<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-K/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 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 1-13521
HYPERCOM CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 86-0828608
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
2851 West Kathleen Road
Phoenix, Arizona 85053
(Address of principal executive offices) (Zip Code)
(602) 504-5000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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<S> <C>
Title of Class Name of each Exchange on which registered
COMMON STOCK, $.001 PAR VALUE NEW YORK STOCK EXCHANGE
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
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 past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
At September 22, 1998, the aggregate market value of voting stock held
by non-affiliates of the Registrant was $65,573,058 based on the closing market
price of the Common Stock on such date, as reported by the New York Stock
Exchange.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 33,594,166 shares of
the Registrant's Common Stock were outstanding as of September 22, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Material from the Registrant's Proxy Statement relating to its 1998
Annual Meeting of Shareholders have been incorporated by reference into Part
III, Items 10, 11, 12, and 13.
<PAGE> 2
EXPLANATORY NOTE: This Form 10-K/A amends the Registrant's Form 10-K originally
filed on September 28, 1998 (the "Original Filing"). Item 14(c) and the Exhibit
Index, which are set forth in their entirety on page 2 and 4 respectively, are
amended by adding reference to Exhibits 10.1 - 10.12. All exhibits listed in
Item 14(c) and the Exhibit Index are either hereby incorporated by reference
from a previously filed registration statement, filed with the Original Filing,
or filed herein with this Form 10-K/A. Any items in the Original Filing not
expressly changed hereby shall be as set forth in the Original Filing.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(c)
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<CAPTION>
Exhibit No. Exhibit Description
<S> <C>
3.1* Amended and Restated Certificate of Incorporation of the
Company. Incorporated by reference to Exhibit 3.1 of the
Company's Form S-1 Registration Statement Under The Securities
Act Of 1933.
3.2* Amended and Restated Bylaws of the Company. Incorporated by
reference to Exhibit 3.2 of the Company's Form S-1
Registration Statement Under The Securities Act of 1933.
4* Amended and Restated Certificate of Incorporation of the
Company. Incorporated by reference to Exhibit 3.1 of the
Company's Form S-1 Registration Statement Under The Securities
Act Of 1933.
10.1 Revolving Credit Agreement by and between Hypercom Corporation
and Bank One, Arizona, NA, dated January 20, 1998
10.2* Lease, as amended, dated June 14, 1996, by and between
Estes-Samuelson Partnership and Hypercom, Inc.
10.3* Hypercom Corporation Long-Term Incentive Plan+
10.4* Hypercom Corporation 1997 Employee Stock Purchase Plan+
10.5* Promissory Note, dated October 17, 1994, by and between
Hypercom, Inc., and George Wallner+
10.6* Hypercom Corporation Nonemployee Directors' Stock Option Plan+
10.7* Employment Agreement with Jairo Gonzalez, dated January 1,
1997+
10.8* Employment Agreement with Albert A. Irato, dated January 1,
1997+
10.9* Loan Agreement, dated October 12, 1996, by and between
Hypercom Pty. Ltd., and George Wallner+
10.10* Loan Agreement, dated October 12, 1996, by and between
Hypercom Pty. Ltd., and Paul Wallner+
10.11* Promissory Note, dated December 31, 1994, by and between
Hypercom, Inc., and Albert Irato+
10.12* Description of lease by and between Hypercom Pty. Ltd., and
Hypercom Unit Trust
21** Subsidiaries of the Company
23** Consent of Independent Public Accountants
27** Financial Data Schedule
</TABLE>
* Incorporated by reference to the Registrant's Registration Statement
on Form S-1 (Registration no. 333-35641), effective November 13, 1997
** Filed with the Original Filing
+ Management or Compensatory Plan Agreement
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report on Form 10-K/A
to be signed on its behalf by the undersigned, thereunto duly authorized.
HYPERCOM CORPORATION,
a Delaware corporation
By: /s/ Albert A. Irato
-------------------------------------
Albert A. Irato
President and Chief Executive Officer
Date: November 3, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report on Form 10-K/A has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
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<CAPTION>
Name and Signature Title Date
------------------ ----- ----
<S> <C> <C>
/s/ Albert A. Irato President, Chief Executive November 3, 1998
- --------------------------------------------------- Officer and Director (Principal
Albert A. Irato Executive Officer)
/s/ Thomas E. Linnen Chief Financial Officer and November 3, 1998
- --------------------------------------------------- Director (Principal Financial
Thomas E. Linnen and Accounting Officer)
/s/ George Wallner Chairman of the Board of November 3, 1998
- --------------------------------------------------- Directors
George Wallner
/s/ Paul Wallner Director November 3, 1998
- ---------------------------------------------------
Paul Wallner
/s/ Jario Gonzalez Director November 3, 1998
- ---------------------------------------------------
Jario Gonzalez
/s/ William E. Fisher Director November 3, 1998
- ---------------------------------------------------
William E. Fisher
/s/ Peter J. Hart Director November 3, 1998
- ---------------------------------------------------
Peter J. Hart
</TABLE>
3
<PAGE> 4
LIST OF EXHIBITS
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<CAPTION>
Exhibit No. Exhibit Description
<S> <C>
3.1* Amended and Restated Certificate of Incorporation of the
Company. Incorporated by reference to Exhibit 3.1 of the
Company's Form S-1 Registration Statement Under The Securities
Act Of 1933.
3.2* Amended and Restated Bylaws of the Company. Incorporated by
reference to Exhibit 3.2 of the Company's Form S-1
Registration Statement Under The Securities Act of 1933.
4* Amended and Restated Certificate of Incorporation of the
Company. Incorporated by reference to Exhibit 3.1 of the
Company's Form S-1 Registration Statement Under The Securities
Act Of 1933.
10.1 Revolving Credit Agreement, by and between Hypercom
Corporation, and Bank One, Arizona, NA, dated January 20,
1998+
10.2* Lease, as amended, dated June 14, 1996, by and between
Estes-Samuelson Partnership and Hypercom, Inc.
10.3* Hypercom Corporation Long-Term Incentive Plan+
10.4* Hypercom Corporation 1997 Employee Stock Purchase Plan+
10.5* Promissory Note, dated October 17, 1994, by and between
Hypercom, Inc., and George Wallner+
10.6* Hypercom Corporation Nonemployee Directors' Stock Option Plan+
10.7* Employment Agreement with Jairo Gonzalez, dated January 1,
1997+
10.8* Employment Agreement with Albert A. Irato, dated January 1,
1997+
10.9* Loan Agreement, dated October 12, 1996, by and between
Hypercom Pty. Ltd., and George Wallner+
10.10* Loan Agreement, dated October 12, 1996, by and between
Hypercom Pty. Ltd., and Paul Wallner+
10.11* Promissory Note, dated December 31, 1994, by and between
Hypercom, Inc., and Albert Irato+
10.12* Description of lease by and between Hypercom Pty. Ltd., and
Hypercom Unit Trust
21** Subsidiaries of the Company
23** Consent of Independent Public Accountants
27** Financial Data Schedule
</TABLE>
* Incorporated by reference to the Registrant's Registration Statement
on Form S-1 (Registration no. 333-35641), effective November 13, 1997
** Filed with the Original Filing
+ Management or Compensatory Plan Agreement
4
<PAGE> 1
REVOLVING
CREDIT AGREEMENT
by and between
HYPERCOM CORPORATION, a Delaware corporation
and
BANK ONE, ARIZONA, NA
Dated as of
January 20, 1998
<PAGE> 2
REVOLVING CREDIT AGREEMENT
BY THIS REVOLVING CREDIT AGREEMENT (together with any amendments or
modifications, the "Credit Agreement"), entered into as of this 20th day of
January, 1998 by and between HYPERCOM CORPORATION, a Delaware corporation (the
"Borrower"), and BANK ONE, ARIZONA, NA, a national banking association (the
"Lender"), in consideration of the mutual promises herein contained and for
other valuable consideration, the parties hereto do hereby agree as follows:
RECITALS
A. Borrower has applied to Lender for a revolving line of credit
facility (the "RLC") in the principal amount of TEN MILLION DOLLARS
($10,000,000) for the purpose of providing working capital financing for
Borrower's business operation.
B. As a condition for extending such financial accommodations, Lender
has required that Borrower enter into this Credit Agreement establishing the
terms and conditions thereof.
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ARTICLE 1
DEFINITION OF TERMS
1.1 Definitions. For the purposes of this Credit Agreement, unless the
context otherwise requires, the following terms shall have the respective
meanings assigned to them in this Article 1 or in the Section hereof referred to
below:
"Advance" means a disbursement of the proceeds of the RLC.
"Affiliate" of any Person means any Person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether by contract or otherwise.
"Authorized Officer" means one or more officers of Borrower
duly authorized (and so certified to Lender by the corporate secretary of
Borrower pursuant to a certificate of authority and incumbency from time to time
satisfactory to Lender in the exercise of Lender's reasonable discretion),
acting alone, to request Advances under the provisions of this Credit Agreement
and execute and deliver documents, instruments, agreements, reports, statements
and certificates in connection herewith.
"Borrower": See the Preamble hereto.
"Borrowing Base Certificate" means a certificate of an
Authorized Officer setting forth a detailed reconciliation of the outstanding
balance of the RLC against the definitional components of the RLC Borrowing
Base, and shall be in the form as Lender may from time to time require.
"Business Day" means with respect to a LIBOR Rate RLC Advance,
a day on which dealings are carried on in the London interbank market.
"Closing Date" means the date on which all conditions
precedent to the initial Advance set forth in Section 5.1 have been met and the
initial Advance is made.
"CMLTD" means the current maturities of Borrower's
consolidated long-term debt, as construed in accordance with GAAP.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means all property of Borrower or the Guarantors
subject to the Security Documents.
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"Commitment" means the agreement of Lender hereunder to issue
Letters of Credit pursuant to the terms and conditions in Letter of Credit
Agreements and to make Advances pursuant to the terms and conditions in the
Agreement.
"Control" when used with respect to any Person means the
power, directly or indirectly, to direct the management policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Controlled Group" means, severally and collectively, the
members of the group controlling, controlled by and/or in common control of
Borrower, within the meaning of Section 4001(b) of ERISA.
"Credit Agreement": See the Preamble hereto.
"Credit Documents" means this Credit Agreement, the Note
(including any renewals, extensions and refundings thereof), the Security
Documents, and any written agreements, certificates or documents (and with
respect to this Credit Agreement and such other written agreements and
documents, any amendments or supplements thereto or modifications thereof)
executed or delivered pursuant to the terms of this Credit Agreement.
"Current Assets" means current assets under GAAP, provided
that, regardless of GAAP, Current Assets shall not include: accounts receivable
other than trade accounts receivable; receivables due from stockholders,
directors, officers, partners, members, employees, subsidiaries, and other
affiliates; promissory notes, including the portion due within the current
period, unless the obligation evidenced thereby has been independently verified
to Lender by an independent certified public accountant; accrued interest
receivable; income tax refunds receivable; prepaid expenses; cash surrender
value of life insurance policies; guarantee or performance deposits; and dealer
reserves.
"Current Liabilities" means current liabilities under GAAP
and, in addition, the following: all indebtedness to stockholders, directors,
officers, partners, members, employees, subsidiaries, and other affiliates that
is not subordinated to the satisfaction of Lender to the obligations of Borrower
under the Loan Documents as to liens and encumbrances, time and right of
payment, and rights against collateral.
"Current Ratio" means as of any date the ratio of Current
Assets as of such date to Current Liabilities as of such date.
"Debt Coverage Ratio" means the ratio of NIDA to CMLTD.
"Default Rate" means an interest rate per annum equal to four
hundred basis point above the rate that would otherwise be payable under the
terms of the respective Note.
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"Dollars" and the sign "$" mean lawful currency of the United
States of America.
"Eligible Account Receivable" means an amount (other than an
amount attributable to Eligible Lease Receivables) owing to any of the Borrower
or the Guarantors (whose accounts receivables are pledged to Lender), as
determined by Lender in its sole and absolute discretion, which has arisen from
the delivery and/or shipment of products previously made and from services
rendered for which an invoice has been issued by Borrower or one of the
Guarantors to its customer ("Customer") (a) which amount is not subject to any
offset, counterclaim or defense asserted by the Customer, (b) which amount is
subject to a perfected security interest in favor of Lender and is not subject
to any other security interest, lien, claim or encumbrances, (c) which amount
has not remained unpaid for more then ninety (90) days after the date of the
related invoice, (d) where not more than fifteen percent (15%) of the total
amount owing from the Customer has remained unpaid for more than ninety (90)
days after the date of the related invoice, (e) which amount is not an uninsured
amount owing from a Customer located in a foreign country, (f) which amount is
not owing from the United States of America or any agency, department or
subdivision thereof, unless a properly executed assignment of claims has been
received by Lender, and (g) which customer is not Borrower or an Affiliate.
"Eligible Inventory" means the inventory Borrower or any of
the Guarantors whose accounts receivables are pledged to Lender (consisting of
raw materials and finished goods), as determined by Lender in its sole and
absolute discretion, to be (a) in good condition and salable in the ordinary
course of Borrower's or such Guarantor's business, (b) owned by Borrower or such
Guarantor free and clear of any mortgages, liens, security interests, claims,
encumbrances or rights of others, excepting only the security interests in favor
of Lender, (c) located at a location identified in a Security Agreement, (d)
subject to a perfected security interest in favor of Lender, (e) not subject to
any consignment to any customer, and (e) not acquired by Borrower or such
Guarantor in or as part of a bulk transfer of sale or assets unless it has
complied with all applicable bulk sales or bulk transfer laws.
"Eligible Lease Receivables" means an amount owing to Borrower
under a lease of equipment owned by Borrower which would otherwise qualify as an
Eligible Account Receivable; provided, however, that the fact that such amount
is an uninsured amount owing from a Customer located in a foreign country shall
not disqualify such amount from being an Eligible Lease Receivable.
"Equity" means Borrower's stockholders' equity, determined on
a consolidated basis in accordance with GAAP.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, together with all final and permanent regulations issued
pursuant thereto. References herein to sections and subsections of ERISA are
deemed to refer to any successor or substitute provisions therefor.
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<PAGE> 6
"ESOP" means any Employee Stock Ownership Plan, as it may be
amended from time to time, adopted by Borrower.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of governors to the Federal Reserve System, as
in effect from time to time.
"Eurodollar Rate Reserve Percentage" for the Interest Period
for each LIBOR Rate RLC Advance means the reserve percentage applicable two (2)
Business Days before the first day of such Interest Period under regulations
issued from time to time by the Board of Governors of the Federal Reserve System
(or any successor) for determining the maximum reserve requirement (including,
but not limited to, any emergency, supplemental, or other marginal reserve
requirement) for a member bank of the Federal Reserve System in San Francisco
with respect to liabilities or assets consisting of or including Eurocurrency
Liabilities (or with respect to any other category of liabilities which includes
deposits by reference to which the Interest Rate on LIBOR Rate RLC Advances is
determined) having a term equal to such Interest Period.
"Event of Default": See Article 9.
"Exchange Act" means the Securities Exchange Act of 1934.
"Existing Letter(s) of Credit" means any and all letter(s) of
credit issued by Lender at the request of Borrower prior to the date of this
Agreement, as to which letter(s) of credit the date that is the Standard Number
of Days after the last date for payment of drafts or drawn and accepted
thereunder is after the date of this Agreement.
"Financial Covenants": See Section 8.8 hereof.
"GAAP" means those generally accepted accounting principles
and practices which are recognized as such by the American Institute of
Certified Public Accountants acting through its Accounting Principles Board or
by the Financial Accounting Standards Board or through other appropriate boards
or committees thereof and which are consistently applied for all periods after
the date hereof so as to properly reflect the financial condition, and the
results of operations and changes in the financial position, of Borrower,
including without limitation accounting rules promulgated pursuant to
Regulations SX and SK, except that any accounting principle or practice required
to be changed by the said Accounting Principles Board or Financial Accounting
Standards Board (or other appropriate board or committee of the said Boards) in
order to continue as a generally accepted accounting principle or practice may
be so changed.
"Governmental Authority" means any government (or any
political subdivision or jurisdiction thereof), court, bureau, agency or other
governmental authority having jurisdiction over Borrower or any of its business,
operations or properties.
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<PAGE> 7
"Guarantees" means the Continuing Guarantees of the Guarantors
pursuant to which each Guarantor guaranties all of the Obligations, jointly and
severally, to a maximum amount guaranteed of $40,000,000.00.
"Guarantors" means, collectively, Hypercom, Inc., an Arizona
corporation, Hypercom Latino America, Inc., an Arizona corporation, and Hypercom
Manufacturing Resources, Inc., an Arizona corporation, and "Guarantor" means one
of the Guarantors.
"Guarantors' Revolving Loan" means the loan from Lender to
Guarantors under that Revolving Line of Credit Loan Agreement (Accounts
Receivable and Inventory), dated March 13, 1996 between Guarantors, as borrower,
and Lender as bank.
"Indebtedness" means, with respect to any Person, all of its
monetary obligations and liabilities.
"Intangible Assets" means all intangible assets under GAAP,
provided, that regardless of GAAP, Intangible Assets shall include: copyrights;
franchises; goodwill; licenses; loan origination fees; non-competition
covenants; organization or formation expenses; patents; shares of the capital
stock of Borrower; service marks; service names; trademarks; trade names;
write-up in the book value of any asset in excess of the acquisition cost of the
asset to Borrower; any amount, however designated on the balance sheet,
representing the excess of the purchase price paid for assets or stock acquired
over the value assigned thereto on the books of Borrower; unamortized debt
discount; deferred discount; computer software; and research and development
costs and expenses. Tangible Net Worth shall not be reduced by any net income
that is less than zero (i.e., a net deficit or loss).
"Interest Period" means, for each LIBOR Rate RLC Advance, the
period commencing on the date of such LIBOR Rate RLC Advance and ending on the
last day of the period selected by Borrower pursuant to the provisions herein
and, thereafter, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the period
selected by Borrower pursuant to the provisions herein. The duration of each
Interest Period shall be 30, 60, 90, 180 days, as selected by Borrower (A), for
a new RLC Advance, in the request for a LIBOR Rate RLC Advance or (B), for an
outstanding RLC Advance, in the request for a LIBOR Rate RLC Advance to continue
bearing interest at the LIBOR Rate or (C), for an outstanding Variable Rate RLC
Advance, in the request to convert to a LIBOR Rate RLC Advance, provided,
however, that:
(i) Interest Periods commencing on the same date
shall be of the same duration;
(ii) Whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall be extended to occur on
the next succeeding Business Day, provided that if such
extension would
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cause the last day of such Interest Period to occur in the
next following calendar month, the last day of such Interest
Period shall occur on the next preceding Business Day; and
(iii) No Interest Period with respect to any RLC
Advance shall extend beyond the RLC Maturity Date.
"Lender": See the Preamble hereto.
"Letter of Credit" means the letters of credit in Lender's
standard form from time to time issued pursuant to this Agreement and any
Existing Letters of Credit.
"Letter of Credit Agreement" means Lender's standard from
Application and Agreement for Commercial Letter of Credit, Lender's standard
form Application for Standby Letter of Credit and Standby Letter of Credit
Agreement, or other standard application and agreement for letters of credit in
use by Lender from time to time.
"LIBOR Rate" means the rate per annum equal to the sum of (i)
250 basis points, and (ii) the rate per annum obtained by dividing (A) the rate
of interest determined by Lender, based on Telerate System reports or such other
source as may be selected by Lender, to be the "London Interbank Offered Rate"
at which deposits in United States dollars are offered by major banks in London,
England for the period equal to such Interest Period, one (1) Business Day
before the first day of the respective Interest Period by (B) a percentage equal
to one hundred percent (100%) minus the Eurodollar Rate Reserve Percentage.
"LIBOR Rate RLC Advance" means an RLC Advance that bears
interest at the LIBOR Rate.
"Lien" means any lien, mortgage, security interest, tax lien,
pledge, encumbrance, conditional sale or title retention arrangement, or any
other interest in property designed to secure the repayment of Indebtedness
whether arising by agreement or under any statute or law, or otherwise.
"Loan" means the RLC.
"Loan Fee": See Section 3.1 hereof.
"Material Adverse Effect" means any circumstance or event
which (i) has any material adverse effect upon the validity or enforceability of
any Credit Document, (ii) materially impairs the ability of Borrower to fulfill
its obligations under the Credit Documents, or (iii) causes an Event of Default
or any event which, with notice or lapse of time or both, would become an Event
of Default.
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<PAGE> 9
"Net Income" means for any period the net income of Borrower
after interest and taxes for such period in accordance with GAAP, determined on
a consolidated basis.
"NIDA" means for any period the Net Income for such period,
plus the sum of all amounts deducted or deductible for, depreciation and
amortization, each as construed in accordance with GAAP, in computing such Net
Income.
"Note" means the RLC Note.
"Obligation" means all present and future indebtedness,
obligations and liabilities of Borrower to Lender, and all renewals and
extensions thereof, or any part thereof, arising pursuant to this Credit
Agreement or represented by the Note, including without limitation the Loan and
all interest accruing thereon, and attorneys' fees incurred in the enforcement
or collection thereof, regardless of whether such indebtedness, obligations and
liabilities are direct, indirect, fixed, contingent, joint, several or joint and
several; together with all indebtedness, obligations and liabilities of Borrower
evidenced or arising pursuant to any of the other Credit Documents, and all
renewals and extensions thereof, or part thereof.
"Owner's Equity Amount" means the sum of Tangible Net Worth
and indebtedness subordinated to the satisfaction of Lender to the obligations
of Borrower under the Loan Documents as to liens and encumbrances, time and
right of payment, and rights against collateral.
"Owner's Equity Percentage" means the result obtained by
dividing (A) the Owner's Equity Amount by (B) Total Assets, less Intangible
Assets.
"Owner's Equity Ratio" means the ratio of Owner's Equity
Amount to Tangible Net Worth.
"Payment Date" means the first day of each month, commencing
on the first full month following the date of this Agreement, provided that if
any such day is not a Business Day, then such Payment Date shall be the next
successive Business Day.
"PBGC" means the Pension Benefit Guaranty Corporation, and any
successor to all or substantially all of the Pension Benefit Guaranty
Corporation's functions under ERISA.
"Permitted Liens" means those Liens to which the Collateral is
subject that are prior to the Liens of the Security Documents, and which consist
of the following:
(a) Any Lien on equipment to secure the purchase price
thereof;
(b) Liens for taxes, assessments or governmental charges not
yet due and payable; and
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<PAGE> 10
(c) Liens to which Lender shall consent in writing, in its
sole and absolute discretion.
"Person" includes an individual, a corporation, a joint
venture, a partnership, a trust, a limited liability company, an unincorporated
organization or a government or any agency or political subdivision thereof.
"Plan" means an employee defined benefit plan or other plan
maintained by Borrower for employees of Borrower and covered by Title IV of
ERISA, or subject to the minimum funding standards under Section 412 of the
Code.
"Prime Rate" means the interest rate per annum publicly
announced by Lender, or its successors, in Phoenix, Arizona as its "prime rate"
as in effect from time to time. Borrower acknowledges that the Prime Rate is not
necessarily the best or lowest rate offered by Lender and Lender may lend to its
customers at rates that are at, above or below its Prime Rate.
"Real Property" means all of the Real Property currently owned
or leased and hereafter owned or leased by Borrower or any Subsidiary, wherever
located, together with all improvements located thereon.
"Regulation U" means Regulation U promulgated by the Board of
Governors of the Federal Reserve System, 12 C.F.R. Part 221, or any other
regulation hereafter promulgated by said Board to replace the prior Regulation U
and having substantially the same function.
"Regulatory Change" means any change effective after the date
of the Note in United States federal, state, or foreign law, regulations, or
rules or the adoption or making after such date of any interpretation,
directive, or request applying to a class of banks including Lender, of or under
any United States federal, state, or foreign law, regulation or rule (whether or
not having the force of law) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.
"Reimbursement Amount" means the amount Borrower is obligated
to pay to Lender under a Letter of Credit Agreement in respect of a draft drawn
or drawn and accepted under the respective Letter of Credit, which amount shall
be the amount of the draft or acceptance and all costs, expenses, fees, and
other amounts then payable by Borrower to Lender under the Letter of Credit
Agreement.
"Reportable Event" means any "reportable event" as described
in Section 4043(b) of ERISA with respect to which the thirty (30) day notice
requirement has not been waived by the PBGC.
"RLC": See Recital A hereto.
"RLC Advance": means a disbursement of the proceeds of the
RLC.
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<PAGE> 11
"RLC Borrowing Base" means the amount, from time to time,
equal to the sum of (i) eighty percent (80.0%) of the aggregate consolidated
book value of the Eligible Accounts Receivable of Borrower and (ii) thirty-five
percent (35.0%) of the aggregate book value of the Eligible Inventory of
Borrower.
"RLC Commitment" means Ten Million Dollars ($10,000,000).
"RLC Maturity Date" means December 5, 1999.
"RLC Note" means the Revolving Promissory Note of even date
herewith in the amount of the RLC executed by Borrower and delivered pursuant to
the terms of this Credit Agreement, together with any renewals, extensions,
modifications or replacements thereof.
"SEC" means the Securities and Exchange Commission.
"Security Agreement": See Section 4.1 hereof.
"Security Documents": See Section 4.2 hereof.
"Significant Debt Agreement" means all documents, instruments
and agreements executed by Borrower, evidencing, securing or ensuring any
Indebtedness of Borrower or any guaranty in excess of $50,000 in outstanding
principal (or principal equivalent) amount.
"Standard Number of Days" means the standard number of days
established by Lender from time to time to allow for delivery to Lender of
drafts drawn under letters of credit issued by Lender and presented to financial
institutions other than Lender for delivery to Lender. Lender may change such
number of days at any time and from time to time in its absolute and sole
discretion without notice to Borrower and may have a different number of days
for commercial letters of credit and standby letters of credit.
"Subsidiary" means any business association directly or
indirectly controlled by Borrower.
"Tangible Net Worth" means (A) the sum of all capital accounts
of the Borrower (including, without limitation, any paid-in capital, capital
surplus, and retained earnings), less (B) the sum of the value on Borrower's
books of all Intangible Assets.
"Treasury Rate" means the rate per annum equal to the weekly
average yield on United States Treasury Securities-Constant Maturity Series
issued by the United States Government for a term equal to or next greater than
the Interest Period as most recently published prior to the date in question by
The Board of Governors of the Federal Reserve System in Federal Reserve
Statistical Release H.15(519).
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"Variable Rate" means the rate per annum equal to the Prime
Rate per annum as in effect from time to time. The Variable Rate will change on
each day that the "Prime Rate" changes.
"Variable Rate RLC Advance" means an Advance that bears or
that is requested to bear interest at the Variable Rate.
"Working Capital" means the excess of Current Assets over
Current Liabilities.
1.2 Terms Generally.
(a) The definitions in Section 1.1 shall apply equally to both
the singular and plural forms of the terms defined.
(b) Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms.
(c) All references herein to Articles, Sections, Exhibits and
Schedules shall be deemed references to Articles and Sections of, and
Exhibits and Schedules to, this Agreement unless the context shall
otherwise require.
(d) Except as otherwise expressly provided herein, all terms
of an accounting or financial nature shall be construed in accordance
with GAAP, as in effect from time to time.
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ARTICLE 2
THE RLC
2.1 RLC Commitment. Lender agrees to loan to or for the
benefit of Borrower, and Borrower agrees to draw upon and borrow, in the manner
and upon the terms and conditions contained in this Credit Agreement, amounts
that in the aggregate at any time outstanding shall not exceed the lesser of the
Commitment or the RLC Borrowing Base.
2.2 Revolving Line. Subject to the terms and conditions set
forth in this Credit Agreement, including, without limitation, the provisions of
Paragraph 2A.5, the RLC shall be a revolving line of credit, against which RLC
Advances may be made to Borrower, repaid by Borrower, and new RLC Advances made
to Borrower, as Borrower may request, provided that (i) no RLC Advance shall be
made if an Event of Default shall be continuing, (ii) no RLC Advance shall be
made that would cause the outstanding principal balance of the RLC to exceed the
lesser of the RLC Commitment or the RLC Borrowing Base, and (iii) no RLC Advance
shall be made on or after the RLC Maturity Date.
2.3 RLC Note. The RLC shall be evidenced by the RLC Note, and
shall bear interest and be payable to Lender upon the terms and conditions
contained therein.
2.4 RLC Payments and RLC Advances.
(a) Interest shall accrue on the unpaid principal of each RLC
Advance:
(i) At the Variable Rate if it is a Variable Rate RLC
Advance.
(ii) At the applicable LIBOR Rate if it is a LIBOR
Rate RLC Advance.
(b) All accrued interest shall be due and payable on the
Payment Date.
(c) The entire unpaid principal balance, all accrued and
unpaid interest, and all other amounts payable under the RLC Note shall
be due and payable in full on the RLC Maturity Date.
(d) Each request for an RLC Advance shall, in addition to
complying with the other requirements in this Credit Agreement, (i)
specify the date and amount of the requested RLC Advance, (ii) specify
whether the RLC Advance shall be an RLC Advance that bears interest at
the Variable Rate or shall be an RLC Advance that bears interest at the
LIBOR Rate, and (iii), if the RLC Advance is to bear interest at the
LIBOR Rate, (A) specify the Interest Period, (B) be delivered to Lender
at least two (2) Business Days prior to the date of the requested RLC
Advance, and (C) be in a minimum amount of $1,000,000.00 with integral
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multiples of $1,000,000.00 in excess thereof. Any RLC Advance not
complying with the foregoing requirements for an RLC Advance bearing
interest at the LIBOR Rate shall bear interest at the Variable Rate.
(e) If Borrower desires that a LIBOR Rate RLC Advance continue
to bear interest at the LIBOR Rate after the end of an existing
Interest Period, Borrower shall deliver to Lender a notice making such
election and specifying the new Interest Period. If Borrower does not
deliver such notice within such time, then after the existing Interest
Period the LIBOR Rate RLC Advance shall become a Variable Rate RLC
Advance and shall bear interest at the Variable Rate.
(f) Borrower may on any Business Day, upon written notice to
and received by Lender not later than 12:00 p.m. (Phoenix, Arizona
local time) (i) on the second Business Day, in the case of any
conversion of a Variable Rate RLC Advance into a LIBOR Rate RLC Advance
and (ii) on the first Business Day in the case of any conversion of a
LIBOR Rate RLC Advance into a Variable Rate RLC Advance, prior to the
date of the proposed conversion, convert any RLC Advance of one type
into an RLC Advance of the other type, provided, however, that any
conversion of a LIBOR Rate RLC Advance (A) shall only be made on the
last day of the applicable Interest Period, and (B) shall be made only
as to an RLC Advance in a minimum amount of $1,000,000.00 with integral
multiples of $1,000,000.00 in excess thereof. Each such notice of a
conversion shall specify the date of such conversion and the RLC
Advance(s) to be converted.
(g) Notwithstanding any provision of the Credit Documents to
the contrary, Lender shall be entitled to fund and maintain its funding
of all or any part of any RLC Advance in any manner it sees fit,
provided, however, that for the purposes of the RLC Note, all
determinations thereunder shall be made as if Lender had actually
funded and maintained each LIBOR Rate RLC Advance during the Interest
Period therefor through the purchase of deposits having a maturity
corresponding to the last day of the Interest Period and bearing an
interest rate equal to the LIBOR Rate for such Interest Period.
(h) If, due to any Regulatory Change, there shall be any
increase in the cost to Lender of agreeing to make or making, funding,
or maintaining LIBOR Rate RLC Advances (including, without limitation,
any increase in any applicable reserve requirement), then Borrower
shall from time to time, upon demand by Lender, pay to Lender such
amounts as Lender may reasonably determine to be necessary to
compensate Lender for any additional costs that Lender reasonably
determines are attributable to such Regulatory Change and Lender will
notify the Borrower of any Regulatory Change that will entitle Lender
to compensation pursuant to this paragraph as promptly as practicable,
but in any event within 90 days after Lender obtains knowledge thereof,
provided, however, that if Lender fails to give such notice within 90
days after it obtains knowledge of such a Regulatory Change, Lender
shall, with respect to compensation payable in respect
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of any costs resulting from such Regulatory Change, only be entitled to
payment for costs incurred from and after the date that Lender does
give such notice. Lender will furnish to Borrower a certificate setting
forth in reasonable detail the basis for the amount of each request by
Lender for compensation under this paragraph. Determinations by Lender
of the amounts required to compensate Lender shall be conclusive,
absent manifest error. Lender shall be entitled to compensation in
connection with any Regulatory Change only for costs actually incurred
by Lender.
(i) Notwithstanding any provision of the Credit Documents, if
Lender shall notify Borrower that as a result of a Regulatory Change it
is unlawful for Lender to make RLC Advances at the LIBOR Rate, or to
fund or maintain LIBOR Rate RLC Advances, (i) the obligations of Lender
to make RLC Advances at the LIBOR Rate and to convert RLC Advances to
the LIBOR Rate shall be suspended until Lender shall notify Borrower
that the circumstances causing such suspension no longer exist, and
(ii) in the event such Regulatory Change makes the maintenance of RLC
Advances at the LIBOR Rate unlawful, Borrower shall forthwith prepay in
full all LIBOR Rate RLC Advances then outstanding, together with
interest accrued thereon and all amounts in connection with such
prepayment specified in the RLC Note, unless Borrower, within five (5)
Business Days of notice from Lender, converts all LIBOR Rate RLC
Advances then outstanding into Variable Rate RLC Advances pursuant to
the conversion procedures in this Note and pays all amounts in
connection with such prepayments or conversions specified in the RLC
Note.
(j) Notwithstanding any other provision of the Credit
Documents, if prior to the commencement of any Interest Period, Lender
shall determine (i) that United States dollar deposits in the amount of
any LIBOR Rate RLC Advance to be outstanding during such Interest
Period are not readily available to Lender in the London interbank
market, or (ii) by reason of circumstances affecting the London
interbank market, adequate and reasonable means do not exist for
ascertaining the LIBOR Rate for such Interest Period in the manner
prescribed in the definition of "LIBOR Rate", then Lender shall
promptly give notice thereof to Borrower and the obligation of Lender
to create, continue, or effect by conversion any LIBOR Rate RLC Advance
in such amount and for such Interest Period shall terminate until
United States dollar deposits in such amount and for the Interest
Period shall again be readily available in the London interbank market
and adequate and reasonable means exist for ascertaining the LIBOR
Rate.
(k) If any payment required under the RLC Note is not paid
within five (5) days after the date such payment is due, then, at the
option of Lender, Borrower shall pay a "late charge" equal to four
percent (4%) of the amount of that payment to compensate Lender for
administrative expenses and other costs of delinquent payments. This
late charge may be assessed without notice, shall be immediately due
and payable and shall be in addition to all other rights and remedies
available to Lender.
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(l) After maturity, including maturity upon acceleration, the
unpaid principal balance, all accrued and unpaid interest and all other
amounts payable under the RLC Note shall bear interest at the Default
Rate.
2.5 Excess Balance Repayment. There shall be due and payable from
Borrower to Lender, and Borrower shall immediately repay to Lender, without
notice or demand, from time to time, any amount by which the outstanding
principal balance of the RLC exceeds the lesser of the Commitment or the
Borrowing Base.
2.6 Principal Prepayments. Borrower shall have the option to prepay the
RLC Note, in full or in part, at any time prior to maturity. With any prepayment
of a LIBOR Rate RLC Advance or a Fixed Rate RLC Advance or with any conversion
of a LIBOR Rate RLC Advance to a Variable Rate RLC Advance, in either case other
than on the last Business Day of the Interest Period for such RLC Advance (the
"Interest Period Termination Date") (including any such prepayment made
voluntarily or involuntarily as a result of the acceleration of maturity upon a
default or otherwise), Borrower shall also pay (a) all accrued and unpaid
interest on the principal being prepaid, (b) all Other Amounts then due, and (c)
a premium, if any, equal to the product of (i) the Average Lost Monthly Interest
Income and (ii) the number of months from the date of prepayment or conversion
to the Interest Period Termination Date (with any fraction of a month counted as
a month), discounted to present value at the Discount Rate over a period equal
to one-half of the number of months in (ii) above.
As used in the preceding paragraph:
"Average Lost Monthly Interest Income" means the amount
determined by dividing (i) the product of the Average Principal and the
Lost Rate, by (ii) 12, where:
"Average Principal" means the amount equal to either
(i) one-half the sum of (A) the amount of principal being
prepaid and (B) the amount of principal that is scheduled to
be due on the Interest Period Termination Date ("Balloon
Amount"), or (ii) the amount of principal being prepaid, if
such amount is less than the Balloon Amount; and
"Lost Rate" means the rate per annum equal to the
percentage, if any, by which (i) the yield to maturity of
United States Treasury debt obligations having a maturity date
nearest to the Interest Period Termination Date ("Treasury
Obligations") determined on the first day of the Interest
Period exceeds (ii) the yield to maturity of Treasury
Obligations determined on the date of prepayment.
"Discount Rate" means the rate per annum equal to the yield to
maturity of Treasury Obligations determined on the date of prepayment.
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"Other Amounts" means all amounts payable by Borrower to
Lender hereunder and all other Credit Documents.
The maturity date and yield to maturity of Treasury Obligations shall be
determined by Lender, in its absolute and sole discretion, on the basis of
quotations published in The Wall Street Journal or other comparable sources.
2.7 Method of Payment. All payments of principal of, and interest on,
the RLC, in full or in part, at any time prior to maturity.
2.8 Conditions. Lender shall have no obligation to make any RLC Advance
unless and until all of the conditions and requirements of this Credit Agreement
are fully satisfied. However, Lender in its sole and absolute discretion may
elect to make one or more RLC Advances prior to full satisfaction of one or more
such conditions and/or requirements. Notwithstanding that such an RLC Advance or
RLC Advances are made, such unsatisfied conditions and/or requirements shall not
be waived or released thereby. Borrower shall be and continue to be obligated to
fully satisfy such conditions and requirements, and Lender, at any time, in
Lender's sole and absolute discretion, may stop making RLC Advances until all
conditions and requirements are fully satisfied.
2.9 Other RLC Advances by Lender. Lender, after giving written notice
to Borrower, from time to time, may make RLC Advances in any amount in payment
of (i) insurance premiums, taxes, assessments, liens or encumbrances existing
against property encumbered by the Security Documents, (ii) interest accrued and
payable upon the RLC, (iii) any charges and expenses that are the obligation of
Borrower under this Credit Agreement or any Security Document, and (iv) any
charges or matters necessary to preserve the property encumbered by the Security
Documents or to cure any Event of Default.
2.10 Assignment. Borrower shall have no right to any RLC Advance other
than to have the same disbursed by Lender in accordance with the disbursement
provisions contained in this Credit Agreement. Any assignment or transfer,
voluntary or involuntary, of this Credit Agreement or any right hereunder shall
not be binding upon or in any way affect Lender without its written consent;
Lender may make RLC Advances under the disbursement provisions herein,
notwithstanding any such assignment or transfer.
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ARTICLE 2A
LETTERS OF CREDIT
2A.1 Issuance of Letters of Credit. Subject to the terms and conditions
of this Credit Agreement and the Letter of Credit Agreements and subject to the
policies, procedures, and requirements of Lender in effect from time to time for
issuance of Letters of Credit (including, without limitation, payment of letter
of credit fees), Lender agrees to issue, from time to time on or before the
scheduled RLC Maturity Date set forth in this Credit Agreement, Letters of
Credit upon request by and for the account of Borrower, provided that as to each
requested Letter of Credit Borrower has delivered to Lender a completed and
executed Letter of Credit Agreement, and provided further that the date that is
the Standard Number of Days after the last date for payment of drafts drawn or
drawn and accepted under a requested Letter of Credit is before the scheduled
RLC Maturity Date set forth in the Agreement. Each reference in this Credit
Agreement to "issue" or "issuance" or other forms of such words in relation to
Letters of Credit shall also include any extension or renewal of a Letter of
Credit. Upon occurrence of an Event of Default, or any condition or event that
with notice, passage of time, or both would be an Event of Default, Lender, in
its absolute and sole discretion and without notice, may suspend the commitment
to issue Letters of Credit. In addition, upon occurrence of an Event of Default,
Lender, in its absolute and sole discretion and without notice, may terminate
the commitment to issue Letters of Credit.
2A.2 Issuance Procedure. To obtain a Letter of Credit, Borrower shall
complete and execute a Letter of Credit Agreement and submit it to the letter of
credit department of Lender. Upon receipt of a completed and executed Letter of
Credit Agreement, Lender will process the application in accordance with the
policies, procedures, and requirements of Lender then in effect. If the
application meets the requirements of Lender and is within the policies of
Lender then in effect, Lender will issue the requested Letter of Credit.
2A.3 Reimbursement of Lender for Payment of Drafts Drawn or Drawn and
Accepted Under Letters of Credit. The obligation of Borrower to reimburse Lender
for payment by Lender of drafts drawn or drawn and accepted under a Letter of
Credit shall be as provided in the respective Letter of Credit Agreement. Lender
will notify Borrower of payment by Lender of a draft drawn or drawn and accepted
under a Letter of Credit and of the respective Reimbursement Amount and will
give Borrower the election (i) to pay the Reimbursement Amount pursuant to the
respective Letter of Credit Agreement or (ii) to pay the Reimbursement Amount by
Lender making an Advance subject to the terms and conditions of this Credit
Agreement and applying the proceeds of the Advance to pay the Reimbursement
Amount. If Borrower does not communicate to Lender its election within two
Business Days after notification by Lender of payment of the draft or
acceptance, Borrower shall be deemed to have elected to pay the Reimbursement
Amount by Lender making an Advance hereunder, provided that if the terms and
conditions in this Credit Agreement for an Advance hereunder are not satisfied,
Borrower shall be deemed to have elected to pay the Reimbursement Amount
pursuant to the Letter of Credit Agreement. Each Advance to pay a Reimbursement
Amount shall be dated the date that Lender pays the respective draft or
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acceptance and shall accrue interest from and after such date. If Borrower is to
pay the Reimbursement Amount pursuant to the Letter of Credit Agreement,
Borrower shall also pay to Lender interest on the Reimbursement Amount from and
including the date Lender pays the respective draft or acceptance at the rate
per annum at which interest is then accruing under the Line of Credit Note until
the Reimbursement Amount for such interest are paid in full; provided that if
Borrower fails to pay the Reimbursement Amount and accrued interest thereon
within five (5) days after notification by Lender to Borrower of payment of the
respective draft or acceptance, interest thereafter shall accrue at the interest
rate applicable to past-due payments under the Note. Such interest shall be
computed on the basis of a 360-day year and accrue on a daily basis for the
actual number of days elapsed. Notwithstanding the above, if Borrower elects or
is deemed to have elected to pay the Reimbursement Amount pursuant to the Letter
of Credit Agreement and fails to pay the Reimbursement Amount and interest
thereon within five (5) days after notification by Lender to Borrower, Lender,
in its absolute and sole discretion and without notice to Borrower and
regardless of whether the terms and conditions in this Credit Agreement for
Advances are satisfied, may make an Advance under this Credit Agreement in the
amount of the Reimbursement Amount and accrued interest thereon and apply the
proceeds of such Advance to pay the Reimbursement Amount and accrued interest.
2A.4 Letters of Credit and Advances. Letters of Credit may be issued by
Lender at the oral or written request of the respective person or persons
designated in the Agreement to request Advances. Such person or persons are
hereby authorized by Borrower to request Letters of Credit and Advances, to
execute and deliver Letter of Credit Agreements on behalf of Borrower, and to
direct disposition of the proceeds of Advances until written notice of the
revocation of such authority is received from Borrower by the Lender and Lender
has had a reasonable time to at upon such notice. Lender shall have no duty to
monitor for Borrower or to report to Borrower the use of Letters or Credit or
proceeds of Advances. Advances shall be disbursed by Lender in the manner agreed
upon by Lender and Borrower from time to time.
2A.5 Limit on Letters of Credit and Advances. Anything in the Loan
Documents to the contrary notwithstanding, the sum from time to time of (i) the
aggregate amount of outstanding and undrawn Letters of Credit, (ii) the
aggregate amount of outstanding and unpaid drafts drawn or drawn and accepted
under Letters of Credit, (iii) the aggregate amount of unpaid Reimbursement
Amounts, and (iv) the amount of outstanding and unpaid Advances shall not exceed
the lesser of (A) the RLC Commitment and (B) the RLC Borrowing Base, provided,
that if such sum at any time exceeds the lesser of (A) and (B), Borrower,
without notice or demand, shall immediately make a payment to Lender in an
amount equal to the sum of (1) such excess and (2) accrued and unpaid interest
thereon.
2A.6 Collateral Upon Event of Default. Upon an event of default and
demand by Lender in its absolute and sole discretion, Borrower shall immediately
deliver to Lender, as security for all Obligations (including, without
limitation, the obligation to pay Reimbursement Amounts), immediately available
funds in an amount equal to the sum of (i) the aggregate amount of outstanding
and undrawn Letters of Credit, and (ii) the aggregate amount of outstanding and
unpaid drafts drawn or drawn and accepted under Letters of Credit. Borrower
hereby grants to
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Lender a security interest in all such funds delivered to Lender to secure
payment and performance of said obligations.
2A.7 Conditions Precedent to Each Advance and Letter of Credit. Lender
shall be obligated to issue a Letter of Credit or make an Advance when requested
by Borrower only if the representations and warranties by Borrower in the Loan
Documents are accurate on and as of the date of this Credit Agreement and on and
as of the date of issuance of the Letter of Credit or of making the Advance
before and after giving effect to the Letter of Credit or the Advance and the
application of the proceeds of the Advance. Delay or failure by Lender to insist
on satisfaction of any condition of issuance of a Letter of Credit or making an
Advance shall not be a waiver of such condition precedent or any other condition
precedent. If Borrower is unable to satisfy any condition precedent of issuance
of a Letter of Credit or making an Advance, the issuance of the Letter of Credit
or the making of the Advance shall not preclude Lender from thereafter declaring
the condition or event causing such inability to be an event of default.
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ARTICLE 3
LOAN FEE
3.1 Revolving Loan Fee. In connection with the RLC, a non-refundable
Loan fee in an amount equal to three-tenths of one percent (0.3%) of the RLC
Commitment (the "RLC Fee") shall be due and payable on or before the Closing
Date and on each anniversary of the Closing Date until the RLC Maturity Date (or
the first Business Day thereafter if such day is not a Business Day). Lender has
earned the RLC Fee payable on the Closing Date and shall have earned the RLC Fee
payable on each anniversary of the Closing Date as of that date.
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ARTICLE 4
SECURITY
4.1 Security. So long as the Loan is outstanding, Borrower shall cause
the Loan and Borrower's obligations under this Credit Agreement to be secured at
all times by valid and effective security agreements (or in the case of
Guarantors, modifications to existing security agreements in favor of Lender)
(collectively, the "Security Agreements"), duly executed and delivered by or on
behalf of Borrower and each Guarantor, granting Lender a valid and enforceable
security interest in all of the kinds and categories of personal property
described in the Security Agreements, including without limitation its accounts
receivable, inventory and equipment, wherever located, in, to, or under which
Borrower and each Guarantor now has or hereafter acquires any right, title, or
interest, whether present, future, or contingent, and in Borrower's or each
Guarantor's expectancy to acquire such property, subject to no prior Liens
except for Permitted Liens.
4.2 Security Documents. All of the documents required by this Article 4
shall be in form satisfactory to Lender and Lender's counsel, and, together with
any UCC financing statements for filing and/or recording, and any other items
required by Lender to fully perfect and effectuate the liens and security
interests of Lender contemplated by the Security Agreements, and this Credit
Agreement, may heretofore or hereinafter be referred to as the "Security
Documents."
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ARTICLE 5
CONDITIONS PRECEDENT
The obligation of Lender to make the Loan and to make each and any
Advance hereunder is subject to the full prior satisfaction at each such time of
each of the following conditions precedent:
5.1 Initial or any Subsequent Advance. The initial Advance shall
(subject to the limitations set forth in Section 2.2) be in an amount necessary
to repay the full amount of the Guarantor's Revolving Loan. Prior to its making
the initial Advance or any subsequent Advance, Lender shall have received the
following, each in form and substance satisfactory to Lender:
(a) This Credit Agreement. This Credit Agreement, duly
executed and delivered to Lender by Borrower.
(b) The Note. The Note, duly executed, drawn to the order of
Lender and otherwise as provided in Article 2 hereof.
(c) Security Agreements. The Security Agreements, duly
executed and delivered to Lender by Borrower and each Guarantor.
(d) Filings. Completion of all filings necessary to perfect
Lender's Liens with respect to the Collateral.
(e) Guarantees. The Guarantees, executed by Guarantors.
(f) Loan Fee. Payment of the Loan Fee.
(g) Insurance. Original copies of policies of insurance in
compliance with Section 7.15 hereof.
(h) Organizational Documents. A copy of the current
Certificate of Incorporation (or other charter documents, however
named) of Borrower, including all amendments thereto, certified as
current and complete by the appropriate authority of the state of said
corporation's incorporation, together with evidence of said
corporation's good standing in said corporation's state of
incorporation and in every other state in which it is doing business or
the conduct of said corporation's business requires such standing for
the enforcement of material contracts.
(i) Officer's Certificate. A certificate signed by an
Authorized Officer of Borrower, stating that (to the best knowledge and
belief of Borrower, after reasonable inquiry and review of matters
pertinent to the subject matter of such certificate): (i) all of the
representations and warranties contained in Article 6 of this Credit
Agreement and in the other Credit Documents are, in all material
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respects, true and correct as of the date hereof (other than those of
such representations which by their express terms speak to a date prior
to such date, which representations are, in all material respects, true
and correct as of such respective dates); (ii) no event has occurred
and is continuing, or would result from the advance of the proceeds of
the Loan, which would constitute an Event of Default, and (iii) no
change or changes having a Material Adverse Effect have occurred in the
business or financial condition of Borrower since the date of the last
financial statements of Borrower heretofore delivered to Lender.
(j) Borrower's Secretary Certificate. A certificate of the
corporate secretary of Borrower, signed by the duly appointed secretary
thereof and issued as of the Closing Date, certifying that (i) attached
thereto is a true and complete copy of the corporate by-laws of said
corporation in effect on the date of passage of the corporate
resolutions described immediately below and at all subsequent times to
and including the date of the certificate, (ii) attached thereto is a
true and complete copy of the resolutions adopted by the Board of
Directors of said corporation authorizing the Loan, the execution,
delivery, and performance of this Credit Agreement, the Note, the
Credit Documents, and all advances of credit hereunder, and that such
resolutions have not been modified, rescinded, or amended and are in
full force and effect, (iii) no change has been made to said
corporation's charter documents other than as reflected in the
certified copies submitted in connection with the delivery of this
Credit Agreement or as approved in writing by Lender, and (iv) set
forth therein and appropriately identified are the names, current
official titles, and signatures of the officers of said corporation
authorized to sign this Credit Agreement and other documents to be
delivered hereunder and/or to act as Authorized Officers hereunder.
(k) Guarantors' Secretary Certificate. A certificate of the
corporate secretary of Borrower and each Guarantor, signed by the duly
appointed secretary thereof and issued as of the Closing Date,
certifying that (i) attached thereto is a true and complete copy of the
corporate by-laws of said corporation in effect on the date of passage
of the corporate resolutions described immediately below and at all
subsequent times to and including the date of the certificate, (ii)
attached thereto is a true and complete copy of the resolutions adopted
by the Board of Directors of said corporation authorizing the
Guarantee, and that such resolutions have not been modified, rescinded,
or amended and are in full force and effect, (iii) no change has been
made to said corporation's charter documents other than as reflected in
the certified copies submitted in connection with the delivery of this
Credit Agreement or as approved in writing by Lender, and (iv) set
forth therein and appropriately identified are the names, current
official titles, and signatures of the officers of said corporation
authorized to sign this Credit Agreement and other documents to be
delivered hereunder and/or to act as Authorized Officers hereunder.
(l) Borrowing Base Certificate. An initial Borrowing Base
Certificate, dated as of the Closing Date.
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(m) Accounts Receivable Audit. If required, the results of an
audit of the Accounts Receivable, which results shall be satisfactory
to Lender in its sole discretion.
(n) Additional Information. Such other information and
documents as may reasonably be required by Lender or Lender's counsel.
5.2 No Event of Default. No Event of Default known to Borrower shall
have occurred and be continuing, or result from Lender's making of the Loan.
5.3 No Material Adverse Change. Since the date of the most recent
financial statements provided to Lender by Borrower, no change shall have
occurred in the business or financial condition of Borrower that could have a
Material Adverse Effect.
5.4 Representations and Warranties. The representations and warranties
contained in Article 6 hereof shall be true and correct in all material
respects, with the same force and effect as though made on and as of the Closing
Date (other than those of such representations which by their express terms
speak to a date prior to that date, which representations shall, in all material
respects, be true and correct as of such respective date).
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Loan, Borrower represents and warrants to
Lender that:
6.1 Organization and Good Standing. It is duly organized, validly
existing and in good standing in all states in which the nature of its business
and property makes such qualifications necessary or appropriate. It has the
legal power and authority to own its properties and assets and to transact the
business in which it is engaged and is or will be qualified in those states
wherein the nature of its proposed business and property will make such
qualifications necessary or appropriate in the future.
6.2 Authorization and Power. It has the corporate power and requisite
authority to execute, deliver and perform this Credit Agreement, the Note and
the other Credit Documents to be executed by it; it is duly authorized to, and
has taken all action, corporate or otherwise, necessary to authorize it to,
execute, deliver and perform this Credit Agreement, the Note and such other
Credit Documents and is and will continue to be duly authorized to perform this
Credit Agreement, the Note and such other Credit Documents.
6.3 No Conflicts or Consents. Neither the execution and delivery of
this Credit Agreement, the Note or the other Credit Documents to which it is a
party, nor the consummation of any of the transactions herein or therein
contemplated, nor compliance with the terms and provisions hereof or with the
terms and provisions thereof, (a) will materially contravene or conflict with:
(i) any provision of law, statute or regulation to which it is subject, (ii) any
judgment, license, order or permit applicable to it, (iii) any indenture, loan
agreement, mortgage, deed of trust, or other agreement or instrument to which it
is a party or by which it may be bound, or to which it may be subject, or (b)
will violate any provision of its Certificate of Incorporation. No consent,
approval, authorization or order of any court or Governmental Authority or other
Person is required in connection with the execution and delivery by it of the
Credit Documents or to consummate the transactions contemplated hereby or
thereby, or if required, such consent, approval, authorization or order shall
have been obtained.
6.4 Enforceable Obligations. This Credit Agreement, the Note and the
other Credit Documents are the legal, valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms, except
as limited by bankruptcy, insolvency or other laws or equitable principles of
general application relating to the enforcement of creditors' rights.
6.5 Financial Condition. It has delivered to Lender copies of the
Borrower's most recent audited consolidated financial statements. Such financial
statements, in all material respects, fairly and accurately present the
financial position of Borrower as of such date and have been prepared in
accordance with GAAP and neither contain any untrue statement of a material fact
nor fail to state a material fact required in order to make such financial
statements not misleading. Since the date thereof, Borrower has not discovered
any obligations, liabilities or indebtedness (including contingent and indirect
liabilities and obligations or unusual forward or
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long-term commitments) which in the aggregate are material and adverse to the
financial position or business of Borrower that should have been but were not
reflected in such financial statements. No changes having a Material Adverse
Effect have occurred in the financial condition or business of Borrower since
the date thereof.
6.6 Full Disclosure. There is no material fact that it has not
disclosed to Lender that would have a Material Adverse Effect. No certificate or
statement delivered herewith or heretofore by it to Lender in connection with
negotiations of this Credit Agreement, contains any untrue statement of a
material fact or omits to state any material fact necessary to keep the
statements contained herein or therein from being misleading.
6.7 No Default. No event or condition has occurred and is continuing
that constitutes an Event of Default.
6.8 Significant Debt Agreements. It is not in default in any material
respect under any Significant Debt Agreement.
6.9 No Litigation. There are no actions, suits or legal, equitable,
arbitration or administrative proceedings pending, or to its actual knowledge
overtly threatened, against Borrower that would, if adversely determined, have a
Material Adverse Effect.
6.10 Taxes. It has filed or caused to be filed all returns and reports
which are required to be filed by any jurisdiction, and has paid or made
provision for the payment of all taxes, assessments, fees or other governmental
charges imposed upon its properties, income or franchises, as to which the
failure to file or pay would have a Material Adverse Effect, except such
assessments or taxes, if any, which are being contested in good faith by
appropriate proceedings.
6.11 ERISA. (a) No Reportable Event has occurred and is continuing with
respect to any Plan; (b) PBGC has not instituted proceedings to terminate any
Plan; (c) neither the Borrower, any member of the Controlled Group, nor any
duly-appointed administrator of a Plan (i) has incurred any liability to PBGC
with respect to any Plan other than for premiums not yet due or payable or (ii)
has instituted or intends to institute proceedings to terminate any Plan under
Section 4041 or 4041A of ERISA; and (d) each Plan of Borrower has been
maintained and funded in all material respects in accordance with its terms and
in all material respects in accordance with all provisions of ERISA applicable
thereto. Neither the Borrower nor any of its Subsidiaries participates in, or is
required to make contributions to, any Multi-employer Plan (as that term is
defined in Section 3(37) of ERISA).
6.12 Compliance with Law. It is in substantial compliance with all
laws, rules, regulations, orders and decrees that are applicable to it, or its
properties, noncompliance with which would have a Material Adverse Effect.
6.13 Survival of Representations, Etc. All representations and
warranties by Borrower herein shall survive the making of the Loan and the
execution and delivery of the Note; any
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investigation at any time made by or on behalf of Lender shall not diminish
Lender's right to rely on the representations and warranties herein.
6.14 Recitals. The recitals and statements of intent appearing in this
Credit Agreement are true and correct.
6.15 No Stock Purchase. No part of the proceeds of any financial
accommodation made by Lender in connection with this Credit Agreement will be
used to purchase or carry "margin stock," as that term is defined in Regulation
U, or to extend credit to others for the purpose of purchasing or carrying such
margin stock.
6.16 Solvent. It (both before and after giving effect to the Loan
contemplated hereby) is solvent, has assets having a fair value in excess of the
amount required to pay its probable liabilities on its existing debts as they
become absolute and matured, and has, and will have, access to adequate capital
for the conduct of its business and the ability to pay its debts from time to
time incurred in connection therewith as such debts mature.
6.17 Advances. Each request for an Advance or for the extension of any
financial accommodation by Lender whatsoever shall constitute an affirmation
that the representations and warranties contained herein are, true and correct
as of the time of such request. All representations and warranties made herein
shall survive the execution of this Credit Agreement, all advances of proceeds
of the Loan and the execution and delivery of all other documents and
instruments in connection with the Loan and/or this Credit Agreement, so long as
Lender has any commitment to lend hereunder and until the Loan has been paid in
full and all of Borrower's obligations under this Credit Agreement, the Note and
all Security Documents have been fully discharged.
6.18 Title to Collateral. It or a Guarantor has good and marketable
title to the Collateral.
6.19 Security Documents. The liens, security interests and assignments
created by the Security Documents will, when granted, be valid, effective and
enforceable liens, security interests and assignments, except to the extent (if
any) otherwise agreed in writing by Lender.
6.20 Subsidiary. Except for the Guarantors, it has no existing
Subsidiary that conducts any business or operations.
6.21 Environmental Matters. Borrower, to the best of its knowledge
after due investigation, is in compliance in all material respects with all
applicable environmental, health and safety statutes and regulations and
Borrower does not have any material contingent liability in connection with any
improper treatment, storage, disposal or release into the environment of any
hazardous or toxic waste or substance.
6.22 Investment Company Act. Borrower is not, and is not directly or
indirectly controlled by, or acting on behalf of, any person which is, an
"Investment Company" within the meaning of the Investment Company Act of 1940,
as amended.
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ARTICLE 7
AFFIRMATIVE COVENANTS
Until payment in full of the Note and the complete performance of the
Obligation, Borrower agrees that:
7.1 Financial Statements, Reports and Documents. It shall deliver, or
cause to be delivered, to Lender each of the following:
(a) Consolidated Monthly Statements of Borrower. As soon as
available, and in any event within sixty (60) days after the end of
each fiscal quarter of Borrower, copies of the consolidated balance
sheet of Borrower as of the end of such month, and consolidated
statements of income of Borrower for that month and for the portion of
the fiscal year ending with such month, in each case setting forth in
comparative form the figures for the corresponding period of the
preceding fiscal year, all in reasonable detail and fairly stated and
prepared in accordance with GAAP.
(b) Consolidated Annual Statements of Borrower. As soon as
available and in any event within one hundred twenty (120) days after
the close of each fiscal year of Borrower, audited consolidated
financial statements of Borrower, including its consolidated balance
sheet as of the close of such fiscal year and consolidated statements
of income of Borrower for such fiscal year, in each case setting forth
in comparative form the figures for the preceding fiscal year, all in
reasonable detail and accompanied by an unqualified opinion thereon of
independent public accountants of recognized national standing
selected by Borrower and acceptable to Lender, to the effect that such
financial statements have been prepared in accordance with GAAP (except
for changes in which such accountants concur) and that the examination
of such accounts in connection with such financial statements has been
made in accordance with generally accepted auditing standards and,
accordingly, includes such tests of the accounting records and such
other auditing procedures as were considered necessary in the
circumstances.
(c) Borrowing Base Certificate. Within forty-five (45) days
after the end of each month, the Borrowing Base Certificate together
with the following:
(i) An aging and listing of all Eligible Accounts
Receivable prepared in accordance with GAAP which itemizes
each account debtor by name and address and which states the
total amount payable to Borrower, indicating future amounts
due and when due, current amounts due, amounts thirty (30)
days past due, sixty (60) days past due, and ninety (90) or
more days past due, and reflecting any credit adjustments,
returns, and allowances;
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(ii) An aging and listing of all trade accounts
payable prepared in a similar manner; and
(iii) A complete and detailed description of all
Eligible Inventory.
(d) Management Letters. With the audited fiscal year-end
statements submitted under Section 7.1(b) above, the management letter,
if any, of Borrower's certified public accountants issued in connection
with such audit.
(e) Other Information. Such other information concerning the
business, properties or financial condition of Borrower as Lender shall
reasonably request.
7.2 Payment of Taxes and Other Indebtedness. It will pay and discharge
(i) all income taxes and payroll taxes, (ii) all taxes, assessments, fees and
other governmental charges imposed upon it or upon its income or profits, or
upon any property belonging to it, before delinquent, which become due and
payable, (iii) all lawful claims (including claims for labor, materials and
supplies), which, if unpaid, might become a Lien upon any of its property and
(iv) all of its Indebtedness as it becomes due and payable, except as prohibited
hereunder; provided, however, that it shall not be required to pay any such tax,
assessment, charge, levy, claims or Indebtedness if and so long as the amount,
applicability or validity thereof shall currently be contested in good faith by
appropriate actions and appropriate accruals and reserves therefor have been
established in accordance with GAAP.
7.3 Maintenance of Existence and Rights; Conduct of Business. It will
preserve and maintain its corporate existence and all of its rights, privileges,
licenses, permits, franchises and other rights necessary or desirable in the
normal conduct of its business, and conduct its business in an orderly and
efficient manner consistent with good business practices.
7.4 Notice of Default. It will furnish to Lender immediately upon
becoming actually aware of the existence of any event or condition that
constitutes an Event of Default, a written notice specifying the nature and
period of existence thereof and the action which it is taking or proposes to
take with respect thereto.
7.5 Other Notices. It will promptly notify Lender of (a) any Material
Adverse Effect, (b) any waiver, release or default under any Significant Debt
Agreement, (c) any claim not covered by insurance against Borrower or any of
Borrower's properties, and (d) the commencement of, and any material
determination in, any litigation with any third party or any proceeding before
any Governmental Authority affecting it, except litigation or proceedings which,
if adversely determined, would not have a Material Adverse Effect.
7.6 Compliance with Credit Documents. It will comply with any and all
covenants and provisions of this Credit Agreement, the Note and all other Credit
Documents.
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7.7 Compliance with Significant Debt Agreements. It will comply in all
material respects with all Significant Debt Agreements.
7.8 Operations and Properties. It will keep in good working order and
condition, ordinary wear and tear excepted, all of its assets and properties
which are necessary to the conduct of its business.
7.9 Books and Records; Access. It will give any authorized
representative of Lender access during normal business hours to, and permit such
representative to examine, copy or make excerpts from, any and all books,
records and documents in its possession of and relating to the Loan, and to
inspect any of its properties. It will maintain complete and accurate books and
records of its transactions in accordance with good accounting practices.
7.10 Compliance with Law. It will comply with all applicable laws,
rules, regulations, and all final, nonappealable orders of any Governmental
Authority applicable to it or any of its property, business operations or
transactions, a breach of which could result in a Material Adverse Effect.
7.11 Authorizations and Approvals. It will promptly obtain, from time
to time at its own expense, all such governmental licenses, authorizations,
consents, permits and approvals as may be required to enable it to comply with
its obligations hereunder and under the other Credit Documents and to operate
its businesses as presently or hereafter duly conducted.
7.12 ERISA Compliance. With respect to its Plans, it shall (a) at all
times comply with the minimum funding standards set forth in Section 302 of
ERISA and Section 412 of the Code or shall have duly obtained a formal waiver of
such compliance from the proper authority; (b) at Lender's request, within
thirty (30) days after the filing thereof, furnish to Lender copies of each
annual report/return (Form 5500 Series), as well as all schedules and
attachments required to be filed with the Department of Labor and/or the
Internal Revenue Service pursuant to ERISA, in connection with each of its Plans
for each year of the plan; (c) notify Lender within a reasonable time of any
fact, including, but not limited to, any Reportable Event arising in connection
with any of its Plans, which constitutes grounds for termination thereof by the
PBGC or for the appointment by the appropriate United States District Court of a
trustee to administer such Plan, together with a statement, if requested by
Lender, as to the reason therefor and the action, if any, proposed to be taken
with respect thereto; and (d) furnish to Lender within a reasonable time, upon
Lender's request, such additional information concerning any of its Plans as may
be reasonably requested.
7.13 Further Assurances. It will make, execute or endorse, and
acknowledge and deliver or file or cause the same to be done, all such notices,
certifications and additional agreements, undertakings or other assurances, and
take any and all such other action, as Lender may, from time to time, deem
reasonably necessary or proper to fully evidence the Loan.
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<PAGE> 32
7.14 News Releases. It shall promptly forward to Lender copies of all
news releases made by it to the news media as to anything of material
significance with respect to its financial status.
7.15 Insurance. It shall maintain in full force and effect at all times
all insurance coverages required under the terms of this Credit Agreement and/or
the Security Documents to which it is a party. In addition, it shall maintain in
full force and effect at all times:
(a) Policies of all risk coverage insurance covering (i) its
Real Property of every kind and description, and wherever located, in
which Lender has been granted or has obtained a lien to secure any
portion of the Obligation, in respective coverage amounts not less
than, from time to time, the full replacement value of all insurable
improvements situated thereon and (ii) all tangible personalty in which
Lender has been granted or obtained a security interest to secure the
Obligation, in respective coverage amounts not less than, from time to
time, the fair market value thereof.
(b) Policies of insurance evidencing personal liability and
property damage liability coverages in amounts not less than
$2,000,000.00 (combined single limit for bodily injury and property
damage), and an umbrella excess liability coverage in an amount not
less than $10,000,000.00 shall be in effect with respect to Borrower.
(c) Policies of workers' compensation insurance in amounts and
with coverages as legally required.
Without limitation of the foregoing, it shall at all times maintain insurance
coverages in scope and amount not less than, and not less extensive than, the
scope and amount of insurance coverages customary in the trades or businesses in
which it is from time to time engaged. All of the aforesaid insurance coverages
shall be issued by insurers reasonably acceptable to Lender. Copies of all
policies of insurance evidencing such coverages in effect from time to time
shall be delivered to Lender prior to the initial Advance under this Credit
Agreement and upon reasonable notice upon issuance of new policies thereafter.
From time to time, promptly upon Lender's request, it shall provide evidence
satisfactory to Lender (i) that required coverage in required amounts is in
effect, and (ii) that Lender is shown as an additional loss payee with respect
to all such coverages, as Lender's interest may appear, by standard
(non-attribution) loss payable endorsement, additional insured endorsement,
insurer's certificate or other means acceptable to Lender in its reasonable
discretion. At Lender's option, it shall deliver to Lender certified copies of
all such policies of insurance in effect from time to time, to be retained by
Lender so long as Lender shall have any commitment to lend hereunder and/or any
portion of the Obligation shall be outstanding or unsatisfied. All such
insurance policies shall provide for at least thirty (30) days prior written
notice of the cancellation or modification thereof to Lender.
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ARTICLE 8
NEGATIVE COVENANTS
Until payment in full of the Note and the performance of the
Obligation, Borrower agrees that:
8.1 Amendments to Organizational Documents. It will not amend its
organizational documents if the result thereof could result in the occurrence
directly or indirectly of a Material Adverse Effect.
8.2 Margin Stock. It shall not use any proceeds of the Loan, or any
proceeds of any other or future financial accommodation from Lender for the
purpose, whether immediate, incidental or ultimate, of purchasing or carrying
any "margin stock" as that term is defined in Regulation U or to reduce or
retire any indebtedness undertaken for such purposes within the meaning of said
Regulation U, and will not use such proceeds in a manner that would involve
Borrower in a violation of Regulation U or of any other Regulation of the Board
of Governors of its Federal Reserve System, nor use such proceeds for any
purpose not permitted by Section 7 of the Exchange Act, or any of the rules or
regulations respecting the extensions of credit promulgated thereunder.
8.3 Fiscal Year. Except with prior notice to Lender, it will not change
the times of commencement or termination of its fiscal year or other accounting
periods; or change its methods of accounting other than to conform to GAAP
applied on a consistent basis. After any such changes, its method of accounting
shall conform to GAAP.
8.4 Liens. On and after the date hereof, it will not create or suffer
to exist Liens upon the Collateral, except (i) Liens, if any, for the benefit of
Lender, and (ii) Permitted Liens.
8.5 Merger, Sale of Assets. It will not, without Lender's prior written
consent: (i) sell, lease, transfer or dispose of substantially all of its assets
to another entity; or (ii) consolidate with or merge into another entity, permit
any other entity to merge into it or consolidate with it, or permit any transfer
of the ownership of, or power to control, Borrower.
8.6 Insider Loan or Dividends. It will neither make loans, receivables
or investments, on a consolidated basis, to officers of Borrower or any other
companies of said officers, except for normal advances for travel and
entertainment, nor declare or pay cash dividends.
8.7 Transfer Collateral. It will not assign, transfer or convey any of
its right, title and interest in the Collateral (whether real or personal)
encumbered by the Security Documents.
8.8 Financial Covenants. It will not permit:
(a) The Current Ratio to be less than 1.30 to 1.0 at end of
any fiscal quarter of Borrower.
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(b) Its Working Capital to be less than $40,000,000.00 at the
end of any fiscal quarter of Borrower.
(c) Its Tangible Net Worth, at the end of any fiscal quarter
of Borrower, to be less than an amount equal to the sum of (A)
$50,000,000, plus (B) an amount equal to the aggregate of twenty-five
percent (25%) of Borrower's net income as of the end of each fiscal
quarter of Borrower, commencing with its fiscal year ending June 30,
1998.
(d) Its Owners Equity Ratio to be less than thirty-five
percent (35%) at the end of any fiscal quarter of Borrower.
(e) Its Debt Coverage Ratio for the prior twelve (12) months
to be less than 2.0 to 1.0 at the end of any fiscal quarter of
Borrower.
Each of the foregoing covenants shall be measured based upon the
financial statements of Borrower on a consolidated basis.
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ARTICLE 9
EVENTS OF DEFAULT
9.1 Events of Default. An "Event of Default" shall exist if any one or
more of the following events (herein collectively called "Events of Default")
shall occur and be continuing:
(a) Borrower shall fail to pay any principal of, or interest
on, either Note when the same shall become due or payable;
(b) Any failure or neglect to perform or observe any of the
covenants, conditions, provisions or agreements of Borrower contained
herein, or in any of the other Credit Documents;
(c) Any warranty, representation or statement contained in
this Credit Agreement or any of the other Credit Documents, or which is
contained in any certificate or statement furnished or made to Lender
pursuant hereto or in connection herewith or with the Loan, shall be or
shall prove to have been false when made or furnished;
(d) The occurrence of any material "event of default" or
"default" by Borrower or a Guarantor under any Security Document, any
other Credit Document, Guaranty or any agreement, now or hereafter
existing, to which Lender or an Affiliate of Lender, and Borrower are a
party;
(e) Borrower shall (i) fail to pay any Indebtedness of
Borrower (other than the Note) due under any Significant Debt
Agreement, or any interest or premium thereon, when due (whether by
scheduled maturity, required prepayment, acceleration, demand, or
otherwise) or within any applicable grace period, (ii) fail to perform
or observe any term, covenant, or condition on its part to be performed
or observed under any agreement or instrument relating to such
Indebtedness, within any applicable grace period when required to be
performed or observed, if the effect of such failure to perform or
observe is to accelerate the maturity of such Indebtedness, or any such
Indebtedness shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled prepayment), prior to the
stated maturity thereof, or (iii) allow the occurrence of any material
event of default with respect to such Indebtedness;
(f) Any one or more of the Credit Documents shall have been
determined to be invalid or unenforceable against Borrower executing
the same in accordance with the respective terms thereof, or shall in
any way be terminated or become or be declared ineffective or
inoperative, so as to deny Lender the substantial benefits contemplated
by such Loan Document or Credit Documents;
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(g) Borrower or any Guarantor shall (i) apply for or consent
to the appointment of a receiver, trustee, custodian, intervenor or
liquidator of itself or of all or a substantial part of its assets,
(ii) file a voluntary petition in bankruptcy or admit in writing that
it is unable to pay its debts as they become due, (iii) make a general
assignment for the benefit of creditors, (iv) file a petition or answer
seeking reorganization of an arrangement with creditors or to take
advantage of any bankruptcy or insolvency laws, (v) file an answer
admitting the material allegations of, or consent to, or default in
answering, a petition filed against it in any bankruptcy,
reorganization or insolvency proceeding, or (vi) take corporate action
for the purpose of effecting any of the foregoing;
(h) An involuntary petition or complaint shall be filed
against Borrower or any Guarantor, seeking bankruptcy or reorganization
of Borrower, or the appointment of a receiver, custodian, trustee,
intervenor or liquidator of Borrower, or all or substantially all of
its assets, and such petition or complaint shall not have been
dismissed within sixty (60) days of the filing thereof; or an order,
order for relief, judgment or decree shall be entered by any court of
competent jurisdiction or other competent authority approving a
petition or complaint seeking reorganization of Borrower, appointing a
receiver, custodian, trustee, intervenor or liquidator of Borrower, or
all or substantially all of its assets, and such order, judgment or
decree shall continue unstayed and in effect for a period of sixty (60)
days;
(i) Any final judgment(s) (excluding those the enforcement of
which is suspended pending appeal) for the payment of money in excess
of the sum of $50,000.00 in the aggregate (other than any judgment
covered by insurance where coverage has been acknowledged by the
insurer) shall be rendered against Borrower or any Guarantor, and such
judgment or judgments shall not be satisfied, settled, bonded or
discharged at least ten (10) days prior to the date on which any of its
assets could be lawfully sold to satisfy such judgment;
(j) Either (i) proceedings shall have been instituted to
terminate, or a notice of termination shall have been filed with
respect to, any Plans (other than a Multi-Employer Pension Plan as that
term is defined in Section 4001(a)(3) of ERISA) by Borrower, any member
of the Controlled Group, PBGC or any representative of any thereof, or
any such Plan shall be terminated, in each case under Section 4041 or
4042 of ERISA, and such termination shall give rise to a liability of
the Borrower or the Controlled Group to the PBGC or the Plan under
ERISA having an effect in excess of $50,000.00 or (ii) a Reportable
Event, the occurrence of which would cause the imposition of a lien in
excess of $50,000.00 under Section 4062 of ERISA, shall have occurred
with respect to any Plan (other than a Multi-Employer Pension Plan as
that term is defined in Section 4001(a)(3) of ERISA) and be continuing
for a period of sixty (60) days;
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<PAGE> 37
(k) Any of the following events shall occur with respect to
any Multi-Employer Pension Plan (as that term is defined in Section
4001(a)(3) of ERISA) to which Borrower or any Guarantor contributes or
contributed on behalf of its employees and Lender determines in good
faith that the aggregate liability likely to be incurred by Borrower or
any Guarantor, as a result of any of the events specified in
Subsections (i), (ii) and (iii) below, will have an effect in excess of
$50,000.00; (i) Borrower or any Guarantor incurs a withdrawal liability
under Section 4201 of ERISA; (ii) any such plan is "in reorganization"
as that term is defined in Section 4241 of ERISA; or (iii) any such
Plan is terminated under Section 4041A of ERISA;
(l) The dissolution, liquidation, sale, transfer, lease or
other disposal of all or substantially all of the assets or business of
Borrower or any Guarantor;
(m) Any levy or execution upon, or judicial seizure of, any
property of Borrower or any Guarantor that has a fair market value in
excess of $50,000.00 that is not bonded or released within thirty (30)
days; or,
(n) The occurrence of any adverse change in the financial
condition of Borrower or any Guarantor that Lender, in its reasonable
discretion, deems material, or if Lender in good faith shall believe
that the prospect of payment or performance of the Loan is impaired.
9.2 Remedies Upon Event of Default. If an Event of Default shall have
occurred and be continuing, then Lender may, at its sole option, exercise any
one or more of the following rights and remedies, and any other remedies
provided in any of the Credit Documents, as Lender in its sole discretion may
deem necessary or appropriate, all of which remedies shall be deemed cumulative,
and not alternative:
(i) cease making Advances or extensions of financial
accommodations in any form to or for the benefit of Borrower
and declare the principal of, and all interest then accrued
on, the Note and any other liabilities hereunder to be
forthwith due and payable, whereupon the same shall become
immediately due and payable without presentment, demand,
protest, notice of default, notice of acceleration or of
intention to accelerate or other notice of any kind all of
which Borrower hereby expressly waives, anything contained
herein or in the Note to the contrary notwithstanding;
(ii) reduce any claim to judgment; and/or
(iii) without notice of default or demand, pursue and
enforce any of Lender' rights and remedies under the Credit
Documents, or otherwise provided under or pursuant to any
applicable law or agreement; provided, however, that if any
Event
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of Default specified in Sections 9.1(g) and 9.1(h) shall
occur, the principal of, and all interest on, the Note and
other liabilities hereunder shall thereupon become due and
payable concurrently therewith, without any further action by
Lender and without presentment, demand, protest, notice of
default, notice of acceleration or of intention to accelerate
or other notice of any kind, all of which Borrower hereby
expressly waives.
Upon the occurrence and during the continuance of any Event of Default,
Lender is hereby authorized at any time and from time to time, without notice to
Borrower (any such notice being expressly waived by Borrower), to set off and
apply any and all moneys, securities or other property of Borrower and the
proceeds therefrom, now or hereafter held or received by or in transit to Lender
or its agents, from or for the account of Borrower, whether for safe keeping,
custody, pledge, transmission, collection or otherwise, and also upon any and
all deposits (general or special) and credits of Borrower, and any and all
claims of Borrower against Lender at any time existing. Lender agrees promptly
to notify Borrower after any such setoff and application, provided that the
failure to give such notice shall not affect the validity of such setoff and
application. The rights of Lender under this Section 9.2 are in addition to
other rights and remedies (including, without limitation, other rights of
setoff) which Lender may have.
9.3 Performance by Lender. Should Borrower fail to perform any
covenant, duty or agreement with respect to the payment of taxes, obtaining
licenses or permits, or any other requirement contained herein or in any of the
Credit Documents within the period provided herein, if any, for correction of
such failure, Lender may, at its option, perform or attempt to perform such
covenant, duty or agreement on behalf of Borrower. In such event, Borrower
shall, at the request of Lender, promptly pay any amount expended by Lender in
such performance or attempted performance to Lender at its main office in
Phoenix, Arizona, together with interest thereon at the Default Rate, from the
date of such expenditure until paid. Notwithstanding the foregoing, it is
expressly understood that Lender does not assume any liability or responsibility
for the performance of any duties of Borrower hereunder or under any of the
Credit Documents or other control over the management and affairs of Borrower.
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ARTICLE 10
MISCELLANEOUS
10.1 Modification. All modifications, consents, amendments or waivers
of any provision of any Loan Document, or consent to any departure by Borrower
therefrom, shall be effective only if the same shall be in writing and accepted
by Lender.
10.2 Waiver. No failure to exercise, and no delay in exercising, on the
part of Lender, any right hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any other further exercise
thereof or the exercise of any other right. The rights of Lender hereunder and
under the Credit Documents shall be in addition to all other rights provided by
law. No modification or waiver of any provision of this Credit Agreement, the
Note or any Credit Documents, nor consent to departure therefrom, shall be
effective unless in writing and no such consent or waiver shall extend beyond
the particular case and purpose involved. No notice or demand given in any case
shall constitute a waiver of the right to take other action in the same, similar
or other instances without such notice or demand.
10.3 Payment of Expenses. Borrower shall pay all costs and expenses of
Lender (including, without limitation, the attorneys' fees of Lender's legal
counsel) incurred by Lender in connection with the documentation of the Loan,
and the preservation and enforcement of Lender's rights under this Credit
Agreement, the Note, and/or the other Credit Documents; provided, however, that
notwithstanding the aforesaid, with respect to any legal action between the
parties hereto that is pursued to judgment the prevailing party only shall be
reimbursed by the other party for all costs and expenses (including, without
limitation, reasonable attorneys' fees and costs) incurred in connection with
the preservation and enforcement of its rights under this Credit Agreement, the
Note and/or other Credit Documents. In addition, Borrower shall pay all costs
and expenses of Lender in connection with the negotiation, preparation,
execution and delivery of any and all amendments, modifications and supplements
of or to this Credit Agreement, the Note or any other Loan Document.
10.4 Notices. Except for telephonic notices permitted herein, any
notices or other communications required or permitted to be given by this Credit
Agreement or any other documents and instruments referred to herein must be (i)
given in writing and personally delivered or mailed by prepaid certified or
registered mail, or (ii) made by telefacsimile delivered or transmitted, to the
party to whom such notice or communication is directed, to the address of such
party as follows:
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Borrower: Hypercom Corporation
2851 West Kathleen Road
Phoenix, Arizona 85023-4053
Lender: Bank One, Arizona, NA
Post Office Box 71
Phoenix, Arizona 85001
Attention: Commercial Banking AZ1-1178
Any notice to be personally delivered may be delivered to the principal offices
(determined as of the date of such delivery) of the party to whom such notice is
directed. Any such notice or other communication shall be deemed to have been
given (whether actually received or not) on the day it is personally delivered
as aforesaid; or, if mailed, on the third day after it is mailed as aforesaid;
or, if transmitted by telefacsimile, on the day that such notice is transmitted
as aforesaid. Any party may change its address for purposes of this Credit
Agreement by giving notice of such change to the other parties pursuant to this
Section 10.4.
10.5 Governing Law. This Credit Agreement has been prepared, is being
executed and delivered, and is intended to be performed in the State of Arizona.
The substantive laws of the State of Arizona and the applicable federal laws of
the United States of America shall govern the validity, construction,
enforcement and interpretation of this Credit Agreement and all of the other
Credit Documents, without regard to Arizona conflicts of law rules.
10.6 Invalid Provisions. If any provision of any Loan Document is held
to be illegal, invalid or unenforceable under present or future laws during the
term of this Credit Agreement, such provision shall be fully severable; such
Loan Document shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of such Loan Document; and
the remaining provisions of such Loan Document shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance from such Loan Document. Furthermore, in lieu of
each such illegal, invalid or unenforceable provision there shall be added as
part of such Loan Document a provision mutually agreeable to Borrower and Lender
as similar in terms to such illegal, invalid or unenforceable provision as may
be possible and be legal, valid and enforceable.
10.7 Binding Effect. The Credit Documents shall be binding upon and
inure to the benefit of Borrower and Lender and their respective successors,
assigns and legal representatives; provided, however, that Borrower may not,
without the prior written consent of Lender, assign any rights, powers, duties
or obligations thereunder.
10.8 Entirety. The Credit Documents embody the entire agreement between
the parties and supersede all prior agreements and understandings, if any,
relating to the subject matter hereof and thereof.
10.9 Time. Time is of the essence hereof.
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10.10 Headings. Section headings are for convenience of reference only
and shall in no way affect the interpretation of this Credit Agreement.
10.11 Survival. All representations and warranties made by Borrower
herein shall survive delivery of the Note and the making of the Loan.
10.12 No Third Party Beneficiary. The parties do not intend the
benefits of this Credit Agreement to inure to any third party, nor shall this
Credit Agreement be construed to make or render Lender liable to any
materialman, supplier, contractor, subcontractor, purchaser or lessee of any
property owned by Borrower, or for debts or claims accruing to any such persons
against Borrower. Notwithstanding anything contained herein or in the Note, or
in any other Loan Document, or any conduct or course of conduct by any or all of
the parties hereto, before or after signing this Credit Agreement or any of the
other Credit Documents, neither this Credit Agreement nor any other Loan
Document shall be construed as creating any right, claim or cause of action
against Lender, or any of its officers, directors, agents or employees, in favor
of any materialman, supplier, contractor, subcontractor, purchaser or lessee of
any property owned by Borrower, nor to any other person or entity other than
Borrower.
10.13 Indemnity. Borrower agrees to and shall indemnify, hold harmless
and defend Lender from any liability, claims or losses resulting from the
disbursement of the proceeds of the Loan. This provision shall survive repayment
of the Loan and shall continue in full force and effect so long as the
possibility of such liability, claims or losses exists.
10.14 Schedules and Exhibits Incorporated. All schedules and exhibits
attached hereto, if any, are hereby incorporated into this Credit Agreement by
each reference thereto as if fully set forth at each such reference.
10.15 Arbitration. Lender and Borrower agree that upon the written
demand of either party, whether made before or after the institution of any
legal proceedings, but prior to the rendering of any judgment in that
proceeding, all disputes, claims and controversies between them, whether
individual, joint, or class in nature, arising from this Credit Agreement, any
Credit Document or otherwise, including without limitation contract disputes and
tort claims, shall be resolved by binding arbitration pursuant to the Commercial
Rules of the American Arbitration Association. Any arbitration proceeding held
pursuant to this arbitration provision shall be conducted in the city nearest
the Borrower's address having an AAA regional office, or at any other place
selected by mutual agreement of the parties. No act to take or dispose of any
Collateral shall constitute a waiver of this arbitration agreement or be
prohibited by this arbitration agreement. This arbitration provision shall not
limit the right of either party during any dispute, claim or controversy to
seek, use, and employ ancillary, or preliminary rights and/or remedies, judicial
or otherwise, for the purposes of realizing upon, preserving, protecting,
foreclosing upon or proceeding under forcible entry and detainer for possession
of, any real or personal property, and any such action shall not be deemed an
election of remedies. Such remedies include, without limitation, obtaining
injunctive relief or a temporary restraining order, invoking a power of sale
under any deed of trust or mortgage, obtaining a writ of attachment or
imposition of a receivership, or exercising any rights relating to personal
property, including taking or disposing
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of such property with or without judicial process pursuant to Article 9 of the
Uniform Commercial Code or when applicable, a judgment by confession of
judgment. Any disputes, claims or controversies concerning the lawfulness or
reasonableness of an act, or exercise of any right or remedy concerning any
Collateral including any claim to rescind, reform or otherwise modify any
agreement relating to the Collateral, shall also be arbitrated; provided,
however that no arbitrator shall have the right or the power to enjoin or
restrain any act of either party. Judgment upon any award rendered by any
arbitrator may be entered in any court having jurisdiction. Nothing in this
arbitration provision shall preclude either party from seeking equitable relief
from a court of competent jurisdiction. The statute of limitations, estoppel,
waiver, laches and similar doctrines which would otherwise be applicable in an
action brought by a party shall be applicable in any arbitration proceeding, and
the commencement of an arbitration proceeding shall be deemed the commencement
of any action for these purposes. The Federal Arbitration Act (Title 9 of the
United States Code) shall apply to the construction, interpretation, and
enforcement of this arbitration provision.
10.16 Jury Waiver. THE UNDERSIGNED AND LENDER (BY ITS ACCEPTANCE
HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG THE UNDERSIGNED AND LENDER ARISING
OUT OF OR IN ANY WAY RELATED TO THIS DOCUMENT OR ANY OTHER RELATED DOCUMENT.
THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDER TO PROVIDE THE FINANCING
DESCRIBED HEREIN OR IN THE OTHER RELATED CREDIT DOCUMENTS.
10.17 Application of Payments. Unless otherwise agreed to, in writing,
or otherwise required by applicable law, payments will be applied first to
accrued, unpaid interest, then to principal, and any remaining amount to any
unpaid collection costs, late charges and other charges; provided, however, upon
delinquency or other default, Lender reserves the right to apply payments among
principal, interest, late charges, collection costs and other charges at its
discretion. All prepayments shall be applied to the indebtedness owing hereunder
in such order and manner as Lender may from time to time determine in its sole
discretion.
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10.18 Counterparts. This Credit Agreement may be executed in multiple
counterparts, each of which, when so executed, shall be deemed an original but
all such counterparts shall constitute but one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this Credit Agreement
as of the day and year first above written.
HYPERCOM CORPORATION, a Delaware
corporation
By:
Name:
Title:
BANK ONE, ARIZONA, NA, a national banking
association
By:
Name:
Title:
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