it expects
total capital expenditures for the fiscal year to range from 8% to 12% of
revenue for facilities expansion and equipment.
The Company believes that its existing cash and cash equivalents, funds
generated from operations, its credit facility with the 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.
PART II - OTHER INFORMATION
Item 1: Legal Proceedings
Shareholders are referred to the Company's report on Form 10-Q for the
quarter ended September 30, 1997 regarding material developments in the
Company's litigation with Virtual Vision, Inc. and Pacific Communication
Sciences, Inc.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Security Agreement between the Registrant and Heller Financial,
Inc. dated March 27, 1998, Promissory Note made by Registrant in
favor of Heller Financial, Inc. dated March 27, 1998, and
Mortgage, Security Agreement, Assignment of Leases and Rents and
Fixture Filing made by the Registrant in favor of Heller
Financial, Inc. dated March 27, 1998
10.2 Credit Agreement between the Registrant and KeyBank National
Association dated March 31, 1998
27.1 Financial Data Schedule
27.1 Restated Financial Data Schedule
(b) Reports on Form 8-K
During the three-month period ending March 31, 1998, there were no
reports on Form 8-K filed.
11
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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: May 13, 1998 MATTHEW J. BERGERON
-----------------------------------------
(Matthew J. Bergeron, President)
(Duly Authorized Officer)
WILLIAM J. THALE
-----------------------------------------
(William J. Thale)
(Principal Financial Officer)
12
Loan No.: 1910069-0008
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is made as of the 27th day of March, 1998,
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 Fifteen Million Two Hundred Thousand and 00/ 100 Dollars ($15,200,000.00), as
evidenced by a note in such principal amount executed and delivered by Debtor to
Secured Party, dated the date hereof (the "Note") and any obligations now or
hereafter arising under the Loan Documents (as defined below) (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 Obligations. 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 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 Indebtedness and, assuming UCC-1 financing statements
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
Alabama and with the Judge of Probate of the County of Madison, Alabama, 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
<PAGE>
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 (i) 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), and (ii) Debtor may encumber items of Collateral acquired
by Debtor after the date hereof ("After Acquired Collateral") if (1) such After
Acquired Collateral is not a replacement or substitution of any item(s) of
Collateral existing on the date hereof (where "replacement" and "substitution"
means situations in which the After Acquired Collateral serves the same function
or service as Collateral existing on the date hereof (regardless of whether it
also serves other functions) and such Collateral existing on the date hereof is
no longer in service by Debtor at its operations in Madison, Alabama), or an
attachment, addition or accession to any item(s) of Collateral existing on the
date hereof that can not reasonably be removed without materially and adversely
affecting the value or utility of the items of Collateral existing on the date
hereof, and (2) such encumbrance is a purchase money security interest (as
defined in the Uniform Commercial Code) with respect to such After Acquired
Collateral, that is duly perfected on, before or within ninety (90) days after
the date Debtor first receives possession of such After Acquired Collateral,
and, upon request therefor from Debtor, Secured Party will subordinate its
security interest arising hereunder in such After Acquired Collateral pursuant
to a subordination agreement in form and substance satisfactory to Secured
Party. 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 (not including flood or
earth movement), for
-2-
<PAGE>
its full insurable value including replacement costs, with a deductible not to
exceed One Hundred Thousand and 00/100 Dollars ($100,000.00) 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 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, with respect to the policies insuring against loss by fire, theft
and other hazards, shall provide that no act or neglect of Debtor shall
invalidate the coverage afforded thereunder to Secured Party, and with respect
to liability insurance policies, shall provide coverage unless Debtor
intentionally fails to disclose all hazards existing as of the inception of the
policy. 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 other than Debtor having
an interest in the real estate.
(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
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<PAGE>
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."
(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 Note and any other
documents and instruments relating thereto (the Agreement, Note 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 Schedule 2(i)
attached hereto. 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.
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<PAGE>
(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,
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.
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(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.
(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 Operating Officer, 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
Madison, Alabama 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
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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 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
the 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.
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(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.
3. Prepayment.
(a) Voluntary. Provided no Event of Default has occurred and is continuing,
Debtor may prepay in whole, but not in part (except as set forth below), on any
regularly scheduled payment date under the Note, the then entire unpaid
principal balance of the 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 one percent (1%) of the principal balance
being prepaid for any prepayment made on or after January 1, 1999. The
prepayment fee described in clause (ii) above shall also be due upon the
acceleration of the maturity date of the Note following the occurrence of any
Event of Default (whether occurring before, on or after January 1, 1999). Any
prepayment of the Note made by Debtor on or before December 31, 1998, however,
shall not be subject to the prepayment fee described in clause (ii) above.
(b) Mandatory. If, subsequent to the date hereof, Debtor issues any debt or
equity securities (including, by way of example, and not in limitation, a
private or public placement of subordinated debt), other than any equity
securities issued pursuant to any employee stock option plan or other, similar
employee compensation or benefit plan, then, Secured Party shall have the right,
at its option, exercisable at the time of such securities issuance by Debtor or
within up to ninety (90) days thereafter, by giving Debtor written notice to
such effect, to require that Debtor make a mandatory prepayment of the Note in
up to that amount equal to the lesser of: (i) the net proceeds realized by
Debtor from such securities issuance or (ii) the then unpaid principal balance
of the Note (or such lesser amount as Secured Party may require or agree to
accept), with such payment to be on the next regularly scheduled payment date
under the Note (but not earlier than ten (10) days after Debtor's receipt of
such notice from Secured Party).
(c) Additional Fee. If, by December 31, 1998, the Note has not been prepaid
in full either pursuant to subsection (a) or subsection (b) above, then, on such
date, Secured Party shall have earned, and there shall be due and payable to
Secured Party on such date, a non-refundable fee equal in amount to two percent
(2%) of the original principal amount of the Note; that is to say, Three Hundred
Four Thousand Dollars ($304,000).
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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 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.
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Each of the following events shall also constitute an Event of Default hereunder
and upon the occurrence of any one or more of them, Secured Party shall have the
right to exercise any one or more of the remedies hereinafter provided:
(aa) If at the end of the first fiscal year of Debtor ending after the date
of this Agreement, and each fiscal year ending thereafter (each a "Fiscal
Year"), Debtor's operating income before interest expense, income taxes,
depreciation, amortization and extraordinary gains and/or losses, all as
determined in accordance with GAAP ("EBITDA"), for each such Fiscal Year, is
less than one and one-half (1.5) times as much as the sum of all of Debtor's
interest expense incurred during the Fiscal Year plus the current portion of
long term debt and capitalized leases reported as of the end of the Fiscal Year,
all as determined in accordance with GAAP; or
(bb) If Debtor at any time has a net worth as determined in accordance with
GAAP of less than thirty million and 00/100 Dollars ($30,000,000) increasing
annually by an amount equal to 50% of the reported net after-tax earnings
beginning with the Fiscal Year ending June 30, 1997 and each subsequent year
thereafter; or
(cc) If at the end of any Fiscal Year End of Debtor, the sum of Debtor's
notes payable, capitalized lease obligations and all other borrowed funds
(whether reflected as a current liability or a long-term liability) as
determined by GAAP is greater than three (3.0) times Debtor's EBITDA for the
Fiscal Year then ended.
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 discontinue its use of the Collateral, and, to the extent
it is not permanently affixed to or otherwise a part of real property, assemble,
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 delivered to Debtor in
accordance with Section 10 of this Agreement at least ten (10) days before the
time of sale or
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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 which costs and expenses
shall be additional Indebtedness hereby secured. After any 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
Note.
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 Chief Financial Officer of Debtor at the last known
address of Debtor, which service shall be deemed completed within ten (10) days
after the date of mailing thereof.
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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 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 (and, if to Debtor, directed to the
Chief Financial Officer of Debtor). All notices shall be deemed given when
received, when delivery is refused or when 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
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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. 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 Security
Agreement as of the day and year first above written.
HELLER FINANCIAL, INC., PRAEGITZER INDUSTRIES,
INC.,
a Delaware corporation an Oregon corporation
By: By:
------------------------------- --------------------------------------
Name: Name: Matthew Bergeron
----------------------------- ------------------------------------
Title: Title: President
---------------------------- -----------------------------------
SCHEDULE
Description of Collateral
Description of Collateral (Full description including make, model and serial
number):
See Schedule A attached hereto.
Place where Collateral is to be kept:
Building 16
One Madison Industrial Park
16 Intergraph Way
Madison, Alabama 35758
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Other liens, encumbrances or security interests to which Collateral is or may be
subject, if any:
See Schedule B attached hereto.
Other Collateral
N/A
If Collateral is attached or to be attached to real estate, set forth:
Address of Real Estate (Including County, block number, lot number, etc.):
See Schedule C attached hereto.
Record Sublessee of Real Estate:
Praegitzer Industries, Inc.
Name and Address of Lessor of Real Estate:
The Industrial Development Board of the City of Madison, Inc.
Madison, Alabama
Name and Address of Sublessor of Real Estate:
Intergraph Corporation
Madison, Alabama
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Initials
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Loan No.: 1910069-0008
PROMISSORY NOTE
$15,200,000 March 27, 1998
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 Fifteen
Million Two Hundred Thousand and 00/100 Dollars ($15,200,000.00), together with
interest thereon from date of disbusrement until full payment at a rate per
annum equal to the One Month LIBOR Rate (hereafter defined), plus four and
25/100 percent (4.25%), payable in fifty-one (51) consecutive monthly
installments of principal plus interest commencing on February 1, 1999, and
continuing on the same day of each consecutive calendar month thereafter until
this Note is fully paid. The first fifty (50) such monthly installments shall
each be in the principal amount of One Hundred Eighty Thousand Nine Hundred
Fifty-Two and 38/100 Dollars ($180,952.38), plus accrued interest, and the final
monthly installment shall be a balloon payment equal to the then remaining
unpaid principal balance hereof, plus accrued interest. All payments shall be
applied first to interest and then to principal. In addition, Maker shall make
interest only payments of accrued interest from the date of this Note through
December 31, 1998, payable monthly in arrears on the first day of each calendar
month (for the preceding calendar month), commencing on May 1, 1998 (with the
initial such payment to cover the period from March 31, 1998 through April 30,
1998). 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 (defined as any day other than a Saturday or
Sunday or holiday on which commercial banks in London, England and New York
City, New York, are authorized to close) 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 and The Chase Manhattan 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;
(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
<PAGE>
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 Mortgage, Security
Agreement, Assignment of Leases and Rents and Fixture Filing dated as of March
27, 1998, made by Maker as "Mortgagor" in favor of Payee as "Mortgagee" (the
"Mortgage") and in the Security Agreement dated as of March 27, 1998, between
Maker and Payee (the "Security Agreement;" and together with the Mortgage and
all documents and instruments related to this Note, the Mortgage 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(cent)) 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
seven and one-half percent (7-1/2%) 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 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 CHIEF FINANCIAL OFFICER OF MAKER AT THE LAST KNOWN ADDRESS OF MAKER, WHICH
SERVICE SHALL BE DEEMED COMPLETED WITHIN TEN (10) DAYS AFTER THE DATE OF MAILING
THEREOF.
-2-
<PAGE>
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
______________________ By: MATTHEW BERGERON
-------------------------------------
Name: ________________ Name: Matthew Bergeron
Address: Title: President
______________________
______________________
______________________
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<PAGE>
THIS MORTGAGE SERVES AS A FINANCING STATEMENT FILED AS A FIXTURE FILING PURSUANT
TO SECTION 7-9-402(6), CODE OF ALABAMA, 1975, AS AMENDED, AND IS TO BE
CROSS-INDEXED IN THE UCC RECORDS OF THE JUDGE OF THE PROBATE COURT, MADISON
COUNTY, ALABAMA.
================================================================================
Loan No. 1910069-0008
AFTER RECORDING RETURN TO: THIS INSTRUMENT WAS
PREPARED BY:
Heller Financial, Inc.
Commercial Equipment Finance Division Gerald T. Woods, Esq.
50 Beale Street, 16th Floor King & Spalding
San Francisco, California 94105-1825 191 Peachtree Street
Attention: Region Credit Manager Atlanta, Georgia 30303-1763
Telephone (404) 572-4786
MORTGAGE, SECURITY AGREEMENT,
ASSIGNMENT OF LEASES AND RENTS
AND FIXTURE FILING
THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS AND
FIXTURE FILING ("Mortgage"), is made as of the 27th day of March, 1998, between
PRAEGITZER INDUSTRIES, INC., the address of which is 1270 Monmouth Cutoff,
Dallas, Oregon 97338 ("Mortgagor"), and HELLER FINANCIAL, INC., a Delaware
corporation, the address of which is Commercial Equipment Finance Division, 500
West Monroe Street, Chicago, Illinois 60661 ("Mortgagee").
1. GRANTING CLAUSE. Mortgagor, to secure the payment of certain
obligations in the aggregate principal sum of Fifteen Million Two Hundred
Thousand and No/100 Dollars ($15,200,000.00), lawful money of the United States
of America, to be paid with interest and periodic charges, which obligations
mature on April 1, 2003, according to a certain Promissory Note, dated the date
hereof, given by Mortgagor to the order of Mortgagee, and any and all
extensions, renewals, modifications or replacements thereof, whether the same be
in greater or lesser amounts (hereinafter referred to as the "Note"), and a
certain Security Agreement, dated the date hereof, entered into between
Mortgager and Mortgagee (hereinafter as it may be modified or amended from time
to time referred to as the "Security Agreement"), and all obligations arising
thereunder, Mortgager has mortgaged, given, granted, bargained, sold, aliened,
enfeoffed, conveyed, confirmed, assigned, and granted a security interest under
the UCC (as hereinafter defined), and in and by these presents does mortgage,
give, grant, bargain, sell, alien, enfeoff, convey, confirm, assign and grant a
security interest under the UCC, unto Mortgagee forever all right, title and
interest of Mortgagor now owned, or hereafter acquired, in and to the following
property, rights and interests (all of said property described below and any
additional property described in Section 2 being herein called the "Property"):
<PAGE>
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 Mortgagor in and to any avenues, streets, ways,
alleys, vaults, strips or gores of land adjoining that property, and all claims
or demands of Mortgagor 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 Section
1.1 above, and all facilities, fixtures, machinery, apparatus, installations,
goods (excluding inventory), equipment, furniture and other tangible 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 Mortgagor and which is affixed or attached to or used in connection
with the property described in Section 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
Mortgagee, 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 Mortgagor 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;
1.3 Machinery and Equipment. All of Mortgagor'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 Mortgagor
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 Mortgagor
or otherwise, and to do any and all things which Mortgagor is or may be or
become entitled to do with respect thereto; provided, however, that no
obligation of
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<PAGE>
Mortgagor 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 Mortgagee;
1.5 Intergraph Sublease. All right, title and interest of
Mortgagor as subtenant in, to and under (i) a certain Sublease Agreement, dated
or to be dated on or about the date hereof, between Intergraph Corporation
("Intergraph"), as sublessor, and Mortgagor, as sublessee, in respect of all or
any portion of the Property described in Sections 1.1 and 1.2 above, including
all supplements, additions, renewals, extensions, modifications or replacements
thereof or thereto, all whether now or hereafter existing (the "Intergraph
Sublease"), a memorandum of which has been or will be recorded in the real
estate records of the Judge of the Probate Court, Madison County, Alabama,
concurrently with the recording of this Mortgage therein, (ii) the leasehold
estate created thereunder in the land, improvements and other property described
in Sections 1.1 and 1.2 above, and (iii) all other rights, remedies, benefits
and claims in favor of Mortgagor created or arising under the Intergraph
Sublease, whether now or hereafter existing, including all option, renewal or
rights, all rights, remedies, benefits and claims in respect of the Primary
Lease (as hereafter defined) and relative to the Board (as hereinafter defined),
and all rights and remedies of Mortgagor in respect of Intergraph upon the
filing by or against of any petition in bankruptcy, as described more
particularly in Section 4.19(d) below; the aforesaid property being subleased to
Mortgagor by Intergraph under the Intergraph Sublease itself being all or a
portion of the property being leased to Intergraph, as tenant, by the Industrial
Development Board of the City of Madison, Inc. (the "Board"), as lessor, under
that certain Lease Agreement, dated June 12, 1973, between the Board, as lessor,
and, initially, Schaefer --Alabama Corporation, as tenant, recorded at Book 479,
page 19 et seq., aforesaid records (together with any supplements, additions,
renewals, extensions, modifications or replacements thereof or thereto, the
"Primary Lease"), the rights of the initial tenant under which heretofore having
been assigned to Intergraph; and
1.6 Further Subleases. All of Mortgagor's rights as sublessor in
and to any existing or future subleases and tenancies, whether written or oral
and whether for a definite term or month to month (herein, "Further Subleases"),
now or hereafter demising Mortgagor's right, title or interest in or to all or
any portion of the property, described in Sections 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
Mortgage, Mortgagee assumes no any liability for the performance of any such
Further Subleases; provided, further, that in accordance with Section 4.13,
Mortgagee's prior written consent must be obtained to any such Further Subleases
or Mortgagor's entry into same shall constitute an Event of Default;
TO HAVE AND TO HOLD the above-granted and described Property unto and
to the proper use and benefit of Mortgagee, and the successors and assigns of
Mortgagee, forever;
PROVIDED, HOWEVER, that, if Mortgagor shall pay to Mortgagee in full
the principal and interest payable in respect of the Note, at the times and in
the manner stipulated thereon and herein, all without any deduction or credit
for taxes or other similar charges paid by
3
<PAGE>
Mortgagor, shall further pay all other obligations secured hereby, and shall
keep, perform, and observe all and singular the covenants and promises in the
Note, the Security Agreement and in each other document, instrument or agreement
executed in connection therewith (herein, together with this Mortgage, called
collectively the "Loan Documents") expressed to be kept, performed, and observed
by and on the part of Mortgagor, all without fraud or delay, then this Mortgage,
and all the properties, interest, and rights hereby granted, bargained, and sold
shall cease, determine, and be void, but shall otherwise remain in full force
and effect.
AND Mortgagor further covenants and agrees with and represents and
warrants to Mortgagee as follows:
2. SECURITY AGREEMENT. To the extent any of the property described in
Section 1 is personal property, Mortgagor, as debtor, grants to Mortgagee, 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 Alabama (the "UCC"), on the terms and conditions contained
herein except that where any provision hereof is in conflict with that certain
Security Agreement dated as of March 27, 1998, between Mortgagor and Mortgagee
(the "Security Agreement" ), or the UCC, the Security Agreement or UCC, as the
case may be, shall control.
3. OBLIGATIONS SECURED. This Mortgage is given for the purpose of
securing repayment of the Note but also the repayment of any and all sums
advanced or expenditures made by Mortgagee subsequent to the execution of this
Mortgage for the maintenance or preservation of the Property or advanced or
expended by Mortgagee pursuant to any provision of this Mortgage 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 Mortgagor. Mortgagor warrants,
covenants, and agrees:
4.1 Warranties.
(a) Mortgagor has full power and authority to grant this Mortgage
to Mortgagee and warrants the Property to be free and clear of all liens,
charges, and other encumbrances except Permitted Liens (as defined in Section
4.13 below) and those, if any, noted on Exhibit B hereto and incorporated herein
by this reference.
(b) The Property is free from damage and no matter has come to
Mortgagor'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
<PAGE>
(c) (i) The Intergraph Sublease and, to Mortgagor's knowledge,
the Primary Lease are in full force and effect (ii) there are no defaults under
the Intergraph Sublease or, to Mortgagor's knowledge, the Primary Lease, and no
event has occurred, which but for the passage of time, or notice, or both, would
constitute a default under the Intergraph sublease or, to Mortgagor's knowledge,
the Primary Lease, (iii) all rents, additional rents and other sums due and
payable under the Intergraph Sublease and, to Mortgagor's knowledge, the Primary
Lease have been paid in full, and (iv) no action has commenced and no notice has
been given or received for the purpose of terminating the Intergraph Sublease
or, to Mortgagor's knowledge, the Primary Lease.
4.2 Preservation of Lien. Mortgagor will preserve and protect the
priority of this Mortgage as a first lien on the Property.
4.3 Repair and Maintenance of Property. Mortgagor 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 Mortgagee; 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. Mortgagor will provide, maintain and deliver to
Mortgagee, as further security for the faithful performance of this Trust Deed,
insurance covering fire, casualty and such other hazards as may be specified by
Mortgagee (including insurance against flood situated in a designated flood
zone) in an amount equal to one hundred percent (100%) of the replacement cost
of the Property and naming Mortgagee as first loss payee pursuant to a
loss-payee form acceptable to Mortgagee, with such deductibles as approved by
Mortgagee but that are, in any event, not more than $100,000 (except with
respect to flood insurance, as to which the deductible shall not exceed
$2,000,000, and earth movement insurance, as to which the deductible shall not
exceed 1 % of Mortgagor's current "property and time element" values). Mortgagor
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 Mortgagee, 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, Mortgagee 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
5
<PAGE>
connection with such damage, and obtain all proceeds, or other relief therefor,
and Mortgagor agrees to pay Mortgagee's costs and reasonable attorneys' fees in
connection therewith. No insurance proceeds at any time assigned to or held by
Mortgagee shall be deemed to be held in trust, and Mortgagee 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 Mortgagor pursuant to this Section 4.4.1 may be applied by
Mortgagee upon any indebtedness secured hereby and in such order as Mortgagee
may determine, or at the option of Mortgagee, the entire amount so collected or
any part thereof may be released to Mortgagor. Mortgagee shall in no case be
obligated to see to the proper application of any amount paid over to Mortgagor.
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. Mortgagor will maintain comprehensive general
liability insurance covering the legal liability of Mortgagor 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
Mortgagee 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 Mortgagor under any Further Subleases is at any time twenty thousand
(20,000) square feet or more, Mortgagor 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 Mortgagee as first loss payee,
provided that Mortgagor 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 Mortgagor pursuant to this Section 4.4 shall be in form and
substance and with companies acceptable to Mortgagee. All policies and renewals
thereof shall contain provision for thirty (30) days' written notice to
Mortgagee prior to any cancellation or modification thereof. Notwithstanding any
of the foregoing, Mortgagee shall not 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 foreclosure sale
held hereunder.
4.4.6 Warning Regarding Insurance. Unless Mortgagor provides
Mortgagee with evidence of the insurance coverage as required by this Mortgage,
Mortgagee may purchase insurance at Mortgagor's expense to protect Mortgagee's
interest. This insurance may, but need not, also protect Mortgagor's interest.
If the collateral becomes damaged, the coverage Mortgagee purchases may not pay
any claim Mortgagor makes or any claim made against Mortgagor. Mortgagor may
later cancel this coverage by providing evidence that Mortgagor has obtained
property coverage elsewhere.
6
<PAGE>
Mortgagor is responsible for the cost of any insurance purchased by Mortgagee.
The cost of any insurance may be added to the sums secured by this Mortgage. If
the cost is added to Mortgagor'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 Mortgagor's prior coverage lapsed or the date Mortgagor failed to
provide proof of coverage.
The coverage Mortgagee purchases may be considerably more expensive than
insurance Mortgagor can obtain on Mortgagor's own and may not satisfy any need
for property damage coverage or any mandatory liability insurance requirements
imposed by applicable law.
4.5 Right of Inspection. Mortgagor shall permit Mortgagee or its
agents, at all reasonable times, to enter upon and inspect the Property.
4.6 Preservation of Licenses, Etc. Mortgagor 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. Mortgagor 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 Mortgagee deems necessary or advisable to grant to Mortgagee the lien
prescribed herein on the Property or to carry out more effectively the purposes
of this Mortgage.
4.8 Legal Actions. Mortgagor 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 Mortgagee; and will pay all costs and
expenses, including cost of evidence of title and any attorneys' fees, incurred
by Mortgagee, in a reasonable sum, in any such action or proceeding in which
Mortgagee may appear, and in any suit brought by Mortgagee to foreclose this
Mortgage.
4.9 Taxes, Assessments and Other Liens. Mortgagor 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 Mortgage, or any
obligation or part thereof secured hereby.
4.10 Mortgage Expenses. Mortgagor will pay all costs, fees and
expenses of this Mortgage including all such costs, fees and expenses incident
to any default hereunder, including reasonable attorneys' fees.
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<PAGE>
4.11 Repayment of Expenditures. Immediately upon notice thereof,
Mortgagor will pay immediately and without demand all sums expended hereunder by
Mortgagee 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. Mortgagor shall comply
with Section 2(g) of the Security Agreement.
4.13 Sale, Transfer, or Encumbrance of Property. Except as
permitted in the Security Agreement and Permitted Liens (defined below),
Mortgagor will not, without the prior written consent of Mortgagee (which
consent shall be subject to the conditions set forth below) sell, lease,
sublease, 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 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
Mortgagor'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 Mortgagee 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 Alabama 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 Mortgagor 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 Mortgagee 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 Alabama) 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 [Intentionally Omitted.]
4.15 Mortgagor Existence. Mortgagee is making this loan in
reliance on Mortgagor's continued existence, ownership and control in its
present corporate form. Mortgagor 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.
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4.16 Tax and Insurance Reserves. In addition to the payments
required by the Note, Mortgagor agrees to pay Mortgagee, at Mortgagee's request
following and during the continuance of the occurrence of an Event of Default
(defined below), such sums as Mortgagee may from time to time estimate will be
required to pay, at least thirty (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 Mortgagee without interest or
other income to the Mortgagor to pay such taxes, assessments and premiums.
Should this estimate as to taxes, assessments and premiums prove insufficient,
the Mortgagor upon demand agrees to pay Mortgagee 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 Mortgagee for taxes, assessments and
premiums, such excess may be credited by Mortgagee on subsequent payments under
this section. If an Event of Default occurs for which Mortgagee elects to
realize upon this Mortgage, then at the time of any sale under power or final
decree of foreclosure, Mortgagee 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 Mortgagee acquires the Property in lieu of realizing on this
Mortgage, the balance of funds it holds shall become the property of Mortgagee.
Any transfer in fee of all or a part of the Property shall
automatically transfer to the grantee all or a proportionate part of Mortgagor's
rights and interest in the fund accumulated hereunder.
4.17 Further Subleases. In respect of any Further Subleases to
which Mortgagee has consented in writing pursuant to Section 4.13:
(a) Mortgagor will in all respects promptly and faithfully keep,
perform and comply with all of the terms, provisions, covenants, conditions and
agreements in any Further Subleases to be kept, performed and complied with by
Mortgagor as sublessor 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
Further Subleases to be performed and complied with by the lessees therein.
(b) Mortgagor shall not receive or collect any rents from any
present or future tenant of the Property under any Further Subleases 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.]
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(d) In the event any tenant or licensee under any Further
Subleases should be the subject of any proceeding under the federal Bankruptcy
Code or any other federal, state or local statute that provides for the possible
termination or rejection of such Further Subleases, Mortgagor covenants and
agrees that in the event any of such Further Subleases is so rejected, no
damages settlement shall be made without the prior written consent of Mortgagee;
and further that any check in payment of damages for rejection of any such
Further Sublease shall be made payable both to Mortgagor and Mortgagee; and
Mortgagor hereby assigns any such payment to Mortgagee and further covenants and
agrees that upon request of Mortgagee it will duly endorse to the order of
Mortgagee any such check, the proceeds of which will be applied to any portion
of the indebtedness secured by this Mortgage as Mortgagee may elect.
4.18 Hazardous Waste.
(a) For purposes of this Mortgage, "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) 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), (v) defined as a "hazardous waste" pursuant to Section
1004 of the Resource Conservation and Recovery Act, 42 U.S.C. ss.6903), or (vi)
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) Mortgagor 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 Mortgagor, 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 Mortgagor 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 Mortgagor's
knowledge after due and diligent inquiry,
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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, 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, Mortgagor 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 Mortgagor fails to perform its obligations under this
subsection 4.18(c), any funds advanced by Mortgagee 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
Mortgage but rather shall be covered by the separate Certificate and Indemnity
Agreement Regarding Hazardous Substances executed concurrently herewith.
(d) Mortgagor shall promptly give Mortgagee: (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 Mortgagor
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 Mortgagor or any government agency to study, assess,
contain or remove any hazardous substances on or near the Property.
(e) In the event Mortgagee requires, from time to time following
the occurrence of an Event of Default, Mortgagor 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, Mortgagor
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 Mortgagee upon request by Mortgagee.
4.19 Special Covenants Concerning Intergraph Sublease. (a)
Mortgagor shall pay all rents, additional rents and other sums required to be
paid by Mortgagor as subtenant under and pursuant to the provisions of the
Intergraph Sublease, and diligently perform and observe all of the terms,
covenants and conditions of the Intergraph Sublease on the part of Mortgagor, as
subtenant thereunder to be performed and observed, (unless such performance or
observance shall be waived or not required in writing by the Intergraph under
the Intergraph Sublease), to the end that all things shall be done which are
necessary to keep unimpaired the rights of Mortgagor, as subtenant, under the
Intergraph
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Sublease, and promptly notify Mortgagee of the giving of any notice by
Intergraph under the Intergraph Sublease to Mortgagor, as subtenant, of any
default by Mortgagor, as subtenant, in the performance or observance of any of
the terms, covenants or conditions of the Intergraph Sublease on the part of
Mortgagor, as subtenant thereunder, to be performed or observed, and deliver to
Mortgagee a true copy of each such notice. Mortgagor shall not, without the
prior written consent of Mortgagee, surrender the leasehold estate created by
the Intergraph Sublease or terminate or cancel the Intergraph Sublease or
modify, change, supplement, alter or amend the Intergraph Sublease, in any
respect, either orally or in writing, and Mortgagor hereby assigns to Mortgagee,
as further security for the payment of the obligations secured hereby and for
the performance and observance of the terms, covenants and conditions of this
Mortgage, all of the rights, privileges and prerogatives of Mortgagor, as
subtenant under the Intergraph Sublease, to surrender the leasehold estate
created by the Intergraph Sublease or to terminate, cancel, modify, change,
supplement, alter or amend the Intergraph Sublease, and any such surrender of
the leasehold estate created by the Intergraph Sublease or termination,
cancellation, modification, change, supplement, alteration or amendment of the
Intergraph Sublease without the prior consent of Mortgagor shall be void and of
no force and effect. If Mortgagor shall default in the performance or observance
of any term, covenant or condition of the Intergraph Sublease on the part of
Mortgagor, as subtenant thereunder, to be performed or observed, then, without
limiting the generality of the other provisions of this Mortgage or any of the
other Loan Documents, and without waiving or releasing Mortgagor from any of its
obligations hereunder or thereunder, Mortgagee shall have the right, but shall
be under no obligation, to pay any sums and to perform any act or take any
action as may be appropriate to cause all of the terms, covenants and conditions
of the Intergraph Sublease on the part of Mortgagor, as subtenant thereunder, to
be performed or observed to be promptly performed or observed on behalf of
Mortgagor, to the end that the rights of Mortgagor in, to and under the
Intergraph Sublease shall be kept unimpaired and free from default. Mortgagee
shall have the further right, but shall likewise be under no obligation, to pay
any sums and to perform any act or take any action as may be appropriate to
cause all of the terms, covenants or conditions of the Primary Lease on the part
of Intergraph, as tenant thereunder, to be performed or observed to be promptly
performed or observed on behalf of Intergraph, to the end that the rights of
Mortgagor in, to and under the Intergraph Sublease shall be kept unimpaired. If
Mortgagee shall make any payment or perform any act or take action in accordance
with the preceding two sentences, Mortgagee will notify Mortgagor of the making
of any such payment, the performance of any such act, or the taking of any such
action. In any such event, Mortgagee and any person designated by Mortgagee
shall have, and are hereby granted, the right to enter upon the Property at any
time and from time to time for the purpose of taking any such action. If
Mortgagee shall receive a copy of any notice of any default by Intergraph under
the Primary Lease or by Intergraph or Mortgagor under the Intergraph Sublease,
whether from the Board, Intergraph, Mortgagor or otherwise, such notice shall
constitute full protection to Mortgagee for any action taken or omitted to be
taken by Mortgagee, in good faith, in reliance thereon. Mortgagor shall, from
time to time, obtain from Intergraph under the Intergraph Sublease such
certificates of estoppel with respect to compliance by Mortgagor with the terms
of the Intergraph Sublease as may be requested by Mortgagee. Mortgagor shall
exercise each individual option, if any, to extend or renew the term of the
Intergraph Sublease upon demand by Mortgagee made at any time within one (1)
year of the last
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day upon which any such option may be exercised, and Mortgagor hereby expressly
authorizes and appoints Mortgagee its attorney-in-fact to exercise, either
jointly or individually, any such option in the name of and upon behalf of
Mortgagor, which power of attorney shall be irrevocable and shall be deemed to
be coupled with an interest.
(b) So long as any portion of the obligations secured hereby
shall remain unpaid, unless Mortgagee shall otherwise consent, the fee title to
the Premises and the leasehold estate therein created pursuant to the provisions
of the Intergraph Sublease shall not merge, but shall always be kept separate
and distinct, notwithstanding the union of such estates in Mortgagor or in any
other person, by purchase, operation of law or otherwise. If Mortgagee shall
acquire the fee title to the Property and the leasehold estate therein created
pursuant to the provisions of the Intergraph Sublease, by foreclosure of this
Mortgage or otherwise, such estates shall not merge as a result of such
acquisition and shall remain separate and distinct for all purposes after such
acquisition unless and until Mortgagee shall elect to merge such estates.
(c) Acquisition of Fee Estate. So long as any portion of the
obligations secured hereby remains unpaid, unless Mortgagee shall otherwise
consent, if Mortgagor shall acquire fee title to the Property the lien of this
Mortgage shall be spread to cover the fee estate and said fee estate shall be
deemed to be included within the definition of the Property. Mortgagor shall, at
its sole cost and expense, execute such instruments as Mortgagee deems useful or
necessary to subject the fee estate to the lien of this Mortgage.
(d) Bankruptcy of Intergraph. Upon the filing by or against
Intergraph of a petition pursuant to Title 11 of the United States Code as now
constituted or hereafter amended or under any other applicable federal or state
bankruptcy law or other similar law (hereinafter referred to as the "Bankruptcy
Code"), and the subsequent rejection of the Intergraph Sublease by Intergraph,
Mortgagor shall not, without the prior written consent of Mortgagee, (i) elect
to treat the Intergraph Sublease as terminated pursuant to Section 365(h)(1) of
the Bankruptcy Code, or (ii) pursuant to Section 365(h)(2) of the Bankruptcy
Code, offset against the rents reserved under the Intergraph Sublease the amount
of any damages caused by Intergraph's rejection of the Intergraph Sublease.
Mortgagor shall promptly, and so as to be received prior to all hearing dates,
return dates or other deadlines, send to Mortgagee copies of all notices,
summonses, pleadings, applications and other documents received by Mortgagor in
connection with such petition or proceeding by Intergraph.
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
Mortgagor herein or elsewhere in connection with the loan secured hereby,
including but not limited to any representations in connection with the security
therefor, shall prove to have been incorrect or misleading in any material
respect;
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(b) Mortgagor 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) Mortgagor 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 Mortgage;
(d) Mortgagor or any other signatory thereto shall default in the
performance of any covenant or agreement contained in this Mortgage and such
default is not cured within thirty (30) days after written notice thereof from
Mortgagee; or
(e) Any "Event of Default" (as defined in the Security Agreement)
shall occur.
(f) if Mortgagor shall default in the observance or performance
of any term, covenant or condition of the Intergraph Sublease on the part of
Mortgagor, as subtenant thereunder, to be observed or performed, unless any such
observance or performance shall have been waived or not required in writing by
Intergraph under the Intergraph Sublease, or if any one or more of the events
referred to in the Intergraph Sublease shall occur which would or may cause the
Intergraph Sublease to terminate without further notice or action thereunder or
which would entitle Intergraph under the Intergraph Sublease to terminate the
Intergraph Sublease and the term thereof by giving notice to Mortgagor, as
subtenant thereunder, or if the leasehold estate created by the Intergraph
Sublease shall be surrendered, in whole or in part, or if the Intergraph
Sublease shall be terminated or cancelled for any reason or under any
circumstance whatsoever, or if any of the terms, covenants or conditions of the
Intergraph Sublease shall in any manner be modified, changed, supplemented,
altered or amended in any way detrimental to the interests of Mortgagor or
Mortgagee without the written consent of Mortgagee.
5.2 Mortgagee's Right to Perform. Upon the occurrence of any
Event of Default, Mortgagee, but without the obligation so to do and without
notice to or demand upon Mortgagor and without releasing Mortgagor from any
obligations hereunder, may: make any payments or do any acts required of
Mortgagor hereunder in such manner and to such extent as either may deem
necessary to protect the security hereof, Mortgagee 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 Mortgagee; 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 Mortgagor, 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.
Mortgagee in making any payment herein and hereby authorized, in the
place and stead of the Mortgagor, 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
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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 Mortgagee 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 Mortgagee, 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, Mortgagee 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
Mortgagor without demand and shall be secured hereby.
5.3 Remedies on Default. Upon the occurrence of any Event of
Default, all indebtedness secured hereby shall become immediately due and
payable, without notice or demand, at the option of Mortgagee, Mortgagee may do
any one, or more, or all, of the foregoing:
(a) (i) enter upon the Property and take possession of any or all
of the Property without being guilty of trespass or conversion,
exclude Mortgagor therefrom, and hold, use, administer, manage and
operate the same to the extent that Mortgagor could do so, without any
liability to Mortgagor resulting therefrom; (ii) collect, receive and
receipt for all proceeds accruing from the operation and management of
the Property; (iii) make repairs and purchase needed additional
property; (iv) insure or reinsure the Property; (v) maintain and
restore the Property; (vi) prepare the Property for resale, lease or
other disposition; (vii) have furnished to the Property utilities and
other materials and services used on or in connection with the
Property; and (viii) exercise every power, right and privilege of
Mortgagor with respect to the Property;
(b) in lieu of or in addition to exercising the power of sale
hereinafter given, to proceed by suit to foreclose its lien on the
Property, sue Mortgagor for damages on account of said default, for
specific performance of any provision contained herein, or to enforce
any other appropriate legal or equitable right or remedy; and
Mortgagee shall be entitled, as a matter of right (upon bill filed or
other proper legal proceedings being commenced for the foreclosure of
this Mortgage, to the extent required by law), to the appointment by
any competent court or tribunal, without notice to Mortgagor or any
other party, of a receiver of the rents, issues, profits and revenues
of the Property, with power to lease and control the Property and with
such other powers as may be deemed necessary;
(c) whether or not possession of the Property is taken, sell the
Property (or such part or parts thereof as Mortgagee may from time to
time elect to sell) under the power of sale which is hereby given to
Mortgagee, at public outcry, to
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the highest bidder for cash, at the front or main door of the
courthouse of the county in which the land to be sold, or a
substantial and material part thereof, is located, after first giving
notice by publication once a week for three successive weeks of the
time, place and terms of such sale, together with a description of the
Property to be sold, by publication in a newspaper published in the
county or counties in which the land to be sold is located in which
notices of such type are customarily published. If there is land to be
sold in more than one county, publication shall be made in all
counties where the land to be sold is located, but if no newspaper is
published in any such county, the notice shall be published in a
newspaper published in an adjoining county for three successive weeks.
The sale shall be held between the hours of 11:00 a.m. and 4:00 p.m.
on the day designated for the exercise of the power of sale hereunder.
Mortgagee may bid at any sale held under this Mortgage and may
purchase the Property, or any part thereof, if the highest bidder
therefor. The purchaser at any such sale shall be under no obligation
to see to the proper application of the purchase money. At any sale
all or any part of the Property, real, personal or mixed, may be
offered for sale in parcels or en masse for one total price, and the
proceeds of any such sale en masse shall be accounted for in one
account without distinction between the items included therein and
without assigning to them any proportion of such proceeds, Mortgagor
hereby waiving the application of any doctrine of marshaling or like
proceeding. In case Mortgagee, in the exercise of the power of sale
herein given, elects to sell the Property in parts or parcels, sales
thereof may be held from time to time, and the power of sale granted
herein shall not be fully exercised until all of the Property not
previously sold shall have been sold or all the obligations secured
hereby shall have been paid in full and this Mortgage shall have been
terminated as provided herein;
(d) with respect to the Property that is subject to Article 9 of
the UCC (the "UCC Property"), exercise all rights and remedies of a
secured party under the UCC, including the right to sell it at public
or private sale or otherwise dispose of, lease or use it, without the
necessity of a court order. At Mortgagee's request, Mortgagor shall
assemble the UCC Property and make it available to Mortgagee at any
place designated by Mortgagee. To the extent permitted by law,
Mortgagor expressly waives notice and any other formalities prescribed
by law with respect to any sale or other disposition of the UCC
Property or exercise of any other right or remedy upon default.
Mortgagor agrees that Mortgagee may sell or dispose of both the real
property included in the Property and the UCC Property in accordance
with the rights and remedies granted under this Mortgage with respect
to real property;
(e) collect the rents, profits, issues and revenues of the
Property, whether paid or accruing before or after the filing of any
petition by or against Mortgagor under the federal Bankruptcy Code,
and, without taking possession, in Mortgagee's own name to demand,
collect, receive, sue for, attach and levy all of such rents, profits,
issues and revenues, to give proper receipts, releases and
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acquittances therefor, and apply the proceeds thereof as set forth
herein or in the Security Agreement;
(f) for and in the name of Mortgagor, execute and deliver to the
purchaser or purchasers of any of the Property sold at foreclosure
good and sufficient deeds of conveyance or bills of sale thereto.
(g) proceed with foreclosure, either through the courts or by
power of sale as provided for in this Mortgage; it being understood
and agreed, in such regard, that several sales may be made hereunder
without exhausting the right of sale for any remaining part of the
obligations secured hereby, whether then matured or unmatured, the
purpose hereof being to provide for a foreclosure and sale of the
Property for any matured part of such obligations without exhausting
the power of foreclosure and the power to sell the Property for any
other part of such obligations, whether matured at the time or
subsequently maturing; and that all prerequisites to the sale shall be
presumed to have been performed, and in any conveyance given hereunder
all statements of facts, or other recitals therein made, as to the
nonpayment of any of the obligations secured hereby or as to the
advertisement of sale, or the time, place and manner of sale, or as to
any other fact or thing, shall be taken in all courts of law or equity
as rebuttably presumptive evidence that the facts so stated or recited
are true;
(h) to sue on the Note or under any other Loan Documents; and
(i) to take any and all such other actions as are then permitted
to it hereunder, under the Note, this Mortgage, any other Loan
Document and in accordance with applicable law.
5.4 No Waiver. By accepting payment of any sum secured hereby
after its due date, Mortgagee 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 Mortgagee
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, Mortgagee 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 Mortgagor agrees to pay
Mortgagee's costs and reasonable attorneys' fees incurred in connection
therewith. No
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condemnation award at any time assigned to or held by Mortgagee shall be deemed
to be held in trust, and Mortgagee may commingle such award with its general
assets and shall not be liable for the payment of any interest thereon.
7. [INTENTIONALLY OMITTED]
8. APPLICATION OF RENTS. Mortgagor hereby gives to and confers upon
Mortgagee the right, power and authority during the continuance of this Mortgage
to collect the rents, issues and profits of the Property, reserving unto
Mortgagor the right, prior to any default in payment of any obligations secured
hereby or hereunder, to collect and retain such rents, issues and profits as
they become due and payable. Upon any such default, Mortgagee 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 Mortgagee 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 Mortgagor and Mortgagee. Any notice to or demand upon
Mortgagor (including any notice of default or notice of sale) or notice to or
demand upon Mortgagee shall be deemed to have been sufficiently made for all
purposes when deposited in the United States mails, postage prepaid, registered
or certified, return receipt requested, addressed as follows:
Mortgagor: Praegitzer Industries, Inc.
1270 Monmouth Cutoff
Dallas, Oregon 97338
Attention: Chief Financial Officer
Mortgagee: Heller Financial, Inc.
Commercial Equipment Finance Division
50 Beale Street, 16th Floor
San Francisco, California 94105-1825
Attention: Region Credit Manager
or to such other address as may be filed in writing by Mortgagor or Mortgagee
with Trustee.
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9.2 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, Mortgagee reserves the right to extend the term, or
otherwise modify the terms, hereof or of the Note as Mortgagee 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 Mortgagor or Mortgagor'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 Mortgage shall be governed by
the law of the State of Alabama. In the event that any provision or clause of
this Mortgage or the Note conflicts with applicable law, the conflict shall not
affect other provisions of this Mortgage or the Note which can be given effect
without the conflicting provision and to this end the provisions of this
Mortgage and the Note are declared to be severable.
13. MORTGAGOR'S RIGHT TO POSSESSION. Mortgagor 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 Mortgagor may, while it is entitled to
possession of the Property, use the same.
14. MAXIMUM INTEREST. No provision of this Mortgage 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 Mortgagor 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 Mortgage 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 Mortgage, 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.
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 Mortgagor, 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
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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 Mortgagee shall include the additional
payment required under the prepayment privilege as stated in the Note.
17. TIME OF ESSENCE. Time is of the essence under this Mortgage and in
the performance of every term, covenant and obligation contained herein.
18. WAIVER OF CERTAIN STATUTORY RIGHTS. Mortgagor shall not and will
not apply for or avail itself of any appraisement, valuation, stay, extension or
exemption laws, or any so-called "moratorium laws" now existing or hereafter
enacted, in order to prevent or hinder the enforcement or foreclosure of this
Mortgage, but hereby waives the benefit of such laws to the full extent that
Mortgagor may do so under applicable law. Mortgagor for itself and all who may
claim through or under it waives any and all right to have the property and
estates comprising the Property marshalled upon any foreclosure of the lien of
this Mortgage and agrees that any court having jurisdiction to foreclose such
lien may order the Property sold as an entirety.
19. MISCELLANEOUS.
19.1 Whenever the context so requires the singular number
includes the plural herein, and the impersonal includes the personal.
19.2 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 Mortgage.
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DATED as of the day and year first above written.
Mortgagor: PRAEGITZER INDUSTRIES, INC.
By: MATTHEW BERGERON
-------------------------------------
Name: Matthew Bergeron
Title: President
[Acknowledgment follows]
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STATE OF OREGON )
COUNTY OF MULTNOMAH )
I, the undersigned Notary Public in and for said County, in said State,
hereby certify that Matthew Bergeron, whose name as President of Praegitzer
Industries, Inc., an Oregon corporation, is signed to the foregoing instrument,
and who is known to me, acknowledged before me on this day that, being informed
of the contents of said instrument, he(she), as such officer and with full
authority, executed the same voluntarily for and as the act of said corporation.
Given under my hand and official seal this 27th day of March, 1998.
-----------------------------------------
NOTARY PUBLIC
My Commission Expires:___________________
[NOTARY SEAL]
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EXHIBIT A
Description of Land
[TO BE ADDED AT CLOSING]
23
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EXHIBIT B
Permitted Encumbrances
[TO BE ADDED AT CLOSING]
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SCHEDULE A
25
CREDIT AGREEMENT
among
PRAEGITZER INDUSTRIES, INC.
and
KEYBANK NATIONAL ASSOCIATION,
TOTAL COMMITMENT -- $40,000,000
March 31, 1998
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is entered into as of March 31, 1998, by and between
PRAEGITZER INDUSTRIES, INC., an Oregon corporation, ("Borrower"), and KEYBANK
NATIONAL ASSOCIATION ("Bank").
RECITALS
Borrower has requested the credit facilities described herein, and Bank has
agreed to provide said credit facilities to Borrower on the terms and conditions
contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and promises of
the parties contained herein, Borrower and Bank hereby agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.1. DEFINED TERMS
All terms defined above shall have the meanings set forth above. Any
accounting term used in this Agreement that is not specifically defined herein
shall have the meaning customarily given to it under GAAP, and all other terms
contained in this Agreement that are not defined herein shall, unless the
context indicates otherwise, have the meanings provided in the Code to the
extent such terms are defined therein. The following terms shall have the
meanings set forth below (with all such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Accounts" shall have the meaning attributed to the term "accounts" in the
Code and shall include, without limitation, all presently existing and hereafter
arising rights to payment for goods sold or leased or for services rendered,
which are not evidenced by instruments or chattel paper, whether or not they
have been earned by performance.
"Agreement" means this Credit Agreement as amended, modified or
supplemented from time to time.
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"Authorized Representative" means a person designated by Borrower on the
most current Notice of Authorized Representatives delivered by Borrower to Bank
as being authorized to request any borrowing or make any interest rate selection
on behalf of Borrower hereunder, or to give Bank any other notice hereunder
which is required by the terms hereof to be made through an Authorized
Representative.
"Available Credit" means, at any time, the amount by which the aggregate of
the outstanding principal amount of the Loans at such time and the Letter of
Credit Obligations at such time is less than the lesser of (a) $40,000,000 or
(b) the Borrowing Base.
"Bankruptcy Code" means the Bankruptcy Reform Act, Title 11 of the United
States Code, as amended or recodified from time to time, including (unless the
context otherwise requires) any rules or regulations promulgated thereunder.
"Borrowing Base" means, as of any date of determination, an amount equal to
the following amount:
(a) 85% of an amount equal to (i) the face amount of the most recently
reported outstanding Eligible Accounts less (ii) sales, excise or similar
taxes included in the amount thereof and less (iii) returns, discounts,
claims, credits and allowances of any nature at any time issued, owing,
granted, outstanding, available or claimed with respect thereto;
(b) plus the lesser of (i) $4,000,000 or (ii) 50% of the most recently
reported amount of Eligible Inventory valued at the lower of cost
(determined on a "first in, first out" basis) or market value;
(c) plus, until the earlier of (i) January 1, 1999 or (ii) the date
the subordinated debt referred to in Section 7.17 is issued, $11,600,000;
(d) less all outstanding Letter of Credit Obligations; and
(e) less all Borrowing Base Reserves.
"Borrowing Base Certificate" means a certificate substantially in the form
of Exhibit A attached hereto.
"Borrowing Base Reserves" means, as of any date of determination, such
amounts (expressed as either a specified amount or as a percentage of a
specified category or item) as Bank, in its Good Faith discretion, may from time
to time establish in determining the Borrowing Base to reflect contingencies or
risks which
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may affect the Collateral, the business, business prospects or financial
condition of Borrower, or the security of the loans made hereunder.
"Business Day" means (a) for all purposes other than as covered by clause
(b) below, any day other than a Saturday, Sunday or other day on which
commercial banks are authorized or required to be closed in Portland, Oregon,
Seattle, Washington or Cleveland, Ohio, and (b) with respect to all notices,
determinations, fundings and payments in connection with any LIBOR interest
selection or LIBOR Loan, any day that is a Business Day described in clause (a)
above and that also is a day for trading by and between banks in U.S. dollar
deposits in the London interbank eurocurrency market.
"Capitalized Lease" means, as to any Person, any lease of property by such
Person as lessee that would be capitalized on a balance sheet of such Person
prepared in accordance with GAAP.
"Capitalized Lease Obligations" means, as to any Person, the capitalized
amount of all obligations of such Person and its subsidiaries under Capitalized
Leases, as determined on a consolidated basis in accordance with GAAP.
"Cash Collateral Account" has the meaning set forth in Section 3.1.
"Change of Law" means the adoption of any Governmental Rule, any change in
any Governmental Rule or the application or requirements thereof (whether such
change occurs in accordance with the terms of such Governmental Rule as enacted,
as a result of amendment or otherwise), any change in the interpretation or
administration of any Governmental Rule by any Governmental Authority, or
compliance by Bank (or any entity controlling Bank) with any request, guideline
or directive (whether or not having the force of law) of any Governmental
Authority.
"Closing Date" means the date of this Agreement.
"Code" means the Uniform Commercial Code of the State of Oregon as amended
from time to time.
"Collateral" means (a) all of Borrower's property and rights in and to
property, including, without limitations, all Rights to Payment, Inventory,
General Intangibles, Equipment, Records, money, instruments, chattel paper,
deposit accounts, documents and investment property; (b) all products, proceeds,
rents and profits of the foregoing; and (c) all of the foregoing, whether now
owned or existing or hereafter acquired or arising or in which any Borrower now
has or hereafter acquires any rights.
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"Commodity Contracts" means commodity options, futures, swaps, and other
similar agreements and arrangements designed to provide protection against
fluctuations in commodity prices.
"Contaminant" means any pollutant, hazardous substance, toxic substance,
hazardous waste or other substance regulated or forming the basis of liability
under any Environmental Law.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of such Person with respect to any
Indebtedness or Contractual Obligation of another Person, if the purpose or
intent of such Person in incurring the Contingent Obligation is to provide
assurance to the obligee of such Indebtedness or Contractual Obligation that
such Indebtedness or Contractual Obligation will be paid or discharged, or that
any agreement entered into by such other Person relating to such Indebtedness or
Contingent Obligation will be complied with, or that any holder of such
Indebtedness or Contractual Obligation will be protected against loss in respect
thereof. Contingent Obligations of a Person include, without limitation, (a) the
direct or indirect guarantee, endorsement (other than for collection or deposit
in the ordinary course of business), co-making, discounting with recourse or
sale with recourse by such Person of an obligation of another Person, and (b)
any liability of such Person for an obligation of another Person through any
agreement (contingent or otherwise) (i) to purchase, repurchase or otherwise
acquire such obligation or any security therefor, or to provide funds for the
payment or discharge of such obligation (whether in the form of a loan, advance,
stock purchase, capital contribution or otherwise), (ii) to maintain the
solvency or any balance sheet item, level of income or financial condition of
another Person, (iii) to make take-or-pay or similar payments, if required,
regardless of non-performance by any other party or parties to an agreement,
(iv) to purchase, sell or lease (as lessor or lessee) property, or to purchase
or sell services, primarily for the purpose of enabling the debtor to make
payment of such obligation or to assure the holder of such obligation against
loss, or (v) to supply funds to or in any other manner invest in such other
Person (including, without limitation, to pay for property or services
irrespective of whether such property is received or such services are
rendered), if in the case of any agreement or liability described under
subclauses (i) through (v) of this sentence the primary purpose or intent
thereof is as described in the preceding sentence. The amount of any Contingent
Obligation shall be equal to the lesser of (A) the amount payable under such
Contingent Obligation (if quantifiable), or (B) the portion of the obligation so
guaranteed or otherwise supported.
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"Contractual Obligation" of any Person means any obligation, agreement,
undertaking or similar provision of any security issued by such Person or of any
agreement, undertaking, contract, lease, indenture, mortgage, deed of trust or
other instrument to which such Person is a party or by which it or any of its
property is bound or to which any of its property is subject.
"Default" means an Event of Default or an event or condition that with the
giving of notice or the passage of time, or both, would constitute an Event of
Default.
"Disclosure Schedule" means Schedule II attached hereto.
"EBITDA" means, as of the end of a fiscal quarter of Borrower, Borrower's
consolidated net income for the four fiscal quarters ending with such quarter,
after deducting all expenses other than interest, taxes, option expenses,
depreciation, depletion and amortization and after eliminating all positive
extraordinary items (as determined in accordance with GAAP) and all positive
charges characterized as unusual charges by Borrower's independent certified
public accountants.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended or recodified from time to time, including (unless the context otherwise
requires) any rules or regulations promulgated thereunder.
"Eligible Accounts" means those Accounts that Bank determines to be
eligible in the Good Faith exercise of its discretion pursuant to Section 2.1(e)
hereof.
"Eligible Inventory" means Inventory that Bank determines to be eligible in
the Good Faith exercise of its discretion pursuant to Section 2.1(f) hereof.
"Environmental Law" means all applicable federal, state and local laws,
statutes, ordinances and regulations, and any applicable judicial or
administrative interpretation, order, consent decree or judgment, relating to
the regulation and protection of the environment. Environmental Laws include but
are not limited to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. ss. 9601 et seq.); the Hazardous
Material Transportation Act, as amended (49 U.S.C. ss. 180 et seq.); the Federal
Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. ss. 136 et
seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. ss.
6901 et seq.); the Toxic Substance Control Act, as amended (42 U.S.C. ss. 7401
et seq.); the Clean Air Act, as amended (42 U.S.C. ss. 740 et seq.); the Federal
Water Pollution Control Act, as amended (33 U.S.C. ss. 1251 et seq.); and the
Safe Drinking Water Act, as amended (42 U.S.C. ss. 300f et seq.), and
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their state and local counterparts or equivalents and any applicable transfer of
ownership notification or approval statutes.
"Environmental Liabilities and Costs" means, as to any Person, all
liabilities, obligations, responsibilities, Remedial Actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including, without limitation, all fees, disbursements and expenses of counsel,
experts and consultants and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any claim or
demand by any other Person, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute, including, without
limitation, any thereof arising under any Environmental Law, Permit, order or
agreement with any Governmental Authority or other Person, and which relate to
any violation or alleged violation of an Environmental Law or a Permit, or a
Release or threatened Release.
"Equipment" means the goods listed in Exhibit H and all attachments,
accessions and property now or hereafter affixed thereto or used in connection
therewith, and substitutions and replacements thereof, wherever located.
"Event of Default" has the meaning set forth in Section 9.1 hereof.
"Fixed Change Coverage Ratio" means the ratio of EBITDA to "Fixed Charges."
As used in this definition, "Fixed Charges" means, as of the end of a fiscal
quarter, the total of the following for the four fiscal quarters ending with
such quarter: (i) Borrower's consolidated scheduled or required principal
repayments of long term debt; (ii) Borrower's consolidated scheduled or required
payments of Capitalized Lease Obligations; and (iii) Borrower's consolidated
interest expense.
"Fixed Rate Term" means a period of one (1), two (2), or three (3) months,
as designated by Borrower, during which a Loan bears interest determined in
relation to LIBOR; provided however, that no Fixed Rate Term may extend beyond
the Maturity Date, and if the last day of a Fixed Rate Term is not a Business
Day, such term shall be extended to the next succeeding Business Day, or if the
next succeeding Business Day falls in another calendar month, such term shall
end on the next preceding Business Day.
"Funded Debt" means, as of the end of a fiscal quarter, the total on a
consolidated basis of all indebtedness of Borrower for borrower money, plus the
amount of all liability, whether contingent or otherwise, for standby letters of
credit, other than standby letters of credit supporting indebtedness for
borrowed money, plus the amount of all Capitalized Lease Obligations of Borrower
plus the present value
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(determined by a discount equal to the Prime Rate) of total payments due under
all Other Leases.
"Funded Debt Ratio" means the ratio of Borrower's Funded Debt to EBITDA.
"GAAP" means generally accepted accounting principles as in effect in the
United States from time to time, consistently applied.
"General Intangibles" shall have the meaning attributed to the term
"general intangible" in the Code, and shall include, without limitation, all tax
and duty refunds, registered and unregistered patents, trademarks, service
marks, copyrights, trade names, applications for the foregoing, trade secrets,
goodwill, processes, drawings, blueprints, customer lists, licenses, whether as
licensor or licensee, choses in action and other claims and existing and future
leasehold interests in equipment.
"Good Faith" means honesty in fact in the conduct or transaction concerned,
without regard to whether standards that might be deemed commercially reasonable
have been observed.
"Governmental Authority" means any domestic or foreign national, state or
local government, any political subdivision thereof, any department, agency,
authority or bureau of any of the foregoing, or any other entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including the Federal Deposit Insurance Corporation,
the Federal Reserve Board, the Comptroller of the Currency, any central bank or
any comparable authority.
"Governmental Rule" means any applicable law, rule, regulation, ordinance,
order, code interpretation, judgment, decree, directive, guidelines, policy or
similar form of decision of any Governmental Authority.
"Indebtedness" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money (including, without limitation,
reimbursement and all other obligations with respect to surety bonds, letters of
credit and bankers' acceptances, whether or not matured) or for the deferred
purchase price of property or services, (b) all obligations of such Person
evidenced by notes, bonds, debentures or similar instruments, (c) all
indebtedness of such Person created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such Person
(even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (d) all Capitalized Lease Obligations of such Person, (e) all
Obligations of such
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Person under Other Leases, (f) all Contingent Obligations of such Person, (g)
all obligations of such Person to purchase, redeem, retire, defease or otherwise
acquire for value any Stock or Stock Equivalents of such Person with a mandatory
repurchase or redemption date of less than ten years from the date of issuance
thereof, (h) all obligations of such Person under Interest Rate Contracts and
Commodity Contracts, (i) all Indebtedness referred to in clauses (a) through (h)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien upon or in property
(including, without limitation, Accounts and General Intangibles) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness, (j) in the case of Borrower, its obligations under the
Loan Documents, (k) all liabilities of such Person that would be shown on a
balance sheet of such Person prepared in accordance with GAAP, and (l) all
liabilities of such Person in connection with the failure to make when due any
contribution or payment pursuant to or under any Plan.
"Indemnitees" has the meaning set forth in Section 10.4 hereof.
"Interest Rate Contracts" means interest rate swap agreements, interest
rate cap agreements, interest rate collar agreements, interest rate insurance,
and other agreements or arrangements designed to provide protection against
fluctuations in interest rates.
"Intergraph Transaction" means Borrower's purchase of the printed circuit
board facility of Intergraph Corporation consisting of the purchase of land,
equipment, buildings, work in process and inventory for a total of approximately
$16,000.000.
"Inventory" shall have the meaning attributed to the term "inventory" in
the Code and, in addition, means all now owned and hereafter acquired inventory,
goods, merchandise and other personal property wherever located, while in the
possession of Borrower, a bailee, or other Person, furnished under any contract
of service or intended for sale or lease, including, without limitation, raw
materials, work in process, spare parts, component parts, finished goods and
materials and supplies of any kind, nature or description which are or might be
used or consumed in Borrower's business or are or might be used in connection
with the manufacture, packing, shipping, advertising, selling or finishing of
such goods, merchandise and other personal property and all documents of title
or documents representing the same.
"Letter of Credit" means a standby letter of credit issued by Bank pursuant
to Section 2.2 hereof.
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"Letter of Credit Agreement" means Bank's standard letter of credit
application and documentation modified to such extent, if any, as Bank deems
necessary.
"Letter of Credit Obligations" means, at any time, all liabilities at such
time of Borrower to Bank with respect to Letters of Credit, whether or not any
such liability is contingent.
"Letter of Credit Request" has the meaning set forth in Section 2.2(d)
hereof.
"LIBOR" means, for each Fixed Rate Term, the rate per annum (rounded upward
if necessary to the nearest whole 1/16 of 1%) and determined pursuant to the
following formula:
LIBOR = Base LIBOR
-----------------------------------
100% - LIBOR Reserve Percentage
As used herein, (a) "Base LIBOR" means the average of the rates per annum
at which U.S. dollar deposits are offered to Bank in the London interbank
eurocurrency market on the second Business Day prior to the commencement of a
Fixed Rate Term at or about 11:00 A.M. (London time), for delivery on the first
day of such Fixed Rate Term, for a term comparable to the number of days in such
Fixed Rate Term and in an amount approximately equal to the principal amount to
which such Fixed Rate Term shall apply, and (b) "LIBOR Reserve Percentage" means
the reserve percentage prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for "Eurocurrency Liabilities" (as defined in
Regulation D of the Federal Reserve Board, as amended), adjusted by Bank for
changes in such reserve percentage during the applicable Fixed Rate Term.
"LIBOR Loan" means any Loan that bears interest with reference to LIBOR.
"LIBOR Margin" means the number of basis points determined in accordance
with Schedule I.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
security interest, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever, including, without limitation, any
conditional sale or other title retention agreement or the interest of a lessor
under a Capitalized Lease Obligation or any Other Lease.
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"Loan" means an advance made by Bank to Borrower pursuant to any of Section
2.1.
"Loan Documents" means this Agreement, the Letter of Credit Agreements, and
each other agreement, note, notice, document, contract or instrument required by
or at any time delivered to Bank in connection with this Agreement.
"Material Adverse Effect" means a material adverse effect on (a) the
condition (financial or otherwise), business, performance, prospects, operations
or properties of Borrower, (b) the ability of Borrower to perform its
obligations under the Loan Documents, or (c) the rights and remedies of Bank
under the Loan Documents.
"Maturity Date" means March 31, 2000.
"Notice of Authorized Representatives" has the meaning set forth in Section
2.1(g) hereof.
"Notice of Borrowing" has the meaning set forth in Section 2.1(d) hereof.
"Notice of Conversion or Continuation" has the meaning set forth in Section
2.4(c) hereof.
"Obligations" means all of Borrower's obligations under the Loan Documents,
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising.
"Other Lease" means any synthetic lease or any financing lease having
substantially the same economic effect as a conditional sale, title retention
agreement or similar arrangement.
"PBGC" means the Pension Benefit Guaranty Corporation established pursuant
to Title IV of ERISA.
"Permit" means any permit, approval, authorization, license, variance or
permission required from a Governmental Authority under an applicable
Governmental Rule.
"Permitted Liens" means
(a) Liens arising by operation of law for taxes, assessments or
governmental charges not yet due;
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(b) statutory Liens of mechanics, materialmen, shippers, warehousemen,
carriers, and other similar persons for services or materials arising in the
ordinary course of business for which payment is not yet due;
(c) non-consensual Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment insurance and
other types of social security;
(d) Liens for taxes or statutory Liens of mechanics, materialmen, shippers,
warehousemen, carriers and other similar persons for services or materials that
are due but are being contested in good faith and by appropriate and lawful
proceedings promptly initiated and diligently conducted and for which reserves
satisfactory to Bank have been established;
(e) Liens listed on the Disclosure Schedule;
(f) Liens in favor of Bank;
(g) purchase money Liens upon or in any property of Borrower and used by
Borrower in the ordinary course of business, which Liens secure the obligation
to pay the purchase price of such property, related payment and performance
obligations and the obligation to pay the cost of services in respect of such
property or to secure Indebtedness and related payment and performance
obligations incurred solely for the purpose of financing the acquisition of such
property or such services, and Liens existing on such property at the time of
its acquisition; provided, however, that the aggregate principal amount of
outstanding Indebtedness secured by the Liens referred to in this clause (g)
shall not at any time exceed the sum of $2,000,000;
(h) zoning restrictions, easements, rights of way, survey exceptions,
encroachments, covenants, licenses, reservations, leasehold interests,
restrictions on the use of real property or minor irregularities incident
thereto which do not in the aggregate materially detract from the value or use
of the property or assets of Borrower or impair, in any material manner, the use
of such property for the purposes for which such property is held by Borrower;
(i) Liens to secure Capitalized Lease Obligations and Other Leases and any
related payment and performance obligations if the incurrence of such
Indebtedness is permitted by Section 8.2; provided, however, that: (i) any such
Lien is created solely for the purpose of securing Indebtedness representing, or
incurred to finance, refinance or refund, the cost (including, without
limitation, the cost of construction and the reasonable fees and expenses
relating to such Indebtedness) of the property
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subject thereto, (ii) the principal amount of the Indebtedness secured by such
Lien does not exceed 100% of such cost, and (iii) such Lien does not extend to
or cover any other property other than such item of property and any
improvements on such item; and
(j) the interests of lessors or lessees of property leased pursuant to
leases permitted hereunder.
"Person" means an individual, partnership, corporation (including, without
limitation, a business trust), joint stock company, limited liability company,
trust, unincorporated association, joint venture or other entity, or a
Governmental Authority.
"Plan" means an employee benefit plan, as defined in Section 3(3) of ERISA,
which Borrower maintains, contributes to or has an obligation to contribute to
on behalf of participants who are or were employed by any of them.
"Prime Rate" means, for any day, an interest rate per annum equal to the
rate of interest most recently announced within Bank at its principal office, as
its prime rate, with any change in the prime rate to be effective as of the day
such change is announced within Bank and with the understanding that the prime
rate is one of Bank's base rates used to price some loans and may not be the
lowest rate at which Bank makes any loan, and is evidenced by the recording
thereof in such internal publication or publications as Bank may designate.
"Prime Rate Loan" means any Loan that bears interest at the Prime Rate.
"Records" means all of Borrower's present and future records and books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other Person).
"Release" means, as to any Person, any unpermitted spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration of a Contaminant into the environment.
"Remedial Action" means all actions required to clean up, remove, prevent
or minimize a Release or threat of Release or to perform pre-remedial studies
and investigations and post-remedial monitoring and care.
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"Rights to Payment" means all Accounts, General Intangibles, contract
rights, chattel paper, documents, instruments, letters of credit, bankers
acceptances and guaranties, and all present and future liens, security
interests, rights, remedies, title and interest in, to and in respect of
Accounts and other Collateral, and shall include without limitation, (a) rights
and remedies under or relating to guaranties, contracts of suretyship, letters
of credit and credit and other insurance related to the Collateral, (b) rights
of stoppage in transit, replevin, repossession, reclamation and other rights and
remedies of an unpaid vendor, lienor or secured party, (c) goods described in
invoices, documents, contracts or instruments with respect to, or otherwise
representing or evidencing, Accounts or other Collateral, including without
limitation, returned, repossessed and reclaimed goods, and (d) deposits by and
property of account debtors or other persons securing the obligations of account
debtors, monies, securities, credit balances, deposits, deposit accounts and
other property of Borrower now or hereafter held or received by or in transit to
Bank or any of its affiliates or at any other depository or other institution
from or for the account of Borrower, whether for safekeeping, pledge, custody,
transmission, collection or otherwise.
"Stock" means shares of capital stock, beneficial or partnership interests,
participations or other equivalents (regardless of how designated) of or in a
corporation or other entity, whether voting or non-voting, and includes, without
limitation, common stock and preferred stock.
"Stock Equivalents" means all securities convertible into or exchangeable
for Stock and all warrants, options or other rights to purchase or subscribe for
any Stock, whether or not presently convertible, exchangeable or exercisable.
"Subsidiary" means any corporation, association, partnership, joint venture
or other business entity of which more than fifty percent (50%) of the voting
stock or other equity interest is owned directly or indirectly by Borrower.
"Tranche" means a collective reference to LIBOR Loans, the then current
Fixed Rate Term with respect to all of which begin on the same date and end on
the same later date (whether or not such LIBOR Loans shall have originally been
made on the same day).
SECTION 1.2. HEADINGS
Headings in the Loan Documents are for convenience of reference only and
are not part of the substance hereof or thereof.
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ARTICLE II. THE CREDITS
SECTION 2.1. REVOLVING CREDITS
(a) On the terms and subject to the conditions contained in this Agreement,
Bank agrees to make loans (each a "Loan") to Borrower from time to time until
the Maturity Date in an aggregate amount not to exceed at any time outstanding
the lesser of (i) $40,000,000 or (ii) the Borrowing Base. Borrower may from time
to time borrow, partially or wholly repay its outstanding Loans, and reborrow,
subject to all the limitations, terms and conditions contained herein.
(b) If at any time the Available Credit is negative, Borrower, without
demand or notice, shall immediately repay that portion of the Loans necessary to
cause the Available Credit to be zero. Borrower shall repay the outstanding
principal balance of the Loans, together with all accrued and unpaid interest
and related fees on the earlier of the Maturity Date or the due date determined
pursuant to Section 9.2.
(c) The Loans shall be evidenced by a promissory note payable to the order
of Bank and substantially in the form attached hereto as Exhibit B.
(d) Borrower, through an Authorized Representative, shall request an
advance under Section 2.1(a) by giving Bank irrevocable written notice or
telephonic notice (confirmed promptly in writing), in the form of Exhibit C
attached hereto (each, a "Notice of Borrowing"), which specifies, among other
things:
(i) the principal amount of the requested advance;
(ii) the proposed date of borrowing, which shall be a Business Day;
(iii) whether such advance is to be a Prime Rate Loan or a LIBOR Loan;
and
(iv) if such advance is to be a LIBOR Loan, the length of the Fixed
Rate Term applicable thereto.
Each such Notice of Borrowing must be received by Bank not later than (A)
11:00 a.m. (Seattle time) on the date of borrowing if a Prime Rate Loan, or (B)
at least three (3) Business Days prior to the date of borrowing if a LIBOR Loan.
In addition to advances requested by Borrower, advances of Loans may be made
automatically pursuant to certain cash management arrangements made by Borrower
with Bank and each such advance shall be a Prime Rate Loan.
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(e) Bank shall have the right in its discretion to determine in Good Faith
which Accounts are eligible for the purpose of determining the Borrowing Base.
General criteria for Eligible Accounts may be established and revised from time
to time by Bank in Good Faith. Without limiting such discretion as to other
Accounts, the following Accounts shall not be Eligible Accounts:
(i) Accounts that do not consist of ordinary trade accounts receivable
owned by Borrower, payable in cash in United States dollars and arising out
of the final sale of Inventory or provision of services in the ordinary
course of Borrower's business as presently conducted by it;
(ii) Accounts with respect to which the services covered thereby have
not been rendered or the goods covered thereby have not been delivered to
the account debtor or its designee or with respect to which Borrower failed
to issue an original invoice at the agreed-upon purchase price to the
account debtor promptly after rendering such services or delivering such
goods to the account debtor;
(iii) Accounts that are not due and payable, absolutely and
unconditionally, within sixty (60) days from the date of the original
invoice applicable thereto;
(iv) Accounts with respect to which more than ninety (90) days have
elapsed since the date of the original invoice applicable thereto;
(v) Accounts with respect to which the account debtor is an affiliate
of Borrower or any officer, employee or agent of the account debtor is an
officer, employee or agent of or affiliated with Borrower directly or
indirectly by virtue of family membership, ownership, control, management
or otherwise;
(vi) Accounts with respect to which the account debtor is a
Governmental Authority, except for those Accounts as to which Borrower has
assigned its right to payment thereof to Bank, and the assignment has been
acknowledged, pursuant to the Assignment of Claims Act of 1940, as amended
(31 U.S.C. ss. 3727);
(vii) the chief executive office of the account debtor with respect to
such Account is not located in the United States of America, unless (A) the
account debtor has delivered to Borrower an irrevocable letter of credit
issued or confirmed by a bank satisfactory to Bank, sufficient to cover
such Account, in form and substance satisfactory to Bank and, if required
by Bank, the
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original of such letter of credit has been delivered to Bank or Bank's
agent and the issuer thereof notified of the assignment of the proceeds of
such letter of credit to Bank, (B) such Account is subject to credit
insurance payable to Bank issued by an insurer and on terms and in an
amount acceptable to Bank, (C) the account debtor resides in a province of
Canada that recognizes Bank's perfection and enforcement rights as to
Accounts by reason of the filing of a UCC-1 in Oregon, or (D) such Account
is otherwise acceptable in all respects to Bank (subject to such lending
formula with respect thereto as Bank may determine);
(viii) Accounts for which the prospect of payment or performance by
the account debtor is or will be impaired in the Good Faith determination
of Bank;
(ix) Accounts with respect to which Bank does not have a valid and
prior, fully perfected lien or which are not free of all liens or other
claims of all other Persons (except Permitted Liens);
(x) Accounts with respect to which the account debtor is the subject
of bankruptcy or a similar insolvency proceeding, or has made an assignment
for the benefit of creditors, or whose assets have been conveyed to a
receiver or trustee, or who has failed or suspended or gone out of
business;
(xi) Accounts with respect to which the account debtor's obligation to
pay the Accounts is conditional upon the account debtor's approval;
(xii) Accounts from an account debtor to the extent that the account
debtor's indebtedness to Borrower (whether evidenced by such Accounts or
otherwise) exceeds an amount which is greater than 15% (25% with respect to
Compaq, Hewlett Packard and Xerox) of the face amount (less maximum
discounts, credits and allowances which may be taken by or granted to
account debtors in connection therewith) of the then outstanding Eligible
Accounts;
(xiii) Accounts owed by a particular account debtor if less than 75%
of the aggregate Accounts then owed to Borrower by that account debtor and
its affiliates constitute Eligible Accounts;
(xiv) Accounts of a particular account debtor in excess of a credit
limit established as to that account debtor by Borrower or by Bank;
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(xv) Accounts that represent a prepayment or progress payment or a
partial payment under an installment contract;
(xvi) Accounts that are evidenced by a promissory note or other
instrument;
(xvii) Accounts with respect to which the terms or conditions prohibit
or restrict assignment or collection rights;
(xviii) Accounts with respect to which the account debtor is located
in any jurisdiction requiring the timely filing by Borrower of a report or
document before such Account is created in order to bring suit or otherwise
enforce its remedies against such account debtor in the courts or through
any judicial process of such jurisdiction, unless Borrower has filed, or is
exempt from filing, such a report; and
(xix) Accounts with respect to which the account debtor is also a
creditor of Borrower, but only to the extent of the amount owed by Borrower
to such account debtor if such amount is less than the amount of all
Accounts with respect to such account debtor that otherwise would be
Eligible Accounts.
Bank shall have the right, but not the duty, to declare particular accounts
ineligible. The fact that Bank has not declared a particular account ineligible
shall not be deemed to be a determination or representation by Bank as to the
creditworthiness or financial condition of any account debtor. Because of
banking relationships between account debtors of Borrower and Bank, Bank may
have information about the creditworthiness of such account debtors; however,
Bank shall have no duty to Borrower to disclose information it may have about
any Borrower's account debtors and Borrower shall have no right to rely upon any
action or inaction of Bank concerning the creditworthiness or financial
condition of Borrower's account debtors. BORROWER HEREBY COVENANTS NOT TO SUE
AND TO HOLD HARMLESS BANK, ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
SUCCESSORS AND ASSIGNS FOR AND FROM ANY AND ALL DAMAGES, LIABILITY, OR CLAIMS OF
LIABILITY, WHETHER KNOWN OR UNKNOWN, OF WHATSOEVER NATURE ARISING OUT OF OR
BASED IN WHOLE OR IN PART UPON BANK'S FAILURE TO DISCLOSE UNFAVORABLE
INFORMATION ABOUT AN ACCOUNT DEBTOR OF BORROWER'S TO BORROWER, OR BANK'S FAILURE
TO TREAT AS INELIGIBLE THE ACCOUNT OF AN ACCOUNT DEBTOR OF BORROWER ABOUT WHOM
BANK HAS UNFAVORABLE INFORMATION.
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(f) Bank shall have the right in its discretion to determine in Good Faith
which Inventory is eligible for the purpose of determining the Borrowing Base.
Without limiting such discretion as to other Inventory, the following Inventory
shall in any event not constitute Eligible Inventory:
(i) finished goods that are not held by Borrower for sale as Inventory
in the ordinary course of Borrower's business as presently conducted by it
or that are obsolete, not in good condition, not of merchantable quality or
not salable in the ordinary course of Borrower's business or that are
subject to defects that would affect their market value;
(ii) Inventory that Bank, in the Good Faith exercise of its
discretion, determines to be unacceptable due to age, type, category or
quantity;
(iii) Inventory in transit or otherwise in the possession of any
Person other than Borrower, except (subject to any additional requirements
imposed by Bank, in the Good Faith exercise of its discretion, to protect
Borrower's title thereto or Bank's Lien therein) goods held in storage
solely for the account of Borrower (subject to Bank's Lien), if the Person
in possession has acknowledged in writing Bank's Lien thereon and has not
issued a negotiable document of title as to the goods;
(iv) Inventory with respect to which Bank, does not have a valid and
prior, fully perfected Lien and that is not free of all other Liens, other
than Permitted Liens;
(v) Inventory in the possession of a warehouseman or other bailee if
Bank has not received a bailee letter acceptable to Bank from such
warehouseman or bailee; and
(vi) Inventory located on premises leased by Borrower if Bank has not
received a landlord's waiver acceptable to Bank with respect to such
premises.
(g) On the Closing Date, and from time to time subsequent thereto at
Borrower's option, Borrower shall deliver to Bank a written notice in the form
of Exhibit D attached hereto, which designates by name one or more Authorized
Representatives and includes each of their respective specimen signatures (each,
a "Notice of Authorized Representatives"). Bank shall be entitled to rely
conclusively on the authority of each person designated as an Authorized
Representative in the most current Notice of Authorized Representatives
delivered by Borrower to Bank, to
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request borrowings and select interest rate options hereunder, and to give to
Bank such other notices as are specified herein as being made through an
Authorized Representative, until such time as Borrower has delivered to Bank,
and Bank has actual receipt of, a new Notice of Authorized Representatives. Bank
shall have no duty or obligation to Borrower to verify the authenticity of any
signature appearing on any Notice of Borrowing or any other written notice from
an Authorized Representative or to verify the authenticity of any person
purporting to be an Authorized Representative giving any telephonic notice
permitted hereby.
SECTION 2.2. LETTER OF CREDIT FACILITY
(a) On the terms and subject to the conditions contained in this Agreement,
Bank agrees promptly to issue one or more Letters of Credit at the request of
Borrower for the account of Borrower from time to time until thirty (30) days
prior to the Maturity Date; provided, however, that Bank shall not issue any
Letter of Credit if:
(i) any order, judgment or decree of any Governmental Authority or
arbitrator of which Bank is aware shall purport by its terms to enjoin or
restrain Bank from issuing such Letter of Credit or any Governmental Rule
applicable to Bank or any request or directive (whether or not having the
force of law) from any Governmental Authority with jurisdiction over Bank
shall prohibit, or request that Bank refrain from, the issuance of letters
of credit generally or such Letter of Credit in particular or shall impose
upon Bank with respect to such Letter of Credit any restriction or reserve
or capital requirement (for which Bank is not otherwise compensated) not in
effect on the date hereof or result in any loss, cost or expense that (A)
was not applicable, in effect or known to Bank on the Closing Date and
which Bank in Good Faith deems material to it, and (B) the reimbursement of
which is not provided for hereunder;
(ii) any of the applicable conditions contained in Article VI is not
then satisfied;
(iii) after giving effect to the issuance of such Letter of Credit,
the Letter of Credit Obligations exceed $5,000,000;
(iv) the amount of the Letter of Credit requested exceeds the
Available Credit; or
(v) fees due in connection with a requested issuance have not been
paid.
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(b) In no event shall the expiry date of any Letter of Credit be more than
one year or fall after ten (10) days prior to the Maturity Date.
(c) Prior to the issuance of each Letter of Credit, Borrower shall have
delivered to Bank, if requested by Bank, a Letter of Credit Agreement, signed by
Borrower, and such other documents or items as Bank may require pursuant to the
terms thereof.
(d) In connection with the issuance of each Letter of Credit, Borrower,
through an Authorized Representative, shall give Bank at least four (4) Business
Days' prior written notice (a "Letter of Credit Request"), in substantially the
form of Exhibit E, of the requested issuance of such Letter of Credit. Such
notice shall be irrevocable and binding on Borrower and shall specify (i) the
stated amount of the Letter of Credit requested, (ii) the date of issuance of
such requested Letter of Credit (which day shall be a Business Day), (iii) the
date on which such Letter of Credit is to expire (which date shall be a Business
Day), (iv) the Person for whose benefit the requested Letter of Credit is to be
issued, and (v) such other terms and conditions of the proposed Letter of Credit
as are requested by Borrower and acceptable to Bank. Such notice, to be
effective, must be received by Bank not later than 11:00 a.m. (Seattle time) on
the last Business Day on which notice can be given under the immediately
preceding sentence.
(e) Subject to the terms and conditions of this Section 2.2 and provided
that the applicable conditions set forth in Article VI have been satisfied, Bank
shall, on the requested date, issue a Letter of Credit on behalf of Borrower in
accordance with the applicable Letter of Credit Request and Bank's usual and
customary business practices and in a final form reasonably satisfactory to
Borrower.
(f) If Bank makes any payment under any Letter of Credit, such payment
shall be deemed to be and shall constitute a Prime Rate Loan made by Bank to
Borrower pursuant to Section 2.1(a).
SECTION 2.3. INTEREST/FEES
(a) Interest. The outstanding principal balance of each Prime Rate Loan
shall bear interest at a fluctuating rate per annum equal to the Prime Rate in
effect from time to time. The outstanding principal balance of each LIBOR Loan
shall bear interest at a fixed rate per annum determined by Bank to be equal to
the aggregate of (i) LIBOR in effect on the first day of the Fixed Rate Term for
such Loan plus (ii) the applicable LIBOR Margin in effect on the second Business
Day before the first day of such Fixed Rate Term. The foregoing notwithstanding,
the rate of interest applicable
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at all times during the continuation of an Event of Default shall be a
fluctuating rate per annum equal to the Prime Rate in effect from time to time,
plus 200 basis points. All fees, expenses and other amounts not paid when due
shall bear interest (from the date due until paid) at the rate set forth in the
preceding sentence.
(b) Letter of Credit Fees. With respect to each Letter of Credit, Borrower
shall pay to Bank a fee, payable upon issuance, equal to the face amount thereof
multiplied by a rate per annum equal to the LIBOR Margin applied for a period
equal to the term of such Letter of Credit. In addition, Borrower shall pay to
Bank upon the occurrence of any activity with respect to any Letter of Credit,
including without limitation, amendment, extension, transfer or cancellation of
any Letter of Credit, a fee determined in accordance with Bank's standard fees
and charges then in effect for such activity.
(c) Closing Fee. On the Closing Date, Borrower shall pay Bank a closing fee
of $188,000.
(d) Facility Fee. Borrower shall pay Bank a facility fee of $10,000 per
quarter payable in arrears on the first day of each January, April, July and
October.
(e) Computation and Payment. All interest and per annum fees shall be
computed on the basis of a 360-day year, actual days elapsed. Interest on Prime
Rate Loans shall be payable quarterly, in arrears, on the first day of each
January, April, July and October and upon the conversion of a Prime Rate Loan to
a LIBOR Loan. Interest on LIBOR Loans shall be paid on the last day of each
Fixed Rate Term.
SECTION 2.4. INTEREST OPTIONS
(a) Election. Subject to the requirement that each LIBOR Loan be in a
minimum amount of $250,000 and in integral multiples of $100,000 and the
limitation in Section 2.4(b) regarding the number of Tranches outstanding at any
time, (i) except as otherwise provided herein, at any time when a Default is not
continuing Borrower may convert all or any portion of a Prime Rate Loan to a
LIBOR Loan for a Fixed Rate Term designated by Borrower, and (ii) at any time
Borrower may convert all or a portion of a LIBOR Loan at the end of the Fixed
Rate Term applicable thereto to a Prime Rate Loan or, if no Default is
continuing, to a LIBOR Loan for a new Fixed Rate Term designated by Borrower. If
Borrower has not made the required interest rate conversion or continuation
election prior to the last day of any Fixed Rate Term, Borrower shall be deemed
to have elected to convert such LIBOR Loan to a Prime Rate Loan.
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(b) Maximum Number of Tranches. At no time shall there be more than three
Tranches outstanding at any time.
(c) Notice to Bank. Borrower, through an Authorized Representative, shall
request each interest rate conversion or continuation by giving Bank irrevocable
written notice or telephonic notice (confirmed promptly in writing), in the form
of Exhibit F attached hereto (a "Notice of Conversion or Continuation"), that
specifies, among other things: (i) the Loan to which such Notice of Conversion
or Continuation applies; (ii) the principal amount that is the subject of such
conversion or continuation; (iii) the proposed date of such conversion or
continuation, which shall be a Business Day; and (iv) if such Notice pertains to
a LIBOR interest selection, the length of the applicable Fixed Rate Term. Any
such Notice of Conversion or Continuation must be received by Bank not later
than (A) 11:00 a.m. (Seattle time) on the effective date of any Prime Rate
interest selection, and (B) at least three (3) Business Days prior to the
effective date of any LIBOR interest selection.
SECTION 2.5. OTHER PAYMENT TERMS
(a) Automatic Debit. Bank may, and Borrower hereby authorizes Bank to,
debit any deposit account of Borrower with Bank for all payments of principal,
interest and fees as they become due, provided that Bank shall first debit
Borrower's account no. 370211003436 with Bank before debiting any other account.
(b) Place and Manner. Borrower shall make all payments due to Bank by
payment to Bank at Bank's office, in lawful money of the United States and in
same day or immediately available funds not later than 12:00 noon (Seattle time)
on the date due.
(c) Date. Whenever any payment due hereunder shall fall due on a day other
than a Business Day, such payment shall be made on the next succeeding Business
Day, and such extension of time shall be included in the computation of interest
or fees, as the case may be.
(d) Application of Payments. All payments under the Loan Documents
(including prepayments) shall be applied first to unpaid fees, costs and
expenses then due and payable under the Loan Documents, second to accrued
interest then due and payable under the Loan Documents, third to reduce the
principal of the Loans. If an Event of Default has occurred and is continuing,
Bank shall apply such payments as determined by it in its discretion.
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SECTION 2.6. CHANGE OF CIRCUMSTANCES
(a) Inability to Determine Rate. If Bank at any time shall determine that
adequate and reasonable means do not exist for ascertaining LIBOR, then Bank
shall give telephonic notice (promptly confirmed in writing) to Borrower of such
determination. If such notice is given and until such notice has been withdrawn
in writing by Bank, then no LIBOR interest option may be selected by Borrower.
(b) LIBOR Illegality; Termination of Commitment. Notwithstanding any other
provisions herein, if any Change of Law shall make it unlawful for Bank (i) to
make a LIBOR interest rate available, or (ii) to maintain LIBOR interest rates
hereunder, then, in the former event, any obligation of Bank hereunder to make
available such unlawful LIBOR interest rate shall forthwith be canceled, and in
the latter event, any such unlawful LIBOR interest rate then outstanding shall
at the option of Bank be converted so that interest is determined in relation to
the Prime Rate pursuant to the terms of this Agreement; provided however, if any
such Change in Law shall permit a LIBOR interest rate until the expiration of
the Fixed Rate Term relating thereto, then such permitted LIBOR interest rate
shall continue as such until the end of such Fixed Rate Term. If as a result of
this Section a LIBOR interest rate is converted to a lower interest rate,
Borrower shall pay to Bank immediately upon demand such amount or amounts as may
be necessary to compensate Bank for any loss in connection therewith.
(c) Illegality; Compensation. Upon the occurrence of any event described in
Section 2.6(b) hereof, Borrower shall pay to Bank, immediately upon demand, such
amount or amounts as may be necessary to compensate Bank for any fines, fees,
charges, penalties or other amounts payable by Bank as a result thereof and that
are attributable to LIBOR interest rates made available to Borrower hereunder.
In determining which amounts payable by Bank and/or losses incurred by Bank are
attributable to LIBOR interest rates made available to Borrower hereunder, any
reasonable allocation made by Bank among its operations shall, in the absence of
manifest error, be conclusive and binding upon Borrower.
(d) Change of Law; Compensation. If any Change of Law (i) shall subject
Bank to any tax, duty or other charge with respect to any LIBOR interest rate,
or shall change the basis of taxation of payments by Borrower to Bank of
principal, interest, fees or any other amount payable hereunder (except for
changes in the rate of taxation on the overall net income of imposed by the
jurisdiction of Bank's incorporation or by any jurisdiction in which its
applicable lending office is located); (ii) shall impose, modify or hold
applicable any reserve, special deposit, compulsory loan or similar requirement
against assets held by, deposits or other liabilities in or for
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the account of, advances or loans by, or any other acquisition of funds by Bank;
or (iii) shall impose on Bank any other condition; and the effect of any of the
foregoing is to increase the cost to Bank of making, renewing or maintaining any
LIBOR Loan hereunder or to reduce any amount receivable by Bank in connection
therewith, then Borrower shall, immediately upon demand, pay to Bank such amount
or amounts as may be necessary to reimburse Bank for such increased costs or to
compensate Bank for such reduced amounts. A certificate as to the amount of such
increased costs or reduced amounts, delivered by Bank to Borrower shall, in the
absence of manifest error, be conclusive and binding on Borrower for all
purposes.
(e) Capital Requirements; Compensation. If Bank shall have determined that
any Change of Law regarding capital adequacy has or shall have the effect of
reducing the rate of return on the capital of Bank (or any entity controlling
Bank) as a consequence of Bank's obligations hereunder to a level below that
which Bank or such entity would have achieved but for such Change of Law (taking
into consideration Bank's or such entity's policies with respect to capital
adequacy), by an amount deemed by Bank to be material, then from time to time,
within fifteen (15) days after demand by Bank, Borrower shall pay to Bank or
such entity such additional amounts as shall compensate Bank or such entity for
such reduction. Any such request by Bank under this Section shall set forth the
basis of the calculation of such additional amounts and shall, in the absence of
manifest error, be conclusive and binding on Borrower for all purposes.
SECTION 2.7. LIBOR PAYMENTS; FUNDING LOSS INDEMNIFICATION
(a) Borrower may prepay the principal of any portion of a Tranche at any
time and in the minimum amount of $250,000, or, if less, the entire principal
amount of such Tranche. In consideration of Bank providing this prepayment
option to Borrower or if any such portion of a LIBOR Loan shall become due and
payable at any time prior to the last day of the Fixed Rate Term applicable
thereto by acceleration or otherwise, Borrower shall pay to Bank immediately
upon demand a fee which is the sum of the discounted monthly difference for each
month from the month of prepayment through the month in which such Fixed Rate
Term matures, calculated as follows for each such month: (i) determine the
amount of interest which would have accrued each month on the amount prepaid at
the interest rate applicable to such amount had it remained outstanding until
the last day of the Fixed Rate Term applicable thereto; (ii) subtract from the
amount determined in (i) above the amount of interest which would have accrued
for the same month on the amount prepaid for the remaining term of such Fixed
Rate Term at LIBOR in effect on the date of
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prepayment for new loans made for such term and in a principal amount equal to
the amount prepaid; and (iii) if the result obtained in (ii) for any month is
greater than zero, discount that difference by LIBOR used in (ii) above.
Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Borrower, therefore, agrees to pay the above-described prepayment
fee and agree that said amount represents a reasonable estimate of the
prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay
any prepayment fee when due, the amount of such prepayment fee shall thereafter
bear interest until paid at a rate per annum equal to the Prime Rate plus 200
basis points.
(b) If Borrower shall (i) fail to borrow the full amount set forth in any
Notice of Borrowing that has been delivered to Bank (whether as a result of the
failure to satisfy any applicable conditions or otherwise), or (ii) fail to
convert or continue at the LIBOR interest option any portion of a Loan in
accordance with a Notice of Conversion or Continuation delivered to Bank
(whether as a result of the failure to satisfy any applicable conditions or
otherwise), Borrower shall, upon demand by Bank, reimburse Bank and hold Bank
harmless for all costs and losses incurred by Bank as a result of such
repayment, prepayment or failure. Borrower understands that such costs and
losses may include, without limitation, losses incurred by Bank as a result of
funding and other contracts entered into by Bank to fund any LIBOR Loan. Bank
shall deliver to Borrower a certificate setting forth the amount of costs and
losses for which demand is made. Such certificate shall, in the absence of
manifest error, be conclusive and binding on Borrower as to the amount of such
loss for all purposes. This Section 2.7(b) shall survive the termination of this
Agreement.
ARTICLE III. COLLECTION AND ADMINISTRATION
SECTION 3.1. CASH COLLATERAL ACCOUNT
(a) Cash Collateral Account. Borrower shall, at Borrower's expense and in
the manner requested by Bank from time to time, direct that remittances and all
other collections and proceeds of Accounts and other Collateral shall be
deposited into a lock box account maintained in Bank's name. In connection
therewith, Borrower shall execute such lockbox agreement(s) as Bank shall
require. Borrower shall maintain with Bank, and Borrower hereby grants to Bank a
security interest in, a non-interest bearing deposit account over which Borrower
shall have no control
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("Cash Collateral Account") and into which the proceeds of all Borrower's Rights
to Payment shall be deposited immediately upon their receipt.
(b) Immediate Deposit. Borrower and all of its affiliates, subsidiaries,
shareholders, directors, employees or agents shall, acting as trustee for Bank,
receive, as the property of Bank, any monies, checks, notes, drafts, or any
other payment relating to and/or proceeds of Accounts or other Collateral which
come into their possession or under their control and immediately upon receipt
thereof, shall deposit or cause the same to be deposited in the Cash Collateral
Account, or remit the same or cause the same to be remitted, in kind, to Bank.
In no event shall the same be commingled with Borrower's own funds.
SECTION 3.2. STATEMENTS
Bank shall render to Borrower each month a statement setting forth the
balance in the loan account(s) maintained by Bank for Borrower pursuant to this
Agreement, including principal, interest, fees, costs and expenses. Each such
statement shall be subject to subsequent adjustment by Bank but shall, absent
manifest errors or omissions, be considered correct and deemed accepted by
Borrower and conclusively binding upon Borrower as an account stated except to
the extent that Bank receives a written notice from Borrower of any specific
exceptions thereto within thirty (30) days after the date such statement has
been mailed by Bank. Until such time as Bank shall have rendered to Borrower a
written statement as provided above, the balance in the loan account(s) shall be
presumptive evidence of the amounts due and owing to Bank by Borrower.
SECTION 3.3. PAYMENTS
All amounts due under any of the Loan Documents shall be payable to the
Cash Collateral Account as provided in Section 3.1 hereof or such other place as
Bank may designate from time to time. Whenever any payment due hereunder shall
fall due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall be included in
the computation of interest or fees, as the case may be. Bank may apply payments
received or collected from Borrower or for the account of Borrower (including,
without limitation, the monetary proceeds of collections or of realization upon
any Collateral) to such of the Loans, whether or not then due, in such order and
manner as Bank determines. At Bank's option, all principal, interest, fees,
costs, expenses and other charges provided for in this Agreement or the other
Loan Documents may be charged directly to the loan account(s) of Borrower.
Borrower shall make all payments due Bank free and clear of, and without
deduction or withholding for or on account of, any setoff,
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counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, restrictions or conditions of any kind. If after receipt of any
payment of, or proceeds of Collateral applied to the payment of, any of the
Obligations Bank is required to surrender or return such payment or proceeds to
any person or entity for any reason, then the Obligations intended to be
satisfied by such payment or proceeds shall be reinstated and continue and this
Agreement shall continue in full force and effect as if such payment or proceeds
had not been received by Bank. Borrower shall be liable to pay to Bank, and does
hereby indemnify and hold Bank harmless for the amount of any payments or
proceeds surrendered or returned. This Section 3.3 shall remain effective
notwithstanding any contrary action which may be taken by Bank in reliance upon
such payment or proceeds. This Section 3.3 shall survive the payment of the
Obligations and the termination of this Agreement.
SECTION 3.4. USE OF PROCEEDS
Borrower shall use the initial proceeds of the Loans provided by Bank to
Borrower hereunder only for: (a) payments to each of the Persons listed in the
initial borrowing request delivered on the Closing Date; and (b) costs, expenses
and fees in connection with the preparation, negotiation, execution and delivery
of this Agreement and the other Loan Documents. All other Loans made or Letters
of Credit provided by Bank to Borrower pursuant to the provisions hereof shall
be used by Borrower only for general operating, working capital and other proper
corporate purposes of Borrower not otherwise prohibited by the terms of this
Agreement. None of the proceeds will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security or for the purposes of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for the any other purpose which might cause any
of the Loans to be considered a "purpose credit" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System, as
amended.
ARTICLE IV. SECURITY
SECTION 4.1. GRANT OF SECURITY INTEREST
Borrower hereby grants to Bank a security interest in all of the Collateral
as security for the full and prompt payment in cash and performance of the
Obligations.
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SECTION 4.2. PERFECTION; DUTY OF CARE
(a) Until all the Obligations have been fully satisfied and paid in cash,
Borrower shall perform all steps requested by Bank to perfect, maintain and
protect Bank's security interest in the Collateral, including, without
limitation, (i) executing and filing financing and continuation statements in
form and substance satisfactory to Bank, and (ii) delivering all Collateral in
which Bank's security interest may be perfected by possession together with such
endorsements as Bank may request.
(b) Bank shall have the right at all times, and from time to time, to
contact Borrower's account debtors to verify Rights to Payment.
(c) Borrower shall pay or cause to be paid all taxes, assessments and
governmental charges levied or assessed or imposed upon or with respect to the
Collateral or any part thereof; provided, however, Borrower shall not be
required to pay any tax if the validity and/or amount thereof is being contested
in good faith and by appropriate and lawful proceedings promptly initiated and
diligently conducted of which Borrower has given prior notice to Bank and for
which appropriate reserves have been established and so long as levy and
execution have been and continue to be stayed. If Borrower fails to pay or so
contest and reserve for such taxes, assessments and governmental charges, Bank
may (but shall not be required to) pay the same and add the amount of such
payment to the principal of the Loan.
(d) In order to protect or perfect the security interest which Bank is
granted hereunder, Bank may discharge any Lien that is not a Permitted Lien or
bond the same, pay for any insurance that Borrower has failed to maintain as
required by this Agreement, maintain guards, pay any service bureau, or obtain
any record and add the same to the principal of the Loan.
(e) Bank shall have no duty of care with respect to the Collateral, except
that Bank shall exercise reasonable care with respect to the Collateral in
Bank's custody, but shall be deemed to have exercised reasonable care if such
property is accorded treatment substantially equal to that which Bank accords
its own property, or if Bank takes such action with respect to the Collateral as
Borrower shall request in writing, provided that no failure to comply with any
such request nor any omission to do any such act requested by Borrower shall be
deemed a failure to exercise reasonable care. Bank's failure to take steps to
preserve rights against any parties or property shall not be deemed to be a
failure to exercise reasonable care with respect to the Collateral in Bank's
custody.
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ARTICLE V. REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Bank,
subject to the exceptions set forth on the Disclosure Schedule, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment in cash
and satisfaction and discharge of all Obligations.
SECTION 5.1. LEGAL STATUS
It is a corporation, duly organized and existing and in good standing under
the laws of the jurisdiction of its incorporation, and is qualified or licensed
to do business (and is in good standing as a foreign corporation, if applicable)
in all jurisdictions in which such qualification or licensing is required or in
which the failure to so qualify or to be so licensed could have a Material
Adverse Effect. It is not and has not, during the preceding five (5) years, been
known as or used any other corporate or fictitious name and has not acquired any
of its assets in a bulk transfer.
SECTION 5.2. AUTHORIZATION AND VALIDITY
The Loan Documents have been duly authorized and the performance by it of
its obligations under the Loan Documents constitute a proper corporate purpose
under all applicable law. The Loan Documents upon their execution and delivery
in accordance with the provisions hereof will constitute legal, valid and
binding agreements and obligations of it enforceable against it in accordance
with their respective terms.
SECTION 5.3. NO VIOLATION
The execution, delivery and performance by it of each of the Loan Documents
does not violate or contravene any provision of its Articles of Incorporation or
By-Laws and does not violate any Governmental Rule or result in a breach of or
constitute a default under any contract, obligation, indenture or other
instrument to which it or any subsidiary of it is a party or by which it may be
bound, which violation, breach or default would have a Material Adverse Effect.
SECTION 5.4. LITIGATION
There are no pending, or to its knowledge threatened, actions, claims,
investigations, suits or proceedings, by or before any governmental authority,
arbitrator, court or administrative agency that could have a Material Adverse
Effect.
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SECTION 5.5. CORRECTNESS OF FINANCIAL STATEMENT
The consolidated financial statements of Borrower dated as of December 31,
1997, heretofore delivered by Borrower to Bank, (a) present fairly the financial
condition of Borrower and its affiliates; (b) disclose all liabilities of
Borrower that are required to be reflected or reserved against under GAAP,
whether liquidated or unliquidated, fixed or contingent; and (c) have been
prepared in accordance with GAAP. Except as disclosed to Bank pursuant to
Section 7.3, since the date of such financial statements there has been no
change or changes which have resulted in a Material Adverse Effect.
SECTION 5.6. TAXES
It has filed, or caused to be filed, all federal, state, local and foreign
tax returns required to be filed by it, and has paid, or caused to be paid, all
taxes as are shown on such returns, or on any assessment received by it, to the
extent that such taxes have become due, except as otherwise contested in good
faith. It has set aside proper amounts on its books, determined in accordance
with GAAP, for the payment of all taxes for the years that have not been audited
by the respective tax authorities and for taxes being contested by it.
SECTION 5.7. NO SUBORDINATION
There is no agreement, indenture, contract or instrument to which it or any
Subsidiary is a party or by which it or any Subsidiary may be bound that
requires the subordination in right of payment of any of its obligations subject
to this Agreement to any other obligation of it or such Subsidiary.
SECTION 5.8. ERISA
It is in compliance in all material respects with the applicable provisions
of ERISA. It has not violated any provision of any Plan maintained or
contributed to by it in a manner that could result in a Material Adverse Effect.
No "reportable event" (as defined in Title IV of ERISA) has occurred and is
continuing with respect to any Plan initiated by it.
SECTION 5.9. OTHER OBLIGATIONS
It is not in default with respect to any of its Indebtedness or any of its
material Contractual Obligations.
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SECTION 5.10. ENVIRONMENTAL MATTERS
It and each Subsidiary of it is in compliance in all material respects with
all Environmental Laws applicable to it, other than such noncompliance as in the
aggregate will not have a Material Adverse Effect. Neither it nor any Subsidiary
of it has received notice that it is the subject of any federal or state
investigation evaluating whether any Remedial Action is needed, except for such
notices received that in the aggregate do not refer to Remedial Actions that
would reasonably be expected to result in a Material Adverse Effect. There have
been no Releases by it or a Subsidiary of it that could reasonably be expected
to result in a Material Adverse Effect.
SECTION 5.11. LIENS
It has good, indefeasible, and merchantable title to and ownership of the
Collateral, free and clear of all Liens, except Permitted Liens. There are no
Liens of any nature whatsoever on any of its properties other than Permitted
Liens.
SECTION 5.12. NO BURDENSOME RESTRICTIONS; NO DEFAULTS
(a) It is not is a party to any Contractual Obligation the compliance with
which would have a Material Adverse Effect or the performance of which, either
unconditionally or upon the happening of an event, will result in the creation
of a Lien (other than Permitted Liens) on the property or assets of Borrower.
(b) No Default has occurred and is continuing.
(c) There is no Governmental Rule the compliance with which by it is
reasonably likely to have a Material Adverse Effect.
SECTION 5.13. NO OTHER VENTURES
It is not engaged in any joint venture or partnership with any other
Person.
SECTION 5.14. INVESTMENT COMPANY ACT
It is not an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company", as such
terms are defined in the Investment Company Act of 1940, as amended.
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SECTION 5.15. INSURANCE
All current policies of insurance of any kind or nature owned by or issued
to it, including, without limitation, policies of fire, theft, product
liability, public liability, property damage, other casualty, employee fidelity,
workers' compensation and employee health and welfare insurance, are in full
force and effect and are of a nature and provide such coverage as is sufficient
and as is customarily carried by companies of its size and character. It has no
reason to believe that it will be unable to comply with Section 7.5.
SECTION 5.16. LABOR MATTERS
(a) There are no strikes, work stoppages, slowdowns or lockouts pending or,
to its knowledge, threatened, against or involving it, other than those which in
the aggregate have no reasonable likelihood of having a Material Adverse Effect.
(b) There are no arbitrations or grievances pending against or involving
it, nor to its knowledge are there any arbitrations or grievances threatened
involving it, other than those which, in the aggregate, have no reasonable
likelihood of having a Material Adverse Effect.
(c) As of the date hereof it is not a party to, and has no obligations
under, any collective bargaining agreement.
(d) There is no organizing activity involving it pending or, to its
knowledge, threatened, by any labor union or group of employees, other than
those which in the aggregate have no reasonable likelihood of having a Material
Adverse Effect. There are no representation proceedings pending against it or,
to its knowledge, threatened with the National Labor Relations Board, and no
labor organization or group of its employees has made a pending demand on it for
recognition, other than those which in the aggregate have no reasonable
likelihood of having a Material Adverse Effect.
(e) There are no unfair labor practice charges, grievances or complaints
pending or in process or, to its knowledge, threatened, by or on behalf of any
employee or group of employees of it, other than those which in the aggregate
have no reasonable likelihood of having a Material Adverse Effect.
(f) There are no complaints or charges against it pending or, to its
knowledge, threatened to be filed with any federal, state or local court,
governmental agency or arbitrator based on, arising out of, in connection with,
or otherwise relating
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to the employment by it of any individual, other than those which in the
aggregate have no reasonable likelihood of having a Material Adverse Effect.
(g) It is in material compliance with all laws, and all orders of any
court, Governmental Authority or arbitrator, relating to the employment of labor
including all such laws relating to wages, hours, collective bargaining,
discrimination, civil rights, and the payment of withholding and/or social
security and similar taxes, other than those the non-compliance with which in
the aggregate would have no Material Adverse Effect.
SECTION 5.17. FORCE MAJEURE
Neither its business nor its properties are currently suffering from the
effects of any fire, explosion, accident, strike, lockout or other labor
dispute, drought, storm, hail, earthquake, embargo, act of God or of the public
enemy or other casualty (whether or not covered by insurance), other than those
the consequences of which in the aggregate would have no Material Adverse
Effect.
SECTION 5.18. INTELLECTUAL PROPERTY
It owns or licenses or otherwise has the right to use all material
licenses, Permits, patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, copyright applications,
franchises, authorizations and other intellectual property rights that are
necessary for the operation of its businesses, without infringement upon or
conflict with the rights of any other Person with respect thereto, including,
without limitation, all trade names. No slogan or other advertising device,
product, process, method, substance, part or other material now employed, or now
contemplated to be employed, by it infringes upon or conflicts with any rights
owned by any other Person, which infringement or conflict is reasonably likely
to have a Material Adverse Effect, and no claim or litigation regarding any of
the foregoing is pending or, to its knowledge, threatened, the existence of
which is reasonably likely to have a Material Adverse Effect. No patent,
invention, device, application, principle or any statute, law, rule, regulation,
standard or code is pending or, to its knowledge, proposed, other than those the
consequences of which in the aggregate have no reasonable likelihood of having a
Material Adverse Effect.
SECTION 5.19. CERTAIN INDEBTEDNESS
The Disclosure Schedule identifies as of the Closing Date all Indebtedness
of it which is either (a) for borrowed money or (b) incurred outside of the
ordinary course of the business.
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SECTION 5.20. SOLVENCY
It has received consideration which is the reasonable equivalent value of
the obligations and liabilities that it has incurred to Bank. It is not
insolvent as defined in any applicable state or federal statute, nor will it be
rendered insolvent by the execution and delivery of this Agreement or the other
Loan Documents. It does not intend to, nor does it believe that it will, incur
debts beyond its ability to pay them as they mature.
SECTION 5.21. TRUTH, ACCURACY OF INFORMATION
All financial and other information furnished to Bank in connection with
this Agreement is accurate in all material respects and does not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the information furnished, in light of the circumstances under
which furnished, not misleading.
SECTION 5.22. CHIEF EXECUTIVE OFFICE AND OTHER LOCATIONS
Its chief executive office and principal place of business is 1270 S.E.
Monmouth Cutoff, Dallas, Oregon 97338-9532. Its books and records are located at
its chief executive office, and the only other offices and/or locations where it
keeps the Collateral (except for Inventory which is in transit) or conducts any
of its business are set forth in Section 5.22 of the Disclosure Schedule.
SECTION 5.23. ACCOUNTS
Unless otherwise noted by it, each Right to Payment listed or referred to
on its trial balance, balance sheet or the books or records, or referred to in
any report to Bank (other than Rights to Payment which are proceeds of letters
of credit, insurance proceeds, contract rights, chattel paper, instruments and
documents not arising directly out of a sale or lease of goods or services) is
and will be free and clear of Liens in favor of any Person other than Bank, will
cover a bona fide sale or lease and delivery of goods usually dealt in by it in
the ordinary course of its business or will cover the rendition of services by
it to customers of a kind ordinarily rendered in the ordinary course of its
business, and will be for a liquidated amount from a customer competent to
contract therefor and maturing as stated by it.
SECTION 5.24. FISCAL YEAR
Borrower's fiscal year ends on June 30.
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ARTICLE VI. CONDITIONS
SECTION 6.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT
The obligation of Bank to extend any credit contemplated by this Agreement
is subject to the fulfillment to Bank's satisfaction of all of the following
conditions:
(a) Approval of Bank's Counsel. All legal matters incidental to the
extension of credit hereunder shall be reasonably satisfactory to counsel for
Bank.
(b) Documentation. Bank shall have received, in form and substance
satisfactory to Bank, each of the following duly executed:
(i) this Agreement, a Letter of Credit Agreement for any Letter of
Credit to be issued on the Closing Date and the Note;
(ii) corporate borrowing resolution from Borrower;
(iii) a good standing certificate and certified copy of the Articles
of Incorporation for Borrower;
(iv) a copy of the bylaws of Borrower certified by its secretary as
correct and complete;
(v) certificate of incumbency from Borrower;
(vi) Notice of Authorized Representatives;
(vii) an opinion of Greene & Markley, PC, counsel to Borrower, as to
such matters as Bank shall reasonably require;
(viii) a Borrowing Base Certificate; and
(ix) such other documents as Bank may require.
(c) Financial Condition. There is no event or circumstance that can
reasonably be expected to have a Material Adverse Effect.
(d) Fees and Expenses. Borrower shall have paid all fees and invoiced costs
and expenses then due pursuant to the terms of this Agreement.
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(e) Insurance. Borrower shall have delivered to Bank evidence of the
insurance coverage, including loss payable endorsements, required pursuant to
Section 7.5.
(f) Heller Financial.
(i) Borrower shall have entered into a new financing arrangement with
Heller Financial, Inc. for not less than $15,200,000 for the purpose of
financing the Intergraph Transaction.
(ii) Heller Financial, Inc. shall have entered into a Lien Priority
Agreement with Bank on terms satisfactory to Bank.
SECTION 6.2. CONDITIONS OF EACH EXTENSION OF CREDIT
The obligation of Bank to make any Loan (including any Loan being made by
Bank on the Closing Date) and of Bank to issue any Letter of Credit shall be
subject to the further conditions precedent that:
(a) the following statements shall be true on the date of such Loan or
issuance, both before and after giving effect thereto and to the application of
the proceeds therefrom (and the acceptance by Borrower of the proceeds of such
Loan or by the beneficiary thereof or its designee of such Letter of Credit
shall constitute a representation and warranty by Borrower that on the date of
such Loan or such issuance such statements are true):
(i) the representations and warranties of Borrower contained in the
Loan Documents are correct in all material respects on and as of such date
as though made on and as of such date or, as to those representations and
warranties limited by their terms to a specified date, were correct in all
material respects on and as of such date; and
(ii) no Default is continuing or would result from the Loans being
made or the Letter of Credit being issued on such date;
(b) the making of the Loans or the issuance of such Letter of Credit on
such date does not violate any Governmental Rule and is not enjoined,
temporarily, preliminarily or permanently;
(c) Bank shall have received a Borrowing Base Certificate and such
additional documents, information and materials as Bank may reasonably request;
and
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(d) no event or circumstance exists that can reasonably be expected to have
a Material Adverse Effect.
ARTICLE VII. AFFIRMATIVE COVENANTS
Borrower covenants that so long as Bank remains committed to extend credit
to Borrower pursuant to the terms hereof or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower under any of the Loan
Documents remain outstanding, and until payment in full, in cash, of all
Obligations, Borrower shall, unless Bank otherwise consents in writing:
SECTION 7.1. PUNCTUAL PAYMENTS
Punctually pay all principal, interest, fees and other liabilities due
under any of the Loan Documents at the times and place and in the manner
specified therein.
SECTION 7.2. ACCOUNTING RECORDS
Keep accurate books and records of the financial affairs of it and its
Subsidiaries sufficient to permit the preparation of financial statements
therefrom in accordance with GAAP.
SECTION 7.3. FINANCIAL STATEMENTS AND REPORTS
Provide to Bank all of the following, in form and detail reasonably
satisfactory to Bank:
(a) not later than 90 days after the end of each fiscal year, a copy of its
Form 10K filed with the Securities and Exchange Commission, together with its
accountant's unqualified opinion with respect to the annual audited financial
statements included within the Form 10K;
(b) not later than twenty (20) days after and as of the end of each month,
a copy of its monthly management package distributed to its directors;;
(c) not later than forty-five (45) days and as of the end of each fiscal
quarter, a copy of its Form 10Q filed with the Securities and Exchange
Commission;
(d) contemporaneously with the delivery of each financial statement
required hereby, a certificate of Borrower's chief financial officer or
treasurer
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substantially in the form of Exhibit G attached hereto (i) stating that no
default existed at any time during the period covered by such statement, except
for those events or conditions, if any, described in such certificate in
reasonable detail together with a statement of any action taken or proposed to
be taken with respect thereto and (ii) setting forth the calculations required
to establish compliance by Borrower with the covenants set forth in Section
7.16;
(e) not later than twenty (20) days after and as of the end of each month:
(i) a Borrowing Base Certificate; (ii) a report of Borrower's inventory, valued
at cost determined on the first-in, first-out basis as of the end of the
preceding month, which report shall separately identify, by category, raw
materials, work in process and finished goods; (iii) a report of the aging of
Borrower's accounts payable as of the end of the preceding month in the
following categories: 0-30 days, 31-60 days, 61-90 days and over 90 days; and
(iv) a report of the aging of Borrower's accounts receivable as of the end of
the preceding month in the following categories: 0-30 days, 31-60 days, 61-90
days and over 90 days;
(f) except as otherwise provided above, within twenty (20) days after the
sending or filing thereof, copies of all reports and statements sent to or filed
by Borrower with the Securities and Exchange Commission; and
(e) from time to time such other information as Bank may reasonably
request.
SECTION 7.4. COMPLIANCE
Preserve and maintain all licenses, Permits, governmental approvals,
rights, privileges and franchises necessary for the conduct of its business and
comply in all material respects, with all Governmental Rules, Contractual
Obligations, commitments, instruments, licenses, Permits and franchises, other
than such failure to preserve or maintain or non-compliance the consequences of
which in the aggregate are not reasonably likely to have a Material Adverse
Effect.
SECTION 7.5. INSURANCE
(a) At all times, Borrower shall maintain property insurance insuring all
Collateral which is tangible property against loss or damage by fire, theft,
burglary, pilferage, loss in transit and such other hazards as Bank shall
specify in an amount equal to the full insurable value of the Collateral with
reasonable deductible amounts. Such insurance shall contain extra expense and
business interruption endorsements, shall contain a lender's loss payable
endorsement acceptable to Bank, shall be
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evidenced by policies containing terms reasonably acceptable to Bank and shall
be provided by insurers acceptable to Bank. The policies or a certificate
thereof signed by the insurer shall be delivered to Bank within five (5)
Business Days after the issuance or renewal of the policies to Borrower. Each
such policy shall provide that such policy may not be amended or canceled
without thirty (30) days prior written notice to Bank. At least fifteen (15)
days before the expiration of a policy, Borrower shall deliver to Bank a binder
(or other evidence reasonably acceptable to Bank) indicating that such policy
has been renewed or that a substitute for such policy will be issued effective
upon the expiration of such policy. If Borrower fails to do so, Bank may (but
shall not be required to) procure such insurance and add the cost thereof to the
Loan.
(b) At all times, Borrower shall maintain in full force and effect such
liability and other insurance with respect to its activities as may be
reasonably required by Bank. Such liability insurance shall name Bank as an
additional insured with respect to the activities of Borrower and shall be
provided by insurer(s) acceptable to Bank.
(c) OREGON STATUTORY NOTICE. The following is inserted pursuant to ORS
746.201:
WARNING
Unless Borrower provides Bank with evidence of the insurance
coverage as required by this Agreement, Bank may purchase insurance at
Borrower's expense to protect Bank's interest. This insurance may, but
need not, also protect Borrower's interest. If the collateral becomes
damaged, the coverage Bank purchases may not pay any claim Borrower
makes or any claim made against Borrower. Borrower may later cancel
this coverage by providing evidence that Borrower has obtained
property coverage elsewhere.
Borrower is responsible for the cost of any insurance purchased
by Bank. The cost of this insurance may be added to Borrower's
contract or loan balance. If the cost is added to Borrower's contract
or loan balance, the interest rate on the underlying contract or loan
will apply to this added amount. The effective date of coverage may be
the date Borrower's prior coverage lapsed or the date Borrower failed
to provide proof of coverage.
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The coverage Bank purchases may be considerably more expensive
than insurance Borrower can obtain on its own and may not satisfy any
need for property damage coverage or any mandatory liability insurance
requirements imposed by applicable law.
SECTION 7.6. FACILITIES
Keep all properties useful or necessary to its business in good repair and
condition, and from time to time make necessary repairs, renewals and
replacements thereto so that such property shall be fully and efficiently
preserved and maintained.
SECTION 7.7. TAXES AND OTHER LIABILITIES
Pay and discharge when due any and all indebtedness, obligations,
assessments and taxes, both real or personal, including without limitation
Federal and state income taxes and state and local property taxes and
assessments, except such as a Borrower may in good faith contest or as to which
a bona fide dispute may arise, and for which Borrower has made provision for
adequate reserves in accordance with GAAP.
SECTION 7.8. LITIGATION
Promptly give notice in writing to Bank of any litigation pending or
threatened against Borrower or any Subsidiary with a claim in excess of $250,000
in the aggregate for Borrower and all Subsidiaries.
SECTION 7.9. NOTICE TO BANK
(a) Promptly (but in no event more than three (3) Business Days after the
occurrence of each such event or matter) give written notice to Bank in
reasonable detail of: (i) the occurrence of any Default; (ii) any termination or
cancellation of any insurance policy which Borrower is required to maintain,
unless such policy is replaced without any break in coverage with an equivalent
or better policy; (iii) any uninsured or partially uninsured loss or losses
through liability or property damage, or through fire, theft or any other cause
affecting the property of Borrower in excess of an aggregate of $500,000 during
any twelve-month period; or (iv) any change in the name or the organizational
structure of Borrower or any Subsidiary.
(b) As soon as possible and in any event within ten (10) days after
Borrower knows or has reason to know that any "reportable event" (as defined in
Title IV of ERISA) that triggers an obligation to file a notice with the PBGC
with respect to any Plan has occurred, deliver to Bank a statement of the
President or chief financial
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officer of Borrower setting forth details as to such reportable event and the
action which Borrower proposes to take with respect thereto, together with a
copy of the notice of such reportable event to the PBGC.
(c) Promptly, upon receipt (but in no event more than three (3) Business
Days after receipt) of a notice by Borrower, any affiliate of Borrower or any
administrator of any Plan that the PBGC has instituted proceedings to terminate
a Plan or to appoint a trustee to administer a Plan, provide to Bank a copy of
such notice.
SECTION 7.10. CONDUCT OF BUSINESS
Except as otherwise permitted by this Agreement, (a) conduct its business
in a regular manner and (b) use its reasonable efforts in the ordinary course
and consistent with past practice to (i) preserve its business and the goodwill
and business of the customers, advertisers, suppliers and others with whom it
has business relations, (ii) keep available the services and goodwill of its
present employees, and (iii) preserve all rights, Permits, licenses, approvals,
privileges, registered patents, trademarks, trade names, copyrights and service
marks and other intellectual property with respect to its business.
SECTION 7.11. PRESERVATION OF CORPORATE EXISTENCE, ETC.
Preserve and maintain its corporate existence, rights (charter and
statutory) and material franchises, unless the failure to so preserve and
maintain is not reasonably likely to have a Material Adverse Effect.
SECTION 7.12. ACCESS
(a) At any reasonable time and from time to time upon at least two (2)
Business Days' prior notice from Bank (unless a Default shall have occurred and
be continuing, in which case no prior notice is necessary), permit Bank, or any
agents or representatives thereof, to (i) examine and make copies of and
abstracts from the records and books of account of Borrower, (ii) visit the
properties of Borrower, (iii) discuss the affairs, finances and accounts of
Borrower with any of its officers or directors who may then be reasonably
available, (iv) communicate directly with Borrower's independent certified
public accountants, (v) arrange for verification of Borrower's Rights to Payment
under reasonable procedures directly with the obligors thereon or by other
methods, and (vi) examine and inspect Borrower's Inventory and the Equipment
wherever located. Borrower shall authorize its independent certified public
accountants to disclose to Bank any and all financial statements and other
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information of any kind, including, without limitation, copies of any management
letter, or the substance of any oral information that such accountants may have
with respect to the business, financial condition, results of operations or
other affairs of Borrower and each of its Subsidiaries.
(b) Borrower shall execute and deliver at the request of Bank such
instruments as may be necessary for Bank to obtain such information concerning
the business of Borrower as Bank may require from accountants, service bureaus
or others having custody of or maintaining records or assets of Borrower.
Borrower shall furnish Bank at reasonable intervals with such statements and
reports regarding the Collateral, Borrower's financial condition and the results
of Borrower's operations, in addition to those otherwise herein required, as
Bank may request from time to time.
SECTION 7.13. PERFORMANCE AND COMPLIANCE WITH OTHER COVENANTS
Perform and observe all the terms, covenants and conditions required to be
performed and observed by it under its Contractual Obligations (including,
without limitation, to pay all rent and other charges payable under any lease
and all debts and other obligations as the same become due), and do all things
necessary to preserve and to keep unimpaired its rights under such Contractual
Obligations, other than such failures the consequences of which in the aggregate
are not reasonably likely to have a Material Adverse Effect.
SECTION 7.14. FISCAL YEAR; ACCOUNTING PRACTICES
Notify Bank of any material change in its accounting practices.
SECTION 7.15. ENVIRONMENTAL
(a) Promptly give notice to Bank upon obtaining knowledge of (i) any claim,
injury, proceeding, investigation or other action, including a request for
information or a notice of potential environmental liability, by or from any
Governmental Authority or any third-party claimant that could result in Borrower
or any Subsidiary incurring Environmental Liabilities and Costs or (ii) the
discovery of any Release at, on, under or from any real property, facility or
equipment owned or leased by Borrower or a Subsidiary in excess of reportable or
allowable standards or levels under any applicable Environmental Law, or in any
manner or amount that could reasonably be expected to result in Borrower or any
Subsidiary incurring Environmental Liabilities and Costs.
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(b) Upon discovery of the presence on any property owned or leased by
Borrower or a Subsidiary of any Contaminant that reasonably could be expected to
result in Environmental Liabilities and Costs, take all Remedial Action required
by applicable Environmental Law.
SECTION 7.16. FINANCIAL CONDITION
Maintain Borrower's financial condition on a consolidated basis as follows
using GAAP consistently with prior practices, except to the extent modified by
the definitions herein:
(a) The Fixed Change Coverage Ratio shall not at any time be less than
1.5:1.
(b) Beginning March 31, 1999, the ratio of (i) EBITDA plus rent expense for
the same four quarters as EBITDA to (ii) "Interest and Rent Expense" shall not
at any time to be less than 2.5:1. "Interest and Rent Expense" means, as of the
end of a fiscal quarter, Borrower's consolidated interest expense and rent
expense for Borrower's four fiscal quarters ending with such quarter.
(c) Consolidated net worth shall not at any time be less than $31,690,000
plus an amount equal to (i) 50% of Borrower's consolidated net income after
taxes from January 1, 1998 through and including the month most recently ended
(provided, however, that such aggregate amount shall not be reduced by the
amount of any consolidated net loss after taxes of Borrower for any month) and
(ii) 90% of the proceeds of additional equity raised by Borrower after the
Closing Date.
(d) The ratio of Borrower's current assets (less Inventory) to current
liabilities as measured at the end of any fiscal quarter shall not at any time
be less than 1.1:1.
(e) The Funded Debt Ratio shall not, at any time before the earlier of (i)
January 1, 1999 or (ii) the date the subordinated debt referred to in Section
7.17 is issued, exceed 4.5:1 and thereafter shall not exceed 4:1.
(f) The ratio of Funded Debt (exclusive of all debt subordinated to the
Obligations in a manner satisfactory to Bank in its sole discretion) to EBITDA
shall not exceed 3:1 at any time after the earlier of (i) December 31, 1998 or
(ii) the date the subordinated debt referred to in Section 7.17 is issued.
(g) Beginning with Borrower's fiscal quarter ending December 31, 1998, make
any capital expenditures (including Capitalized Lease Obligations) in any fiscal
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quarter in excess of EBITDA as of the end of such quarter less the amount of all
capital expenditures made by Borrower during the three preceding fiscal
quarters.
SECTION 7.17. ADDITIONAL SUBORDINATED DEBT
During the period after the Closing Date and before January 1, 1999,
Borrower shall issue not less than $40,000,000 of unsecured subordinated debt on
terms satisfactory to Bank in its sole discretion, and the first $20,000,000 of
the net proceeds thereof will be dispersed as follows: (i) to Heller Financial,
Inc., the least of 76% of such proceeds, $15,200,000 or the balance owed by
Borrower on its secured indebtedness to Heller Financial, Inc.; and (ii) the
balance to Bank in reduction of the Obligations.
SECTION 7.18. LIENS
Keep the Collateral free and clear of all Liens, except Permitted Liens.
SECTION 7.19. FURTHER ASSURANCES
At the request of Bank at any time and from time to time, duly execute and
deliver, or cause to be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such further acts as may
be necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise effectuate
the provisions or purposes of this Agreement or any of the other Loan Documents,
at Borrower's expense. Bank may at any time and from time to time request a
certificate from an officer of Borrower representing that all conditions
precedent to the making of Loans and issuing Letters of Credit contained herein
are satisfied. In the event of such request by Bank, Bank may, at its option,
cease to make any further Loans or provide any further Letters of Credit until
Bank has received such certificate and, in addition, Bank has determined that
such conditions are satisfied. Where permitted by law, Borrower hereby
authorizes Bank to execute and file one or more UCC financing statements signed
only by Bank.
ARTICLE VIII. NEGATIVE COVENANTS
Borrower covenants that so long as Bank remains committed to extend credit
to Borrower pursuant to the terms hereof or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower under any of the Loan
Documents remain
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outstanding, and until payment in full, in cash of all Obligations, Borrower
will not, without the prior written consent of Bank:
SECTION 8.1. LIENS
Create or suffer to exist any Lien upon or with respect to any of its
properties, whether now owned or hereafter acquired, or assign any right to
receive income, except Permitted Liens.
SECTION 8.2. INDEBTEDNESS
Borrower and Subsidiaries, on a consolidated basis, create or suffer to
exist any Indebtedness except:
(a) the Obligations;
(b) current liabilities in respect of taxes, assessments and governmental
charges or levies incurred, or liabilities for labor, materials, inventory,
services, supplies and rentals incurred, or for goods or services purchased, in
the ordinary course of business consistent with industry practice in respect of
arm's length transactions and the past practice of Borrower
(c) Indebtedness of Borrower outstanding on the Closing Date and reflected
on Section 5.19 of the Disclosure Schedule and all renewals, extensions,
refinancing or refunding of such Indebtedness in a principal amount which does
not exceed the then outstanding principal amount, together with all prepayment
fees, penalties and expenses in respect of the Indebtedness being renewed,
extended, refinanced or refunded, provided each such renewal, extension,
refinancing or refunding is on terms and conditions no less favorable to the
creditors than the Indebtedness being renewed, extended, refinanced or refunded;
(d) Indebtedness of the type and in the amount contemplated by item (g) of
the definition of "Permitted Liens;
(e) Indebtedness in an aggregate principal amount at any time outstanding
not in excess of an amount which, after giving pro forma effect to the
incurrence thereof and the application of the proceeds thereof, would not cause
a breach of the covenants in Section 7.16; and
(f) the Indebtedness described in Section 7.17.
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SECTION 8.3. LEASE OBLIGATIONS
Create or suffer to exist any obligations as lessee for the rental or hire
of real or personal property of any kind under other leases or agreements to
lease (other than Capitalized Leases and Other Leases) having an original term
of one (1) year or more which would cause the aggregate direct or contingent
liabilities of Borrower and Subsidiaries in respect of all such obligations to
exceed $6,000,000 payable in any period of twelve (12) consecutive months
(exclusive of the leases with KeyCorp terminated on the Closing Date).
SECTION 8.4. RESTRICTED PAYMENTS, REDEMPTIONS
(a) Declare or make any dividend payment or other distribution of assets,
properties, cash, rights, obligations or securities on account or in respect of
any of its Stock or Stock Equivalents except (i) dividends paid to Borrower and
(ii) dividends paid by Borrower solely in Stock or Stock Equivalents of
Borrower;
(b) purchase, redeem or otherwise acquire for value any of Borrower's Stock
or Stock Equivalents; or
(c) make any change in its capital structure, including, without
limitation, the creation of new classes or types of Stock or Stock Equivalents.
SECTION 8.5. MERGERS, STOCK ISSUANCES, SALE OF ASSETS, ETC.
(a) Merge or consolidate with any Person;
(b) Acquire all or substantially all of (i) the Stock or Stock Equivalents
of any Person, (ii) the assets of any Person or (iii) the assets constituting
the business of a division, branch or other unit operation of any Person, except
for the Intergraph Transaction or any transaction involving consideration from
Borrower of less than $3,000,000, in either event provided that no Default
results from such transaction; or
(c) Sell, convey, transfer, lease or otherwise dispose of any of its assets
(including, without limitation, the Stock of a Subsidiary) or any interest
therein to any Person, or permit or suffer any other Person to acquire any
interest in any of the assets of Borrower, except (i) Permitted Liens, (ii) the
sale or disposition of inventory in the ordinary course of business and/or
assets which have become obsolete or are replaced in the ordinary course of
business, (iii) during any fiscal year of Borrower, the sale or other
disposition of equipment having an aggregate book value of less than $1,000,000
and (iv) real property having an aggregate net book value of $3,500,000.
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SECTION 8.6. INVESTMENTS IN OTHER PERSONS
Directly or indirectly, make or maintain any loan or advance to any other
Person or own, purchase or otherwise acquire any Stock, Stock Equivalents, other
equity interest, obligations or other securities of, or otherwise invest in, any
other Person (any such transaction being an "Investment"), except:
(a) Investments in Accounts, contract rights and chattel paper, notes
receivable and similar items arising or acquired in the ordinary course of
business consistent with Borrower's past practice;
(b) incidental advances to employees of Borrower in the ordinary course of
business;
(c) Investments in direct obligations to the United States of America or
any agency thereof, banker's acceptances and certificates of deposit issued by
any commercial bank in the United States of America; and
(d) loans to others not exceeding $250,000 in the aggregate outstanding at
any time.
SECTION 8.7. CHANGE IN NATURE OF BUSINESS
Directly or indirectly engage in any business activity other than its
current business activity.
SECTION 8.8. GUARANTIES
Except for up to $5,000,000 of guaranties of the obligations of its
Malaysian Subsidiary, guarantee or become liable in any way as surety, endorser
(other than as endorser of negotiable instruments for deposit or collection in
the ordinary course of business), accommodation endorser or otherwise for, nor
pledge or hypothecate any assets of Borrower or any Subsidiary as security for,
any liabilities or obligations of any other Person except any of the foregoing
required by this Agreement.
SECTION 8.9. PLANS
(a) Adopt or become obligated to contribute to any Title IV Plan or any
multiemployer Plan or any other Plan subject to Section 412 of the Internal
Revenue Code (except for any such Plan listed on the Disclosure Schedule on the
Closing Date), (b) establish or become obligated with respect to any new welfare
benefit Plan, or modify any existing welfare benefit Plan, which is reasonably
likely to result in an
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increase of the present value of future liabilities for post-retirement life
insurance and medical benefits, or (c) establish or become obligated to
contribute to any new unfunded pension Plan, or modify any existing unfunded
pension Plan, which is reasonably likely to result in an increase in the present
value of future unfunded liabilities under all such plans.
SECTION 8.10. [INTENTIONALLY OMITTED]
SECTION 8.11. CANCELLATION OF INDEBTEDNESS OWED TO IT
Cancel any claim or Indebtedness owed to it except for legitimate business
purposes in the reasonable judgment of Borrower and in the ordinary course of
business.
SECTION 8.12. MARGIN REGULATIONS
Use the proceeds of any Loans to purchase or carry any margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System).
SECTION 8.13. ENVIRONMENTAL
Permit any lessee or any other Person to dispose of any Contaminant by
placing it in or on the ground or waters of any property owned or leased by
Borrower or any of its Subsidiaries, except in material compliance with
Environmental Law or the terms of any Permit or other than those which in the
aggregate have no reasonable likelihood of having a Material Adverse Effect.
SECTION 8.14. TRANSACTIONS WITH AFFILIATES
Enter into any transaction directly or indirectly with or for any affiliate
except in the ordinary course of business on a basis no less favorable to such
affiliate than would be obtained in a comparable arm's length transaction with a
Person not an affiliate involving assets that are not material to the business
and operations of Borrower.
SECTION 8.15. NEW COLLATERAL LOCATION; NAME CHANGE
Open any new location or change its name unless (i) Borrower gives Bank (a)
thirty (30) days prior written notice of the intended name change, (b) thirty
(30) days prior written notice of the intended opening of such new location if
the assets of Borrower to be located at such location will be, or are expected
to be, in excess of
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$250,000 or (c) written notice of such new location within ten (10) days after
the opening thereof if advance notice is not required under item (b) above and
if the location is not in a state in which Bank has previously filed a UCC-1
financing statement, and (ii) Borrower executes and delivers to Bank such
agreements, documents and instruments as Bank may deem reasonably necessary or
desirable to protect its interests in the Collateral, including, without
limitation, UCC-1 financing statements.
ARTICLE IX. EVENTS OF DEFAULT
SECTION 9.1. EVENTS OF DEFAULT
The occurrence of any of the following shall constitute an "Event of
Default" under this Agreement:
(a) Borrower shall fail to pay when due any amount payable under any of the
Loan Documents;
(b) any financial statement or certificate furnished to Bank in connection
with, or any representation or warranty made by Borrower under any of the Loan
Documents shall prove to be false or misleading in any material respect when
furnished or made;
(c) Borrower shall fail to provide any certificate, report or other
information which it is required to provide pursuant to Section 7.3 or Section
7.9 on the date specified in Section 7.3 or Section 7.9; provided that unless
Borrower has previously failed to provide any required certificate, report or
other information by the required date on two prior occasions within the
preceding twelve (12) months, such failure shall be considered an Event of
Default only if Borrower fails to provide such certificate, report or other
information within five (5) Business Days (two (2) Business Days with respect to
Section 7.9(a)) of the earlier of (i) the date Borrower has knowledge of its
failure to so provide such certificate, report or other information, or (ii) the
date Bank, notifies Borrower of such failure;
(d) any default by Borrower in the performance of or compliance with any
obligation, agreement or other provision contained in Sections 7.5,7.10, 7.11,
7.12, 7.14, 7.16, 7.17, 8.2, 8.3, 8.4, 8.5, 8.6, 8.8 and 8.15;
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(e) any default by Borrower in the performance of or compliance with any
obligation, agreement or other provision contained in any Loan Document (other
than those referred to in subsections (a), (b), (c) and (d) above) for ten (10)
days after notice thereof by Bank to Borrower;
(f) any default by Borrower in the payment or performance of obligation(s),
or any defined event of default, under the terms of any contract or instrument
(other than any of the Loan Documents) evidencing Indebtedness in excess of
$100,000;
(g) any judgment(s), order(s) or writ(s) in excess of an aggregate of
$100,000 is/are rendered or entered against Borrower and/or one or more
Subsidiaries, except any judgment for which Borrower is fully insured and with
respect to which the insurer has admitted in writing its liability for the full
amount thereof or except if the enforcement of such judgment, order or writ has
been stayed or the liability thereon bonded in a manner and on terms reasonably
satisfactory to Bank; or the service of notice(s) of levy and/or of writ(s) of
attachment or execution, or other like process, against any of the assets of
Borrower and/or one or more Subsidiaries with respect to obligations in excess
of an aggregate of $100,000;
(h) Borrower shall become insolvent, or shall suffer or consent to or apply
for the appointment of a receiver, trustee, custodian or liquidator of itself or
any of its property, or shall generally be unable to or fail to pay its debts as
they become due, or shall make a general assignment for the benefit of
creditors; Borrower shall file a voluntary petition in bankruptcy, or seek to
effect a plan or other arrangement with creditors or any other relief under the
Bankruptcy Code, or under any state or other Federal law granting relief to
debtors, whether now or hereafter in effect; or any involuntary petition or
proceeding pursuant to the Bankruptcy Code or any other applicable state or
other Federal law relating to bankruptcy, reorganization or other relief for
debtors is filed or commenced against Borrower and is not dismissed, stayed or
vacated within sixty (60) days thereafter; Borrower shall file an answer
admitting the jurisdiction of the court and the material allegations of any
involuntary petition; or Borrower shall be adjudicated a bankrupt, or an order
for relief shall be entered by any court of competent jurisdiction under the
Bankruptcy Code or any other applicable state or Federal law relating to
bankruptcy, reorganization or other relief for debtors; as used herein;
(i) any tax lien (other than a Permitted Lien) greater than $50,000 shall
have been filed against Borrower or any of its property by any federal, state,
or municipal authority;
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(j) if any of the following events occur: (a) any Plan incurs any
"accumulated funding deficiency" (as defined in ERISA) whether waived or not,
(b) Borrower or any affiliate engages in any "prohibited transaction" (as
defined in ERISA), (c) any Plan is terminated, (d) a trustee is appointed by an
appropriate United States district court to administer any Plan, or (e) the PBGC
institutes proceedings to terminate any Plan or to appoint a trustee to
administer any Plan;
(k) the dissolution or liquidation of Borrower, or Borrower or its
directors or stockholders shall take action seeking to effect the dissolution or
liquidation of Borrower; or
(l) there shall exist or occur any event or condition that Bank in Good
Faith believes impairs, or is substantially likely to impair, the prospect of
payment or performance by Borrower of its obligations under any of the Loan
Documents.
SECTION 9.2. REMEDIES
(a) Upon the occurrence or existence of any Event of Default (other than an
Event of Default referred to in Section 9.1(h) hereof) and at any time
thereafter during the continuance of such Event of Default, Bank may, by written
notice to Borrower, (i) terminate Bank's obligation to extend any further credit
under any of the Loan Documents, and/or (ii) declare all indebtedness of
Borrower under the Loan Documents to be immediately due and payable without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by Borrower. Upon the occurrence or existence of any
Event of Default described in Section 9.1(h) hereof, immediately and without
notice, (A) the obligations, if any, of Bank to extend any further credit under
any of the Loan Documents shall automatically cease and terminate, and (B) all
indebtedness of Borrower under the Loan Documents shall automatically become
immediately due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived by Borrower. In
addition to the foregoing remedies, upon the occurrence or existence of any
Event of Default, Bank may exercise any other right, power or remedy granted to
it under any Loan Document or permitted to it by law, either by suit in equity
or by action at law, or both.
(b) Upon the occurrence of an Event of Default, Bank, in addition to any
other rights and remedies contained in the Loan Documents, shall have all of the
rights and remedies of a secured party under the Code and all other applicable
law, all of which rights and remedies shall be cumulative and nonexclusive to
the extent permitted by law. Bank may cause the Collateral to remain on
Borrower's premises, at Borrower's expense, pending sale or other disposition
thereof. Bank shall have the
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right to conduct such sales on Borrower's premises or elsewhere, at Borrower's
expense, on such occasion(s) as Bank may see fit, and Borrower, at Bank's
request, will, at Borrower's expense, assemble the Collateral and make it
available to Bank at such place(s) as Bank may reasonably designate from time to
time. Any sale, lease or other disposition by Bank of the Collateral, or any
part thereof, may be for cash or other value. Borrower shall execute and
deliver, or cause to be executed and delivered, such instruments, documents,
assignments, deeds, waivers, certificates and affidavits and take such further
action as Bank shall reasonably require in connection with such sale, and
Borrower hereby constitutes Bank as its attorney-in-fact to execute any such
instrument, document, assignment, deed, waiver, certificate or affidavit on
behalf of Borrower and in its name. Borrower acknowledges that portions of the
Collateral may be difficult to preserve and dispose of and may be subject to
complex maintenance and management; accordingly, Bank shall have the widest
possible latitude in the exercise of its rights and remedies hereunder.
(c) Bank is hereby granted a license and right to use, without charge upon
the occurrence and during the continuance of an Event of Default and until the
Obligations are fully and finally paid in cash, Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names, trademarks,
service marks, advertising material or any property of a similar nature in
completing the production, advertising for sale and sale of any Collateral.
(d) Any notice required to be given by Bank with respect to any of the
Collateral which notice is given pursuant to Section 10.2 and deemed received
pursuant to Section 10.2 at least five (5) days before a sale, lease,
disposition or other intended action by Bank with respect to any of the
Collateral shall constitute fair and reasonable notice to Borrower of any such
action. A public sale in the following fashion shall be conclusively presumed to
be reasonable: (i) the sale is held in a county where any part of the Collateral
is located or in which Borrower has a place of business; (ii) the sale is
conducted by auction, but it need not be by a professional auctioneer; and (iii)
any Collateral is sold as is and without any preparation for sale; and (iv)
Borrower is given notice of such public sale pursuant to the preceding sentence.
(e) Upon the occurrence and during the continuance of an Event of Default,
Bank shall have, with respect to Rights to Payment, all rights and powers to:
(i) direct any and all account debtors to make all payments in respect of the
Rights to Payment directly to Bank or otherwise demand payment of any or all of
the Rights to Payment; (ii) enforce payment of any or all of the Rights to
Payment by legal proceedings or otherwise; (iii) exercise Borrower's rights and
remedies with respect to any actions or
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proceedings brought to collect a Right to Payment; (iv) sell or assign any Right
to Payment upon such terms, for such amount and at such time or times as Bank
deems advisable; (v) settle, adjust, compromise, extend or renew a Right to
Payment; (vi) discharge or release any Right to Payment; and (vii) prepare, file
and sign Borrower's name on any proof of claim in bankruptcy or any similar
document against an account debtor, and to otherwise exercise the rights granted
herein.
(f) Bank shall have no obligation to preserve any rights to the Collateral
against any Person. Bank shall be under no obligation to make any demand upon or
pursue or exhaust any rights or remedies against Borrower or others with respect
to payment of the Obligations, or to pursue or exhaust any rights or remedies
with respect to any of the Collateral or any other security for the Obligations,
or to marshal any assets in favor of Borrower or any other Person against or in
payment of any or all of the Obligations.
(g) In addition to the Liens granted to Bank and any rights now or
hereafter granted under applicable law and not by way of limitation of any such
Liens and rights, upon the occurrence and during the continuance of any Event of
Default, Bank is hereby irrevocably authorized by Borrower at any time or from
time to time, without notice to Borrower or to any other Person, any such notice
being hereby expressly waived, to set-off, appropriate and apply against the
Obligations any and all deposits (general or special, including, but not limited
to, indebtedness evidenced by certificates of deposit, whether matured or
unmatured, but not including trust accounts) and any other indebtedness at any
time held or owing by Bank or any affiliate of Bank to or for the credit of
Borrower.
(h) Borrower shall pay to Bank, on demand and as part of the Obligations,
all costs and expenses, including court costs and costs of sale, incurred by
Bank in exercising any of its rights or remedies hereunder, and all costs and
expenses incurred in connection with any review of any part of the Collateral by
a collateral analyst employed by Bank (including, without limitation, Bank's
then customary per diem charges for such analysts) if such review was conducted
at any time during the continuation of an Event of Default.
SECTION 9.3. BANK AS BORROWER'S ATTORNEY
Borrower hereby appoints Bank or any other Person whom Bank may designate,
as Borrower's attorney, with power during the continuation of an Event of
Default: to indorse Borrower's name on any checks, notes, acceptances, money
orders, drafts or other forms of payment or security that may come into Bank's
possession; to sign Borrower's name on any invoice or bill of lading relating to
any
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Right to Payment, on drafts against customers, on schedules and assignments of
Rights to Payment, on notices of assignment, financing statements and other
public records, and on notices to customers; to notify the post office
authorities to change the address for delivery of Borrower's mail to an address
designated by Bank; to receive, open and process all mail addressed to Borrower;
and to do all things necessary to perfect Bank's security interest in the
Collateral, to preserve and protect the Collateral and to otherwise carry out
this Agreement. Provided Bank acts in a reasonable manner, Borrower ratifies and
approves all acts of such attorney, and neither Bank nor the attorney will be
liable for any acts or omissions nor for any error of judgment or mistake of
fact or law. This power being coupled with an interest is irrevocable until the
Obligations have been fully paid in cash or the financing arrangements between
Bank and Borrower are terminated, whichever shall later occur.
ARTICLE X. MISCELLANEOUS
SECTION 10.1. NO WAIVER
No delay, failure or discontinuance of Bank in exercising any right, power
or remedy under any of the Loan Documents shall affect or operate as a waiver of
such right, power or remedy; nor shall any single or partial exercise of any
such right, power or remedy preclude, waive or otherwise affect any other or
further exercise thereof or the exercise of any other right, power or remedy.
Any waiver, permit, consent or approval of any kind by Bank of any breach of or
default under any of the Loan Documents must be in writing and shall be
effective only to the extent set forth in such writing.
SECTION 10.2. NOTICES
All notices, requests and demands which any party is required or may desire
to give to any other party under any provision of this Agreement must be in
writing delivered to each party at the following address:
Borrower: Praegitzer Industries, Inc.
1270 S.E. Monmouth Cutoff
Dallas, OR 97338
Attn: Vice President, Finance
Telecopy No.: (503) 623-5438
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With a copy to: Charles R. Markley
Greene & Markley, PC
Suite 600
1515 S.W. Fifth Avenue
Portland, OR 97201
Telecopy No.: (503) 224-8434
Bank: KeyBank National Association
Large Corporate Group
700 Fifth Avenue
46th Floor
Seattle, WA 98104
Attn: John Brock
Telecopy No.: (206) 684-6035
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three days after deposit in the
U.S. mail, first class and postage prepaid; and (c) if sent by telecopy, upon
receipt and the sender will endeavor to send a hard copy of such telecopied
notice to the recipient by mail.
SECTION 10.3. COSTS, EXPENSES AND ATTORNEYS' FEES
Borrower shall pay to Bank immediately upon demand the full amount of all
payments, advances, charges, costs and expenses, including reasonable attorneys'
fees (whether incurred at the trial or appellate level, in an arbitration
proceeding, in bankruptcy, including, without limitation, any adversary
proceeding, contested matter or motion), incurred by Bank in connection with (a)
the negotiation and preparation of the Loan Documents, (b) the enforcement,
preservation or protection (or attempted enforcement, preservation or
protection) of Bank's rights, including, without limitation, periodic collateral
examinations, and/or the collection of any amounts which become due to Bank,
under any of the Loan Documents, and (c) the prosecution or defense of any
action in any way related to any of the Loan Documents, including without
limitation, any action for declaratory relief, and including any of the
foregoing incurred in connection with any bankruptcy proceeding relating to
Borrower.
SECTION 10.4. INDEMNIFICATION
To the fullest extent permitted by law, Borrower hereby agrees to protect,
indemnify, defend and hold harmless Bank and its officers, directors,
shareholders,
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employees, agents, attorneys and affiliates, together with respective heirs,
beneficiaries, executors, administrators, trustees, predecessors, successors and
assigns (collectively, "Indemnitees") from and against any liability, loss,
damage or expense of any kind or nature and from any suit, claim or demand
(including in respect of or for reasonable attorneys' fees (whether incurred at
the trial or appellate level, in an arbitration proceeding, in bankruptcy
(including, without limitation, any adversary proceeding, contested matter or
motion) or otherwise) and other expenses, including the allocated costs and
expenses of internal counsel) arising on account of or in connection with any
matter or thing or action or failure to act by Indemnitees, or any of them,
arising out of relating to any Loan Document, except to the extent such
liability arises from the willful misconduct or gross negligence of the
Indemnitees. Upon receiving knowledge of any suit, claim or demand asserted by a
third party that Bank believes is covered by this indemnity, Bank shall give
Borrower notice of the matter and an opportunity to defend it, at Borrower's
sole cost and expense, with legal counsel satisfactory to Bank. Bank may also
require Borrower to defend the matter. Any failure or delay of Bank to notify
Borrower of any suit, claim or demand shall not relieve Borrower of its
obligations of this Section, but shall reduce such obligations to the extent of
any increase in those obligations caused solely by an unreasonable failure or
delay in providing such notice. The obligations of Borrower under this Section
shall survive the payment in full and performance of the other Obligations.
SECTION 10.5. RELEASE
In consideration for Bank entering into the Loan Documents, Borrower hereby
releases and forever discharges Indemnitees from any and all liability or claims
of liability, whether known or unknown, of whatever nature arising out of or
based in whole or in part upon any agreement, act or omission of any Indemnitee
or any Person acting, or purporting to act, on behalf of any Indemnitee,
occurring before the Closing Date.
SECTION 10.6. SUCCESSORS, ASSIGNMENT
This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties; provided, however, that Borrower may not
assign or transfer its interest hereunder. Bank reserves the right to sell,
assign, transfer, negotiate or grant participations in all or any part of, or
any interest in, Bank's rights and benefits under each of the Loan Documents. In
connection therewith, Bank may disclose all documents and information which Bank
now has or may hereafter acquire relating to any credit extended by Bank to
Borrower, Borrower or its business, any guarantor hereunder or the business of
such guarantor, or the Collateral.
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SECTION 10.7. ENTIRE AGREEMENT; AMENDMENT
This Agreement and the other Loan Documents constitute the entire agreement
among Borrower and Bank with respect to any extension of credit by Bank and
supersede all prior negotiations, communications, discussions and correspondence
concerning the subject matter hereof. This Agreement may be amended or modified
only by a written instrument executed by each party hereto.
SECTION 10.8. NO THIRD PARTY BENEFICIARIES
This Agreement is made and entered into for the sole protection and benefit
of the parties hereto and their respective permitted successors and assigns, and
no other person or entity shall be a third party beneficiary of, or have any
direct or indirect cause of action or claim in connection with, this Agreement
or any other of the Loan Documents to which it is not a party.
SECTION 10.9. TIME
Time is of the essence of each and every provision of this Agreement and
each other of the Loan Documents.
SECTION 10.10. TERMINATION OF EXISTING AGREEMENT
All of Bank's obligations pursuant to the Credit Facility and Security
Agreement dated April 12, 1996, as amended ("Prior Agreement"), between Borrower
and Bank are hereby terminated and Bank shall have no further obligations or
duties with respect thereto. The initial proceeds of the Loans provided by Bank
to Borrower hereunder will be used, in part, for the payment of Borrower's
obligations under the Prior Agreement, and upon the payment in full of such
obligations, the Amended and Restated Master Promissory Note issued in
connection with the Prior Agreement will be marked "PAID" by Bank and returned
to Borrower.
SECTION 10.11. SEVERABILITY OF PROVISIONS
If any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
or any remaining provisions of this Agreement.
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SECTION 10.12. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
when executed and delivered shall be deemed to be an original, and all of which
when taken together shall constitute one and the same Agreement.
SECTION 10.13. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Oregon.
SECTION 10.14. WAIVER OF JURY TRIAL
EACH OF BORROWER AND BANK, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION IN ANY WAY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS OR EVENTS REFERENCED HEREIN OR THEREIN OR CONTEMPLATED HEREBY OR
THEREBY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND/OR ANY OTHER OF THE LOAN DOCUMENTS. A COPY
OF THIS SECTION MAY BE FILED WITH ANY COURT AS WRITTEN EVIDENCE OF THE WAIVER OF
THE RIGHT TO TRIAL BY JURY AND THE CONSENT TO TRIAL BY COURT.
SECTION 10.15. OREGON STATUTORY NOTICE
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY BANK
AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY BORROWER'S
RESIDENCE MUST BE IN
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[INTENTIONALLY LEFT BLANK]
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WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY BANK TO BE ENFORCEABLE.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
PRAEGITZER INDUSTRIES, INC.
By: /s/
-------------------------------------
Title:
----------------------------------
KEYBANK NATIONAL ASSOCIATION
By: /s/
-------------------------------------
Title:
----------------------------------
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 390
<SECURITIES> 0
<RECEIVABLES> 27,280
<ALLOWANCES> 400
<INVENTORY> 15,331
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<PP&E> 108,574
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<CURRENT-LIABILITIES> 24,309
<BONDS> 65,106
0
0
<COMMON> 42,324
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<SALES> 133,339
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<OTHER-EXPENSES> 17,166
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<CHANGES> 0
<NET-INCOME> 5,106
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 667
<SECURITIES> 0
<RECEIVABLES> 24,928
<ALLOWANCES> 0
<INVENTORY> 8,823
<CURRENT-ASSETS> 36,322
<PP&E> 60,704
<DEPRECIATION> 24,288
<TOTAL-ASSETS> 85,960
<CURRENT-LIABILITIES> 19,995
<BONDS> 27,533
0
0
<COMMON> 41,119
<OTHER-SE> (5,328)
<TOTAL-LIABILITY-AND-EQUITY> 85,960
<SALES> 102,542
<TOTAL-REVENUES> 102,542
<CGS> 85,285
<TOTAL-COSTS> 85,285
<OTHER-EXPENSES> 24,984
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,596
<INCOME-PRETAX> (8,992)
<INCOME-TAX> 1,045
<INCOME-CONTINUING> (10,037)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,037)
<EPS-PRIMARY> (.83)
<EPS-DILUTED> (.83)
</TABLE>
