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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 1995
Commission File Number 1-4817
BOWMAR INSTRUMENT CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 35-0905052
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5080 NORTH 40TH STREET, SUITE 475
PHOENIX, ARIZONA 85018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 602/957-0271
Securities registered pursuant to Section 12(b) of the Act:
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<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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<S> <C>
Common Stock, without par value American Stock Exchange
(stated value $.10 per share)
$3.00 Senior Voting Cumulative Convertible Preferred Stock American Stock Exchange
(par value $1.00 per share)
13-1/2% Convertible Subordinated American Stock Exchange
Debentures due December 15, 1995
</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. / /
As of December 18, 1995, the aggregate market value of the Registrant's Common
Stock and Preferred Stock held by non-affiliates (based upon the closing price
of the shares on the American Stock Exchange on December 18, 1995) was
approximately $18,870,000.
On December 18, 1995, 6,454,874 shares of the Registrant's Common Stock and
119,990 shares of the Registrant's Preferred Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement prepared in connection with the 1996
Annual Meeting of Shareholders are incorporated by reference into PART III of
this Annual Report.
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TABLE OF CONTENTS
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PAGE
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PART I
<S> <C> <C>
ITEM 1 BUSINESS
General......................................................... 1
Financial Information About Industry Segments .................. 1
Narrative Description of Business
Microelectronic Circuits .................................... 1
Microelectronic Segment Review............................... 1
Electromechanical and Mechanical Equipment
and Components.............................................. 2
Electromechanical Segment Review............................. 3
Principal Customers.......................................... 3
Research, Engineering and Development........................ 4
Environmental Protection..................................... 4
Employees.................................................... 4
Executive Officers of the Company............................... 4
ITEM 2 PROPERTIES.......................................................... 5
ITEM 3 LEGAL PROCEEDINGS................................................... 5
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ................ 5
PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS..................................... 5
ITEM 6 SELECTED FINANCIAL DATA ............................................ 6
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............................. 7
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................... 9
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE............................. 9
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ................ 9
ITEM 11 EXECUTIVE COMPENSATION.............................................. 9
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...... 9
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .................... 9
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K..... 10
ITEM 15 SIGNATURES.......................................................... 26
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PART I
ITEM 1 BUSINESS
GENERAL
Bowmar Instrument Corporation ("Bowmar") was incorporated in the State of
Indiana in 1951. Bowmar and its subsidiaries (hereinafter sometimes referred to
collectively as the "Company") manufacture and sell microelectronic and
electromechanical products. These products fall into two industry segments -
microelectronic circuits and components ("microelectronic") and
electromechanical and mechanical equipment and components ("electromechanical").
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The sales and operating results of each industry segment and the identifiable
assets attributable to each industry segment for fiscal years 1995, 1994 and
1993 are set forth in Note 13 to the Consolidated Financial Statements.
NARRATIVE DESCRIPTION OF BUSINESS
MICROELECTRONIC CIRCUITS
The products designed, manufactured and sold by the Company in its
microelectronic segment include high density, solid state memory modules and
multichip modules for use in both commercial and military applications.
HIGH DENSITY, SOLID STATE MEMORY MODULES
The Company designs and manufactures high density memory microcircuits. These
memory modules are designed specifically for use in adverse environmental
conditions. In addition, these solid state memory modules are designed to
provide larger amounts of mass memory, space reduction and faster data
processing speeds. These products are used in both military and commercial
applications and include static RAM modules (SRAM), electronically erasable PROM
modules (EEPROM), and Flash PROM modules.
MULTICHIP MODULES
The Company designs and manufactures highly reliable, compact multichip modules
(MCM's). Multichip modules are used as components in a broad spectrum of
electronic devices where circuit reliability and size reduction is important. A
multichip module is a packaging technique that places several semiconductor
chips, interconnected with a high density substrate, into a compact package.
Multichip modules can be designed to perform a wide variety of electronic
functions, such as amplifiers, regulators, switches, data converters,
oscillators and decoders. These products are sold to original equipment
manufacturers serving principally the military market, as well as the aerospace,
medical and high temperature markets.
MICROELECTRONIC SEGMENT REVIEW
The products designed, manufactured, and sold by the Company in its
microelectronic segment are sold to private industry and to the United States
and foreign governments both through Company sales personnel and independent
sales representatives and distributors. The materials, products and services
used by the Company to manufacture products in its microelectronic segment are
readily available from a variety of sources. None of the business of the
microelectronic segment is seasonal.
Neither the needs of the Company for a continuing allotment of goods from its
suppliers, nor the requirements of its customers for the products of this
segment require the carrying of significant finished goods inventory.
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Although the Company purchases components from other manufacturers, some of
which must be ordered several months in advance, it has not encountered, and
does not anticipate encountering, any significant difficulty in obtaining the
components required in its manufacturing operations. The Company does not
provide extended payment terms to its customers. Products in the microelectronic
segment are sold under a standard one year warranty and may be returned for
repair or replacement during the warranty period.
The backlog for products of the microelectronic segment was approximately
$8,249,000 and $11,341,000, at the end of fiscal years 1995 and 1994,
respectively. Approximately 100% percent of this segment's fiscal 1994 backlog
was shipped during fiscal 1995. Approximately 98% percent of the fiscal 1995
year-end backlog is expected to be shipped during fiscal 1996 and the remainder
in fiscal 1997.
Management believes that the key competitive factors affecting its
microelectronic segment are product reliability, the ability to meet delivery
schedules and price. In marketing the products of this segment, the Company
competes with many other companies, many of which have greater financial
strength and technical and marketing resources than does the Company.
Consequently, it is the Company's objective to concentrate its activities in
markets where its resources do not place it at a competitive disadvantage and
where the Company's engineering capabilities and the reliability of its products
are recognized.
ELECTROMECHANICAL AND MECHANICAL EQUIPMENT AND COMPONENTS
The products designed, manufactured and sold by the Company in its
electromechanical segment include electromechanical components and packages,
electromechanical display devices, electronic display devices, keyboards and
related sub-systems, medical and dental equipment and ordnance products.
ELECTROMECHANICAL COMPONENTS AND PACKAGES
The Company's electromechanical components and instrument packages consist of
rotating devices, including gearheads, mechanical counters, dial drives,
mechanical packages and related devices. Specific applications for these
products include controls for automatically tuning airborne radio transmitters
and receivers, controls for fuel flow in jet engines and selected automatic
flight control servomechanisms. These products are sold principally to aircraft
instrument manufacturers as information displays in aerospace and ground
equipment.
ELECTROMECHANICAL DISPLAY DEVICES
The Company also produces digital displays which permit a more accurate readout
of information than is feasible with analog meters. These products include
display devices which respond electromagnetically to electronic input signals,
thus eliminating mechanical transmission delays. These products are sold
primarily to aircraft instrument manufacturers.
INTERFACE PRODUCTS
The Company designs and manufactures, to customer specification, a variety of
keyboard assemblies for military and commercial aerospace applications. The
Company has the capability of meeting demanding requirements such as
backlighting to meet night vision goggle (NVG) compatibility, adverse
environments, and the integration of displays, including LCD's, and
microprocessor technology.
MEDICAL AND DENTAL PRODUCTS
The Company produces and markets a dental/medical equipment sterilizer (Cox
Rapid Heat Sterilizer) which is primarily sold in the dental equipment market.
Other product activities involve the joint development of a new type of dental
x-ray device with Panoramic Corporation. The x-ray system is a real time
intra-oral imaging device which, due to its low patient radiation exposure,
permits the operator to view live x-ray images.
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ORDNANCE
The Company produces mechanical and electromechanical fuzing and safing and
arming devices. Fuzes and safing and arming devices are manufactured for use in
various rocket and missile applications, and are sold directly to the U.S.
Government or to U.S. Government military prime contractors.
ELECTROMECHANICAL PACKAGES AND SYSTEMS
The Company designs and manufacturers complex specialized systems used in
interface control of cable handling systems aboard submarines and antenna
control systems in satellite communications systems. These products are sold
directly to the U.S. Government or to U.S. Government prime contractors.
ELECTROMECHANICAL SEGMENT REVIEW
The customers for the products of the electromechanical segment include original
equipment manufacturers in the aerospace industry and agencies of the United
States Government. The materials, products and services used by the Company to
manufacture its products in the electromechanical segment are readily available
from a variety of sources. None of the business of the electromechanical segment
is seasonal.
Neither the needs of the Company for a continuing allotment of goods from its
suppliers nor the requirements of its customers for the products of the
electromechanical segment require the carrying of finished goods inventory.
While the Company purchases components from other manufacturers, some of which
must be ordered several months in advance, it has not encountered, and does not
anticipate encountering, any significant difficulty in obtaining the components
required in its manufacturing operations. The Company does not provide extended
payment terms to its customers. Products in the electromechanical segment are
sold under a standard one year warranty and may be returned for repair or
replacement during the warranty period.
The backlog for products of the electromechanical segment was approximately
$2,834,000 and $6,887,000, at the end of fiscal years 1995 and 1994,
respectively. Approximately 63% percent of this segment's 1994 backlog was
shipped during fiscal 1995. Approximately 97% percent of the fiscal 1995
year-end backlog is expected to be shipped during fiscal 1996 and the remainder
in fiscal 1997 and 1998.
Management believes that price, product reliability and the ability to meet
delivery schedules are the key competitive factors relating to the Company's
products. Since many of the Company's competitors have greater financial
strength and technical and marketing resources, the Company's objective is to
concentrate its activities in markets in which its engineering capabilities and
the reliability of its products are recognized. The Company believes it is a
significant supplier in its selected product areas even though it faces strong
competition from other manufacturers, some of which utilize technology different
from that used by the Company.
PRINCIPAL CUSTOMERS
In fiscal years 1995 and 1994, sales of microelectronic products to one customer
accounted for approximately 21% and 27% respectively, of the Company's total
sales. Sales in this segment during 1995 to another customer also accounted for
approximately 12% of the Company's total sales. During fiscal year 1993, sales
of various electromechanical business segment products to the U.S. government
accounted for approximately 20 percent of the Company's total sales for that
year. No other customer accounted for 10 percent or more of the Company's total
sales in either business segment for such fiscal years. The majority of the
Company's sales in both business segments are made to the U.S. Government or to
U.S. Government prime contractors. These contracts tend to be for relatively
large dollar amounts, sometimes calling for deliveries over more than one year.
The award of new contracts or the expiration of old contracts could have a
significant short-term impact on sales and operating results.
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RESEARCH, ENGINEERING AND DEVELOPMENT
Current research and product development activities are directed primarily
toward the improvement of existing standard products while some projects are
focused on the development of new products. Although the Company devotes a
minimal portion of its resources to pure research and development, the Company
emphasizes the application of its engineering expertise to the development and
refinement of proprietary products. Expenditures by the Company on research and
product development for fiscal years 1995, 1994 and 1993 amounted to
approximately $762,000, $593,000 and $272,000 respectively. The Company
principally utilizes its engineering staff in its research and development
efforts.
ENVIRONMENTAL PROTECTION
Compliance with federal, state and local laws or regulations which govern the
discharge of materials into the environment, has not had a material adverse
effect upon the capital expenditures, earnings or competitive position of the
Company.
EMPLOYEES
As of September 30, 1995, the Company employed 204 persons. Of such employees,
92 were employed in the microelectronic segment, 107 in the electromechanical
segment and 5 were employed on the corporate staff. A total of 59 of the
Company's employees in the electromechanical segment were employed pursuant to
collective bargaining agreements covering workers at the Company's Technologies
division in Fort Wayne, Indiana. This agreement will expire on November 15,
1998. The Company believes its labor relations are satisfactory.
EXECUTIVE OFFICERS OF THE COMPANY
The names, ages, positions and business experience of all of the executive
officers of Bowmar are listed below. Officers are appointed annually by the
Board of Directors at the meeting of directors immediately following the Annual
Meeting of Shareholders and serve until the next annual election or until their
successors have been elected and qualified or as otherwise provided in the
Company's By-Laws.
There are no family relationships between any of the directors and executive
officers of the Company, nor any arrangement or understanding between any such
executive officer and any other person pursuant to which he was elected as an
executive officer.
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NAME, AGE & POSITION BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
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EDWARD A. WHITE, 67 Elected Chairman of the Board of the Company on October 22,
Chairman of the Board 1983. Served as Chief Executive Officer from October 22, 1983 to
January 31, 1992 and as President from July 31, 1987 until
December 10, 1990.
THOMAS K. LANIN, 52 Elected President and Chief Executive Officer on June 2, 1995.
President and Chief Served as Vice President Finance and Chief Financial Officer from
Executive Officer March 1987 and Secretary and Treasurer from April 1987. Elected
as a director of the Company in July 1988.
JOSEPH G. WARREN, JR., 50 Elected Vice President Finance, Chief Financial Officer, Secretary
Vice President Finance, and Treasurer on July 12, 1995. From 1994 to 1995 served as Vice
Chief Financial Officer, President Finance of Axxess Technologies, Inc. From 1993 to 1994
Secretary and Treasurer served as Vice President of Golden Technologies, Inc. From 1992
to 1993 served as President of Coors Ceramicon Designs, Ltd., and
from 1985 to 1992 served as Vice President Finance of Coors
Ceramics Company.
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ITEM 2 PROPERTIES
The following table sets forth the information as to the Company's principal
properties:
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APPROXIMATE
LOCATION SIZE TYPE OF OWNERSHIP OPERATION/FUNCTION
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Ft. Wayne, IN 75,000 sq. ft. Owned Manufacture of electro-
(plus 10 acres mechanical and
of vacant land mechanical equipment
adjacent thereto) and components
Phoenix, AZ 28,000 sq. ft. Lease (expires Manufacture of
10/97) microelectronic modules
Phoenix, AZ 2,900 sq. ft. Lease (expires 3/98) Corporate executive office
Acton, MA 82,000 sq. ft. Owned Land and buildings held
for sale; leased to
third party
</TABLE>
Management considers these properties to be well maintained and adequate for
their use. See Note 6 to the Consolidated Financial Statements in this Annual
Report for description of the mortgages and liens on these properties.
ITEM 3 LEGAL PROCEEDINGS
NONE.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders, through
solicitation of proxies or otherwise, during the fourth quarter of fiscal 1995.
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
See Note 14 to the Consolidated Financial Statements in this Annual Report.
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ITEM 6 SELECTED FINANCIAL DATA
(In thousands of dollars, except share data)
<TABLE>
<CAPTION>
FISCAL YEAR
OPERATIONS: 1995 1994 1993 1992 1991
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Net sales $ 26,869 $ 27,821 $ 20,101 $ 24,596 $ 27,476
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Gross margin $ 10,153 $ 10,324 $ 5,990 $ 8,171 $ 7,217
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Income before income taxes $ 577 $ 2,550 $ 888 $ 1,416 $ 272
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Net income $ 3,903 $ 2,175 $ 755 $ 1,243 $ 286
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Weighted average number of common
shares and equivalents - primary 6,615,241 6,554,441 6,236,590 6,261,963 6,124,655
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Net income per common share - primary $ 0.54 $ 0.28 $ 0.06 $ 0.20 $ 0.05
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Net income per common share - fully diluted $ 0.48 $ 0.27 $ 0.06 $ 0.20 $ 0.05
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FINANCIAL POSITION (AT YEAR END):
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Working capital $ 6,889 $ 5,209 $ 3,817 $ 3,497 $ 2,324
Total assets $ 17,432 $ 13,783 $ 10,910 $ 11,368 $ 12,354
Long-term debt $ 3,992 $ 4,617 $ 5,078 $ 5,891 $ 8,814
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</TABLE>
Note: No dividends have been declared or paid on Bowmar common shares. There
were 2,792 holders of record of Bowmar common stock on December 18,
1995.
This table should be read in conjunction with the Consolidated Financial
Statements provided elsewhere herein.
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ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Fiscal 1995, 1994 and 1993 net sales were $26,869,000, $27,821,000 and
$20,101,000 respectively. The 3.4% decrease in net sales from 1994 to 1995 was
the result of a 10.5% decrease in sales in the electromechanical segment. The
decrease in sales in the electromechanical segment was primarily in the
mechanical and interface product lines, partially offset by increased ordnance
and rapid heat transfer sterilizer product lines. The increased sales in the
ordnance product line were positively impacted by a $435,000 claim settlement
recognized in the second quarter of fiscal 1995. Sales during fiscal 1995 in the
microelectronic segment were approximately equivalent to those in the prior
year. This segment experienced a decrease in custom military products which was
offset by an increase in the standard military memory product line. The 38.4%
increase in net sales from 1993 to 1994 was the result of a 137.4% increase in
sales in the microelectronic segment, partially offset by a 21.5% decrease in
sales in the electromechanical segment. Sales in the microelectronic segment
increased by approximately $10.4 million due primarily to a large order for high
density memories being utilized in the Abrams tank, as well as other new memory
products. Sales in the electromechanical segment decreased from 1993 to 1994 by
approximately $2.7 million due primarily to decreased sales in both ordnance and
systems products reflecting increased competitive pressures due to the decreased
level of procurement by the Department of Defense. Sales for the fourth quarter
of fiscal 1993 for the electromechanical segment included $1.9 million received
in settlement of an ordnance claim.
The Company continues to believe that changes in defense spending will not have
a material adverse affect on the Company's overall results. However, it appears
that although the Company's microelectronic segment of the Company's business
could experience growth as a result of changes in defense spending, the
Company's electromechanical segment could continue to be negatively impacted.
Accordingly, the Company continues to pursue its goal of reduced dependency on
the defense industry.
Gross margin, as a percentage of sales, increased slightly during fiscal 1995 to
37.8%. Gross margins in the microelectronic segment were approximately $8.0
million or 44.2% due to improving margins in the standard military memory
product line. Gross margins in the electromechanical segment were approximately
$2.2 million or 24.7% where margin percentages were down in each product line.
The gross margin for this segment was positively impacted by 5% due to the
recognition of the above noted ordnance claim settlement. Gross margins, as a
percent of sales, were 37.1% in fiscal 1994. Gross margins in the
microelectronic segment in 1994 were approximately $7.0 million or 38.9% due
primarily to the increased sales of high density memory products which have a
higher gross margin than other product lines. Gross margins in the
electromechanical segment in 1994 were approximately $3.3 millon or 33.8%.
Although sales in this segment had been down from the prior year, margins in the
mechanical and keyboard product lines increased over that year. Gross margins,
as a percent of sales, had decreased to 29.8% in fiscal 1993. This gross margin
percentage was 28.0% before giving effect to the gross margin of approximately
$900,000 derived from the settlement of a $1.9 million ordnance claim.
Selling, general and administrative expenses in fiscal 1995 were approximately
22.2% greater than those in fiscal 1994. This increase was principally due to
increased commissions, advertising and bonuses in the microelectronic segment,
to the writeoff in the third quarter of $236,000 in prepaid royalty payments and
increased marketing expenses both related to the Cox Sterile Products
acquisition, as well as to a $338,000 charge for the post employment benefits of
a former executive at the Company's headquarters. In fiscal 1994 selling,
general and administrative expense were greater than in 1993, due primarily to
increased commissions, marketing, and promotional support and bonus expenses in
the microelectronic segment, and increased advertising and selling expenses in
the electromechanical segment.
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Product development expense in fiscal 1995 increased by $169,000 or 28% over
1994 due to increased spending on the rapid heat transfer sterilizer in the
electromechanical segment and new product development and research in the
microelectronic segment. Product development expense also increased in fiscal
1994 versus 1993. The increase, primarily in the electromechanical segment,
related to the development of prototypes of a high-definition, low-intensity
dental x-ray machine and the development of a sterilizing autoclave.
Interest expense in fiscal 1995 was approximately the same as in fiscal 1994,
due to decreased borrowing in 1995 which offset the effect of higher interest
rates. Interest expense in fiscal 1994 was approximately the same as in fiscal
1993. The effect of increased borrowing on interest expense was offset by
reduced overall interest rates on term debt and the write off, in 1993 (as
compared to 1994), of greater deferred debt issuance costs. The Company expects
that the lower rates under its new financing agreement will lower its overall
cost of financing in the near term.
Other income in fiscal 1995 consists of net rent proceeds from the Company's
leased facility in Acton, MA., offset primarily by the write-off of $319,000 of
goodwill associated with the Cox Sterile Products acquisition. In fiscal 1994,
other income consisted primarily of the net rent proceeds, offset by expenses
related to a dispute with a state taxing authority and the write-off of disputed
reimbursable costs on a third-party development contract. Other income in fiscal
1993 consisted primarily of net rent proceeds and gains on the disposition of
certain fixed assets.
During the third quarter of fiscal 1995, the Company recorded a $3.3 million tax
credit resulting from the elimination of the valuation allowance, as prescribed
by the provisions of Statement of Financial Accounting Standards No. 109,
related to the Company's deferred tax assets. As a result of this elimination,
the Company's effective tax rate in future years for financial statement
purposes will approximate the statutory rate. The Company is subject to the
alternative minimum tax which, when combined with state taxes, resulted in a
current tax provision of $200,000, $375,000 and $133,000 in fiscal 1995, 1994
and 1993, respectively. During the fourth quarter of fiscal 1994 the Company
recorded a tax liability of $176,000 after becoming aware of a potential
liability with regard to certain state income taxes for taxable years 1990
through 1994 as a result of a ruling by that state's supreme court. There have
been no tax assessments nor has the state audited the Company's tax returns for
those years.
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
Fiscal year-end 1995 working capital increased to $6,889,000 from $5,209,000 at
October 1, 1994. Included in this increase is $1,698,000 in current deferred tax
assets. Changes in the components of working capital are detailed in the
Company's Consolidated Statements of Cash Flows. The Company's current ratio at
fiscal year-end 1995 is approximately 2.3 to 1. Its total debt-to-equity ratio
improved to approximately 1.2 to 1.
Management believes that cash generated by operations, in addition to the
Company's borrowing capability, should be sufficient to fund the Company's cash
needs for the foreseeable future.
Subsequent to fiscal year-end 1995, the Company entered into a $10.7 million
financing agreement with Bank One Arizona, N.A. The financing agreement provides
for a two-year revolving line of credit facility of $4.0 million at 1% over the
Bank's prime rate, a five year term loan of $4.2 million at 1.25% over the
Bank's prime rate, an acquisition line of credit of $1 million at 1.5% over the
Bank's prime rate and a $1.5 million equipment leasing line of credit.
Approximately $2.1 million of the new term loan was used to pay the outstanding
term loan with Foothill Capital Corporation and approximately $1.8 million was
used to retire the balance of the Company's 13.5% convertible subordinated
debentures. The remaining financing is expected to be used for working capital,
equipment purchases and possible acquisitions.
8
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The Company continues to seek a buyer for its land and building in Acton, MA,
and anticipates that proceeds from the sale would be in excess of the
obligations thereon.
The Company's capital expenditure plans are principally to expand manufacturing
capacity in the microelectronic segment and to improve the efficiency of the
manufacturing processes, and are expected to be financed largely through leasing
arrangements and, to a lesser extent, through funds provided from operations.
In fiscal 1995 and 1994, the Company generated $3,017,000 and $946,000,
respectively of cash from operating activities. Management anticipates that
operations will continue to generate cash in the foreseeable future. Management
also anticipates that for the near term its cash payments for Federal income
taxes will be based on rates applicable to the alternative minimum tax as it
uses its net operating loss carryforwards.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14 of this Annual Report for required financial statements and
supplementary data.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11 EXECUTIVE COMPENSATION
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by PART III (ITEMS 10, 11, 12 and 13) is incorporated
herein by reference to the Company's definitive Proxy Statement, prepared in
connection with the 1996 Annual Meeting of Shareholders, filed pursuant to
Regulation 14A.
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PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1)(2) Financial Statements and Supplementary Data
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<CAPTION>
Consolidated Financial Statements Page
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Consolidated Balance Sheets as of September 30, 1995 and 11
October 1, 1994
Consolidated Statements of Income for the Years Ended
September 30, 1995, October 1, 1994 and October 2, 1993 12
Consolidated Statements of Shareholders' Equity for the Years
Ended September 30, 1995, October 1, 1994 and October 2, 1993 13
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1995, October 1, 1994 and October 2, 1993 14
Notes to Consolidated Financial Statements 15
Report of Independent Accountants 25
Financial Data Schedule
</TABLE>
Financial Statement Schedules for the Years Ended September 30,
1995, October 1, 1994, and October 2, 1993
Financial statement schedules have been omitted because either
they are not required or are not applicable, or because the
information has been included in the consolidated financial
statements or notes thereto.
(a)(3) Exhibits
Exhibit Number
3.1 Amended and Restated Articles of Incorporation. (Previously
filed as Exhibit A to the Registrant's definitive Proxy
Statement prepared in connection with the 1993 Annual Meeting
of Shareholders, which is incorporated herein by reference.)
3.2 Amended and Restated Code of By-Laws as amended on July 28,
1995. (The former having been previously filed as Exhibit 3 to
the Registrants Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993, and the latter having been previously
filed as Exhibit 5(a) to the Current Report on Form 8K dated
October 16, 1995, both of which are incorporated here in by
reference.)
4.1 Indenture, Bowmar Instrument Corporation 13 1/2% Convertible
Subordinated Debentures due December 15, 1995. (Previously
filed as Exhibit 4.4 to the Registration Statement on Form
S-7, File No. 2-70025, on November 25, 1980, which is
incorporated herein by reference.)
4.2 See Exhibit 3.1 above.
10a
<PAGE> 13
10.1(a) Loan documents by and between Foothill Capital Corporation
("Foothill") and Bowmar Instrument Corporation and its wholly
owned subsidiaries Bowmar/ALI, Inc. and White Technology, Inc.
(Previously filed as exhibits 10.1(a) through 10.1(n) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended September 30, 1989, Exhibits 10.1(o) through 10.1(w) for
the fiscal year ended September 30, 1990, Exhibit 10.1(x) for
the fiscal year ended September 30, 1991, Exhibits 10.1 (gg)
and (hh) for the fiscal year ended September 30, 1992, and
Exhibits 10.1 (bb) and (cc) for the fiscal year ended October
2, 1993 which are incorporated herein by reference.)
10.1(b) Lease dated February 23, 1990, by and between Bowmar/Ali, Inc.
as landlord and Lau Acquisition Corporation as tenant.
(Previously filed as Exhibit 10.1 (bb) to the Registrant's
Annual Report of Form 10-K for the fiscal year ended September
30, 1990, which is incorporated herein by reference.)
10.1(c) Employment agreement dated August 15, 1991 between Edward A.
White and Bowmar Instrument Corporation. (Previously filed as
Exhibit 10.1 (dd) to the Registrant's Annual report of Form
10-K for the fiscal year ended September 30, 1991, which is
incorporated herein by reference.)
10.1(d) Employment agreement dated August 15, 1991, as amended as of
August 15, 1992, and as of June 1, 1995 between Gardiner S.
Dutton and Bowmar Instrument Corporation. (The first two
having been previously filed as Exhibit 10.1 (ff) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended September 30, 1992, and the last having been filed as
Exhibit 5(b) to Form 8-K dated June 26, 1995, all which are
incorporated herein by reference.)
10.1(e) Amendment No. Sixteen dated April 2, 1994, to General Loan and
Security Agreements dated August 30, 1989, by and among
Foothill, Bowmar Instrument Corporation and Bowmar/Ali, Inc.
10.2(a) Form of Incentive Stock Option Agreement covering incentive
stock options granted under the Corporation's now terminated
1986 Plan, as amended October 23, 1987. (Previously filed as
Exhibit 10.2 (c) to the Registrant's Annual Report on Form
10-K for the fiscal year ended September 30, 1987, which is
incorporated herein by reference.)
10.2(b) Form of Non-Incentive Stock Option Agreement covering
non-incentive stock options granted under the Corporation's
now terminated 1986 Plan, as amended October 23, 1987.
(Previously filed as Exhibit 10.2 (c) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended September
30, 1987, which is incorporated herein by reference.)
10.2(c) Bowmar Instrument Corporation Stock Option Plan for
Non-Employee Directors as amended February 4, 1994.
(Incorporated herein by reference to Exhibit B to the
Registrant's definitive Proxy Statement, prepared in
connection with the 1994 Annual Meeting of Shareholders.)
10.2(d) Non-Incentive Stock Option Agreement dated August 16, 1991, as
amended August 15, 1992, between Bowmar Instrument Corporation
and Gardiner S. Dutton. (Previously filed as Exhibit 10.1 (ff)
to the Registrant's Annual Report on Form 10-K for the fiscal
year ended September 30, 1992, which is incorporated herein by
reference.)
10b
<PAGE> 14
10.2(e) 1994 Flexible Stock Plan. (Previously filed as Exhibit A to
the Registrant's definitive Proxy Statement prepared in
connection with the 1994 Annual Meeting of Shareholders, which
is incorporated herein by reference.)
10.3(a) Form of Agreement governing awards of restricted stock under
the Corporation's now terminated Restricted Plan (Incorporated
by reference to the exhibit to Amendment No. 1 to the
Registrant's Registration Statement of Form S-8 (No. 2-
67645).)
10.4(a) Loan Agreement, dated as of August 28, 1995, by and between
the Registrant and Bank One, Arizona NA (the "Lender").
10.4(b) Security Agreement, dated as of August 28, 1995, executed by
the Registrant, as Debtor, in favor of the Lender, as Secured
Party.
10.4(c) Promissory Note (Acquisition Note), dated August 28, 1995, in
the principal amount of $1,000,000, executed by the Registrant
in favor of the Lender.
10.4(d) Promissory Note (Term Note), dated August 28, 1995, in the
principal amount of $4,200,000, executed by the Registrant in
favor of the Lender.
10.4(e) Revolving Promissory Note, dated August 28, 1995, in the
principal amount of $4,000,000, executed by the Registrant in
favor of the lender.
10.4(f) Mortgage Security Agreement, Assignment of Rents and Fixture
Filing (Indiana), dated August 28, 1995, by and between the
Registrant, as Mortgagor, and the Lender, as Beneficiary.
10.4(g) Mortgage, Security Agreement, Assignment of Rents and Fixture
Filing (Massachusetts), dated August 28, 1995, by and between
Bowmar/ALI, Inc., a Massachusetts corporation (a wholly-owned
subsidiary of the Registrant), as Mortgagor, and the Lender,
as Beneficiary.
11 Computation of Earnings per share
21 Subsidiaries of the Registrant - The Registrant has one
subsidiary, Bowmar/Ali, Inc., a Massachusetts Corporation.
23 Consent of Independent Accountants
27 Financial Data Schedule
(b) Reports on Form 8-K
On July 28, 1995, the Registrant filed a report on Form 8-K regarding
its Amended and Restated Code of By-Laws.
(c) Not applicable.
(d) Not applicable.
10c
<PAGE> 15
BOWMAR INSTRUMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
<TABLE>
<CAPTION>
SEPTEMBER 30, OCTOBER 1,
1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 739 $ 147
Accounts receivable, net 3,882 4,834
Inventories 5,420 4,866
Prepaid expenses 457 478
Deferred income taxes 1,698 0
- ---------------------------------------------------------------------------------------
Total Current Assets 12,196 10,325
Property, Plant and Equipment, net 1,335 1,446
Deferred Income Taxes 2,167 0
Other Assets, net 1,734 2,012
- ---------------------------------------------------------------------------------------
Total Assets $ 17,432 $ 13,783
=======================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable $ 0 $ 1,135
Current portion of long-term debt 661 639
Accounts payable 1,453 1,036
Accrued salaries and benefits 2,092 1,555
Other accrued expenses 1,101 751
- ---------------------------------------------------------------------------------------
Total Current Liabilities 5,307 5,116
Long-Term Debt 3,992 4,617
Other Long-Term Liabilities 338 0
- ---------------------------------------------------------------------------------------
Total Liabilities 9,637 9,733
- ---------------------------------------------------------------------------------------
Commitments and Contingencies (see Note 10)
- ---------------------------------------------------------------------------------------
Shareholders' Equity
Preferred stock, $1 par value,
authorized 500,000 shares, issued 119,900 120 120
and 120,032 shares
Common stock, $.10 stated value, authorized
15,000,000 shares, issued 6,499,316 and 6,458,257 shares 650 646
Treasury stock, 44,442 shares, at stated value (4) (4)
Additional paid-in capital 6,245 6,047
Retained earnings (deficit) 784 (2,759)
- ---------------------------------------------------------------------------------------
Total Shareholders' Equity 7,795 4,050
- ---------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 17,432 $ 13,783
=======================================================================================
</TABLE>
See notes to consolidated financial statements.
11
<PAGE> 16
BOWMAR INSTRUMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of dollars, except share data)
<TABLE>
<CAPTION>
FISCAL YEAR
1995 1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 26,869 $ 27,821 $ 20,101
Cost of sales 16,716 17,497 14,111
- --------------------------------------------------------------------------------------------------------
Gross margin 10,153 10,324 5,990
- --------------------------------------------------------------------------------------------------------
Expenses:
Selling, general and administrative 8,315 6,807 4,562
Product development 762 593 272
Interest expense 723 751 775
Other (income) expense, net (224) (377) (507)
- --------------------------------------------------------------------------------------------------------
Total expenses 9,576 7,774 5,102
- --------------------------------------------------------------------------------------------------------
Income before income taxes 577 2,550 888
Income taxes 3,326 (375) (133)
- --------------------------------------------------------------------------------------------------------
NET INCOME $ 3,903 $ 2,175 $ 755
========================================================================================================
Net income per common share:
Primary $ 0.54 $ 0.28 $ 0.06
Fully diluted $ 0.48 $ 0.27 $ 0.06
- --------------------------------------------------------------------------------------------------------
Weighted average number of common shares and equivalents:
Primary 6,615,241 6,554,441 6,236,590
Fully diluted 8,214,708 8,156,853 7,953,494
========================================================================================================
</TABLE>
See notes to consolidated financial statements.
12
<PAGE> 17
BOWMAR INSTRUMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands of dollars, except share data)
<TABLE>
<CAPTION>
TOTAL
ADDITIONAL RETAINED SHARE-
PREFERRED COMMON TREASURY PAID-IN EARNINGS HOLDERS'
STOCK STOCK STOCK CAPITAL (DEFICIT) EQUITY
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, OCTOBER 1, 1992 $ 131 $ 615 $ (3) $ 5,907 $(4,943) $ 1,707
Net income 755 755
Issuance of common stock:
Exercise of options and
awards - 3,000 shares 1 2 3
Exchange of 23,458 shares
for 1,760 shares of preferred (2) 2 0
Deferred compensation costs 12 12
Treasury stock transactions:
Purchase of 20,000 shares (2) (48) (50)
Exercise of options -
13,000 shares 1 21 22
Additional expenses related
to debenture exchange (49) (49)
Payment of preferred dividends (384) (384)
- ----------------------------------------------------------------------------------------------------------
BALANCE, OCTOBER 2, 1993 129 618 (4) 5,845 (4,572) 2,016
Net income 2,175 2,175
Issuance of common stock:
Exercise of options and
awards - 161,970 shares 16 158 174
Exchange of 116,873 shares
for 8,768 shares of preferred (9) 12 (3) 0
Deferred compensation costs 47 47
Payment of preferred dividends (362) (362)
- ----------------------------------------------------------------------------------------------------------
BALANCE, OCTOBER 1, 1994 120 646 (4) 6,047 (2,759) 4,050
Net income 3,903 3,903
Issuance of common stock:
Exercise of options and
awards and related tax benefits -
40,500 shares 4 158 162
Deferred compensation costs 40 40
Payment of preferred dividends (360) (360)
- ----------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1995 $ 120 $ 650 $ (4) $ 6,245 $ 784 $ 7,795
==========================================================================================================
</TABLE>
See notes to consolidated financial statements.
13
<PAGE> 18
BOWMAR INSTRUMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
<TABLE>
<CAPTION>
FISCAL YEAR
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,903 $ 2,175 $ 755
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 552 701 528
Amortization of debt issue costs 52 36 146
Deferred income tax benefit (3,526) 0 0
Net changes in balance sheet accounts:
Accounts receivable 952 (1,897) 464
Inventories (554) (692) (1,406)
Prepaid expenses 21 (92) (5)
Other assets 319 0 630
Accounts payable 417 (469) 589
Accrued salaries and benefits 537 964 (609)
Other accrued expenses 350 163 (574)
Other (6) 57 (101)
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 3,017 946 417
- ------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (454) (450) (364)
Proceeds from sales of property, plant and equipment 5 0 12
Net change in other assets (41) (243) 17
- ------------------------------------------------------------------------------------------------------------------
Net cash (used in) investing activities (490) (693) (335)
- ------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Borrowings under (payments on) notes payable, net (1,135) 499 636
Retirement of long-term debt (602) (553) (841)
Issuance of common stock 162 174 25
Payment of costs for preferred stock issuance 0 0 (49)
Payment of preferred stock dividends (360) (362) (384)
Purchase of treasury stock 0 0 (50)
- ------------------------------------------------------------------------------------------------------------------
Net cash (used in) financing activities (1,935) (242) (663)
- ------------------------------------------------------------------------------------------------------------------
Net change in cash 592 11 (581)
Cash at beginning of year 147 136 717
- ------------------------------------------------------------------------------------------------------------------
Cash at end of year $ 739 $ 147 $ 136
- ------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Net cash paid for interest $ 689 $ 974 $ 843
Net cash paid for income taxes $ 164 $ 190 $ 113
Non-Cash Investing and Financing Activities:
Capital lease agreements $ 88 $ 235 $ 0
==================================================================================================================
</TABLE>
See notes to consolidated financial statements.
14
<PAGE> 19
BOWMAR INSTRUMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
a. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Bowmar
Instrument Corporation and its subsidiaries (collectively the
"Company"). All significant intercompany accounts and transactions are
eliminated. Certain amounts in prior fiscal years consolidated
financial statements have been reclassified to conform to current
presentation.
b. CHANGE IN FISCAL YEAR-END
The Company elected in fiscal 1993 to change its fiscal year-end from
September 30 to the Saturday nearest September 30, in order to coincide
the Company's year-end with the 4/4/5 week schedule of its operating
units.
c. ACCOUNTS RECEIVABLE
Accounts receivable have been reduced by an allowance for doubtful
accounts of approximately $102,000 and $126,000 at fiscal year-end 1995
and 1994, respectively.
d. INVENTORIES
Inventories are stated at the lower of cost (principally first-in,
first-out) or market. In accordance with industry practices,
inventories may include amounts relating to contracts and programs with
long production cycles, a portion of which is not expected to be
realized within one year.
e. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, including property under capital lease
agreements, are stated at cost. Depreciation is determined on a
straight-line basis over the estimated useful lives ranging from 5 to
33 years for buildings and improvements and 3 to 10 years for machinery
and equipment. Leasehold improvements are amortized over the lives of
the leases or estimated useful lives of the assets, whichever is less.
When assets are sold or otherwise retired, the cost and accumulated
depreciation are removed from the books and the resulting gain or loss
is included in operating results.
f. GOVERNMENT CONTRACTS
Sales under government contracts are recorded when the units are
shipped and accepted by the government. Applicable earnings are
recorded pro rata based upon total estimated earnings at completion of
the contracts; projected losses are provided for in their entirety when
identified.
g. PRODUCT DEVELOPMENT
Product development and tooling costs relating to specific customer
orders are charged to expense as such orders are delivered.
15
<PAGE> 20
h. INCOME TAXES
The Company files a consolidated tax return with all of its
wholly-owned subsidiaries. Temporary differences in the recognition of
taxable income for financial reporting and income tax purposes relate
primarily to the use of different depreciation methods and useful lives
for tax purposes, the allowances for doubtful accounts and inventory
obsolescence and the timing of reporting bonus expense.
i. NET INCOME PER COMMON SHARE
Primary income per share is computed by deducting preferred dividends
from net income to determine net income available to common
shareholders. This amount is then divided by the weighted average
number of common shares outstanding and common stock equivalents.
Income per share assuming full dilution is determined by dividing net
income by the weighted average number of common shares outstanding
during the year after giving effect to common stock equivalents arising
from stock options and preferred stock assumed converted to common
stock.
j. ACCOUNTING STANDARD NOT ADOPTED
The Company has not made a decision as to the date or method of
adoption of Statement of Financial Accounting Standard No. 123
"Accounting for Stock-Based Compensation" issued in October 1995.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, OCTOBER 1,
1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 2,164,000 $ 1,807,000
Work-in-process 2,891,000 2,718,000
Finished goods 365,000 341,000
- ---------------------------------------------------------------------
$ 5,420,000 $ 4,866,000
=====================================================================
</TABLE>
Under contractual arrangements by which progress payments are received on U.S.
Government subcontracts, title to inventories identified with related contracts
is vested in the government. Inventories were reduced by $40,000 in 1995 and
$140,000 in 1994 for such progress payments.
3. OTHER ASSETS
Other assets include approximately $1,532,000 for certain land and buildings in
Acton, MA. The Company intends to sell this property which is presently leased
to the purchasers of the Bowmar/ALI Military Systems Division under an operating
lease agreement which extends through February 1997. Rental income during fiscal
years 1995, 1994 and 1993 was $552,000, $532,000 and $512,000, respectively.
Future minimum rentals due the Company under this lease are approximately
$572,000 in 1996 and $242,000 in the first five months of 1997. In fiscal 1994
other assets also included approximately $340,000 of goodwill related to the Cox
Sterile Products acquisition. This remaining goodwill was written off in the
third quarter of fiscal 1995 by a charge of $319,000 to other expense.
16
<PAGE> 21
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, OCTOBER 1,
1995 1994
--------------------------------------------------------------------
<S> <C> <C>
Land $ 123,000 $ 123,000
Buildings and improvements 927,000 888,000
Machinery and equipment 5,745,000 6,639,000
Leasehold improvements 315,000 352,000
Total, at cost 7,110,000 8,002,000
Less accumulated depreciation
and amortization 5,775,000 6,556,000
--------------------------------------------------------------------
$ 1,335,000 $ 1,446,000
====================================================================
</TABLE>
At fiscal year-end 1995 and 1994, property, plant and equipment includes
approximately $473,000 and $450,000, respectively, of equipment under leases
that have been capitalized. Accumulated amortization for such equipment
approximated $233,000 and $134,000 for fiscal years 1995 and 1994, respectively.
5. NOTES PAYABLE
Notes payable at September 30, 1995, represent borrowings issued in conjunction
with an asset-based lending agreement with Foothill Capital Corporation
consisting of a credit line and term loans collateralized by the Company's
assets. Subsequent to the fiscal year-end the Company entered into a $10.7
million financing agreement with Bank One Arizona (see Note 6). The Foothill
lending agreement which expired November 15, 1995, had an authorized maximum
borrowing on the credit line of $4,000,000. The credit line bore interest at the
prime interest rate plus 2.75%, which was 11.5%, 10.5% and 9.25% at fiscal
year-end 1995, 1994 and 1993, respectively. The average interest rate for fiscal
years 1995, 1994 and 1993 was approximately 11.4%, 10.1%, and 9.8%,
respectively. The Company paid a commitment fee at a rate of 0.5% per annum on
the unused portion of the credit line.
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, OCTOBER 1,
1995 1994
-----------------------------------------------------------------------------
<S> <C> <C>
13.5% Convertible subordinated debentures $ 1,826,000 $ 1,826,000
Foothill Capital Corp. term loan 2,314,000 2,581,000
Industrial revenue bonds 472,000 540,000
Obligations under capital leases 41,000 309,000
-----------------------------------------------------------------------------
4,653,000 5,256,000
Less current portion 661,000 639,000
-----------------------------------------------------------------------------
$ 3,992,000 $ 4,617,000
=============================================================================
</TABLE>
17
<PAGE> 22
The 13.5% convertible subordinated debentures and the Foothill Capital
Corporation term loan were retired in November 1995 from the proceeds of the
$10.7 million financing agreement with Bank One Arizona. As of September 30,
1995, the 13.5% convertible subordinated debentures and the Foothill Capital
Corporation term loan have been classified based on the terms of the new
financing agreement.
The Bank One financing provides for a two year revolving line of credit facility
in the principal amounts of $4.0 million at 1% over the Bank's prime rate; a
five year term loan in the principal amount of $4.2 million at 1.25% over the
Bank's prime rate; an acquisition line of credit of $1 million at 1.5% over the
Bank's prime rate and an equipment leasing line of credit of $1.5 million. The
Bank One financing is collateralized by all of the assets of the Company,
subject to the prior lien associated with the industrial revenue bonds.
The industrial revenue bonds are payable at the rate of $22,500 per quarter
through September 30, 2000, plus interest at the reference rate of the Fort
Wayne National Bank. The interest rate at September 30, 1995 was 6.6%. The bonds
are collateralized by real property with a net book value of $1,532,000 which is
included in other assets. At September 30, 1995, the Company was not in
compliance with certain covenants related to the industrial revenue bonds. The
sole holder of these bonds has consented to the Company's noncompliance with
these covenants through October 1, 1996, thereby effectively waiving compliance
through that date.
Based on terms of the industrial revenue bonds, obligations under capital leases
and the terms of the new Bank One financing agreement, the aggregate maturities
of the above term debt, including the interest portion of minimum lease payments
on capital leases, are approximately $661,000 in 1996, $550,000 in 1997,
$511,000 in 1998, $511,000 in 1999, and $2,420,000 in 2000.
7. INCOME TAXES
The (credit) provision for income taxes consists of the following:
<TABLE>
<CAPTION>
FISCAL YEAR
1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Current $ 200,000 $ 375,000 $ 133,000
Deferred (3,526,000) 0 0
- -------------------------------------------------------------------------------
$(3,326,000) $ 375,000 $ 133,000
===============================================================================
</TABLE>
Based on the Company's recent pre-tax income and projections of future taxable
income over the period in which the deferred income tax assets are deductible,
the Company believes it will realize the benefit of the deferred tax assets. As
a result, during fiscal 1995, the Company recorded a $3.3 million tax credit
resulting from the elimination of the valuation allowance related to the
Company's deferred tax asset. There can be no assurance, however, that the
Company will generate a specific level of continued earnings.
18
<PAGE> 23
A reconciliation of the (credit) provision for income taxes between the U.S.
statutory and effective rates follows:
<TABLE>
<CAPTION>
FISCAL YEAR
1995 1994 1993
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Provision at statutory rate 34.0% 34.0% 34.0%
Alternative minimum tax 0.0 2.0 1.4
State taxes, net of federal benefit 5.9 12.7 13.6
Utilization of federal net operating loss carryover (34.0) (34.0) (34.0)
Elimination of valuation allowance for deferred
tax assets (582.3) 0.0 0.0
- -----------------------------------------------------------------------------------------
(576.4)% 14.7% 15.0%
=========================================================================================
</TABLE>
The income tax effect of loss carryforwards, tax credit carryforwards and
temporary differences between financial and tax reporting give rise to the
deferred income assets and liabilities. Deferred income taxes consisted of the
following:
<TABLE>
<CAPTION>
SEPTEMBER 30, OCTOBER 1,
1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C>
Inventories $ 554,000 $ 761,000
Accrued salaries, benefits, interest and expenses 971,000 331,000
Net operating loss carryforwards 2,232,000 2,651,000
Alternative minimum tax credits 82,000 50,000
Other 26,000 25,000
Valuation allowance 0 (3,818,000)
- --------------------------------------------------------------------------------------
$ 3,865,000 $ 0
======================================================================================
</TABLE>
During the fourth quarter of fiscal 1994, the Company became aware of a
potential liability with regard to certain state income taxes for taxable years
1990 through 1994 as a result of a ruling by that state's Supreme Court. There
have been no tax assessments nor has the state audited the Company's tax returns
for those years. The Company recorded an estimated liability of approximately
$176,000 in the fourth quarter of fiscal 1994.
As of September 30, 1995, the Company had federal net operating loss carryovers
for tax purposes of approximately $5,656,000 which expire from 2003 through
2005. Additionally, the Company has an alternative minimum tax credit of
approximately $82,000.
19
<PAGE> 24
8. BENEFIT PLANS
The Company has a defined benefit pension plan for employees at its Fort Wayne,
Indiana facility pursuant to a collective bargaining agreement. Benefits are
based primarily on a benefits multiplier and years of service. The Company funds
the amount equal to the minimum funding required plus additional amounts which
may be approved by the Company from time to time.
Net periodic pension cost included the following components:
<TABLE>
<CAPTION>
FISCAL YEAR
1995 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost benefits earned $ 69,000 $ 82,000 $ 77,000
Interest cost 130,000 118,000 113,000
Return on plan assets (132,000) (135,000) (119,000)
Amortization of transition assets (10,000) (10,000) (10,000)
Amortization of prior service costs 12,000 12,000 12,000
- -----------------------------------------------------------------------------
$ 69,000 $ 67,000 $ 73,000
=============================================================================
</TABLE>
At September 30, 1995, the actuarial present value of accumulated benefit
obligations was $1,782,000 of which $1,774,000 was vested. The vested benefit
obligation is the actuarial present value of the vested benefits to which the
employee is entitled if the employee separates immediately. Prepaid pension cost
at September 30, 1995 and October 1, 1994, was calculated as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, OCTOBER 1,
1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Projected benefit obligation $ 1,782,000 $ 1,546,000
Market value of plan assets 2,047,000 1,903,000
- ------------------------------------------------------------------------------
Plan assets over projected benefit obligation 265,000 357,000
Unrecognized transition asset (28,000) (39,000)
Unrecognized past service costs 92,000 104,000
Unrecognized net loss (gain) (20,000) (118,000)
- ------------------------------------------------------------------------------
$ 309,000 $ 304,000
==============================================================================
</TABLE>
Plan assets primarily consist of investments in mutual funds, corporate bonds
and money market funds. The weighted-average assumed discount rate was 7.5% and
the long-term rate of return on assets was 7%.
In addition, the Company has an Incentive Savings 401(k) Plan covering
substantially all non-union employees of the Company who have completed six
months of service. During each of the fiscal years 1995, 1994 and 1993, the
Company made contributions to the plan of approximately $45,000, $58,000 and
$58,000 respectively.
20
<PAGE> 25
9. STOCK OPTIONS AND AWARDS
Under the Company's shareholder approved 1994 Flexible Stock Plan, common stock
is available for the grant of options, appreciation rights, restricted stock
awards, performance shares and other stock-based awards. At September 30, 1995,
30,583 shares were available for future grants to certain officers and employees
at prices not less than the fair market value at the date of grant determined by
the Board of Directors. At fiscal year-end 1995, 234,000 shares from the
Company's 1994 plan are under option.
During fiscal 1995, the Board of Directors terminated the Company's shareholder
approved 1986 Stock Option Plan. Shares from the Company's 1986 Plan remain
under option and are exercisable as early as one year after grant. At fiscal
year-end 1995, 66,000 shares from the Company's 1986 Plan are under option.
The Company's shareholder approved Non-Qualified Stock Option Plan for
Non-Employee Directors provides for 132,069 shares of common stock, for issuance
to non-employee directors, at an exercise price equal to the fair market value
on the date of issuance. The options are exercisable six months after date of
grant and expire in ten years. A total of 74,000 options under this
Non-Qualified Plan have been issued to non-employee directors and remain
unexercised at September 30, 1995.
The Company's shareholder approved Non-Qualified Option provides a non-qualified
option to purchase, for ten years, 275,000 shares of common stock at a price of
$1.375 per share, the closing price of the stock on August 15, 1991, the date on
which the options were granted to the Company's former President. The option is
100% vested. Of such options, 75,000 have been exercised leaving 200,000 shares
unexercised.
A summary of changes in outstanding options follows:
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares under option, beginning of year 353,500 442,000 442,000
Options granted (at an average
exercise price of $3.315,
$2.415 and $1.743) 257,000 31,000 27,000
Options exercised (at an average
exercise price of $1.476, $1.453 and $1.208) (35,500) (116,000) (21,000)
Options canceled (1,000) (3,500) (6,000)
- -----------------------------------------------------------------------------------------
Shares under option, end of year 574,000 353,500 442,000
=========================================================================================
Shares exercisable 309,250 318,500 410,250
=========================================================================================
Exercise price range $ 1.25 $ 1.25 $ 1.25
to $ 3.63 to $ 3.56 to $ 2.19
=========================================================================================
Shares available for future grant 88,429 248,000 96,000
=========================================================================================
</TABLE>
During fiscal 1995, the Board of Directors terminated the Company's Restricted
Stock Award Plan under which shares of the Company's common stock were available
to certain officers and employees without the payment of consideration. The cost
of such awards at the date of grant was considered to be compensation and is
being expensed over the vesting period. Amounts charged to expense in fiscal
years 1995, 1994 and 1993, net of forfeitures, were $40,000, $47,000, and
$12,000, respectively. At September 30, 1995, a total of 75,500 shares
previously awarded were restricted.
21
<PAGE> 26
10. COMMITMENTS AND CONTINGENCIES
The Company leases certain property and equipment under noncancelable lease
agreements some of which include renewal options of up to five years. Total rent
expense for 1995, 1994 and 1993 was $399,000, $202,000, and $256,000,
respectively. Future minimum annual fixed rentals required under noncancelable
operating leases having an original term of more than one year are $410,000 in
1996, $273,000 in 1997, $46,000 in 1998, $15,000 in 1999 and $8,000 in 2000.
During fiscal 1995 a claim for $435,000 was settled and recorded as a sale.
There were no costs associated with this claim. During fiscal 1993 a claim which
was settled for $1,900,000 was recorded as a sale. Deferred costs and the
expenses related to the settlement of the claim were recorded as cost of sales.
After giving effect to the costs and related income taxes the impact on fiscal
1993 net income was approximately $820,000.
11. PREFERRED STOCK
Preferred shareholders vote equally with common shareholders. Each share of
preferred stock has one vote, is convertible into 13.33 shares of the Company's
common stock (stated value $0.10 per share), and pays annual dividends totaling
$3.00, payable quarterly on March 31, June 30, September 30 and December 31 of
each year. The preferred stock is redeemable at the option of the Company at
$25.00 per share on and after January 1, 1998, and is not subject to mandatory
redemption.
12. CONCENTRATIONS OF CREDIT RISK
The Company sells its products primarily to the defense and commercial
industries in the United States. The Company performs ongoing credit evaluations
of its customers' financial condition and, generally, requires no collateral
from its customers. At certain times throughout the year the Company may
maintain certain bank accounts in excess of the FDIC insured limits.
13. BUSINESS SEGMENTS
The Company operates in two industry segments. These segments are the
manufacture and sale of (1) electromechanical and mechanical equipment and
components, which include electromechanical display devices, electromechanical
components and packages, keyboards and related subsystems and ordnance; and (2)
microelectronic equipment and components, which include high density solid state
memory modules and multichip microcircuits.
A significant portion of the Company's business activity in each business
segment is conducted either directly with, or as a subcontractor to entities
having contracts with, the United States Department of Defense. As of September
30, 1995 and October 1, 1994, the Company's receivables from such customers were
approximately $3,000,000 and $3,189,000, respectively. Certain major customers
made up at least 10% of total Company sales in each of the last three fiscal
years. Sales to one customer of the electromechanical segment were 20% of total
Company sales for fiscal year 1993, while sales to one customer of the
microelectronic segment in fiscal 1995 and 1994 were 21% and 27%, respectively.
Sales to another customer of the microelectronic segment in 1995 were 11% of
total company sales.
Sales for each business segment are principally to unaffiliated customers.
Intersegment sales are not significant. Assets identifiable to industry segments
are those assets which are used in the Company's operations and do not include
general corporate assets. General corporate assets consist primarily of cash,
furniture and fixtures, unamortized debt issue costs and the deferred income tax
assets.
22
<PAGE> 27
OPERATIONS BY BUSINESS SEGMENTS
(in thousands of dollars)
<TABLE>
<CAPTION>
FISCAL YEAR
1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES
Electromechanical $ 8,802 $ 9,835 $ 12,524
Microelectronic 18,067 17,986 7,577
- ------------------------------------------------------------------------------
TOTAL $ 26,869 $ 27,821 $ 20,101
==============================================================================
OPERATING INCOME (LOSS)
Electromechanical $ (977) $ 1,110 $ 2,573
Microelectronic 3,680 3,354 (111)
- ------------------------------------------------------------------------------
Operating income 2,703 4,464 2,462
General corporate expense 1,403 1,163 799
Interest expense 723 751 775
Provision for income taxes (3,326) 375 133
- ------------------------------------------------------------------------------
NET INCOME $ 3,903 $ 2,175 $ 755
==============================================================================
IDENTIFIABLE ASSETS
Electromechanical $ 4,248 $ 5,446 $ 3,182
Microelectronic 6,627 6,231 5,795
General corporate 6,557 2,106 1,933
- ------------------------------------------------------------------------------
TOTAL $ 17,432 $ 13,783 $ 10,910
==============================================================================
CAPITAL EXPENDITURES*
Electromechanical $ 249 $ 197 $ 160
Microelectronic 293 484 197
General corporate 0 4 7
- ------------------------------------------------------------------------------
TOTAL $ 542 $ 685 $ 364
==============================================================================
DEPRECIATION AND AMORTIZATION EXPENSE
Electromechanical $ 218 $ 202 $ 182
Microelectronic 278 443 303
General corporate 56 56 43
- ------------------------------------------------------------------------------
TOTAL $ 552 $ 701 $ 528
==============================================================================
</TABLE>
* Includes expenditures under capital leases.
23
<PAGE> 28
14. INTERIM FINANCIAL RESULTS (UNAUDITED)
(In thousands of dollars, except share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL 1995 FISCAL 1994
DEC 31 APR 1 JUN 30 SEPT 30 YEAR JAN 1 APR 2 JUL 2 OCT 1 YEAR
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 6,021 $ 6,609 $ 7,004 $ 7,235 $ 26,869 $6,890 $ 6,830 $6,799 $ 7,302 $27,821
- -----------------------------------------------------------------------------------------------------------------------------------
Gross margin $ 2,416 $ 2,859 $ 2,312 $ 2,566 $ 10,153 $2,537 $ 2,781 $2,471 $ 2,535 $10,324
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 462 $ 687 $ 2,203 $ 551 $ 3,903 $ 547 $ 641 $ 519 $ 468 $ 2,175
- -----------------------------------------------------------------------------------------------------------------------------------
Net income per share:
Primary $ 0.06 $ 0.09 $ 0.32 $ 0.07 $ 0.54 $ 0.07 $ 0.08 $ 0.07 $ 0.06 $ 0.28
Fully diluted $ 0.06 $ 0.09 $ 0.27 $ 0.07 $ 0.48 $ 0.07 $ 0.08 $ 0.06 $ 0.06 $ 0.27
===================================================================================================================================
Common stock market price:
High 3 1/2 3 7/16 3 3/8 3 15/16 5 5/8 4 7/16 4 3 9/16
Low 2 13/16 2 3/4 2 1/2 2 3/4 1 5/8 2 3/4 2 5/8 2 9/16
===================================================================================================================================
Preferred stock market price:
High 47 46 42 1/4 52 72 56 48 48
Low 38 39 1/4 35 39 33 43 38 1/4 37 1/8
===================================================================================================================================
</TABLE>
Note: Both common and preferred shares are traded on the American Stock
Exchange.
24
<PAGE> 29
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF BOWMAR INSTRUMENT CORPORATION
We have audited the consolidated financial statements of Bowmar Instrument
Corporation and Subsidiaries as of September 30, 1995 and October 1, 1994, and
for each of the three years in the period ended September 30, 1995, as listed in
Item 14(a) of this Form 10-K. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Bowmar
Instrument Corporation and Subsidiaries as of September 30, 1995 and October 1,
1994, and the results of their operations and their cash flows for each of the
three years in the period ended September 30, 1995, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Phoenix, Arizona
December 15, 1995
25
<PAGE> 30
ITEM 15 SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
BOWMAR INSTRUMENT CORPORATION
By:
-----------------------------------
Joseph G. Warren, Jr.
Vice President Finance, Secretary,
Treasurer and Chief Financial and
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the date indicated:
- ------------------------------- -------------------------------------
Fred N. Gerard Thomas K. Lanin
Director President, Chief Executive Officer
and Director
- ------------------------------- -------------------------------------
Steven P. Matteucci Dan L. McGurk
Director Director
- ------------------------------- -------------------------------------
Thomas M. Reahard Edward A. White
Director Chairman of the Board
and Director
December 27, 1995
26
<PAGE> 1
EXHIBIT 10.1(E)
Amendment No. Sixteen dated April 2, 1994, to General Loan and Security
Agreements dated August 30, 1989, by and among Foothill, Bowmar Instrument
Corporation and Bowmar/Ali, Inc. (Previously filed as Exhibit 10.1(e) to the
Registrants Annual report of Form 10-K for the fiscal year ended October 1,
1994, which is incorporated herein by reference.)
<PAGE> 1
EXHIBIT 10.4(A)
LOAN AGREEMENT
BY THIS LOAN AGREEMENT (together with any amendments or modifications,
the "Loan Agreement"), entered into as of this 28th day of August, 1995 by and
between BOWMAR INSTRUMENT CORPORATION, an Indiana 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 FOUR MILLION AND NO/100 DOLLARS
($4,000,000.00) for the purpose of providing working capital financing for
Borrower's business operations.
B. Borrower has also applied to Lender for a term loan facility (the
"Term Loan") in the principal amount of FOUR MILLION TWO HUNDRED THOUSAND AND
NO/100 DOLLARS ($4,200,000.00) (the "Term Loan Amount") for the purpose of
refinancing Borrower's existing debt and convertible debentures.
C. Borrower has also applied to Lender for a non-revolving line of
credit facility (the "Acquisition Loan" and with the RLC and the Term Loan, the
"Loans") in the principal amount of ONE MILLION AND NO/100 DOLLARS
($1,000,000.00) (the "Acquisition Loan Amount") for the purpose of financing in
whole or in part the acquisition of companies, divisions, subsidiaries, new
product lines or facilities approved by Lender in its sole and absolute
discretion.
D. As a condition for extending such financial accommodations,
Lender has required that Borrower enter into this Loan Agreement establishing
the terms and conditions thereof.
<PAGE> 2
ARTICLE 1
DEFINITION OF TERMS
1.1 Definitions. For the purposes of this Loan 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:
"Accounts Receivable" means, as of any date, accounts receivable
of Borrower.
"Acquisition Advance" means a disbursement of any portion of the
Acquisition Loan.
"Acquisition Conversion Date" means the date on or after the
Acquisition Termination Date selected by Borrower from which interest shall
accrue under the Acquisition Note at the Acquisition Conversion Rate.
"Acquisition Conversion Rate" means the rate per annum equal to
the sum of (i) four percent (4%) per annum, and (ii) the yield to maturity of
Treasury Obligations having a maturity date nearest to the Acquisition Maturity
Date determined two Business Days before the Acquisition Conversion Date. The
maturity date and yield of said 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.
"Acquisition Loan": See Recital C hereto.
"Acquisition Loan Amount" means the sum of up to ONE MILLION AND
NO/100 DOLLARS ($1,000,000.00) or a lesser amount actually borrowed.
"Acquisition Maturity Date" means July 31, 2001.
"Acquisition Note" means the Promissory Note of even date
herewith in the amount of the Acquisition Loan executed by Borrower and
delivered pursuant to the terms of this Loan Agreement, together with any
renewals, extensions, modifications or replacements thereof.
"Acquisition Termination Date" means the date that is twelve (12)
months after the date of the Acquisition Note.
"Acton Lien" means the lien described in Subsection (c) of the
definition of Permitted Liens.
"Advance" means RLC Advances, the Term Advance and Acquisition
Advances.
"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
-2-
<PAGE> 3
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 Loan Agreement
and execute and deliver documents, instruments, agreements, reports, statements
and certificates in connection herewith.
"Borrower": See the Preamble hereto.
"Borrowing Base" means an amount equal to:
(a) Seventy-five percent (75%) of the outstanding amount of
all Eligible Accounts Receivable of Borrower, as determined in
accordance with GAAP; plus
(b) The lesser of (i) thirty percent (30%) of the lower of
cost or market value on an inventory line item basis the Net
Eligible Inventory of Borrower, as determined in accordance with
GAAP, and (ii) $1,500,000.00.
"Borrowing Base Certificate" means a certificate of an Authorized
Officer setting forth a detailed reconciliation of the definitional components
of the Borrowing Base, in the form attached hereto as Exhibit "1" and by this
reference incorporated herein or such other form as Lender may from time to time
require.
"Bowmar/ALI" means Bowmar/ALI, Inc., a Massachusetts corporation,
a wholly owned subsidiary of Borrower.
"Bowmar Technologies" means the Bowmar Technologies division of
Borrower.
"Business Day" means a day of the year on which banks are not
required or authorized to close in Phoenix, Arizona.
"Change in Control" means the occurrence or existence of either
of the following events or conditions without the prior written consent of
Lender, if different than the state of affairs as of the Closing Date:
(a) the acquisition by any Person or two or more Persons
acting in concert of "beneficial ownership" (within the meaning
of Rule 13d-3 promulgated by the SEC under the Exchange Act or as
otherwise specified under the provisions of this Loan Agreement)
of securities of
-3-
<PAGE> 4
Borrower having more than 50% of the ordinary voting power for
the election of directors; or
(b) the acquisition by any Person or two or more Persons
acting in concert of Control of Borrower.
"Closing Date" means the earlier of the date of the first Advance
or the date of execution of this Loan Agreement by both parties.
"CMLTD" means the current maturities of Borrower's 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 subject to the
Security Documents.
"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.
"Current Assets" means all assets of Borrower classified as
current assets under GAAP.
"Current Liabilities" means all liabilities of Borrower
classified as current liabilities under GAAP, and for the purpose of this
definition, any amount which is outstanding under the RLC regardless of whether
it would be characterized as a current liability in accordance with GAAP.
"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.
"Deeds of Trust": See Section 6.2 hereof.
"Default Rate" means an interest rate per annum equal to four
percent (4%) above the rate that would otherwise be payable under the terms of
the respective Notes.
"Dollars" and the sign "$" mean lawful currency of the United
States of America.
"Eligible Accounts Receivable" means all Accounts Receivable less
any Account Receivable (i) that is subject to any prior Lien, (ii) that is
payable by a foreign company, a company located outside the United States or a
-4-
<PAGE> 5
governmental entity, (iii) that is payable by a company with fifteen percent
(15%) or more of its Accounts Receivable remaining unpaid for more than ninety
(90) days after the due dates for payment, (iv) whose invoice or other statement
or agreement comprising that account has remained unpaid for more than ninety
(90) days after the due date for payment specified therein. Notwithstanding the
foregoing, no more than twenty-five percent (25%) of all Eligible Accounts
Receivable may, at any one time, be payable be the same account debtor.
"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.
"ESOP" means any Employee Stock Ownership Plan, as it may be
amended from time to time, adopted by Borrower.
"Event of Default": See Article 11.
"Exchange Act" means the Securities Exchange Act of 1934.
"Financial Covenants": See Section 10.8 hereof.
"Floating Rate" means the rate per annum equal to the sum of (i)
the relevant Floating Rate Factor per annum, and (ii) the Prime Rate per annum
as in effect from time to time. The Floating Rate will change on each day that
the "Prime Rate" changes.
"Floating Rate Factor" means:
(a) For the RLC, one percent (1.0%).
(b) For the Term Loan, one and one quarter percent (1.25%).
(c) For the Acquisition Loan, one and one half percent (1.5%).
"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
-5-
<PAGE> 6
authority having jurisdiction over Borrower or any of its business, operations
or properties.
"Gross Eligible Inventory" means all finished goods of Bowmar
Technologies and White Microelectronics, and all raw materials of White
Microelectronics, that are not subject to any prior Lien.
"Indebtedness" means, with respect to any Person, all of its
monetary obligations and liabilities.
"Lender": See the Preamble hereto.
"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.
"Loans" means the RLC, the Term Loan and the Acquisition Loan,
each being a Loan.
"Loan Agreement": See the Preamble hereto.
"Loan Documents" means this Loan Agreement, the Notes (including
any renewals, extensions and refundings thereof), the Deed of Trust, the
Security Agreement, and any written agreements, certificates or documents (and
with respect to this Loan 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 Loan Agreement.
"Material Adverse Effect" means any circumstance or event which
(i) has any material adverse effect upon the validity or enforceability of any
Loan Document, (ii) materially impairs the ability of Borrower to fulfill its
obligations under the Loan 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.
"Net Eligible Inventory" means Gross Eligible Inventory less the
amount by which Borrower's accounts payable exceed the sum of (i) work in
process, and (ii) the raw materials of Bowmar Technologies.
"Net Income" means for any period the net income of Borrower for
such period, determined in accordance with GAAP.
"NIDA" means the Net Income for the prior twelve (12) month
period, plus all amounts deducted or deductible for depreciation and
amortization, each as construed in accordance with GAAP, in computing such Net
Income.
"Notes" means the RLC Note, the Term Note and the Acquisition
Note, each being a Note.
-6-
<PAGE> 7
"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 Loan Agreement
or represented by the Notes, including without limitation the Loans 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 Loan Documents, and all
renewals and extensions thereof, or part thereof.
"Owner's Equity Percentage" means the result obtained by dividing
(i) Tangible Net Worth, by (ii) Total Assets.
"Payment Date" means with respect to each Note, the first day of
the first month after the initial Advance under such Note and the first day of
each month thereafter, provided that if any such day is not a Business Day, then
such Payment Date should be the next succeeding 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) Liens for taxes, assessments or governmental charges not yet
due and payable;
(b) Liens to which Lender shall consent in writing, in its sole
and absolute discretion, which liens shall include the liens set forth in
Schedule "B" attached hereto and by this reference incorporated herein
and hereby consented to by Lender; and
(c) A lien in favor of the holders of certain Industrial Revenue
Bonds on Bowmar/ALI's plant facility located in Acton, Massachusetts,
securing indebtedness in an amount not to exceed $525,000.00.
"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
-7-
<PAGE> 8
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 and Bowmar/ALI, wherever
located, together with all improvements located thereon, including, without
limitation, Borrower's plant facility located in Fort Wayne, Indiana and
Bowmar/ALI's real property located in Acton, Massachusetts, as more particularly
described on Schedule "A" attached hereto and by this reference incorporated
herein.
"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.
"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.
"RLC Commitment" means the sum of FOUR MILLION AND NO/100 DOLLARS
($4,000,000.00).
"RLC Fee": See Section 5.1 hereof.
"RLC Maturity Date" means July 31, 1997.
"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 Loan Agreement, together with any renewals, extensions,
modifications or replacements thereof.
"SEC" means the Securities and Exchange Commission.
"Security Agreement": See Section 6.1 hereof.
"Security Documents": See Section 6.3 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 $200,000.00 in outstanding
principal (or principal equivalent) amount (other than unsecured trade debt).
"Tangible Net Worth" means the sum of all capital accounts of
Borrower (including, without limitation, any paid in capital, capital surplus,
and retained earnings) less the book value of all intangible assets, determined
in accordance with GAAP.
-8-
<PAGE> 9
"Term Advance" means a disbursement of the proceeds of the Term
Loan.
"Term Conversion Date" means the date selected by Borrower from
which interest shall accrue under the Term Note at the Term Conversion Rate.
"Term Conversion Rate" means the rate per annum equal to the sum
of (i) three and three-quarters percent (3.75%) per annum, and (ii) the yield to
maturity of Treasury Obligations having a maturity date nearest to the Term
Maturity Date determined two Business Days before the Term Conversion Date. The
maturity date and yield of said 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.
"Term Loan": See Recital B hereto.
"Term Loan Amount": See Recital B hereto.
"Term Fee": See Section 5.3 hereof.
"Term Maturity Date" means July 31, 2000.
"Term Note" means the Promissory Note of even date herewith in
the amount of the Term Loan executed by Borrower and delivered pursuant to the
terms of this Loan Agreement, together with any renewals, extensions,
modifications or replacements thereof.
"Total Assets" means the total assets of Borrower, determined in
accordance with GAAP.
"Treasury Obligations" means United States Treasury debt
obligations.
"Unused RLC Fee": See Section 5.2 hereof.
"White Microelectronics" means the White Microelectronics
division of Borrower.
"Working Capital" means the excess of Current Assets over Current
Liabilities.
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ARTICLE 2
THE RLC
2.1 Loan 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 Loan Agreement, amounts that in the
aggregate at any time outstanding shall not exceed the lesser of the RLC
Commitment or the Borrowing Base.
2.2 Revolving Line. Subject to the terms and conditions set forth in
this Loan Agreement, 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, or if any event has
occurred which, with the giving of notice or passage of time, or both, would
constitute an Event of Default, (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 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, which include the following provisions:
(a) Interest shall accrue on the unpaid principal balance of the
RLC at the Floating Rate.
(b) All accrued interest shall be due and payable on each 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) If any payment required under the RLC Note is not paid within
fifteen (15) 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.
(e) 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.
2.4 Notice of RLC Advance. RLC Advances shall be made by Lender to
Borrower upon written notice or telephonic notice followed by facsimile notice
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from Borrower to Lender specifying the date and amount of the requested RLC
Advance.
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 RLC Commitment or the
Borrowing Base.
2.6 Method of Payment. All payments of principal of, and interest on,
the RLC Note shall be made to Lender before 2:00 p.m. (Phoenix, Arizona time),
in immediately available funds. All payments made on the RLC Note shall be
applied, to the extent of the amount thereof, in the order of priority to be
determined by Lender in its sole discretion: (i) to the payment of costs, fees
or other charges incurred in connection with the RLC; (ii) to the payment of
accrued interest on the RLC; and/or (iii) to the reduction of the principal
balance.
2.7 Conditions. Lender shall have no obligation to make any RLC
Advance unless and until all of the conditions and requirements of this Loan
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.
2.8 Other RLC Advances by Lender. Lender, after giving ten (10) days
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 unpaid upon the RLC, (iii) any charges and expenses
that are the obligation of Borrower under this Loan 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.
2.9 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 Loan Agreement. Any assignment or transfer,
voluntary or involuntary, of this Loan 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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<PAGE> 12
2.10 Renewal. Lender shall give Borrower reasonable notice of whether
Lender will consent, in its sole and absolute discretion, to a renewal or
extension of the RLC Maturity Date. Borrower shall give Lender forty-five (45)
days prior notice of any intention to refinance any of the Loans prior to the
maturity thereof.
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ARTICLE 3
THE TERM LOAN
3.1 Loan Commitment. Lender agrees to loan to or for the benefit of
Borrower, and Borrower agrees to draw upon and borrow in a single Term Advance,
in the manner and upon the terms and conditions contained in this Loan
Agreement, an amount equal to the Term Loan Amount.
3.2 Term Note. The Term Loan shall be evidenced by the Term Note, and
shall bear interest and be payable to Lender upon the terms and conditions
contained therein, which include the following provisions:
(a) Interest shall accrue on the unpaid principal balance of the
Term Note (based on 360-day year) at the Floating Rate, provided, that
Borrower may elect, upon written notice that is received by Lender at
least ten (10) days prior to the Term Conversion Date, that interest
accrue at the Term Conversion Rate, in which case, commencing on the
Term Conversion Date, interest shall accrue at the Term Conversion
Rate. During the period that interest accrues at the Floating Rate, the
interest rate on the Term Note shall change from time to time on the
effective date of, and in conformity with, changes in the Prime Rate.
(b) Unless and until Borrower shall elect that interest accrue
under the Term Note at the Term Conversion Rate, monthly installments
of interest and principal shall be due and payable on each Payment Date
in the principal amount of $35,000.00 each, plus all accrued and unpaid
interest.
(c) Should Borrower elect that the Term Note bear interest at the
Term Conversion Rate, equal payments of principal and interest shall be
due and payable in consecutive monthly installments commencing on the
first Payment Date after the Term Conversion Date, and continuing on
each Payment Date thereafter, each in an amount sufficient to fully
amortize the principal amount of the Term Note outstanding on the Term
Conversion Date, at the Term Conversion Rate, over an amortization
period equal to one hundred twenty (120) months less the full number of
months that elapsed between the date of the Term Note and the Term
Conversion Date.
(d) The entire unpaid principal balance, all accrued and unpaid
interest, and all other amounts payable under the Term Note shall be
due and payable in full on the Term Maturity Date.
(e) If any payment required under the Term Note is not paid
within fifteen (15) 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.
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<PAGE> 14
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.
(f) After maturity, including maturity upon acceleration, the
unpaid principal balance, all accrued and unpaid interest and all other
amounts payable under the Term Note shall bear interest at the Default
Rate.
3.3 Principal Prepayments. Borrower may prepay the outstanding
principal balance of the Term Note in accordance with the terms and provisions
of the Term Note, including without limitation, any prepayment premium required
therein. However, notwithstanding anything contained in the Term Note to the
contrary, no prepayment premium shall be required in connection with a
prepayment made from the application of sales proceeds from Bowmar/ALI's real
property located in Acton, Massachusetts.
3.4 Method of Payment. All payments of principal of, and interest on,
the Term Note shall be made to Lender before 2:00 p.m. (Phoenix, Arizona time),
in immediately available funds. All payments made on the Term Note shall be
applied, to the extent of the amount thereof, in the order of priority to be
determined by Lender in its sole discretion (i) to the payment of costs, fees or
other charges incurred in connection with the Term Loan; (ii) to the payment of
accrued interest on the Term Loan; and/or (iii) to the reduction of the
principal balance of the Term Loan.
3.5 Notice of Term Advance. The Term Advance shall be made by Lender
to Borrower upon the satisfaction of all of the conditions precedent to the
effectiveness of this Loan Agreement or such later date as shall be mutually
acceptable to Borrower and Lender.
3.6 Conditions. Lender shall have no obligation to make the Term
Advance unless and until all of the conditions and requirements of this Loan
Agreement are fully satisfied. However, Lender in its sole and absolute
discretion may elect to make the Term Advance prior to full satisfaction of one
or more such conditions and/or requirements. Notwithstanding that the Term
Advance is 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.
3.7 Assignment. Borrower shall have no right to the Term Advance
other than to have the same disbursed by Lender in accordance with the
disbursement provisions contained in this Loan Agreement. Any assignment or
transfer, voluntary or involuntary, of this Loan Agreement or any right
hereunder shall not be binding upon or in any way affect Lender without its
written consent; Lender may make the Term Advance under the disbursement
provisions herein, notwithstanding any such assignment or transfer.
3.8 Bowmar/ALI. The Term Loan is to be used in part to refinance
existing indebtedness (other than the Permitted Lien referred to in Subparagraph
(c) of the definition of that term) on Bowmar/ALI's Acton, Massachusetts real
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<PAGE> 15
property, which is to be encumbered by a Deed of Trust pursuant to the terms
hereof.
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ARTICLE 4
THE ACQUISITION LOAN
4.1 Acquisition Loan. Lender agrees to review requests by Borrower
for Acquisition Advances for the purpose of financing in whole or in part the
purchase of companies, divisions, subsidiaries, new product lines or facilities
on a case by case basis. If such requests are approved by Lender in its sole and
absolute discretion, Lender shall make Acquisition Advances to or for the
benefit of Borrower, in such manner and upon such terms and conditions as Lender
shall determine in its sole and absolute discretion, provided that such amounts
shall not exceed in the aggregate the Acquisition Loan Commitment.
4.2 Line of Credit. Subject to the terms and conditions set forth in
this Loan Agreement, Lender, from time to time, may in its sole and absolute
discretion make Acquisition Advances as Borrower may request, provided that the
outstanding principal balance shall not exceed the Acquisition Loan Amount.
Until the Acquisition Termination Date, the Acquisition Loan shall be a line of
credit, against which Acquisition Advances, if approved by Lender in its sole
and absolute discretion, may be made to Borrower, provided that Borrower (i) is
not in default under any provision of this Loan Agreement, and (ii) no advance
shall be made that would cause the outstanding principal balance of the
Acquisition Loan to exceed the Acquisition Loan Amount. On and after the
Acquisition Termination Date, no further Acquisition Advances shall be made to
Borrower under the Acquisition Loan.
4.3 Acquisition Note. The Acquisition Loan shall be evidenced by the
Acquisition Note, and shall bear interest and be payable to Lender upon the
terms and conditions contained therein, which include the following provisions:
(a) Interest shall accrue on the unpaid principal balance of the
Acquisition Note (based on 360-day year) at the Floating Rate,
provided, that Borrower may elect, upon written notice that is received
by Lender at least ten (10) days prior to the Acquisition Conversion
Date, that interest accrue at the Acquisition Conversion Rate, in which
case, commencing on the Acquisition Conversion Date, interest shall
accrue at the Acquisition Conversion Rate. During the period that
interest accrues at the Floating Rate, the interest rate on the
Acquisition Note shall change from time to time on the effective date
of, and in conformity with, changes in the Prime Rate.
(b) All accrued interest shall be due and payable on each Payment
Date prior to the Acquisition Termination Date.
(c) Commencing on the first Payment Date on or after the
Acquisition Termination Date, unless and until Borrower shall elect
that interest accrue under the Acquisition Note at the Acquisition
Conversion Rate, monthly installments of interest and principal shall
be due and payable on each Payment Date each in a principal amount
sufficient to amortize the principal balance outstanding on
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<PAGE> 17
the Acquisition Conversion Date over sixty (60) equal monthly
installments, plus all accrued and unpaid interest.
(d) Should Borrower elect that the Acquisition Note bear interest
at the Acquisition Conversion Rate, equal payments of principal and
interest shall be due and payable in consecutive monthly installments
commencing on the first Payment Date after the Acquisition Conversion
Date, and continuing on each Payment Date thereafter, each in an amount
sufficient to fully amortize the principal amount of the Acquisition
Note outstanding on the Acquisition Conversion Date, at the Acquisition
Conversion Rate, over an amortization period equal to number of months
remaining until the Acquisition Maturity Date.
(e) The entire unpaid principal balance, all accrued and unpaid
interest, and all other amounts payable under the Acquisition Note
shall be due and payable in full on the Acquisition Maturity Date.
(f) If any payment required under the Acquisition Note is not
paid within fifteen (15) 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.
(g) After maturity, including maturity upon acceleration, the
unpaid principal balance, all accrued and unpaid interest and all other
amounts payable under the Acquisition Note shall bear interest at the
Default Rate.
4.4 Principal Prepayments. Borrower may prepay the outstanding
principal balance of the Acquisition Note in accordance with the terms and
provisions of the Acquisition Note, including without limitation, any prepayment
premium required therein.
4.5 Notice of Acquisition Advance. Acquisition Advances shall be made
by Lender to Borrower upon written notice from Borrower to Lender specifying the
date, amount and purpose of the requested RLC Advance. Borrower shall provide
Lender with all supporting information required by Lender in connection with the
requested Acquisition Advance, for the purpose of evaluating the requested
Acquisition Advance and determining if any additional collateral security for
the Loans is required in connection therewith.
4.6 Method of Payment. All payments of principal of, and interest on,
the Acquisition Note shall be made to Lender before 2:00 p.m. (Phoenix, Arizona
time), in immediately available funds. All payments made on the Acquisition Note
shall be applied, to the extent of the amount thereof, in the order of priority
to be determined by Lender in its sole and absolute discretion: (i) to the
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payment of costs, fees or other charges incurred in connection with the
Acquisition; (ii) to the payment of accrued interest on the Acquisition Loan;
and/or (iii) to the reduction of the principal balance.
4.7 Conditions. Lender shall have no obligation to make any
Acquisition Advance unless and until Lender shall have approved the requested
Acquisition Advance in its sole and absolute discretion and all of the
conditions and requirements of this Loan Agreement are fully satisfied. However,
Lender in its sole and absolute discretion may elect to make one or more
Acquisition Advances prior to full satisfaction of one or more such conditions
and/or requirements. Notwithstanding that such an Acquisition Advance or
Acquisition 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 Acquisition
Advances until Lender shall have approved the requested Acquisition Advance in
its sole and absolute discretion and all conditions and requirements are fully
satisfied.
4.8 Other Acquisition Advances by Lender. Lender, after giving ten
(10) days written notice to Borrower, from time to time, may make Acquisition
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 unpaid upon the Acquisition Loan, (iii) any
charges and expenses that are the obligation of Borrower under this Loan
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.
4.9 Assignment. Borrower shall have no right to any Acquisition
Advance other than to have the same disbursed by Lender in accordance with the
disbursement provisions contained in this Loan Agreement. Any assignment or
transfer, voluntary or involuntary, of this Loan Agreement or any right
hereunder shall not be binding upon or in any way affect Lender without its
written consent; Lender may make Acquisition Advances under the disbursement
provisions herein, notwithstanding any such assignment or transfer.
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ARTICLE 5
LOAN FEES
5.1 RLC Fee. In connection with the RLC, Lender has earned and
Borrower shall pay to Lender on or before the Closing Date a non-refundable RLC
Fee (the "RLC Fee") in the amount of $12,500.00. Borrower acknowledges that the
RLC Fee is in addition to that non-refundable commitment fee previously paid by
Borrower to Lender.
5.2 Unused RLC Fee. An unused RLC fee (the "Unused RLC Fee") computed
at the rate of one-quarter of one percent (.25%) per annum on the unused portion
of the RLC Commitment, calculated from the date hereof shall be payable monthly
in arrears. For each month (or portion thereof), the unused commitment fee shall
be equal to (A) the RLC Commitment minus (B) the "average monthly outstandings"
for the month (or portion thereof) with respect to which the Unused RLC Fee is
being computed, with the resulting number multiplied by (C) one-twelfth (1/12th)
of the rate per annum set forth above. As used herein, "average monthly
outstandings" means the sum of the outstanding amount of the RLC Advances on
each day during the month (or portion thereof for which the Unused RLC Fee is
being computed) with respect to which the Unused RLC Fee is being computed,
divided by the number of days in that month (or portion thereof). If the Unused
RLC Fee is being computed for less than a full month, the percentage used in
clause (C) above shall be computed on a daily basis for the number of days for
which the fee is being computed.
5.3 Term Fee. In connection with the Term Loan, Lender has earned and
Borrower shall pay to Lender on or before the Closing Date a non-refundable Term
Loan fee (the "Loan Fee") in the amount of $12,500.00. Borrower acknowledges
that the Term Fee is in addition to that non-refundable commitment fee
previously paid by Borrower to Lender.
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ARTICLE 6
SECURITY
6.1 Security. So long as the Loans are outstanding, Borrower shall
cause the Loans and Borrower's obligations under this Loan Agreement to be
secured at all times by a valid and effective security agreement (the "Security
Agreement"), duly executed and delivered by or on behalf of Borrower, granting
Lender a valid and enforceable security interest in all of the kinds and
categories of personal property described in the Security Agreement, including
without limitation its Accounts Receivable, inventory and equipment, wherever
located, in, to, or under which Borrower now has or hereafter acquires any
right, title, or interest, whether present, future, or contingent, and in
Borrower's expectancy to acquire such property, subject to no prior Liens except
for Permitted Liens.
6.2 Deeds of Trust. So long as the Loans are outstanding, Borrower
shall cause the Loans and Borrower's obligations under this Agreement to be
secured by the following:
(a) Two Deeds of Trust, Assignments of Rents, Security Agreements
and Fixture Filings or Mortgages, Assignments of Rents, Security
Agreements and Fixture Filings (each a "Deed of Trust") constituting a
first and prior lien on the Real Property, subject to no prior Liens
except for Permitted Liens;
(b) A valid and effectual assignment of rents and leases covering
the Real Property;
(c) A valid and effectual security agreement granting Lender a
first and prior security interest in all of the property described
below in, to, or under which Borrower and Bowmar/ALI now have or
hereafter acquire any right, title or interest, whether present,
future, or contingent: all equipment, inventory, accounts, general
intangibles, instruments, documents, and chattel paper, as those terms
are defined in the Uniform Commercial Code, and all other personal
property of any kind (including without limitation money and rights to
the payment of money), whether now existing or hereafter created, that
are now or at any time hereafter (i) in the possession or control of
Lender in any capacity; (ii) erected upon, attached to, or appurtenant
to, the Real Property; (iii) located or used on the Real Property or
identified for use on the Real Property (whether stored on the Real
Property or elsewhere); or (iv) used in connection with, arising from,
related to, or associated with the Real Property or any of the personal
property described herein, the construction of any improvements on the
Real Property, the ownership, development, maintenance, leasing,
management, or operation of the Real Property, the use or enjoyment of
the Real Property, or the operation of any business conducted on the
Real Property; together with all products and proceeds of all of the
foregoing, in any form; and
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<PAGE> 21
(d) Valid and effectual assignments of Borrower's and
Bowmar/ALI's interest in all operating, management and supervision
agreements, all other documents relating to the ownership, maintenance,
leasing, management and operation of the Real Property.
6.3 Security Documents. All of the documents required by this Article
6 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 Agreement, the Deed of Trust,
and this Loan Agreement, may heretofore or hereinafter be referred to as the
"Security Documents."
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ARTICLE 7
CONDITIONS PRECEDENT
The obligation of Lender to make the Loans and to make the initial
Advance hereunder is subject to the full prior satisfaction of each of the
following conditions precedent, which conditions precedent shall be satisfied on
or before November 15, 1995, and, as to each future Advance, to the full prior
satisfaction at each such time of each of the conditions precedent in Sections
7.2, 7.3 and 7.4 hereof:
7.1 Initial Advance. Prior to its making the initial Advance, Lender
shall have received the following, each in form and substance satisfactory to
Lender:
(a) This Loan Agreement. This Loan Agreement, duly executed and
delivered to Lender by Borrower.
(b) The Notes. The Notes, duly executed, drawn to the order of
Lender and otherwise as provided in Articles 2, 3 and 4 hereof.
(c) Opinion of Counsel. A favorable opinion of counsel for
Borrower, in form and content satisfactory to Lender.
(d) Officer's Certificate. A current 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 8 of this Loan
Agreement and in the other Loan Documents are, in all material
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 Loans, 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.
(e) Organizational Documents. A copy of the current Articles of
Incorporation (or other charter documents, however named) of Borrower
and Bowmar/ALI, including all amendments thereto, certified as current
and complete by the appropriate authority of the state of said
corporations' incorporation, together with evidence of said
corporations' good standing in said corporations' state of
incorporation and in every other state in which each corporation is
doing business or the conduct of said corporations'
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<PAGE> 23
business requires such standing for the enforcement of material
contracts.
(f) Secretary Certificate. Certificates of the corporate
secretaries of Borrower and Bowmar/ALI, signed by the duly appointed
secretary thereof and issued as of the Closing Date, each 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 Loans, the
execution, delivery, and performance of this Loan Agreement, the Notes,
the Loan 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 Loan
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 Loan Agreement and other documents to be delivered
hereunder and/or to act as Authorized Officers hereunder.
(g) Deeds of Trust. The Deeds of Trust, duly executed and
delivered to Lender by Borrower and Bowmar/ALI.
(h) Security Agreement. The Security Agreement, duly executed and
delivered to Lender by Borrower.
(i) Filings. Completion of all filings necessary to perfect
Lender's Liens with respect to the Collateral.
(j) Borrowing Base Certificate. An initial Borrowing Base
Certificate, dated as of the date of initial funding.
(k) Environmental Indemnity Agreement. An Environmental Indemnity
Agreement with respect to the Real Property, duly executed and
delivered to Lender by Borrower.
(l) Prior Lien Agreement. A Prior Lienholder Recognition and
Estoppel Agreement with respect to the prior lien on the Real Property
located in Acton, Massachusetts, duly executed and delivered to Lender
by the holders of such prior lien, together with such supporting
information relating to such lien and the indebtedness secured thereby
as Lender shall require.
(m) Non-Disturbance Agreement. A Non-Disturbance, Attornment,
Estoppel and Subordination Agreement with respect to the lease on the
Real Property located in Acton, Massachusetts, duly
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<PAGE> 24
executed and delivered to Lender by Borrower and the tenant, together
with copies of such lease and other supporting information relating to
such lease as Lender shall require.
(n) Real Property Appraisals. Appraisals of the Real Property, at
Borrower's expense, showing a value satisfactory to Lender in its sole
and absolute discretion.
(o) Equipment and Machinery Appraisals. Appraisals of Borrower's
equipment and machinery, at Lender's expense, showing a value
satisfactory to Lender in its sole and absolute discretion.
(p) Surveys. One or more current surveys of the Real Property by
a licensed surveyor acceptable to Lender describing the boundaries of
the Real Property and showing all means of ingress and egress,
rights-of-way, easements (each of which shall be identified by docket
and page or recording number where recorded) and all other customary
and relevant information pursuant to ALTA standards and any title
company requirements. All surveys shall be certified to Lender and the
title company issuing the title policy required below.
(q) Title Policy. One or more ALTA extended coverage mortgagee's
title insurance policies [ALTA Loan Policy - 1970 (Rev. 10-17-70)] or
equivalent, at Borrower's expense, with such endorsements as Lender may
require, issued by a title insurance company satisfactory to Lender in
the aggregate amount of $3,915,000.00 (with direct access reinsurance
in amounts, by companies and in form acceptable to Lender as Lender may
require) insuring the liens of the Deed of Trust to be first and prior
liens upon the Real Property as security for all Advances pursuant to
the terms of this Loan Agreement, subject only to such exceptions
(including without limitation, the Permitted Exceptions) as Lender may
expressly approve in writing.
(r) Environmental. An environmental questionnaire and disclosure
statement completed and signed by Borrower covering the current and
former condition and uses of the Real Property and adjacent property,
followed by a current preliminary environmental assessment (Phase I
assessment) of the Real Property and adjacent property which shall be
dated no earlier than one hundred eighty (180) days prior to the date
hereof, plus any sampling and analysis (Phase II assessment) or special
limited assessment that Lender may require after review of the Phase I
assessment, together with any other environmental investigations and
reports that Lender may require, all of which shall be at Borrower's
expense by a Lender-approved environmental consulting firm and none of
which shall reveal any existing or potential environmental condition
adversely affecting the use or value of the Real Property.
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(s) Insurance. Original copies of policies of insurance in
compliance with Section 9.15 hereof.
(t) Accounts Receivable Audit. The results of an audit of the
Accounts Receivable, which results shall be satisfactory to Lender in
its sole discretion.
(u) Flood Insurance. Evidence whether the Real Property, or any
part thereof, lies within a "special flood hazard area" as designated
on maps prepared by the U.S. Department of Housing and Urban
Development pursuant to the Flood Disaster Protection Act of 1973, as
amended, and, if so designated, a National Flood Insurance Association
standard flood insurance policy, plus insurance from a private
insurance carrier if required by Lender, for the duration of the Loan
in the amount of the full insurable value of the completed
Improvements, naming Lender as an additional loss payee.
(v) CCR. Copies of any Declaration of Covenants, Conditions and
Restrictions and related documents pertaining to the Real Property and
the Improvements.
(w) Loan Fees. Payment of the RLC Fee and the Term Fee.
(x) Arbitration Resolution. An Arbitration Resolution, executed
by Borrower.
(y) No Liens. Evidence satisfactory to Lender that, other than
the Permitted Liens, the Collateral is not subject to any prior Lien,
including, without limitation, any lien in favor of Foothill Capital
Corporation.
(z) Additional Information. Such other information and documents
as may reasonably be required by Lender or Lender's counsel.
(aa) Legal Descriptions. Legal descriptions of the Real Property
satisfactory to Lender, together with the authorization and direction
of Borrower and Bowmar/ALI to attach such legal descriptions to the
appropriate Loan Documents.
7.2 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 Loans.
7.3 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.
7.4 Representations and Warranties. The representations and
warranties contained in Article 8 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
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(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).
7.5 Satisfaction of Conditions Precedent. Borrower and Lender
acknowledge that all of the conditions precedent to the initial Advance set
forth in this Article 7 have not been satisfied as of the execution of this Loan
Agreement. In the event that on November 15, 1995, all of the conditions
precedent set forth in this Article 7, have not been satisfied, Lender's
commitment to make the Loans under this Loan Agreement shall terminate unless
Lender and Borrower shall agree in writing to extend said date.
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ARTICLE 8
REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Loans, Borrower represents and warrants to
Lender that:
8.1 Organization and Good Standing. It is duly organized in the State
of Indiana, validly existing and in good standing in the State of Indiana and is
duly qualified to do business in the States of Arizona and Indiana. 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.
8.2 Authorization and Power. It has the corporate power and requisite
authority to execute, deliver and perform this Loan Agreement, the Notes and the
other Loan 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 Loan Agreement, the Notes and such other Loan Documents
and is and will continue to be duly authorized to perform this Loan Agreement,
the Notes and such other Loan Documents.
8.3 No Conflicts or Consents. Neither the execution and delivery of
this Loan Agreement, the Notes or the other Loan 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, or (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 Articles 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
Loan Documents or to consummate the transactions contemplated hereby or thereby,
or if required, such consent, approval, authorization or order shall have been
obtained.
8.4 Enforceable Obligations. This Loan Agreement, the Notes and the
other Loan 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.
8.5 Financial Condition. Borrower has delivered to Lender copies of
the Borrower's most recent audited financial statements. Such financial
statements, in all material respects, fairly present the financial position of
Borrower as of such date and have been prepared in accordance with GAAP. Since
the date thereof, Borrower has not discovered any obligations, liabilities or
indebtedness (including contingent and indirect liabilities and obligations or
unusual forward
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or 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 of the latest financial statements delivered to Lender.
8.6 Full Disclosure. There is no material fact known to Borrower 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 Loan 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.
8.7 No Default. No event or condition has occurred and is continuing
that constitutes an Event of Default.
8.8 Significant Debt Agreements. It is not in default in any material
respect under any Significant Debt Agreement.
8.9 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.
8.10 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.
8.11 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).
8.12 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.
8.13 Survival of Representations, Etc. All representations and
warranties by Borrower herein shall survive the making of the Loans and the
execution and
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delivery of the Notes; any 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.
8.14 Recitals. The recitals and statements of intent appearing in this
Loan Agreement are true and correct.
8.15 No Stock Purchase. No part of the proceeds of any financial
accommodation made by Lender in connection with this Loan 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.
8.16 Solvency. 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.
8.17 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 Loan Agreement, all advances of proceeds of
the Loans and the execution and delivery of all other documents and instruments
in connection with the Loans and/or this Loan Agreement, so long as Lender has
any commitment to lend hereunder and until the Loans have been paid in full and
all of Borrower's obligations under this Loan Agreement, the Notes and all
Security Documents have been fully discharged.
8.18 Title to Collateral. It has good and marketable title to the
Collateral, free of any Liens except for Permitted Liens, if any.
8.19 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.
8.20 Subsidiaries. Borrower has no existing subsidiary that conducts
any business or operations other than Bowmar/ALI.
8.21 Foothill Capital Corporation. Borrower and Lender acknowledge
that prior to (and only prior to) the satisfaction of the conditions precedent
set forth in Article 7 hereof the representations and warranties contained in
Sections 8.3, 8.8, 8.18 and 8.19 are subject to conflicts arising under, and the
effect of, Borrower's agreements with Foothill Capital Corporation.
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ARTICLE 9
AFFIRMATIVE COVENANTS
Until payment in full of the Notes and the complete performance of the
Obligation, Borrower agrees that:
9.1 Financial Statements, Reports and Documents. Borrower shall
deliver, or cause to be delivered, to Lender each of the following:
(a) Monthly Statements of Borrower. As soon as available, and in
any event within thirty (30) days after the end of each month, company
prepared financial statements of Borrower, including the balance sheet
of Borrower as of the end of such month, and statements of income of
Borrower for that month and for the portion of the fiscal year ending
with such month, all in reasonable detail and fairly stated and with
respect to quarterly (without footnotes) and annual financial
statements prepared in accordance with GAAP.
(b) Annual Statements of Borrower. As soon as available and in
any event within ninety (90) days after the close of each fiscal year
of Borrower, audited financial statements of Borrower, including its
balance sheet as of the close of such fiscal year and 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) Quarterly Certificate Respecting Financial Covenants. As soon
as available but in any event within forty-five (45) days after the end
of each quarterly accounting period of Borrower hereafter, a
certificate signed by an Authorized Officer of the Borrower, or other
financial officer acceptable to Lender, setting forth in such level of
detail as Lender shall reasonably require a calculation of the
Financial Covenants as of the end of that quarterly period.
(d) Borrowing Base Certificate. Within thirty (30) days after the
end of each month, the Borrowing Base Certificate.
(e) Agings of Accounts. Within thirty (30) days after the end of
each month, agings and listings of all Accounts Receivable,
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all inventory, and all accounts payable of Borrower, in such level of
detail as Lender shall reasonably require. Lender shall have the right,
at Borrower's expense, to inspect Borrower's Accounts Receivable,
inventory and accounts payable.
(f) Compliance Certificate of Borrower. Within forty-five (45)
days after the end of each quarterly accounting period (excluding the
fiscal year-end quarter) and within ninety (90) days after the end of
each fiscal year of Borrower hereafter, a certificate signed by an
Authorized Officer of Borrower, stating that a review of the activities
of Borrower during such month or year has been made under his
supervision, that, as of such date, Borrower has observed, performed
and fulfilled each and every obligation and covenant contained herein
and no Event of Default exists under any of the same or, if any Event
of Default shall have occurred, specifying the nature and status
thereof, and stating that all financial statements of Borrower
delivered to Lender during the respective period pursuant to Section
9.1(a) and 9.1(b) hereof, to such officer's knowledge after due
inquiry, fairly present in all material respects the financial position
of the Borrower and the results of its operations at the dates and for
the periods indicated, and have been prepared in accordance with GAAP
(excluding footnotes for each quarterly financial statement other than
the fiscal year-end quarter), subject to year end audit and
adjustments.
(g) Management Letters. Within one hundred twenty (120) days
after the end of each fiscal year of Borrower, the management letter,
if any, of Borrower's certified public accountants issued in connection
with the audit.
(h) Other Information. (i) As soon as available, copies of each
annual report, proxy or financial statement or other report or
communication which Borrower may make available to stockholders or
debenture holders, as such, and copies of all annual, regular, and
periodic and special reports and registration statements sent to the
SEC or any securities exchange, and (ii) such other information
concerning the business, properties or financial condition of Borrower
as Lender shall reasonably request.
9.2 Payment of Taxes and Other Indebtedness. Borrower 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.
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9.3 Maintenance of Existence and Rights; Conduct of Business.
Borrower will preserve and maintain its corporate existence and all of its
rights, privileges and franchises 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.
9.4 Notice of Default. Borrower 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.
9.5 Other Notices. Borrower will promptly notify Lender of (a) any
Material Adverse Effect, (b) any waiver, release or default under any
Significant Debt Agreement, (c) except as to any claim not covered as a result
of an insurance deductible provision, 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.
9.6 Compliance with Loan Documents. Borrower will comply with any and
all covenants and provisions of this Loan Agreement, the Notes and all other
Loan Documents.
9.7 Compliance with Significant Debt Agreements. Borrower will comply
in all material respects with all Significant Debt Agreements.
9.8 Operations and Properties. Borrower 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.
9.9 Books and Records; Access. Borrower 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.
9.10 Compliance with Law. Borrower 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.
9.11 Authorizations and Approvals. Borrower 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 Loan Documents and to operate its
businesses as presently or hereafter duly conducted.
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9.12 ERISA Compliance. With respect to its Plans, Borrower 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.
9.13 Further Assurances. Borrower 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.
9.14 News Releases. Borrower 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.
9.15 Insurance. Borrower shall maintain in full force and effect at
all times all insurance coverages required under the terms of this Loan
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) all 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
$1,000,000.00 (combined single limit for bodily injury and property
damage), and an umbrella excess liability coverage in an amount not
less than $5,000,000.00 shall be in effect with respect to Borrower.
(c) Policies of workers' compensation insurance in amounts and
with coverages as legally required.
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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 Loan
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.
9.16 Change in Control. Should there be a Change in Control as to
Borrower, the Loans shall be immediately due and payable.
9.17 Termination of Operations. Borrower shall provide Lender with
prior written notice of any termination of all or any material portion of
Borrower's operations.
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ARTICLE 10
NEGATIVE COVENANTS
Until payment in full of the Notes and the performance of the
Obligation, Borrower agrees that:
10.1 Amendments to Organizational Documents. Borrower will not amend
its organizational documents if the result thereof could result in the
occurrence directly or indirectly of a Material Adverse Effect.
10.2 Margin Stock. Borrower shall not use any proceeds of the Loans,
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 Securities Exchange Act of 1934, as
amended, or any of the rules or regulations respecting the extensions of credit
promulgated thereunder.
10.3 Fiscal Year. Except with prior notice to Lender, Borrower 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.
10.4 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.
10.5 Dividends. It will not declare or pay cash dividends in excess of
$500,000.00 during any fiscal year of Borrower.
10.6 Insider Loans. It will not make loans, receivables or
investments, to officers or directors of Borrower or any other companies of said
officers or directors, except for normal advances for travel and entertainment
and except for the existing balances of loans due from Borrower's chairman.
10.7 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.
10.8 Financial Covenants. It will not permit:
(a) The Current Ratio to be less than 1.5 to 1.0 at end of any
quarterly accounting period of Borrower.
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(b) Its Working Capital to be less than $4,000,000.00 at the end
of any quarterly accounting period of Borrower.
(c) Its Tangible Net Worth to be less than $4,400,000.00 at the
end of any quarterly accounting period of Borrower.
(d) Its Owner's Equity Percentage to be less than thirty percent
(30%) at the end of any quarterly accounting period of Borrower.
(e) Its Debt Coverage Ratio to be less than 3.0 to 1.0 at the
end of any quarterly accounting period of Borrower.
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ARTICLE 11
EVENTS OF DEFAULT
11.1 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,
any of the Notes when the same shall become due or payable and such
failure continues for fifteen (15) days after notice thereof to
Borrower;
(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 Loan Documents (other than a failure or
neglect described in one or more provisions of this Section 11.1) and
such failure or neglect continues unremedied for a period of thirty
(30) days after notice thereof to Borrower;
(c) Any material warranty, representation or statement contained
in this Loan Agreement or any of the other Loan Documents, or which is
contained in any certificate or statement furnished or made to Lender
pursuant hereto or in connection herewith or with the Loans, 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 under 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 Notes) 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 Loan Documents shall have been
determined to be invalid or unenforceable against Borrower in
accordance with the respective terms thereof, or shall in any way be
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terminated or become or be declared ineffective or inoperative, so as
to deny Lender the substantial benefits contemplated by such Loan
Document or Loan Documents;
(g) Borrower 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, 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 $200,000.00 in the aggregate (other than any judgment
covered by insurance where coverage has been acknowledged by the
insurer) shall be rendered against Borrower, 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 $200,000.00 or (ii) a Reportable
Event, the occurrence of which would cause the imposition of a lien in
excess of $200,000.00 under
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<PAGE> 39
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;
(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 contributes or contributed on
behalf of its employees and Lender determines in good faith that the
aggregate liability likely to be incurred by Borrower, as a result of
any of the events specified in Subsections (i), (ii) and (iii) below,
will have an effect in excess of $200,000.00; (i) Borrower 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 occurrence of a Change in Control without the written
consent of Lender;
(m) The dissolution, liquidation, sale, transfer, lease or other
disposal of all or substantially all of the assets or business of
Borrower;
(n) Any levy or execution upon, or judicial seizure of, any
property of Borrower that has a fair market value in excess of
$200,000.00 that is not bonded or released within forty-five (45) days;
(o) The occurrence of either any material adverse change in the
financial condition of Borrower or a material change in the management
of Borrower, in either case 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; or
(p) Any failure of Bowmar/ALI to make payments when due under the
indebtedness secured by the Acton Lien.
11.2 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 Loan 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 Notes 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 Notes
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<PAGE> 40
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 Loan Documents, or otherwise provided under or pursuant
to any applicable law or agreement; provided, however, that if any Event of
Default specified in Sections 11.1(g) and 11.1(h) shall occur, the principal of,
and all interest on, the Notes 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 11.2 are in addition to
other rights and remedies (including, without limitation, other rights of
setoff) which Lender may have.
11.3 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
Loan 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 Loan
Documents or other control over the management and affairs of Borrower.
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<PAGE> 41
ARTICLE 12
MISCELLANEOUS
12.1 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.
12.2 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 Loan Documents shall be in addition to all other rights provided by
law. No modification or waiver of any provision of this Loan Agreement, the
Notes or any Loan 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.
12.3 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 Loans,
and the preservation and enforcement of Lender's rights under this Loan
Agreement, the Notes, and/or the other Loan Documents, as well as the costs of
the Real Property appraisal and any updates thereof, the surveys, the title
insurance policies, any environmental reports and any filing and recording fees;
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
Loan Agreement, the Notes and/or other Loan Documents. Lender shall have the
right to require reappraisals of the Real Property at Borrower's expense. 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 Loan Agreement, the Notes or any
other Loan Document.
12.4 Notices. Except for telephonic notices permitted herein, any
notices or other communications required or permitted to be given by this Loan
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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<PAGE> 42
Borrower: Bowmar Instrument Corporation
5080 North 40th Street
Suite 475
Phoenix, Arizona 85018
Attention: Joseph G. Warren, Jr.
Lender: Bank One, Arizona, NA
Post Office Box 71
Phoenix, Arizona 85001
Attention: Commercial Banking A593
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 Loan
Agreement by giving notice of such change to the other parties pursuant to this
Section 12.4.
12.5 Governing Law. This Loan 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 Loan Agreement and all of the other Loan
Documents, without regard to Arizona conflicts of law rules.
12.6 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 Loan 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.
12.7 Binding Effect. The Loan 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.
12.8 Entirety. The Loan 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.
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<PAGE> 43
12.9 Headings. Section headings are for convenience of reference only
and shall in no way affect the interpretation of this Loan Agreement.
12.10 Survival. All representations and warranties made by Borrower
herein shall survive delivery of the Notes and the making of the Loans.
12.11 No Third Party Beneficiary. The parties do not intend the
benefits of this Loan Agreement to inure to any third party, nor shall this Loan
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 Notes, 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 Loan Agreement or any of the other
Loan Documents, neither this Loan 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.
12.12 Schedules and Exhibits Incorporated. All schedules and exhibits
attached hereto are hereby incorporated into this Loan Agreement by each
reference thereto as if fully set forth at each such reference.
12.13 Counterparts. This Loan 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.
12.14 Securities Laws. Lender understands that Borrower is a public
company listed on the American Stock Exchange and is subject to various Federal
and state securities laws. Lender understands that Borrower will be furnishing
information to Lender pursuant to this Loan Agreement and otherwise which is not
public. Lender has advised Borrower that Lender, its officers, employees and
agents are, or will be made aware of, their obligations with respect to that
information under those securities laws.
IN WITNESS WHEREOF, the undersigned have executed this Loan Agreement
as of the day and year first above written.
BOWMAR INSTRUMENT CORPORATION, an
Indiana corporation
By: /s/ Joe G. Warren, Jr.
Name: Joe G. Warren, Jr.
Title: Vice President
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<PAGE> 44
BANK ONE, ARIZONA, NA, a national banking
association
By: /s/ Michael V. McCann
Name: Michael V. McCann
Title: Vice President
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<PAGE> 45
EXHIBIT "1"
BOWMAR INSTRUMENT CORPORATION
BORROWING BASE CERTIFICATE
<PAGE> 46
SCHEDULE "A"
REAL PROPERTY DESCRIPTION
<PAGE> 47
SCHEDULE "B"
Liens:
<PAGE> 48
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS............................... 1
ARTICLE 1 DEFINITION OF TERMS........ 2
1.1 Definitions................ 2
ARTICLE 2 THE RLC.................... 10
2.1 Loan Commitment............ 10
2.2 Revolving Line............. 10
2.3 RLC Note................... 10
2.4 Notice of RLC Advance...... 11
2.5 Excess Balance
Repayment.................. 11
2.6 Method of Payment.......... 11
2.7 Conditions................. 11
2.8 Other RLC Advances by
Lender..................... 11
2.9 Assignment................. 11
2.10 Renewal.................... 11
ARTICLE 3 THE TERM LOAN.............. 13
3.1 Loan Commitment............ 13
3.2 Term Note.................. 13
3.3 Principal Prepayments...... 14
3.4 Method of Payment.......... 14
3.5 Notice of Term Advance..... 14
3.6 Conditions................. 14
3.7 Assignment................. 14
ARTICLE 4 THE ACQUISITION LOAN....... 16
4.1 Acquisition Loan........... 16
4.2 Line of Credit............. 16
4.3 Acquisition Note........... 16
4.4 Principal Prepayments...... 17
4.5 Notice of Acquisition
Advance.................... 17
4.6 Method of Payment.......... 17
4.7 Conditions................. 18
4.8 Other Acquisition
Advances by Lender......... 18
4.9 Assignment................. 18
ARTICLE 5 LOAN FEES.................. 19
</TABLE>
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<PAGE> 49
<TABLE>
<S> <C>
5.1 RLC Fee.................... 19
5.2 Unused RLC Fee............. 19
5.3 Term Fee................... 19
ARTICLE 6 SECURITY................... 20
6.1 Security................... 20
6.2 Deeds of Trust............. 20
6.3 Security Documents......... 21
ARTICLE 7 CONDITIONS PRECEDENT....... 22
7.1 Initial Advance............ 22
7.2 No Event of Default........ 25
7.3 No Material Adverse
Change..................... 25
7.4 Representations and
Warranties................. 25
7.5 Satisfaction of Conditions
Precedent........................ 26
ARTICLE 8 REPRESENTATIONS AND
WARRANTIES....................... 27
8.1 Organization and Good
Standing................... 27
8.2 Authorization and Power.... 27
8.3 No Conflicts or
Consents................... 27
8.4 Enforceable Obligations.... 27
8.5 Financial Condition........ 27
8.6 Full Disclosure............ 28
8.7 No Default................. 28
8.8 Significant Debt
Agreements................. 28
8.9 No Litigation.............. 28
8.10 Taxes...................... 28
8.11 ERISA...................... 28
8.12 Compliance with Law........ 28
8.13 Survival of
Representations, Etc....... 29
8.14 Recitals................... 29
8.15 No Stock Purchase.......... 29
8.16 Solvency................... 29
8.17 Advances................... 29
8.18 Title to Collateral........ 29
8.19 Security Documents......... 29
8.20 Subsidiaries............... 29
8.21 Foothill Capital
Corporation ............... 29
ARTICLE 9 AFFIRMATIVE COVENANTS...... 30
</TABLE>
-ii-
<PAGE> 50
<TABLE>
<S> <C>
9.1 Financial Statements,
Reports and Documents...... 30
9.2 Payment of Taxes and
Other Indebtedness......... 31
9.3 Maintenance of Existence
and Rights; Conduct of
Business................... 32
9.4 Notice of Default.......... 32
9.5 Other Notices.............. 32
9.6 Compliance with Loan
Documents.................. 32
9.7 Compliance with
Significant Debt
Agreements................. 32
9.8 Operations and
Properties................. 32
9.9 Books and Records;
Access..................... 32
9.10 Compliance with Law........ 32
9.11 Authorizations and
Approvals.................. 32
9.12 ERISA Compliance........... 33
9.13 Further Assurances......... 33
9.14 News Releases.............. 33
9.15 Insurance.................. 33
9.16 Change in Control.......... 34
9.17 Termination of
Operations................. 34
ARTICLE 10 NEGATIVE COVENANTS......... 35
10.1 Amendments to
Organizational
Documents.................. 35
10.2 Margin Stock............... 35
10.3 Fiscal Year................ 35
10.4 Liens...................... 35
10.5 Dividends.................. 35
10.6 Insider Loans.............. 35
10.7 Transfer Collateral........ 35
10.8 Financial Covenants........ 35
ARTICLE 11 EVENTS OF DEFAULT.......... 37
11.1 Events of Default.......... 37
11.2 Remedies Upon Event of
Default.................... 39
11.3 Performance by Lender...... 40
ARTICLE 12 MISCELLANEOUS.............. 41
</TABLE>
-iii-
<PAGE> 51
<TABLE>
<S> <C>
12.1 Modification............... 41
12.2 Waiver..................... 41
12.3 Payment of Expenses........ 41
12.4 Notices.................... 41
12.5 Governing Law.............. 42
12.6 Invalid Provisions......... 42
12.7 Binding Effect............. 42
12.8 Entirety................... 42
12.9 Headings................... 43
12.10 Survival................... 43
12.11 No Third Party
Beneficiary................ 43
12.12 Schedules and Exhibits
Incorporated............... 43
12.13 Counterparts............... 43
</TABLE>
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<PAGE> 52
LOAN AGREEMENT
by and between
BOWMAR INSTRUMENT CORPORATION
and
BANK ONE, ARIZONA, NA
Dated as of
August 28, 1995
<PAGE> 1
EXHIBIT 10.4(B)
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is made and entered into as of the 28th day of
August, 1995, by BOWMAR INSTRUMENT CORPORATION, an Indiana corporation
(hereinafter called "Debtor"), whose chief executive office (or residence if
Debtor is an individual without an office) is located at 5080 North 40th Street,
Suite 475, Phoenix, Arizona 85018, Attention: Joseph G. Warren, Jr., in favor of
BANK ONE, ARIZONA, NA, a national banking association, and its successors and
assigns (hereinafter called "Secured Party"), whose address is Post Office Box
71, Phoenix, Arizona 85001, Attention: Commercial Banking A593.
1. SECURITY INTEREST
Debtor hereby grants to Secured Party a security interest (hereinafter
called the "Security Interest") in all of Debtor's right, title and interest in
and to the following described personal property:
(a) All accounts, general intangibles, instruments, documents and
chattel paper (including all accounts receivable, notes, drafts, lease
agreements and security agreements), and all goods, if any, represented
thereby, whether now existing or hereafter acquired or created from time
to time in the course of Debtor's business;
(b) All inventory now owned or hereafter acquired, including all
goods held for sale or lease in Debtor's business, as now or hereafter
conducted, and all materials, work in process and finished goods used or
to be consumed in Debtor's business (whether or not the inventory is
represented by warehouse receipts or bills of lading or has been or may be
placed in transit or delivered to a public warehouse);
(c) All equipment now owned or hereafter acquired, including all
furniture, fixtures, furnishings, vehicles (whether titled or non-titled),
machinery, materials and supplies, wherever located, including but not
limited to such items described on the collateral schedule (if any)
attached hereto and by this reference made a part hereof, together with
all parts, accessories, attachments, additions thereto or replacements
therefor;
(d) All instruments, documents and chattel paper now held by or
hereafter delivered to Secured Party, together with all property rights
and security interests evidenced thereby, all increases thereof
(including, without limitation, stock dividends), all profits therefrom
and all transformations thereof, including but not limited to such items
described on the collateral schedule (if any)
<PAGE> 2
attached hereto and by this reference made a part hereof (all
hereinafter called the "Specific Collateral-in-Possession");
(e) The following specific items of personal property described on
Exhibit "1" attached hereto and by this reference incorporated herein;
together with (i) all policies or certificates of insurance covering any of the
foregoing property, and all awards, loss payments, proceeds and premium refunds
that may become payable with respect to such policies; (ii) all property of
Debtor that is now or may hereafter be in the possession or control of Secured
Party in any capacity, including without limitation all monies owed or that
become owed by Secured Party to Debtor and (iii) all proceeds of any of the
foregoing property, whether due or to become due from any sale, exchange or
other disposition thereof, whether cash or non-cash in nature, and whether
represented by checks, drafts, notes or other instruments for the payment of
money, including, without limitation, all property, whether cash or non-cash in
nature, derived from tort, contractual or other claims arising in connection
with any of the foregoing property. All property described above is hereinafter
called the "Collateral."
2. OBLIGATION SECURED
The Security Interest shall secure, in such order of priority as Secured
Party may elect:
(a) Payment of the sum of $4,000,000.00 according to the terms of
that Revolving Promissory Note of even date herewith, made by Debtor,
payable to the order of Secured Party, evidencing a revolving line of
credit, all or any part of which may be advanced to Debtor, repaid by
Debtor and readvanced to Debtor, from time to time, subject to the terms
and conditions thereof, with interest thereon, extension and other fees,
late charges, prepayment premiums and attorneys' fees, according to the
terms thereof, and all extensions, modifications, renewals or replacements
thereof (hereinafter called the "RLC Note");
(b) Payment of the sum of $4,200,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and attorneys'
fees, according to the terms of that Promissory Note (Term Note) of even
date herewith, made by Debtor, payable to the order of Secured Party, and
all extensions, modifications, renewals or replacements thereof
(hereinafter called the "Term Note");
(c) Payment of the sum of $1,000,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and attorneys'
fees, according to the terms of that Promissory Note (Term Note) of even
date herewith, made by Debtor, payable to the
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<PAGE> 3
order of Secured Party, and all extensions, modifications, renewals or
replacements thereof (hereinafter called the "Acquisition Note") (the RLC
Note, the Term Note and the Acquisition Note are hereinafter severally and
collectively called the "Note");
(d) Payment, performance and observance by Debtor of each covenant,
condition, provision and agreement contained herein and of all monies
expended or advanced by Secured Party pursuant to the terms hereof, or to
preserve any right of Secured Party hereunder, or to protect or preserve
the Collateral or any part thereof;
(e) Payment, performance and observance by Debtor of each covenant,
condition, provision and agreement contained in that Loan Agreement of
even date herewith, by and between Debtor and Secured Party (hereinafter
called the "Loan Agreement") and in any other document or instrument
related to the indebtedness described in subparagraphs (a), (b) and (c)
above and of all monies expended or advanced by Secured Party pursuant to
the terms thereof or to preserve any right of Secured Party thereunder;
(f) Payment and performance of any and all other indebtedness,
obligations and liabilities of Debtor to Secured Party of every kind and
character, direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter incurred, whether such indebtedness is from
time to time reduced and thereafter increased or entirely extinguished and
thereafter reincurred;
except if any portion of the Collateral is as of the date hereof intended to be
used primarily for personal, family or household purposes, that portion of the
Collateral shall secure only the Specified Obligation. All of the indebtedness
and obligations secured by this Agreement are hereinafter collectively called
the "Obligation."
3. USE; LOCATION; CONSTRUCTION
3.1 The Collateral is or will be used or produced primarily for business
(including a profession but excluding farming).
3.2 The Collateral will be kept at Debtor's address set forth at the
beginning of this Agreement and/or at the following location(s): (i) 4246 East
Wood Street, Phoenix, Arizona 85040; (ii) 8000 Bluffton Road, Fort Wayne,
Indiana 46809; and (iii) 531 Main Street, Town of Acton, Massachusetts 01721.
3.3 Debtor's records concerning the Collateral will be kept at Debtor's
address set forth at the beginning of this Agreement and/or at the following
location(s): (i) 4246 East Wood Street, Phoenix, Arizona 85040; (ii) 8000
Bluffton Road, Fort Wayne, Indiana 46809; (iii) 531 Main Street, Town of Acton,
-3-
<PAGE> 4
Massachusetts 01721; and (iv) 5080 North 40th Street, Suite 475, Phoenix,
Arizona 85018.
4. REPRESENTATIONS AND WARRANTIES OF DEBTOR
Debtor hereby represents and warrants that:
4.1 If Debtor is a corporation, limited liability company, partnership or
trust, it (i) is duly organized, validly existing and in good standing under the
laws of the state in which it is organized; (ii) is qualified to do business and
is in good standing under the laws of the state in which the Collateral is
located and in each state in which it is doing business; (iii) has full power
and authority to own its properties and assets and to carry on its businesses as
now conducted; and (iv) is fully authorized and permitted to execute and deliver
this Agreement and to enter into any transactions evidenced by any portion of
the Collateral. Subject to Debtor's obligations to Foothill Capital Corporation
("Foothill"), which obligations will be terminated prior to the initial advance
under the Note, the execution, delivery and performance by Debtor of this
Agreement and all other documents and instruments relating to the Obligation
will not result in any breach of the terms and conditions or constitute a
default under any agreement or instrument under which Debtor is a party or is
obligated. Debtor is not in default in the performance or observance of any
covenants, conditions or provisions of any such agreement or instrument.
4.2 Subject to security interests in favor of Foothill, which security
interests will be released prior to the initial advance under the Note, Debtor
is the owner of the Collateral free of all security interests or other
encumbrances except the Security Interest and no financing statement covering
the Collateral is filed or recorded in any public office, other than Permitted
Liens (as defined in the Loan Agreement).
4.3 The Collateral is, and is intended to be, used, produced or acquired
by Debtor for use primarily for the purpose marked in Section 3 above. The
address of Debtor set forth at the beginning of this Agreement is the chief
executive office of Debtor or Debtor's residence if Debtor is an individual
without an office. If a portion of the Collateral is or will become a fixture,
it will be affixed to real property covered by a mortgage executed by Debtor in
favor of Secured Party.
4.4 Each account, chattel paper or general intangible included in the
Collateral is genuine and enforceable in accordance with its terms against the
party named therein who is obligated to pay the same (hereinafter called
"Obligor"), and the security interests that are part of each item of chattel
paper included in the Collateral are valid, first and prior perfected security
interests. Each Obligor is solvent, and the amount that Debtor has represented
to Secured Party as owing by each Obligor is the amount actually and
unconditionally owing by that Obligor, without deduction except for normal cash
discounts where applicable; no Obligor has any defense, setoff, claim or
-4-
<PAGE> 5
counterclaim against Debtor that can be asserted against Secured Party whether
in any proceeding to enforce the Security Interest or otherwise. Each document,
instrument and chattel paper included in the Collateral is complete and regular
on its face and free from evidence of forgery or alteration. No default has
occurred in connection with any instrument, document or chattel paper included
in the Collateral, no payment in connection therewith is overdue and no
presentment, dishonor or protest has occurred in connection therewith.
5. COVENANTS OF DEBTOR
5.1 Debtor shall not sell, transfer, assign or otherwise dispose of any
Collateral or any interest therein (except as permitted herein), with an
aggregate value in excess of $50,000.00 during any fiscal year, without
obtaining the prior written consent of Secured Party and, after the initial
advance under the Note, shall keep the Collateral free of all security interests
or other encumbrances except the Security Interest and Permitted Liens. Although
proceeds of Collateral are covered by this Agreement, this shall not be
construed to mean that Secured Party consents to any sale of the Collateral.
5.2 Debtor shall keep and maintain the Collateral in good condition and
repair and shall not use the Collateral in violation of any provision of this
Agreement or any applicable statute, ordinance or regulation or any policy of
insurance insuring the Collateral.
5.3 Debtor shall provide and maintain insurance insuring the Collateral
against risks, with coverage and in form and amount satisfactory to Secured
Party. At Secured Party's request, Debtor shall deliver to Secured Party the
original policies of insurance containing endorsements naming Secured Party as a
loss payee.
5.4 Debtor shall pay when due all taxes, assessments and other charges
which may be levied or assessed against the Collateral; provided, that, upon
Notice to Secured Party, Debtor shall have the right to reasonably contest such
items in accordance with applicable law.
5.5 Debtor shall prevent any portion of the Collateral that is not a
fixture from being or becoming a fixture and shall prevent any portion of the
Collateral from being or becoming an accession to other goods that are not part
of the Collateral.
5.6 If the Collateral includes motor vehicles, Debtor shall provide
Secured Party with the license numbers of all titled vehicles, shall cause the
Security Interest to be shown as a valid first lien on the Certificate of Title
for all titled vehicles and shall deliver lien filing receipts to Secured Party
as evidence thereof.
5.7 Debtor, upon demand, shall promptly deliver to Secured Party all
instruments, documents and chattel paper included in the Collateral and all
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<PAGE> 6
invoices, shipping or delivery records, purchase orders, contracts or other
items related to the Collateral. Debtor shall notify Secured Party immediately
of any default by any Obligor in the payment or performance of its obligations
with respect to any Collateral. Debtor, without Secured Party's prior written
consent, shall not make or agree to make any alteration, modification or
cancellation of, or substitution for, or credit, adjustment or allowance on, any
Collateral.
5.8 Debtor shall give Secured Party immediate written notice of any change
in the location of: (i) Debtor's chief executive office (or residence if Debtor
is an individual without an office); (ii) the Collateral or any part thereof; or
(iii) Debtor's records concerning the Collateral.
5.9 Secured Party or its agents may inspect the Collateral at reasonable
times and may enter into any premises where the Collateral is or may be located.
Debtor shall keep records concerning the Collateral in accordance with generally
accepted accounting principles and, upon the occurrence of an Event of Default,
shall mark its records and the Collateral to indicate the Security Interest.
Secured Party shall have free and complete access to Debtor's records and shall
have the right to make extracts therefrom or copies thereof. Upon request of
Secured Party from time to time, Debtor shall submit up-to-date schedules of the
items comprising the Collateral in such detail as Secured Party may require and
shall deliver to Secured Party confirming specific assignments of all accounts,
instruments, documents and chattel paper included in the Collateral.
5.10 Debtor, at its cost and expense, shall protect and defend this
Agreement, all of the rights of Secured Party hereunder, and the Collateral
against all claims and demands of other parties, including without limitation
defenses, setoffs, claims and counterclaims asserted by any Obligor against
Debtor and/or Secured Party. Debtor shall pay all claims and charges that in the
opinion of Secured Party might prejudice, imperil or otherwise affect the
Collateral or the Security Interest. Debtor shall promptly notify Secured Party
of any levy, distraint or other seizure by legal process or otherwise of any
part of the Collateral and of any threatened or filed claims or proceedings that
might in any way affect or impair the terms of this Agreement.
5.11 The Security Interest, at all times after the initial advance under
the Note, shall be perfected and shall be prior to any other interests in the
Collateral, other than Permitted Liens. Debtor shall act and perform as
necessary and shall execute and file all security agreements, financing
statements, continuation statements and other documents requested by Secured
Party to establish, maintain and continue the perfected Security Interest.
Debtor, on demand, shall promptly pay all costs and expenses of filing and
recording, including the costs of any searches, deemed necessary by Secured
Party from time to time to establish and determine the validity and the
continuing priority of the Security Interest.
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<PAGE> 7
5.12 If Debtor shall fail to pay any taxes, assessments, expenses or
charges, to keep all of the Collateral free from other security interests,
encumbrances or claims, to keep the Collateral in good condition and repair, to
procure and maintain insurance thereon, or to perform otherwise as required
herein, Secured Party may, upon thirty (30) days notice to Debtor (unless
Secured Party determines an emergency exists in which case no notice shall be
required), advance the monies necessary to pay the same, to accomplish such
repairs, to procure and maintain such insurance or to so perform; Secured Party
is hereby authorized to enter upon any property in the possession or control of
Debtor for such purposes.
5.13 All rights, powers and remedies granted Secured Party herein, or
otherwise available to Secured Party, are for the sole benefit and protection of
Secured Party, and Secured Party may exercise any such right, power or remedy at
its option and in its sole and absolute discretion without any obligation to do
so. In addition, if under the terms hereof, Secured Party is given two or more
alternative courses of action, Secured Party may elect any alternative or
combination of alternatives at its option and in its sole and absolute
discretion. All monies advanced by Secured Party under the terms hereof and all
amounts paid, suffered or incurred by Secured Party in exercising any authority
granted herein, including reasonable attorneys' fees, shall be added to the
Obligation, shall be secured by the Security Interest, shall bear interest at
the highest rate payable on any of the Obligation until paid, and shall be due
and payable by Debtor to Secured Party immediately without demand.
6. NOTIFICATION AND PAYMENTS; COLLECTION OF COLLATERAL; USE OF COLLATERAL BY
DEBTOR
6.1 Secured Party, after the occurrence of any Event of Default, defined
below, and without notice to Debtor, may notify any or all Obligors of the
existence of the Security Interest and may direct the Obligors to make all
payments on the Collateral to Secured Party. Until Secured Party has notified
the Obligors to remit payments directly to it, Debtor, at Debtor's own cost and
expense, shall collect or cause to be collected the accounts and monies due
under the accounts, documents, instruments and general intangibles or pursuant
to the terms of the chattel paper. Secured Party shall not be liable or
responsible for any embezzlement, conversion, negligence or default by Debtor or
Debtor's agents with respect to such collections; all agents used in such
collections shall be agents of Debtor and not agents of Secured Party. Unless
Secured Party notifies Debtor in writing that it waives one or more of the
requirements set forth in this sentence, after the occurrence of any Event of
Default, any payments or other proceeds of Collateral received by Debtor, before
or after notification to Obligors, shall be held by Debtor in trust for Secured
Party in the same form in which received, shall not be commingled with any
assets of Debtor and shall be turned over to Secured Party not later than the
next business day following the day of receipt. All payments and other proceeds
of Collateral received by Secured Party directly or from Debtor shall be applied
to the Obligation in such order and manner and at such time as Secured Party, in
its sole discretion, shall
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<PAGE> 8
determine. In addition, Debtor shall promptly notify Secured Party of the return
to or possession by Debtor of goods underlying any Collateral; Debtor shall hold
the same in trust for Secured Party and shall dispose of the same as Secured
Party directs.
6.2 Secured Party, before or after the occurrence of an Event of Default
and without notice to Debtor, may demand, collect and sue on the Collateral
(either in Debtor's or Secured Party's name), enforce, compromise, settle or
discharge the Collateral and endorse Debtor's name on any instruments,
documents, or chattel paper included in or pertaining to the Collateral; Debtor
hereby irrevocably appoints Secured Party its attorney in fact for all such
purposes.
6.3 Until the occurrence of an Event of Default, Debtor may: (i) use,
consume and sell any inventory included in the Collateral in any lawful manner
in the ordinary course of Debtor's business provided that all sales shall be at
commercially reasonable prices; and (ii) subject to Paragraphs 6.1 and 6.2
above, retain possession of any other Collateral and use it in any lawful manner
consistent with this Agreement.
7. COLLATERAL IN THE POSSESSION OF SECURED PARTY
7.1 Secured Party shall use such reasonable care in handling, preserving
and protecting the Collateral in its possession as it uses in handling similar
property for its own account. Secured Party, however, shall have no liability
for the loss, destruction or disappearance of any Collateral unless there is
affirmative proof of a lack of due care; the lack of due care shall not be
implied solely by virtue of any loss, destruction or disappearance.
7.2 Debtor shall be solely responsible for taking any and all actions to
preserve rights against all Obligors; Secured Party shall not be obligated to
take any such actions whether or not the Collateral is in Secured Party's
possession. Debtor waives presentment and protest with respect to any instrument
included in the Collateral on which Debtor is in any way liable and waives
notice of any action taken by Secured Party with respect to any instrument,
document or chattel paper included in any Collateral that is in the possession
of Secured Party.
8. EVENTS OF DEFAULT; REMEDIES
8.1 The occurrence of any of the following events or conditions shall
constitute and is hereby defined to be an "Event of Default":
(a) Any levy or execution upon, or judicial seizure of, any portion
of the Collateral or any other collateral or security for the Obligation.
(b) Any attachment or garnishment of, or the existence or filing of
any lien or encumbrance against, any portion of the
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<PAGE> 9
Collateral or any other collateral or security for the Obligation that is
not removed and released within forty-five (45) days after its creation.
(c) The institution of any legal action or proceedings to enforce
any lien or encumbrance upon any portion of the Collateral or any other
collateral or security for the Obligation, that is not dismissed within
forty-five (45) days after its institution.
(d) The abandonment by Debtor of all or any part of the Collateral.
(e) The loss, theft or destruction of, or any substantial damage to,
any portion of the Collateral or any other collateral or security for the
Obligation, that is not adequately covered by insurance.
(f) The occurrence of any event of default under the Note, the Loan
Agreement or any other document or instrument executed or delivered in
connection with the Obligation and the expiration of any applicable notice
and cure period.
8.2 Secured Party, so far as may be lawful, may purchase all or any part
of the Collateral offered at any public or private sale made in the enforcement
of Secured Party's rights and remedies hereunder.
8.3 Any demand or notice of sale, disposition or other intended action
hereunder or in connection herewith, whether required by the Uniform Commercial
Code or otherwise, shall be deemed to be commercially reasonable and effective
if such demand or notice is given to Debtor at least five (5) days prior to such
sale, disposition or other intended action, in the manner provided herein for
the giving of notices.
8.4 Debtor shall pay all costs and expenses, including without
limitation costs of Uniform Commercial Code searches, court costs and reasonable
attorneys' fees, incurred by Secured Party in enforcing payment and performance
of the Obligation or in exercising the rights and remedies of Secured Party
hereunder. All such costs and expenses shall be secured by this Agreement and by
all deeds of trust and other lien and security documents securing the
Obligation. In the event of any court proceedings, court costs and attorneys'
fees shall be set by the court and not by jury and shall be included in any
judgment obtained by Secured Party or Debtor.
8.5 In addition to any remedies provided herein for an Event of Default,
Secured Party shall have all the rights and remedies afforded a secured party
under the Uniform Commercial Code and all other legal and equitable remedies
allowed under applicable law. No failure on the part of Secured Party to
exercise any of its rights hereunder arising upon any Event of Default shall be
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<PAGE> 10
construed to prejudice its rights upon the occurrence of any other or subsequent
Event of Default. No delay on the part of Secured Party in exercising any such
rights shall be construed to preclude it from the exercise thereof at any time
while that Event of Default is continuing. Secured Party may enforce any one or
more rights or remedies hereunder successively or concurrently. By accepting
payment or performance of any of the Obligation after its due date, Secured
Party shall not thereby waive the agreement contained herein that time is of the
essence, nor shall Secured Party waive either its right to require prompt
payment or performance when due of the remainder of the Obligation or its right
to consider the failure to so pay or perform an Event of Default.
9. MISCELLANEOUS PROVISIONS
9.1 The acceptance of this Agreement by Secured Party shall not be
considered a waiver of or in any way to affect or impair any other security that
Secured Party may have, acquire simultaneously herewith, or hereafter acquire
for the payment or performance of the Obligation, nor shall the taking by
Secured Party at any time of any such additional security be construed as a
waiver of or in any way to affect or impair the Security Interest; Secured Party
may resort, for the payment or performance of the Obligation, to its several
securities therefor in such order and manner as it may determine.
9.2 Without notice or demand, without affecting the obligations of Debtor
hereunder or the personal liability of any person for payment or performance of
the Obligation, and without affecting the Security Interest or the priority
thereof, Secured Party, from time to time, may: (i) extend the time for payment
of all or any part of the Obligation, accept a renewal note therefor, reduce the
payments thereon, release any person liable for all or any part thereof, or
otherwise change the terms of all or any part of the Obligation; (ii) take and
hold other security for the payment or performance of the Obligation and
enforce, exchange, substitute, subordinate, waive or release any such security;
(iii) join in any extension or subordination agreement; or (iv) release any part
of the Collateral from the Security Interest.
9.3 Debtor waives and agrees not to assert: (i) any right to require
Secured Party to proceed against any guarantor, to proceed against or exhaust
any other security for the Obligation, to pursue any other remedy available to
Secured Party, or to pursue any remedy in any particular order or manner; (ii)
the benefits of any legal or equitable doctrine or principle of marshalling;
(iii) the benefits of any statute of limitations affecting the enforcement
hereof; (iv) demand, diligence, presentment for payment, protest and demand, and
notice of extension, dishonor, protest, demand and nonpayment, relating to the
Obligation; and (v) any benefit of, and any right to participate in, any other
security now or hereafter held by Secured Party.
9.4 The terms herein shall have the meanings in and be construed under the
Uniform Commercial Code. This Agreement shall be governed by and construed
according to the laws of the State of Arizona. Each provision of this Agreement
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shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be void or
invalid, the same shall not affect the remainder hereof which shall be effective
as though the void or invalid provision had not been contained herein.
9.5 No modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made except by a written agreement executed
by Debtor and a duly authorized officer of Secured Party.
9.6 This is a continuing Agreement which shall remain in full force and
effect until actual receipt by Secured Party of written notice of its revocation
as to future transactions and shall remain in full force and effect thereafter
until all of the Obligation incurred before the receipt of such notice, and all
of the Obligation incurred thereafter under commitments extended by Secured
Party before the receipt of such notice, shall have been paid and performed in
full.
9.7 No setoff or claim that Debtor now has or may in the future have
against Secured Party shall relieve Debtor from paying or performing the
Obligation.
9.8 Time is of the essence hereof. If more than one Debtor is named
herein, the word "Debtor" shall mean all and any one or more of them, severally
and collectively. All liability hereunder shall be joint and several. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their heirs, personal representatives, successors and assigns. The
term "Secured Party" shall include not only the original Secured Party hereunder
but also any future owner and holder, including pledgees, of note or notes
evidencing the Obligation. The provisions hereof shall apply to the parties
according to the context thereof and without regard to the number or gender of
words or expressions used.
9.9 All notices required or permitted to be given hereunder shall be in
writing and may be given in person or by United States mail, by delivery service
or by electronic transmission. Any notice directed to a party to this Agreement
shall become effective upon the earliest of the following: (i) actual receipt by
that party; (ii) delivery to the designated address of that party, addressed to
that party; or (iii) if given by certified or registered United States mail,
twenty-four (24) hours after deposit with the United States Postal Service,
postage prepaid, addressed to that party at its designated address. The
designated address of a party shall be the address of that party shown at the
beginning of this Agreement or such other address as that party, from time to
time, may specify by notice to the other parties.
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9.10 A carbon, photographic or other reproduced copy of this Agreement
and/or any financing statement relating hereto shall be sufficient for filing
and/or recording as a financing statement.
IN WITNESS WHEREOF, these presents are executed as of the date indicated
above.
BOWMAR INSTRUMENT CORPORATION, an
Indiana corporation
By: /s/ Joseph G. Warren, Jr.
Name: Joseph G. Warren, Jr.
Title: Vice President
DEBTOR
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<PAGE> 13
EXHIBIT "1"
Specific Items of Personal Property
<PAGE> 1
EXHIBIT 10.4(C)
PROMISSORY NOTE
(Acquisition Note)
$1,000,000.00 Phoenix, Arizona
August 28, 1995
FOR VALUE RECEIVED, the undersigned BOWMAR INSTRUMENT CORPORATION, an
Indiana corporation (hereinafter called "Maker"), promises to pay to the order
of BANK ONE, ARIZONA, NA, a national banking association (the "Payee"; Payee and
each subsequent transferee and/or owner of this Note, whether taking by
endorsement or otherwise, are herein successively called "Holder") at Post
Office Box 71, Phoenix, Arizona 85001, Attention: Commercial Banking A593, or at
such other place as Holder may from time to time designate in writing, the
principal sum of ONE MILLION AND NO/100 DOLLARS ($1,000,000.00) or so much
thereof as Holder may advance to or for the benefit of Maker plus interest
calculated on a daily basis (based on a 360-day year) from the date hereof on
the principal balance from time to time outstanding as hereinafter provided,
principal, interest and all other sums payable hereunder to be paid in lawful
money of the United States of America as follows:
A. Interest shall accrue on the unpaid principal balance of this
Note at the Floating Rate, provided, that Maker may elect, upon written
notice that is received by Holder at least ten (10) days prior to the
Conversion Date, that interest accrue at the Conversion Rate, in which
case, commencing on the Conversion Date, interest shall accrue at the
Conversion Rate. During the period that interest accrues at the Floating
Rate, the interest rate on this Note shall change from time to time on the
effective date of, and in conformity with, changes in the Prime Rate.
B. All accrued interest shall be due and payable on each Payment
Date prior to the Advance Termination Date.
C. Commencing on the first Payment Date on or after the Advance
Termination Date, unless and until Maker shall elect that interest accrue
under this Note at the Conversion Rate, monthly installments of interest
and principal shall be due and payable on each Payment Date each in a
principal amount sufficient to amortize the principal balance outstanding
on the Conversion Date over sixty (60) equal monthly installments, plus
all accrued and unpaid interest.
D. Should Maker elect that this Note bear interest at the Conversion
Rate, equal payments of principal and interest shall be due and payable in
consecutive monthly installments commencing on
<PAGE> 2
the first Payment Date after the Conversion Date, and continuing on each
Payment Date thereafter, each in an amount sufficient to fully amortize
the principal amount of this Note outstanding on the Conversion Date, at
the Conversion Rate, over an amortization period equal to number of months
remaining until the Maturity Date.
E. The entire unpaid principal balance, all accrued and unpaid
interest, and all other amounts payable under this Note shall be due and
payable in full on the Maturity Date.
As used in this Note:
"Advance Termination Date" means the date that is twelve (12) months
after the date of this Note.
"Business Day" means a day of the year on which banks are not
required or authorized to close in Phoenix, Arizona.
"Conversion Date" means the date on or after the Advance Termination
Date selected by Maker from which interest shall accrue under this Note at
the Conversion Rate.
"Conversion Rate" means the rate per annum equal to the sum of (i)
four percent (4%) per annum, and (ii) the yield to maturity of Treasury
Obligations having a maturity date nearest to the Maturity Date determined
two Business Days before the Conversion Date. The maturity date and yield
of said Treasury Obligations shall be determined by Holder, in its
absolute and sole discretion, on the basis of quotations published in The
Wall Street Journal or other comparable sources.
"Default Rate" means an interest rate per annum equal to four
percent (4%) above the rate that would otherwise be payable under the
terms of the respective Notes.
"Floating Rate" means the rate per annum equal to the sum of (i) one
and one half percent (1.5%) per annum, and (ii) the Prime Rate per annum
as in effect from time to time. The Floating Rate will change on each day
that the "Prime Rate" changes.
"Maturity Date" means July 31, 2001.
"Payment Date" means the first day of the first month after the
initial advance of proceeds under this Note and the first day of each
month thereafter, provided that if any such day is not a Business Day,
then such Payment Date should be the next successive Business Day.
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<PAGE> 3
"Prime Rate" means the interest rate per annum publicly announced by
Bank One, Arizona, NA, a national banking association, or its successors,
in Phoenix, Arizona as its "prime rate" as in effect from time to time.
Maker acknowledges that the Prime Rate is not necessarily the best or
lowest rate offered by such Bank and such Bank may lend to its customers
at rates that are at, above or below its Prime Rate.
"Treasury Obligations" means United States Treasury debt
obligations.
Maker agrees to an effective rate of interest that is the rate stated
above plus any additional rate of interest resulting from any other charges in
the nature of interest paid or to be paid by or on behalf of Maker, or any
benefit received or to be received by Holder, in connection with this Note.
If any payment required under this Note is not paid when due, within
fifteen (15) days after the date such payment is due, then, at the option of
Holder, Maker shall pay a "late charge" equal to four percent (4%) of the amount
of that payment to compensate Holder 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 Holder.
All payments made on this Note shall be applied, to the extent of the
amount thereof, in the order of priority to be determined by Holder in its sole
discretion: (i) to the payment of costs, fees or other charges incurred in
connection with the indebtedness evidenced hereby: (ii) to the payment of
accrued interest; and/or (iii) to the reduction of the principal balance.
This Note is issued pursuant to that Loan Agreement (the "Loan Agreement")
of even date herewith between Maker and Payee and is secured by, among other
things, Mortgages of even date herewith, executed by Maker, as trustor, in favor
of Payee, as beneficiary, encumbering property situate in Fort Wayne, Indiana
and Acton, Massachusetts. Such Mortgages and all other documents or instruments
securing the indebtedness evidenced by this Note or executed or delivered in
connection with the indebtedness evidenced by this Note are hereinafter called
the "Security Documents."
Time is of the essence of this Note. At the option of Holder, the entire
unpaid principal balance, all accrued and unpaid interest and all other amounts
payable hereunder shall become immediately due and payable without notice upon
the failure to pay any sum due and owing hereunder as provided herein if such
failure continues for fifteen (15) days after notice thereof to Maker or upon
the occurrence of any Event of Default, as defined in the Loan Agreement or any
of the Security Documents.
After maturity, including maturity upon acceleration, the unpaid principal
balance, all accrued and unpaid interest and all other amounts payable hereunder
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<PAGE> 4
shall bear interest at the Default Rate. Maker shall pay all costs and expenses,
including reasonable attorneys' fees and court costs, incurred in the collection
or enforcement of all or any part of this Note. All such costs and expenses
shall be secured by the Mortgages and by all other Security Documents. In the
event of any court proceedings, court costs and attorneys' fees shall be set by
the court and not by jury and shall be included in any judgment obtained by
Holder or Maker.
Maker may prepay the outstanding principal balance hereof, in whole or in
part, at any time prior to the Maturity Date. Subject to the right of Maker to
prepay this Note in full without prepayment premium in the event the RLC (as
defined in the Loan Agreement) is not renewed by Holder upon any scheduled
maturity thereunder, after the Conversion Date, with any such prepayments
(whether made voluntarily or involuntarily as a result of an acceleration of the
Maturity Date or otherwise), Maker shall also pay (a) all accrued and unpaid
interest on the principal being prepaid, (b) all other amounts then due and
payable by Maker to Holder under this Note, the Loan Agreement and the Security
Documents, and (c) a prepayment 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 to the Maturity 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. At the option of Holder, in its
absolute and sole discretion, any prepayment shall be applied to installments
coming due hereunder in the inverse order of their due dates.
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 Maturity
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 Treasury Obligations
having a maturity date nearest to the Maturity Date determined on
the date hereof exceeds (ii) the yield to maturity of Treasury
Obligations having a maturity date nearest to the Maturity Date
determined on the date of prepayment.
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"Discount Rate" means the rate per annum equal to the yield to
maturity of Treasury Obligations having a maturity date nearest to the
Maturity Date determined on the date of prepayment.
The maturity date and yield to maturity of Treasury Obligations shall be
determined by Holder, in its absolute and sole discretion, on the basis of
quotations published in The Wall Street Journal or other comparable sources.
Failure of Holder to exercise any option hereunder shall not constitute a
waiver of the right to exercise the same in the event of any subsequent default
or in the event of continuance of any existing default after demand for strict
performance hereof.
Maker and all sureties, guarantors and/or endorsers hereof (or of any
obligation hereunder) and accommodation parties hereon (severally each
hereinafter called a "Surety") each: (a) agree that the liability under this
Note of all parties hereto is joint and several; (b) severally waive any
exemption laws and right thereunder affecting the full collection of this Note;
(c) severally waive any and all formalities in connection with this Note to the
maximum extent allowed by law, including (but not limited to) demand, diligence,
presentment for payment, protest and demand, and notice of extension, dishonor,
protest, demand and nonpayment of this Note; and (d) consent that Holder may
extend the time of payment or otherwise modify the terms of payment of any part
or the whole of the debt evidenced by this Note, at the request of any other
person liable hereon, and such consent shall not alter nor diminish the
liability of any person hereon.
In addition, each Surety waives and agrees not to assert: (a) any right to
require Holder to proceed against Maker or any other Surety, to proceed against
or exhaust any security for the Note, to pursue any other remedy available to
Holder, or to pursue any remedy in any particular order or manner; (b) the
benefit of any statute of limitations affecting its liability hereunder or the
enforcement hereof; (c) the benefits of any legal or equitable doctrine or
principle of marshalling; (d) notice of the existence, creation or incurring of
new or additional indebtedness of Maker to Holder; (e) the benefits of any
statutory provision limiting the liability of a surety, including without
limitation the provisions of Sections 12-1641, et seq., of the Arizona Revised
Statutes; (f) any defense arising by reason of any disability or other defense
of Maker or by reason of the cessation from any cause whatsoever (other than
payment in full) of the liability of Maker for payment of the Note; and (g) the
benefits of any statutory provision limiting the right of Holder to recover a
deficiency judgment, or to otherwise proceed against any person or entity
obligated for payment of the Note, after any foreclosure or trustee's sale of
any security for the Note, including without limitation the benefits, if any, to
a Surety of Arizona Revised Statutes Section 33-814. Until payment in full of
the Note, no Surety shall have any right of subrogation and each hereby waives
any right to enforce any remedy which Holder now has, or may hereafter have,
against Maker or any other Surety, and waives any benefit of, and any right to
participate in, any security now or hereafter held by Holder.
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<PAGE> 6
Maker agrees that to the extent Maker or any Surety makes any payment to
Holder in connection with the indebtedness evidenced by this Note, and all or
any part of such payment is subsequently invalidated, declared to be fraudulent
or preferential, set aside or required to be repaid by Holder or paid over to a
trustee, receiver or any other entity, whether under any bankruptcy act or
otherwise (any such payment is hereinafter referred to as a "Preferential
Payment"), then the indebtedness of Maker under this Note shall continue or
shall be reinstated, as the case may be, and, to the extent of such payment or
repayment by Holder, the indebtedness evidenced by this Note or part thereof
intended to be satisfied by such Preferential Payment shall be revived and
continued in full force and effect as if said Preferential Payment had not been
made.
Without limiting the right of Holder to bring any action or proceeding
against Maker or any Surety or against any property of Maker or any Surety (an
"Action") arising out of or relating to this Note or any indebtedness evidenced
hereby in the courts of other jurisdictions, Maker and each Surety hereby
irrevocably submit to the jurisdiction, process and venue of any Arizona State
or Federal court sitting in Phoenix, Arizona, and hereby irrevocably agree that
any Action may be heard and determined in such Arizona State court or in such
Federal court. Maker and all Sureties each hereby irrevocably waives, to the
fullest extent it may effectively do so, the defenses of lack of jurisdiction
over any person, inconvenient forum or improper venue, to the maintenance of any
Action in any jurisdiction.
This Note shall be binding upon Maker and its successors and assigns and
shall inure to the benefit of Payee, and any subsequent holders of this Note,
and their successors and assigns.
All notices required or permitted in connection with this Note shall be
given at the place and in the manner provided in the Loan Agreement for the
giving of notices.
This Note shall be governed by and construed according to the laws of the
State of Arizona.
IN WITNESS WHEREOF, these presents are executed as of the date first
written above.
BOWMAR INSTRUMENT CORPORATION, an
Indiana corporation
By: /s/ Joe G. Warren, Jr.
Name: Joe G. Warren, Jr.
Title: Vice President
MAKER
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<PAGE> 1
EXHIBIT 10.4(D)
PROMISSORY NOTE
(Term Note)
$4,200,000.00 Phoenix, Arizona
August 28, 1995
FOR VALUE RECEIVED, the undersigned BOWMAR INSTRUMENT CORPORATION, an
Indiana corporation (hereinafter called "Maker"), promises to pay to the order
of BANK ONE, ARIZONA, NA, a national banking association (the "Payee"; Payee and
each subsequent transferee and/or owner of this Note, whether taking by
endorsement or otherwise, are herein successively called "Holder") at Post
Office Box 71, Phoenix, Arizona 85001, Attention: Commercial Banking A593, or at
such other place as Holder may from time to time designate in writing, the
principal sum of FOUR MILLION TWO HUNDRED THOUSAND AND NO/100 DOLLARS
($4,200,000.00) or so much thereof as Holder may advance to or for the benefit
of Maker plus interest calculated on a daily basis (based on a 360-day year)
from the date hereof on the principal balance from time to time outstanding as
hereinafter provided, principal, interest and all other sums payable hereunder
to be paid in lawful money of the United States of America as follows:
A. Interest shall accrue on the unpaid principal balance of this
Note at the Floating Rate, provided, that Maker may elect, upon written
notice that is received by Holder at least ten (10) days prior to the
Conversion Date, that interest accrue at the Conversion Rate, in which
case, commencing on the Conversion Date, interest shall accrue at the
Conversion Rate. During the period that interest accrues at the Floating
Rate, the interest rate on this Note shall change from time to time on the
effective date of, and in conformity with, changes in the Prime Rate.
B. Unless and until Maker shall elect that interest accrue under
this Note at the Conversion Rate, monthly installments of interest and
principal shall be due and payable on each Payment Date in the principal
amount of $35,000.00 each, plus all accrued and unpaid interest.
C. Should Maker elect that this Note bear interest at the Conversion
Rate, equal payments of principal and interest shall be due and payable in
consecutive monthly installments commencing on the first Payment Date
after the Conversion Date, and continuing on each Payment Date thereafter,
each in an amount sufficient to fully amortize the principal amount of
this Note outstanding on the Conversion Date, at the Conversion Rate, over
an amortization period equal to one hundred twenty (120) months less the
full number of
<PAGE> 2
months that elapsed between the date of this Note and the Conversion
Date.
D. The entire unpaid principal balance, all accrued and unpaid
interest, and all other amounts payable under this Note shall be due and
payable in full on the Maturity Date.
As used in this Note:
"Business Day" means a day of the year on which banks are not
required or authorized to close in Phoenix, Arizona.
"Conversion Date" means the date selected by Maker from which
interest shall accrue under this Note at the Conversion Rate.
"Conversion Rate" means the rate per annum equal to the sum of (i)
three and three-quarters percent (3.75%) per annum, and (ii) the yield to
maturity of Treasury Obligations having a maturity date nearest to the
Maturity Date determined two Business Days before the Conversion Date. The
maturity date and yield of said Treasury Obligations shall be determined
by Holder, in its absolute and sole discretion, on the basis of quotations
published in The Wall Street Journal or other comparable sources.
"Default Rate" means an interest rate per annum equal to four
percent (4%) above the rate that would otherwise be payable under the
terms of the respective Notes.
"Floating Rate" means the rate per annum equal to the sum of (i) one
and one quarter percent (1.25%) per annum, and (ii) the Prime Rate per
annum as in effect from time to time. The Floating Rate will change on
each day that the "Prime Rate" changes.
"Maturity Date" means July 31, 2000.
"Payment Date" means the first day of the first month after the
initial advance of proceeds under this Note and the first day of each
month thereafter, provided that if any such day is not a Business Day,
then such Payment Date should be the next successive Business Day.
"Prime Rate" means the interest rate per annum publicly announced by
Bank One, Arizona, NA, a national banking association, or its successors,
in Phoenix, Arizona as its "prime rate" as in effect from time to time.
Maker acknowledges that the Prime Rate is not necessarily the best or
lowest rate offered by such Bank and such Bank may lend to its customers
at rates that are at, above or below its Prime Rate.
-2-
<PAGE> 3
"Treasury Obligations" means United States Treasury debt
obligations.
Maker agrees to an effective rate of interest that is the rate stated
above plus any additional rate of interest resulting from any other charges in
the nature of interest paid or to be paid by or on behalf of Maker, or any
benefit received or to be received by Holder, in connection with this Note.
If any payment required under this Note is not paid when due, within
fifteen (15) days after the date such payment is due, then, at the option of
Holder, Maker shall pay a "late charge" equal to four percent (4%) of the amount
of that payment to compensate Holder 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 Holder.
All payments made on this Note shall be applied, to the extent of the
amount thereof, in the order of priority to be determined by Holder in its sole
discretion: (i) to the payment of costs, fees or other charges incurred in
connection with the indebtedness evidenced hereby: (ii) to the payment of
accrued interest; and/or (iii) to the reduction of the principal balance.
This Note is issued pursuant to that Loan Agreement (the "Loan Agreement")
of even date herewith between Maker and Payee and is secured by, among other
things, Mortgages of even date herewith, executed by Maker, as trustor, in favor
of Payee, as beneficiary, encumbering property situate in Fort Wayne, Indiana
and Acton, Massachusetts. Such Mortgages and all other documents or instruments
securing the indebtedness evidenced by this Note or executed or delivered in
connection with the indebtedness evidenced by this Note are hereinafter called
the "Security Documents."
Time is of the essence of this Note. At the option of Holder, the entire
unpaid principal balance, all accrued and unpaid interest and all other amounts
payable hereunder shall become immediately due and payable without notice upon
the failure to pay any sum due and owing hereunder as provided herein if such
failure continues for fifteen (15) days after notice thereof to Maker or upon
the occurrence of any Event of Default, as defined in the Loan Agreement or any
of the Security Documents.
After maturity, including maturity upon acceleration, the unpaid principal
balance, all accrued and unpaid interest and all other amounts payable hereunder
shall bear interest at the Default Rate. Maker shall pay all costs and expenses,
including reasonable attorneys' fees and court costs, incurred in the collection
or enforcement of all or any part of this Note. All such costs and expenses
shall be secured by the Mortgages and by all other Security Documents. In the
event of any court proceedings, court costs and attorneys' fees shall be set by
the court and not by jury and shall be included in any judgment obtained by
Holder or Maker.
-3-
<PAGE> 4
Maker may prepay the outstanding principal balance hereof, in whole or in
part, at any time prior to the Maturity Date. Subject to the right of Maker to
prepay this Note in full without prepayment premium in the event the RLC (as
defined in the Loan Agreement) is not renewed by Holder upon any scheduled
maturity thereunder, after the Conversion Date, with any such prepayments
(whether made voluntarily or involuntarily as a result of an acceleration of the
Maturity Date or otherwise), Maker shall also pay (a) all accrued and unpaid
interest on the principal being prepaid, (b) all other amounts then due and
payable by Maker to Holder under this Note, the Loan Agreement and the Security
Documents, and (c) a prepayment 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 to the Maturity 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. At the option of Holder, in its
absolute and sole discretion, any prepayment shall be applied to installments
coming due hereunder in the inverse order of their due dates.
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 Maturity
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 Treasury Obligations
having a maturity date nearest to the Maturity Date determined on
the date hereof exceeds (ii) the yield to maturity of Treasury
Obligations having a maturity date nearest to the Maturity Date
determined on the date of prepayment.
"Discount Rate" means the rate per annum equal to the yield to
maturity of Treasury Obligations having a maturity date nearest to the
Maturity Date determined on the date of prepayment.
The maturity date and yield to maturity of Treasury Obligations shall be
determined by Holder, in its absolute and sole discretion, on the basis of
quotations published in The Wall Street Journal or other comparable sources.
Failure of Holder to exercise any option hereunder shall not constitute a
waiver of the right to exercise the same in the event of any subsequent default
-4-
<PAGE> 5
or in the event of continuance of any existing default after demand for strict
performance hereof.
Maker and all sureties, guarantors and/or endorsers hereof (or of any
obligation hereunder) and accommodation parties hereon (severally each
hereinafter called a "Surety") each: (a) agree that the liability under this
Note of all parties hereto is joint and several; (b) severally waive any
exemption laws and right thereunder affecting the full collection of this Note;
(c) severally waive any and all formalities in connection with this Note to the
maximum extent allowed by law, including (but not limited to) demand, diligence,
presentment for payment, protest and demand, and notice of extension, dishonor,
protest, demand and nonpayment of this Note; and (d) consent that Holder may
extend the time of payment or otherwise modify the terms of payment of any part
or the whole of the debt evidenced by this Note, at the request of any other
person liable hereon, and such consent shall not alter nor diminish the
liability of any person hereon.
In addition, each Surety waives and agrees not to assert: (a) any right to
require Holder to proceed against Maker or any other Surety, to proceed against
or exhaust any security for the Note, to pursue any other remedy available to
Holder, or to pursue any remedy in any particular order or manner; (b) the
benefit of any statute of limitations affecting its liability hereunder or the
enforcement hereof; (c) the benefits of any legal or equitable doctrine or
principle of marshalling; (d) notice of the existence, creation or incurring of
new or additional indebtedness of Maker to Holder; (e) the benefits of any
statutory provision limiting the liability of a surety, including without
limitation the provisions of Sections 12-1641, et seq., of the Arizona Revised
Statutes; (f) any defense arising by reason of any disability or other defense
of Maker or by reason of the cessation from any cause whatsoever (other than
payment in full) of the liability of Maker for payment of the Note; and (g) the
benefits of any statutory provision limiting the right of Holder to recover a
deficiency judgment, or to otherwise proceed against any person or entity
obligated for payment of the Note, after any foreclosure or trustee's sale of
any security for the Note, including without limitation the benefits, if any, to
a Surety of Arizona Revised Statutes Section 33-814. Until payment in full of
the Note, no Surety shall have any right of subrogation and each hereby waives
any right to enforce any remedy which Holder now has, or may hereafter have,
against Maker or any other Surety, and waives any benefit of, and any right to
participate in, any security now or hereafter held by Holder.
Maker agrees that to the extent Maker or any Surety makes any payment to
Holder in connection with the indebtedness evidenced by this Note, and all or
any part of such payment is subsequently invalidated, declared to be fraudulent
or preferential, set aside or required to be repaid by Holder or paid over to a
trustee, receiver or any other entity, whether under any bankruptcy act or
otherwise (any such payment is hereinafter referred to as a "Preferential
Payment"), then the indebtedness of Maker under this Note shall continue or
shall be reinstated, as the case may be, and, to the extent of such payment or
repayment by Holder, the indebtedness evidenced by this Note or part thereof
-5-
<PAGE> 6
intended to be satisfied by such Preferential Payment shall be revived and
continued in full force and effect as if said Preferential Payment had not been
made.
Without limiting the right of Holder to bring any action or proceeding
against Maker or any Surety or against any property of Maker or any Surety (an
"Action") arising out of or relating to this Note or any indebtedness evidenced
hereby in the courts of other jurisdictions, Maker and each Surety hereby
irrevocably submit to the jurisdiction, process and venue of any Arizona State
or Federal court sitting in Phoenix, Arizona, and hereby irrevocably agree that
any Action may be heard and determined in such Arizona State court or in such
Federal court. Maker and all Sureties each hereby irrevocably waives, to the
fullest extent it may effectively do so, the defenses of lack of jurisdiction
over any person, inconvenient forum or improper venue, to the maintenance of any
Action in any jurisdiction.
This Note shall be binding upon Maker and its successors and assigns and
shall inure to the benefit of Payee, and any subsequent holders of this Note,
and their successors and assigns.
All notices required or permitted in connection with this Note shall be
given at the place and in the manner provided in the Loan Agreement for the
giving of notices.
This Note shall be governed by and construed according to the laws of the
State of Arizona.
IN WITNESS WHEREOF, these presents are executed as of the date first
written above.
BOWMAR INSTRUMENT CORPORATION, an
Indiana corporation
By: /s/ Joe G. Warren, Jr.
Name: Joe G. Warren, Jr.
Title: Vice President
MAKER
-6-
<PAGE> 1
EXHIBIT 10.4(E)
REVOLVING PROMISSORY NOTE
$4,000,000.00 Phoenix, Arizona
August 28, 1995
FOR VALUE RECEIVED, the undersigned BOWMAR INSTRUMENT CORPORATION, an
Indiana corporation (hereinafter called "Maker"), promises to pay to the order
of BANK ONE, ARIZONA, NA, a national banking association (the "Payee"; Payee and
each subsequent transferee and/or owner of this Note, whether taking by
endorsement or otherwise, are herein successively called "Holder") at Post
Office Box 71, Phoenix, Arizona 85001, Attention: Commercial Banking A593, or at
such other place as Holder may from time to time designate in writing, the
principal sum of FOUR MILLION AND NO/100 DOLLARS ($4,000,000.00) or so much
thereof as Holder may advance to or for the benefit of Maker plus interest
calculated on a daily basis (based on a 360-day year) from the date hereof on
the principal balance from time to time outstanding as hereinafter provided,
principal, interest and all other sums payable hereunder to be paid in lawful
money of the United States of America as follows:
A. Interest shall accrue on the unpaid principal balance of this
Note at the Floating Rate.
B. All accrued interest shall be due and payable on each Payment
Date.
C. The entire unpaid principal balance, all accrued and unpaid
interest, and all other amounts payable under this Note shall be due and
payable in full on the Maturity Date.
As used in this Note:
"Business Day" means a day of the year on which banks are not
required or authorized to close in Phoenix, Arizona.
"Default Rate" means an interest rate per annum equal to four
percent (4%) above the rate that would otherwise be payable under the
terms of the respective Notes.
"Floating Rate" means the rate per annum equal to the sum of (i) one
percent (1.0%) per annum, and (ii) the Prime Rate per annum as in effect
from time to time. The Floating Rate will change on each day that the
"Prime Rate" changes.
"Maturity Date" means July 31, 1997.
<PAGE> 2
"Payment Date" means the first day of the first month after the
initial advance of proceeds under this Note and the first day of each
month thereafter, provided that if any such day is not a Business Day,
then such Payment Date should be the next successive Business Day.
"Prime Rate" means the interest rate per annum publicly announced by
Bank One, Arizona, NA, a national banking association, or its successors,
in Phoenix, Arizona as its "prime rate" as in effect from time to time.
Maker acknowledges that the Prime Rate is not necessarily the best or
lowest rate offered by such Bank and such Bank may lend to its customers
at rates that are at, above or below its Prime Rate.
The principal balance of this Note represents a revolving credit all or
any part of which may be advanced to Maker, repaid by Maker, and re-advanced to
Maker from time to time, subject to the other terms hereof and the conditions,
if any, contained in the Loan Agreement, defined below, and provided that the
principal balance outstanding at any one time shall not exceed the face amount
hereof.
Maker agrees to an effective rate of interest that is the rate stated
above plus any additional rate of interest resulting from any other charges in
the nature of interest paid or to be paid by or on behalf of Maker, or any
benefit received or to be received by Holder, in connection with this Note.
If any payment required under this Note is not paid when due, within
fifteen (15) days after the date such payment is due, then, at the option of
Holder, Maker shall pay a "late charge" equal to four percent (4%) of the amount
of that payment to compensate Holder 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 Holder.
All payments made on this Note shall be applied, to the extent of the
amount thereof, in the order of priority to be determined by Holder in its sole
discretion: (i) to the payment of costs, fees or other charges incurred in
connection with the indebtedness evidenced hereby: (ii) to the payment of
accrued interest; and/or (iii) to the reduction of the principal balance.
This Note is issued pursuant to that Loan Agreement (the "Loan Agreement")
of even date herewith between Maker and Payee and is secured by, among other
things, Mortgages of even date herewith, executed by Maker and Bowmar/ALI, Inc.,
as mortgagor, in favor of Payee, as beneficiary, encumbering property situate in
Fort Wayne, Indiana and Acton, Massachusetts. Such Mortgages and all other
documents or instruments securing the indebtedness evidenced by this Note or
executed or delivered in connection with the indebtedness evidenced by this Note
are hereinafter called the "Security Documents."
-2-
<PAGE> 3
Time is of the essence of this Note. At the option of Holder, the entire
unpaid principal balance, all accrued and unpaid interest and all other amounts
payable hereunder shall become immediately due and payable without notice upon
the failure to pay any sum due and owing hereunder as provided herein if such
failure continues for fifteen (15) days after notice thereof to Maker or upon
the occurrence of any Event of Default, as defined in the Loan Agreement or any
of the Security Documents.
After maturity, including maturity upon acceleration, the unpaid principal
balance, all accrued and unpaid interest and all other amounts payable hereunder
shall bear interest at the Default Rate. Maker shall pay all costs and expenses,
including reasonable attorneys' fees and court costs, incurred in the collection
or enforcement of all or any part of this Note. All such costs and expenses
shall be secured by the Mortgages and by all other Security Documents. In the
event of any court proceedings, court costs and attorneys' fees shall be set by
the court and not by jury and shall be included in any judgment obtained by
Holder or Maker.
Maker shall have the option to prepay this Note, in full or in part, at
any time without penalty.
Failure of Holder to exercise any option hereunder shall not constitute a
waiver of the right to exercise the same in the event of any subsequent default
or in the event of continuance of any existing default after demand for strict
performance hereof.
Maker and all sureties, guarantors and/or endorsers hereof (or of any
obligation hereunder) and accommodation parties hereon (severally each
hereinafter called a "Surety") each: (a) agree that the liability under this
Note of all parties hereto is joint and several; (b) severally waive any
exemption laws and right thereunder affecting the full collection of this Note;
(c) severally waive any and all formalities in connection with this Note to the
maximum extent allowed by law, including (but not limited to) demand, diligence,
presentment for payment, protest and demand, and notice of extension, dishonor,
protest, demand and nonpayment of this Note; and (d) consent that Holder may
extend the time of payment or otherwise modify the terms of payment of any part
or the whole of the debt evidenced by this Note, at the request of any other
person liable hereon, and such consent shall not alter nor diminish the
liability of any person hereon.
In addition, each Surety waives and agrees not to assert: (a) any right to
require Holder to proceed against Maker or any other Surety, to proceed against
or exhaust any security for the Note, to pursue any other remedy available to
Holder, or to pursue any remedy in any particular order or manner; (b) the
benefit of any statute of limitations affecting its liability hereunder or the
enforcement hereof; (c) the benefits of any legal or equitable doctrine or
principle of marshalling; (d) notice of the existence, creation or incurring of
new or additional indebtedness of Maker to Holder; (e) the benefits of any
statutory provision limiting the liability of a surety, including without
-3-
<PAGE> 4
limitation the provisions of Sections 12-1641, et seq., of the Arizona Revised
Statutes; (f) any defense arising by reason of any disability or other defense
of Maker or by reason of the cessation from any cause whatsoever (other than
payment in full) of the liability of Maker for payment of the Note; and (g) the
benefits of any statutory provision limiting the right of Holder to recover a
deficiency judgment, or to otherwise proceed against any person or entity
obligated for payment of the Note, after any foreclosure or trustee's sale of
any security for the Note, including without limitation the benefits, if any, to
a Surety of Arizona Revised Statutes Section 33-814. Until payment in full of
the Note, no Surety shall have any right of subrogation and each hereby waives
any right to enforce any remedy which Holder now has, or may hereafter have,
against Maker or any other Surety, and waives any benefit of, and any right to
participate in, any security now or hereafter held by Holder.
Maker agrees that to the extent Maker or any Surety makes any payment to
Holder in connection with the indebtedness evidenced by this Note, and all or
any part of such payment is subsequently invalidated, declared to be fraudulent
or preferential, set aside or required to be repaid by Holder or paid over to a
trustee, receiver or any other entity, whether under any bankruptcy act or
otherwise (any such payment is hereinafter referred to as a "Preferential
Payment"), then the indebtedness of Maker under this Note shall continue or
shall be reinstated, as the case may be, and, to the extent of such payment or
repayment by Holder, the indebtedness evidenced by this Note or part thereof
intended to be satisfied by such Preferential Payment shall be revived and
continued in full force and effect as if said Preferential Payment had not been
made.
Without limiting the right of Holder to bring any action or proceeding
against Maker or any Surety or against any property of Maker or any Surety (an
"Action") arising out of or relating to this Note or any indebtedness evidenced
hereby in the courts of other jurisdictions, Maker and each Surety hereby
irrevocably submit to the jurisdiction, process and venue of any Arizona State
or Federal court sitting in Phoenix, Arizona, and hereby irrevocably agree that
any Action may be heard and determined in such Arizona State court or in such
Federal court. Maker and all Sureties each hereby irrevocably waives, to the
fullest extent it may effectively do so, the defenses of lack of jurisdiction
over any person, inconvenient forum or improper venue, to the maintenance of any
Action in any jurisdiction.
This Note shall be binding upon Maker and its successors and assigns and
shall inure to the benefit of Payee, and any subsequent holders of this Note,
and their successors and assigns.
All notices required or permitted in connection with this Note shall be
given at the place and in the manner provided in the Loan Agreement for the
giving of notices.
-4-
<PAGE> 5
This Note shall be governed by and construed according to the laws of the
State of Arizona.
IN WITNESS WHEREOF, these presents are executed as of the date first
written above.
BOWMAR INSTRUMENT CORPORATION, an
Indiana corporation
By: /s/ Joe G. Warren, Jr.
Name: Joe G. Warren, Jr.
Title: Vice President
MAKER
-5-
<PAGE> 1
EXHIBIT 10.4(F)
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT
OF RENTS AND FIXTURE FILING
(Indiana)
FOR PURPOSES OF THE SECURITY AGREEMENT CONTAINED
IN THIS INSTRUMENT THE "SECURED PARTY" AND THE
"DEBTOR" AND THEIR RESPECTIVE ADDRESSES ARE AS FOLLOWS:
SECURED PARTY: BANK ONE, ARIZONA, NA, a national banking association
POST OFFICE BOX 71
PHOENIX, ARIZONA 85001
ATTENTION: COMMERCIAL BANKING A593
DEBTOR: BOWMAR INSTRUMENT CORPORATION, an Indiana corporation
5080 NORTH 40TH STREET, SUITE 475
PHOENIX, ARIZONA 85018
ATTENTION: JOSEPH G. WARREN, JR.
THIS INSTRUMENT WHEN RECORDED SHALL CONSTITUTE A "FIXTURE FILING" FOR
PURPOSES OF THE UNIFORM COMMERCIAL CODE. THE ADDRESS OF THE SECURED PARTY SHOWN
ABOVE IS THE ADDRESS AT WHICH INFORMATION CONCERNING THE SECURED PARTY'S
SECURITY INTEREST MAY BE OBTAINED.
BOWMAR INSTRUMENT CORPORATION, an Indiana corporation (the "Mortgagor"),
MORTGAGES AND WARRANTS to BANK ONE, ARIZONA, NA, a national banking association
with its principal office in Phoenix, Arizona (the "Bank") and the Mortgagor
GRANTS A SECURITY INTEREST to the Bank in the following property, to-wit:
all that real estate located in Allen County, Indiana, described in
Schedule "A" which is attached to this Mortgage, Security Agreement,
Assignment of Rents and Fixture Filing (this "Mortgage") and incorporated
herein by this reference (the "Real Estate"); and
any items of furniture, machinery, equipment or other tangible personal
property which are now or hereafter become attached to the Real Estate or
any improvement thereon so as to constitute a fixture, whether now owned
or hereinafter acquired (the "Personal Property").
TOGETHER WITH all present and future improvements, rights, privileges,
interests, easements, hereditaments, and appurtenances thereunto belonging or in
any manner pertaining thereto, and the proceeds therefrom (all of such Real
Estate, Personal Property and other rights being hereafter referred to as the
"Mortgaged Premises").
This Mortgage is given to secure all of the Mortgagor's Obligations to the
Bank. The term "Obligations" as used in this Mortgage means all obligations of
the Mortgagor in favor of the Bank of every type and description, direct or
<PAGE> 2
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, including but not limited to all Obligations of the Mortgagor
in favor of the Bank arising under a Loan Agreement between the Mortgagor and
the Bank dated the date of this Mortgage (the "Loan Agreement"), which
Obligations include the obligation of the Mortgagor to repay all advances made
by the Bank to the Mortgagor under a revolving line of credit in the principal
amount of $4,000,000.00, to repay a term loan in the principal amount of
$4,200,000.00, and to repay all advances made by the Bank to Mortgagor under a
non-revolving acquisition line of credit in the principal sum of $1,000,000.00.
The final maturity date of the revolving line of credit is July 31, 1997, the
final maturity date of the term loan is July 31, 2000, and the final maturity
date of the non-revolving acquisition line of credit is July 31, 2001. All of
the Obligations, including those arising under the Loan Agreement, are secured
as they now exist and as they may be increased or otherwise changed by any
amendment to any instrument or agreement which now or hereafter evidences,
secures or expresses terms applicable to any of the Obligations, including
amendments to the Loan Agreement and any "Security Documents" as that term is
defined in the Loan Agreement.
As additional security for the Obligations, the Mortgagor assigns to the
Bank the rents, issues and profits of the Mortgaged Premises, including any
rents and all other amounts (collectively "Lease Payments") which are due or
shall become due to the Mortgagor under the terms of any present or future lease
(a "Lease"), oral or written, of all or any portion of the Mortgaged Premises
(all such rents, issues, profits and Lease Payments are hereafter collectively
referred to as the "Rents"). This Assignment of Rents is an absolute assignment,
and is intended to vest in the Bank the right to collect all Rents subject only
to the conditional license to collect Rents granted by the Bank to the Mortgagor
under the terms of numbered Paragraph 7 of this Mortgage.
The Mortgagor further covenants and agrees as follows:
1. The Mortgagor shall pay and perform all of the Obligations promptly
when payment or performance is due, with reasonable attorneys' fees and costs of
collection, and without relief from valuation and appraisement laws.
2. The Mortgagor shall keep the Mortgaged Premises in good repair and
shall not commit or permit waste thereon or do or permit to be done anything
that may impair the value of the Mortgaged Premises. The Mortgagor shall
promptly restore any part of the Mortgaged Premises which may be damaged or
destroyed, in a good and workmanlike manner and in conformity with the Americans
With Disabilities Act of 1990 and corresponding rules and regulations (the
"ADA") and with plans and specifications approved by Bank. The Mortgagor shall
pay when due all taxes and assessments levied or assessed against the Mortgaged
Premises or any part thereof.
3. The Mortgagor shall comply with all statutes, ordinances, rules,
regulations, orders, and directions of any legislative, executive,
administrative, or judicial body or official applicable to the Mortgaged
Premises, or any part thereof, or to the Mortgagor, or to the operation of any
business of Mortgagor which directly affects the Mortgaged Premises; provided,
however, that the Mortgagor may contest any of the matters referred to in this
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<PAGE> 3
paragraph as provided in the Loan Agreement or otherwise in any reasonable
manner which in the judgment of the Bank will not adversely affect the rights of
the Bank, its successors or assigns.
4. The Mortgagor will procure and maintain in effect at all times
insurance written by insurance companies acceptable to the Bank which insures
against loss or destruction of the Mortgaged Premises by fire, wind storm,
lightning, vandalism and malicious mischief and such other perils as are
generally covered by "extended coverage" insurance for the full replacement
value of the Mortgaged Premises. All policies providing such insurance shall
provide that any loss thereunder shall be payable to the Bank under a standard
form of secured lender's loss payable endorsement. The Mortgagor shall also
procure business interruption insurance in such amounts as the Bank may
reasonably require. The Mortgagor authorizes the Bank to endorse on Mortgagor's
behalf and to negotiate drafts representing proceeds of such insurance, provided
that the Bank shall remit to the Mortgagor such surplus, if any, as remains
after the proceeds have been applied at the Bank's option: (a) to the
satisfaction of the Obligations, whether or not then due and payable, or to the
establishment of a cash collateral account securing the Obligations, or (b) to
the restoration of the Mortgaged Premises. Certificates evidencing the existence
of all of the insurance required under the terms of this Mortgage shall be
furnished to the Bank and the original policies providing such insurance shall
be delivered to the Bank at the Bank's request. If the insurance proceeds are to
be used for the restoration and repair of the Mortgaged Premises, they shall be
held by Bank in an interest bearing account selected by Bank in its sole and
absolute discretion (the "Restoration Account"). Mortgagor, at its expense,
shall promptly prepare and submit to Bank all plans and specifications necessary
for the restoration and repair of the damaged Mortgaged Premises, together with
evidence acceptable to Bank setting forth the total expenditure needed for the
restoration and repair based upon a fixed price contract with a reputable
builder and covered by performance and labor and material payment bonds. The
plans and specifications and all other aspects of the proposed restoration and
repair shall be subject to Bank's approval. In the event the insurance proceeds
held in the Restoration Account are insufficient to complete the restoration and
repair, Mortgagor shall deposit in the Restoration Account an amount equal to
the difference between the amount then held in the Restoration Account and the
total contract price for the restoration and repair. Mortgagor may commence
restoration and repair of the damaged Mortgaged Premises only when authorized in
writing by Bank to do so and thereafter shall proceed diligently with the
restoration and repair until completed. Disbursements shall be made from the
Restoration Account for the restoration and repair in accordance with a
disbursement schedule, and subject to other terms and conditions, acceptable to
Bank. Disbursements from the Restoration Account shall be charged first against
funds deposited by Mortgagor and, after such funds are exhausted, against the
insurance proceeds deposited therein. In the event the amounts held in the
Restoration Account exceed the cost of the restoration and repair of the damaged
Mortgaged Premises, the excess funds shall be disbursed to Mortgagor to the
extent of any amounts deposited therein by Mortgagor. Any funds remaining after
such disbursement, at Bank's option, may be applied by Bank to the payment of
the Obligation, whether or not then due, or may be disbursed to Mortgagor. All
funds held in the Restoration Account are hereby assigned to Bank as further
security for the Obligation.
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<PAGE> 4
Bank, at any time, may apply all or any part of the funds held in the
Restoration Account to the curing of any Default.
5. Upon demand and failure of the Mortgagor so to do, the Bank may, in its
discretion upon thirty (30) days notice to Mortgagor (unless Mortgagor
determines an emergency exists in which case no notice shall be required),
advance and pay all sums necessary to protect and preserve the Mortgaged
Premises, and all sums so advanced and paid by the Bank shall become a part of
the indebtedness secured hereby, shall bear interest from date of payment at a
rate equal to the Prime Rate plus five and one half percent (5.5%) per annum,
and shall be payable to the Bank upon demand. Such sums shall include, but not
by way of limitation: (a) taxes, assessments and other charges which may be or
become senior to this Mortgage as liens on the Mortgaged Premises, or any part
thereof; (b) the cost of any title insurance, surveys, or other evidence which
in the discretion of the Bank may be required in order to evidence, insure or
preserve the lien of this Mortgage; (c) all costs, expenses, and reasonable
attorneys' fees incurred by the Bank in respect of any and all legal and
equitable actions which relate to this Mortgage or to the Mortgaged Premises,
and (d) the cost of any repairs respecting the Mortgaged Premises which are
reasonably deemed necessary by the Bank. As used in this Mortgage, the term
"Prime Rate" means a variable per annum rate of interest equal at all times to
the rate of interest established and quoted by the Bank as its Prime Rate, such
rate to change contemporaneously with each change in such established and quoted
rate; provided that it is understood the Prime Rate shall not necessarily be
representative of the rate of interest actually charged by the Bank on any loan
or class of loans. The Bank shall be subrogated to the rights of the holder of
each lien or claim paid with moneys secured hereby. Upon written request by
Bank, Mortgagor shall appear in and prosecute or defend any action or proceeding
that may affect the lien or the priority of the lien of this Mortgage or the
rights of Bank hereunder and shall pay all costs, expenses (including the cost
of searching title) and attorneys' fees incurred in such action or proceeding.
Bank may appear in and defend any action or proceeding purporting to affect the
lien or the priority of the lien of this Mortgage or the rights of Bank.
6. If all or any part of the Mortgaged Premises is damaged, taken, or
acquired, either temporarily or permanently, in any condemnation proceeding, or
by exercise of the right of eminent domain, or by the alteration of the grade of
any street affecting the Mortgaged Premises, the amount of any award or other
payment for such taking or damages made in consideration thereof, to the extent
of the full amount of the then remaining unpaid Obligations, is hereby assigned
to the Bank, which is empowered to collect and receive the same and to give
proper receipts therefor in the name of the Mortgagor, and all such sums shall
be paid forthwith directly to the Bank. Any award or payment so received by the
Bank may, at the option of the Bank: (a) be applied to the satisfaction of the
Obligations, whether or not then due and payable, or to the establishment of a
cash collateral account for the Obligations, or (b) be released, in whole or in
part, to the Mortgagor for the purpose of altering, restoring, or rebuilding any
part of the Mortgaged Premises which may have been altered, damaged or destroyed
as a result of such taking, alteration, or proceeding.
7. At any time a Default (as hereafter defined) has occurred and is
continuing, the Bank may enter upon and take possession of the Real Estate or
any
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<PAGE> 5
part thereof, and at any such time, or if the Bank in the reasonable exercise of
its discretion determines that payment or performance of any of the Obligations
is insecure, the Bank may demand, sue for, receive and give receipts, releases
and satisfactions for all Rents. At any time that the Bank has not exercised its
right to take possession of the Real Estate and there is not in effect any
demand by the Bank for the direct payment of Lease Payments to the Bank given
pursuant to the immediately preceding sentence, the Mortgagor may collect Lease
Payments provided that no Rents shall be collected by the Mortgagor more than
thirty (30) days in advance of the period of occupancy to which they relate.
Lease Payments collected by the Mortgagor pursuant to the license granted in the
immediately preceding sentence shall be held by the Mortgagor as trustee for the
benefit of the Bank and shall be applied to the satisfaction of Obligations to
the extent that any are then due and payable. Any balance remaining after
satisfaction of all Obligations which are then due and payable may be used by
the Mortgagor for any proper purpose. Any demand by the Bank upon any tenant of
the Mortgaged Premises accompanied by a copy of this Mortgage shall be
sufficient authority for such tenant thereafter to make all Lease Payments
directly to the Bank and any such tenant shall have no obligation or authority
to inquire into the propriety of any such demand. Upon making Lease Payments to
the Bank pursuant to the Bank's demand, any tenant of the Mortgaged Premises
shall be as fully discharged of its obligations under any Lease to the extent of
such payments as if such payments had been made directly to the Mortgagor. If at
any time Lease Payments are required to be made directly to the Bank under the
terms of this paragraph and notwithstanding such requirement such payments are
made to the Mortgagor, the Mortgagor will receive such payments in trust for the
Bank and will forward them immediately to the Bank in the form in which
received, adding only such endorsements or assignments as may be necessary to
perfect the Bank's title thereto. Any amounts collected by the Bank pursuant to
the assignment of rents contained in this Mortgage shall be applied by the Bank
to the payment of such of the Obligations as are then due and payable as the
Bank in its sole discretion shall determine. If no Obligations are then due and
payable, such amounts may be held by the Bank as cash collateral for the
Obligations, without liability for interest thereon, provided that the Bank
will, at the direction of the Mortgagor, invest such amounts for the account and
at the risk of the Mortgagor in U.S. Treasury Bills with less than 60 days
remaining to maturity or in similar essentially risk-free, cash equivalent
investments as the Mortgagor may reasonably direct and any earnings derived from
such investments will become a part of the cash collateral account. Any portion
or all of the cash collateral account which is not applied to Obligations
pursuant to the terms of this paragraph may at the discretion of the Bank be
released to the Mortgagor. The authority given to collect Rents conferred upon
the Bank under the terms of this Mortgage is irrevocable.
8. The Mortgagor grants to the Bank as secured party a security interest
in the Personal Property in accordance with the provisions of the Uniform
Commercial Code as enacted in Indiana. The Mortgagor authorizes the Bank at the
expense of the Mortgagor to execute on its behalf and file any other financing
statements deemed necessary by the Bank to perfect its security interest in the
Personal Property and to file such financing statements in those public offices
deemed necessary by the Bank. Such financing statements may be signed by the
Bank alone. In addition, the Mortgagor shall execute and deliver any financing
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<PAGE> 6
statement or other document that the Bank may request to perfect or to further
evidence the security interest created by this Mortgage.
9. If, after the execution of this Mortgage, applicable law requires
the taxation of this Mortgage or any Obligation secured by this Mortgage, the
Mortgagor, upon demand by the Bank, shall pay such taxes or reimburse the Bank
therefor unless it is unlawful to require the Mortgagor to do so.
Notwithstanding the foregoing, the Mortgagor shall not be obligated to pay any
portion of any of the Bank's federal or state income taxes.
10. As used in this paragraph, the following terms have the meanings
indicated:
(a) Clean-up. "Clean-up" means the removal or remediation of
Contamination or other response to Contamination in compliance with all
Environmental Laws and to the satisfaction of all applicable governmental
agencies, and in compliance with good commercial practice.
(b) Contamination. "Contamination" means the Release of any
Hazardous Substance on, in or under the Real Estate or the presence of any
Hazardous Substance on, in or under the Real Estate as the result of a
Release, or the emanation of any Hazardous Substance from the Real Estate.
(c) Environmental Laws. "Environmental Laws" means all federal,
state and local laws, statutes, codes, ordinances, regulations, rules or
other requirements with the force of law, including but not limited to
consent decrees and judicial or administrative orders, relating to the
environment, including but not limited to those applicable to the use,
storage, treatment, disposal or Release of any Hazardous Substances, all
as amended or modified from time to time including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") as amended by the Superfund Amendments and Reauthorization Act
of 1986 ("SARA"); the Resource Conservation and Recovery Act of 1976, as
amended ("RCRA"); the Clean Water Act, as amended; the Clean Air Act, as
amended; the Federal Insecticide, Fungicide and Rodenticide Act, as
amended; the Hazardous Materials Transportation Act, as amended, and any
and all Indiana environmental statutes including, without limitation,
those codified under Title 13 of the Indiana Code and all regulations
promulgated under or pursuant to such federal and Indiana Statutes.
(d) Hazardous Substance. "Hazardous Substance" means any hazardous
waste or hazardous substance, or any pollutant or contaminant or toxic
substance or other chemicals or substances including, without limitation,
asbestos, petroleum, polychlorinated biphenyls, and any other substance
regulated by any Environmental Laws.
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<PAGE> 7
(e) Release. "Release" means the spilling, leaking, disposing,
discharging, dumping, pouring, emitting, depositing, injecting leaching,
escaping or other release or threatened release, whether intentional or
unintentional, of any Hazardous Substance.
(f) Regulatory Actions. "Regulatory Actions" means any claim,
demand, action or proceeding brought or instigated by any governmental
authority in connection with any Environmental Law including, without
limitation, any civil, criminal or administrative proceeding whether or
not seeking costs, damages, penalties or expenses.
(g) Third-party Claims. "Third-party Claims" means any claim,
action, demand or proceeding, other than a Regulatory Action, based on
negligence, trespass, strict liability, nuisance, toxic tort or detriment
to human health or welfare due to Contamination, whether or not seeking
costs, damages, penalties, or expenses, and including any action for
contribution to Clean-up costs.
The Mortgagor shall indemnify, defend and hold harmless the Bank and its
affiliates, shareholders, directors, officers, employees and agents (all being
included in the word "Bank" for purposes of this paragraph) from any and all
claims, causes of action, damages, demands, fines, liabilities, losses,
penalties, judgments, settlements, expenses and costs, however defined, and of
whatever nature, known or unknown, absolute or contingent, including, but not
limited to, attorneys' fees, consultant's fees, fees of environmental or other
engineers, and related expenses including, without limitation, expenses related
to site inspections and soil and water analyses, which may be asserted against,
imposed on, suffered or incurred by the Bank arising out of or in any way
related to (a) any actual, alleged or threatened Release of any Hazardous
Substance on, in or under the Real Estate, (b) any related injury to human
health or safety (including wrongful death) or any actual or alleged injury to
the environment by reason of the condition of, or past or present activities on
the Real Estate, (c) any actual or alleged violation of Environmental Law
related to the Real Estate, (d) any lawsuit or administrative proceeding brought
or threatened by any person, including any governmental entity or agency,
federal, state or local, including any governmental order relating to or
occasioned by any actual or alleged Contamination or threat of Contamination,
(e) any lien imposed upon the Real Estate in favor of any governmental entity as
a result of any Contamination or threat of Contamination, and (f) all costs and
expenses of any Clean-up. The Mortgagor represents and covenants that the
Mortgagor's storage, generation, transportation, handling or use, if any, of
Hazardous Substances on or from the Real Estate is currently, and will remain at
all times, in compliance with all applicable Environmental Laws. If any Clean-up
is required with respect to the Real Estate, the Mortgagor shall expeditiously
complete such Clean-up at the Mortgagor's expense and without the necessity of
demand by the Bank. If the Mortgagor should fail to initiate and diligently
pursue any Clean-up or should otherwise fail to perform any obligation under the
terms of this paragraph, the Bank may, at its sole discretion and without any
obligation to complete any Clean-up which it may cause to be commenced, cause
the Clean-up or partial Clean-up of the Real Estate and pay on behalf of the
Mortgagor any costs, fines or penalties imposed on the Mortgagor pursuant to any
Environmental Laws or make
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<PAGE> 8
any other payment or perform any other action which will prevent a lien in favor
of any federal, state or local government authority or any other person from
attaching to the Real Property pursuant to the provisions of any Environmental
Law, and all costs and expenses of the Bank incurred in pursuing any of the
remedies provided in this paragraph shall be added to the obligations secured by
this Mortgage, which costs and expenses shall become due and payable without
notice as incurred by the Bank, together with interest thereon at the Prime Rate
plus five and one half percent (5.5%) per annum until paid.
11. Without obtaining the prior written consent of Bank, Mortgagor shall
not sell, transfer, convey, assign or otherwise dispose of, or further encumber,
all or any part of the Mortgaged Premises or any interest therein, voluntarily
or involuntarily, by operation of law or otherwise. Upon the occurrence of any
such transaction with Bank's consent, or without Bank's consent if Bank elects
not to exercise its rights and remedies for an Event of Default, Bank (i) may
increase the interest rate on all or any part of the Obligations to its then
current market rate for similar indebtedness; (ii) may charge a loan fee and a
processing fee in connection with the change; and (iii) shall not be obligated
to release Mortgagor from any liability hereunder or for the Obligations except
to the extent required by law. Consent to any such transaction shall not be
deemed to be consent or a waiver of the requirement of consent to any other such
transaction.
12. The occurrence of any of the following events shall be deemed a
"Default" under this Mortgage:
(a) an "Event of Default" as defined in the Loan Agreement shall
have occurred and be continuing or the Mortgagor shall otherwise fail to
pay or perform any of the Obligations promptly when such payment or
performance is due or within such grace period as may be applicable;
(b) the Mortgagor shall otherwise fail to observe and perform the
terms and conditions of this Mortgage and such failure continues
unremedied for a period of thirty (30) days after notice thereof to
Mortgagor;
(c) the Mortgagor shall abandon the Mortgaged Premises;
(d) Any levy or execution upon, or judicial seizure of, any portion
of the Mortgaged Premises;
(e) Any attachment or garnishment of, or the existence or filing of
any lien or encumbrance other than as consented to by Bank against, any
portion of the Mortgaged Premises, that is not removed or released within
forty-five (45) days after its creation;
(f) The institution of any legal action or proceedings to enforce
any lien or encumbrance upon any portion of the Mortgaged Premises, that
is not dismissed within forty-five (45) days after its institution;
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<PAGE> 9
(g) The existence of any encroachment upon the Mortgaged Premises
that has occurred without the approval of Bank that is not removed or
corrected within thirty (30) days after its creation; or
(h) The demolition or destruction of, or any substantial damage to,
any portion of the Mortgaged Premises that is not adequately covered by
insurance.
13. Upon the occurrence and continuance of a Default, all indebtedness
secured hereby shall, at the option of the Bank, become immediately due and
payable and this Mortgage may be foreclosed accordingly. Upon the occurrence and
continuance of a Default, the Bank shall be entitled to the appointment of a
receiver for the Mortgaged Premises to collect the rents and profits and to
maintain the Mortgaged Premises without regard to the adequacy of any security
for the Obligations or the solvency of Mortgagor or any other person or entity.
The Bank shall have the option of proceeding as to both the Real Estate and the
Personal Property in accordance with its rights and remedies in respect of the
Real Estate, in which event the default provisions of the Uniform Commercial
Code shall not apply. If the Bank elects to proceed with respect to the Personal
Property separately from the Real Estate, the requirement of the Uniform
Commercial Code as to reasonable notice of any proposed sale or disposition of
the Personal Property shall be met if such notice is delivered or mailed to the
Mortgagor at its address stated above at least five (5) days prior to such sale
or disposition. In any action to foreclose this Mortgage, the Bank shall be
entitled to recover, in addition to all reasonable attorney and related
paraprofessional expenses incurred in connection therewith, all other reasonable
costs and expenses associated with foreclosure including, without limitation,
all expenses incurred for title searches, abstracts of title, title insurance,
appraisals, surveys and environmental assessments reasonably deemed necessary by
the Bank, all of which costs and expenses shall be additional amounts secured by
this Mortgage. As used in the preceding sentence, the term "environmental
assessments" means inspections and reports of environmental engineers or firms
of environmental engineers or other appropriate experts, and associated
samplings and testings of soil or groundwater, the purpose of which is to
determine whether there is any Contamination associated with the Real Estate and
if so, the extent thereof, and to estimate of the cost of Clean-up of any
Contamination, and to determine whether there are any underground storage tanks
or any asbestos in, on, or under the Real Estate and if so, whether there are
any violations of Environmental Laws in connection therewith. As used in this
paragraph, the terms "Contamination," "Clean-up" and "Environmental Laws" are
used as defined in numbered Paragraph 10.
14. All rights, powers and remedies granted Bank herein, or otherwise
available to Bank, are for the sole benefit and protection of Bank, and Bank may
exercise any such right, power or remedy at its option and in its sole and
absolute discretion without any obligation to do so. In addition, if, under the
terms hereof, Bank is given two or more alternative courses of action, Bank may
elect any alternative or combination of alternatives, at its option and in its
sole and absolute discretion. All monies advanced by Bank under the terms hereof
and all amounts paid, suffered or incurred by Bank in exercising any authority
granted herein, including reasonable attorneys' fees, shall be added to the
Obligation, shall be secured by this Mortgage, shall bear interest at a rate
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equal to the Prime Rate plus five and one half percent (5.5%) per annum until
paid, and shall be due and payable by Mortgagor to Bank immediately without
demand.
15. In order to insure the payment of taxes and assessments that are now,
or hereafter may be, a lien upon the Mortgaged Premises, and to insure the
payment of all premiums on policies of insurance required herein, Mortgagor, if
required by Bank after the occurrence of a Default, shall pay to Bank each
month, in addition to any other payments required hereunder, an amount equal to
the taxes and special assessments levied or to be levied against the Mortgaged
Premises and the premium or premiums that will become due and payable to
maintain the insurance on the Mortgaged Premises, all as reasonably estimated by
Bank (giving due consideration to the previous year's taxes, assessments and
premiums) less all deposits therefore already made, divided by the number of
months remaining before one month prior to the date when the taxes, assessments
and premiums become delinquent. If amounts paid to Bank under the terms of this
paragraph are insufficient to pay all taxes, assessments and premiums as they
become due, Mortgagor shall pay to Bank upon demand all additional sums
necessary to fully pay and discharge these items. All moneys paid to Bank under
the terms of this paragraph may be either held by Bank to pay the taxes,
assessments and premiums before the same become delinquent or applied to the
Obligation upon payment by Bank from its own funds of the taxes, assessments and
premiums. To the extent provision is not made for payment pursuant to this
paragraph, Mortgagor shall remain obligated to pay all taxes, assessments and
premiums as they become due and payable. Deposits made under this paragraph may
be commingled with Bank's general funds; Bank shall have no liability to
Mortgagor for interest on any deposits.
16. The Bank, at its option and on such terms as it may desire, may extend
the time of payment or performance of any part or all of the Obligations or
release any part of the Mortgaged Premises from the lien of this Mortgage
without impairing the lien of this Mortgage except as to the portion of the
Mortgaged Premises expressly released and without releasing the Mortgagor or any
guarantors or sureties of or from any of the obligations. No delay by the Bank
in the exercise of any of its rights under this Mortgage shall preclude the
subsequent exercise thereof so long as any Default continues uncured, and no
waiver by the Bank of any Default of the Mortgagor shall operate as a waiver of
subsequent or other Defaults. The making of any payment by the Bank for any of
the purposes herein permitted shall not constitute a waiver of any breach of the
Mortgagor's covenant to perform such act. Notice by the Bank of its intention to
exercise any right or option under this Mortgage is expressly waived by the
Mortgagor, and any one or more of the Bank's rights or remedies under this
Mortgage may be enforced successively or concurrently. Mortgagor waives and
agrees not to assert: (i) any right to require Bank to proceed against any
guarantor, to proceed against or exhaust any other security for the Obligations,
to pursue any other remedy available to Bank, or to pursue any remedy in any
particular order or manner; (ii) the benefits of any legal or equitable doctrine
or principle of marshalling; (iii) the benefits of any statute of limitations
affecting the enforcement hereof; (iv) demand, diligence, presentment for
payment, protest and demand, and notice of extension, dishonor, protest, demand
and nonpayment, relating to the Obligations; and (v) any benefit of, and any
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<PAGE> 11
right to participate in, any other security now or hereafter held by Bank. Time
is of the essence of this Mortgage.
17. Bank shall have the right to inspect the Mortgaged Premises at all
reasonable times.
18. All obligations of the Mortgagor under this Mortgage shall extend to
and be binding upon the successors and assigns of the Mortgagor, and shall inure
to the benefit of the Bank and its successors and assigns.
19. This Mortgage secures indebtedness incurred for a business purpose.
20. The Obligations and the agreements of any person or entity to pay or
perform the Obligations shall be governed by and construed according to the laws
of the State of Arizona, provided, that this Mortgage shall be governed by and
construed according to the substantive laws of the State of Indiana,
notwithstanding the fact that Indiana conflicts of law rules might otherwise
require the substantive rules of law of another jurisdiction to apply. Each
term, condition and provision of this Mortgage shall be interpreted in such
manner as to be effective and valid under applicable law but if any term,
condition or provision of this Mortgage shall be held to be void or invalid, the
same shall not affect the remainder hereof which shall be effective as though
the void or invalid term, condition or provision had not been contained herein.
Any procedures provided herein for such remedies shall be modified by and
replaced with, where inconsistent with or required by, any procedures or
requirements of the laws of the State of Indiana.
Dated: August 28, 1995.
BOWMAR INSTRUMENT CORPORATION, an
Indiana corporation
By: /s/ Joe G. Warren, Jr.
Name: Joe G. Warren, Jr.
Title: Vice President
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<PAGE> 12
STATE OF ARIZONA )
) ss:
County of Maricopa )
Before me, a Notary Public in and for the above County and State,
personally appeared Joe G. Warren, Jr., the Vice President, of BOWMAR INSTRUMENT
CORPORATION, an Indiana corporation, who as such officer acknowledged the
execution of the foregoing Mortgage for and on behalf of the corporation.
WITNESS my hand and Notarial seal this 31st day of August, 1995.
Signature: /s/ Frances Kennedy
Printed: Frances Kennedy
Notary Public
My Commission Expires: My Commission Expires Apr. 26, 1997
My County of Residence: Maricopa
THIS INSTRUMENT PREPARED BY: _________________________________________
Attorney-at-law
Streich Lang
Renaissance One
Two North Central Avenue
Phoenix, Arizona 85004-2391
Telephone: (602) 229-5200
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SCHEDULE "A"
All that real estate in Allen County, Indiana, described as follows:
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EXHIBIT 10.4(G)
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT
OF RENTS AND FIXTURE FILING
(Massachusetts)
FOR PURPOSES OF THE SECURITY AGREEMENT CONTAINED
IN THIS INSTRUMENT THE "SECURED PARTY" AND THE
"DEBTOR" AND THEIR RESPECTIVE ADDRESSES ARE AS FOLLOWS:
SECURED PARTY: BANK ONE, ARIZONA, NA, a national banking association
POST OFFICE BOX 71
PHOENIX, ARIZONA 85001
ATTENTION: COMMERCIAL BANKING A593
DEBTOR: BOWMAR/ALI, INC., a Massachusetts corporation
5080 NORTH 40TH STREET, SUITE 475
PHOENIX, ARIZONA 85018
ATTENTION: JOSEPH G. WARREN, JR.
THIS INSTRUMENT WHEN RECORDED SHALL CONSTITUTE A "FIXTURE FILING" FOR
PURPOSES OF THE UNIFORM COMMERCIAL CODE. THE ADDRESS OF THE SECURED PARTY SHOWN
ABOVE IS THE ADDRESS AT WHICH INFORMATION CONCERNING THE SECURED PARTY'S
SECURITY INTEREST MAY BE OBTAINED.
BOWMAR/ALI, INC., a Massachusetts corporation (the "Mortgagor"),
MORTGAGES, WARRANTS AND GRANTS WITH MORTGAGE COVENANTS to BANK ONE, ARIZONA, NA,
a national banking association with its principal office in Phoenix, Arizona
(the "Bank") and the Mortgagor GRANTS A SECURITY INTEREST to the Bank in the
following property, to-wit:
all that real estate located in Middlesex County, Massachusetts, described
in Schedule "A" which is attached to this Mortgage, Security Agreement,
Assignment of Rents and Fixture Filing (this "Mortgage") and incorporated
herein by this reference (the "Real Estate"); and
any items of furniture, machinery, equipment or other tangible personal
property owned by Mortgagor which are now or hereafter become attached to
the Real Estate or any improvement thereon so as to constitute a fixture,
whether now owned or hereinafter acquired by Mortgagor (the "Personal
Property").
TOGETHER WITH all present and future improvements, rights, privileges,
interests, easements, hereditaments, and appurtenances thereunto belonging or in
any manner pertaining thereto, and the proceeds therefrom (all of such Real
Estate, Personal Property and other rights being hereafter referred to as the
"Mortgaged Premises").
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This Mortgage is given to secure all of the Obligations of Bowmar
Instrument Corporation, an Indiana corporation ("Borrower") to the Bank. The
term "Obligations" as used in this Mortgage means all obligations of the
Borrower in favor of the Bank of every type and description, direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
including but not limited to all Obligations of the Borrower in favor of the
Bank arising under a Loan Agreement between the Borrower and the Bank dated the
date of this Mortgage (the "Loan Agreement"), which Obligations include the
obligation of the Borrower to repay all advances made by the Bank to the
Borrower under a revolving line of credit in the principal amount of
$4,000,000.00, to repay a term loan in the principal amount of $4,200,000.00,
and to repay all advances made by the Bank to Borrower under a non-revolving
acquisition line of credit in the principal sum of $1,000,000.00. The final
maturity date of the revolving line of credit is July 31, 1997, the final
maturity date of the term loan is July 31, 2000, and the final maturity date of
the non-revolving acquisition line of credit is July 31, 2001. All of the
Obligations, including those arising under the Loan Agreement, are secured as
they now exist and as they may be increased or otherwise changed by any
amendment to any instrument or agreement which now or hereafter evidences,
secures or expresses terms applicable to any of the Obligations, including
amendments to the Loan Agreement and any "Security Documents" as that term is
defined in the Loan Agreement.
As additional security for the Obligations, the Mortgagor assigns to the
Bank the rents, issues and profits of the Mortgaged Premises, including any
rents and all other amounts (collectively "Lease Payments") which are due or
shall become due to the Mortgagor under the terms of any present or future lease
(a "Lease"), oral or written, of all or any portion of the Mortgaged Premises
(all such rents, issues, profits and Lease Payments are hereafter collectively
referred to as the "Rents"). This Assignment of Rents is an absolute assignment,
and is intended to vest in the Bank the right to collect all Rents subject only
to the conditional license to collect Rents granted by the Bank to the Mortgagor
under the terms of numbered Paragraph 7 of this Mortgage.
The Mortgagor further covenants and agrees as follows:
1. This Mortgage shall secure payment and performance of the Obligations,
with reasonable attorneys' fees and costs of collection, without relief from
valuation and appraisement laws.
2. The Mortgagor shall keep the Mortgaged Premises in good repair and
shall not commit or permit waste thereon or do or permit to be done anything
that may impair the value of the Mortgaged Premises. The Mortgagor shall
promptly restore any part of the Mortgaged Premises which may be damaged or
destroyed, in a good and workmanlike manner and in conformity with the Americans
With Disabilities Act of 1990 and corresponding rules and regulations (the
"ADA") and with plans and specifications approved by Bank. The Mortgagor shall
pay when due all taxes and assessments levied or assessed against the Mortgaged
Premises or any part thereof.
3. The Mortgagor shall comply with all statutes, ordinances, rules,
regulations, orders, and directions of any legislative, executive,
administrative, or judicial body or official applicable to the Mortgaged
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Premises, or any part thereof, or to the Mortgagor, or to the operation of any
business of Mortgagor which directly affects the Mortgaged Premises; provided,
however, that the Mortgagor may contest any of the matters referred to in this
paragraph as provided in the Loan Agreement or otherwise in any reasonable
manner which in the judgment of the Bank will not adversely affect the rights of
the Bank, its successors or assigns.
4. The Mortgagor will procure and maintain in effect at all times
insurance written by insurance companies acceptable to the Bank which insures
against loss or destruction of the Mortgaged Premises by fire, wind storm,
lightning, vandalism and malicious mischief and such other perils as are
generally covered by "extended coverage" insurance for the full replacement
value of the Mortgaged Premises. All policies providing such insurance shall
provide that any loss thereunder shall be payable to the Bank under a standard
form of secured lender's loss payable endorsement. The Mortgagor shall also
procure business interruption insurance in such amounts as the Bank may
reasonably require. The Mortgagor authorizes the Bank to endorse on Mortgagor's
behalf and to negotiate drafts representing proceeds of such insurance, provided
that the Bank shall remit to the Mortgagor such surplus, if any, as remains
after the proceeds have been applied at the Bank's option: (a) to the
satisfaction of the Obligations, whether or not then due and payable, or to the
establishment of a cash collateral account securing the Obligations, or (b) to
the restoration of the Mortgaged Premises. Certificates evidencing the existence
of all of the insurance required under the terms of this Mortgage shall be
furnished to the Bank and the original policies providing such insurance shall
be delivered to the Bank at the Bank's request. If the insurance proceeds are to
be used for the restoration and repair of the Mortgaged Premises, they shall be
held by Bank in an interest bearing account selected by Bank in its sole and
absolute discretion (the "Restoration Account"). Mortgagor, at its expense,
shall promptly prepare and submit to Bank all plans and specifications necessary
for the restoration and repair of the damaged Mortgaged Premises, together with
evidence acceptable to Bank setting forth the total expenditure needed for the
restoration and repair based upon a fixed price contract with a reputable
builder and covered by performance and labor and material payment bonds. The
plans and specifications and all other aspects of the proposed restoration and
repair shall be subject to Bank's approval. In the event the insurance proceeds
held in the Restoration Account are insufficient to complete the restoration and
repair, Mortgagor shall deposit in the Restoration Account an amount equal to
the difference between the amount then held in the Restoration Account and the
total contract price for the restoration and repair. Mortgagor may commence
restoration and repair of the damaged Mortgaged Premises only when authorized in
writing by Bank to do so and thereafter shall proceed diligently with the
restoration and repair until completed. Disbursements shall be made from the
Restoration Account for the restoration and repair in accordance with a
disbursement schedule, and subject to other terms and conditions, acceptable to
Bank. Disbursements from the Restoration Account shall be charged first against
funds deposited by Mortgagor and, after such funds are exhausted, against the
insurance proceeds deposited therein. In the event the amounts held in the
Restoration Account exceed the cost of the restoration and repair of the damaged
Mortgaged Premises, the excess funds shall be disbursed to Mortgagor to the
extent of any amounts deposited therein by Mortgagor. Any funds remaining after
such disbursement, at Bank's option, may be applied by Bank to the payment of
the Obligation, whether or not
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then due, or may be disbursed to Mortgagor. All funds held in the Restoration
Account are hereby assigned to Bank as further security for the Obligation.
Bank, at any time, may apply all or any part of the funds held in the
Restoration Account to the curing of any Default.
5. Upon demand and failure of the Mortgagor so to do, the Bank may, in its
discretion upon thirty (30) days notice to Mortgagor (unless Bank determines an
emergency exists in which case no notice shall be required), advance and pay all
sums necessary to protect and preserve the Mortgaged Premises, and all sums so
advanced and paid by the Bank shall become a part of the indebtedness secured
hereby, shall bear interest from date of payment at a rate equal to the Prime
Rate plus five and one half percent (5.5%) per annum, and shall be payable to
the Bank upon demand. Such sums shall include, but not by way of limitation: (a)
taxes, assessments and other charges which may be or become senior to this
Mortgage as liens on the Mortgaged Premises, or any part thereof; (b) the cost
of any title insurance, surveys, or other evidence which in the discretion of
the Bank may be required in order to evidence, insure or preserve the lien of
this Mortgage; (c) all costs, expenses, and reasonable attorneys' fees incurred
by the Bank in respect of any and all legal and equitable actions which relate
to this Mortgage or to the Mortgaged Premises, and (d) the cost of any repairs
respecting the Mortgaged Premises which are reasonably deemed necessary by the
Bank. As used in this Mortgage, the term "Prime Rate" means a variable per annum
rate of interest equal at all times to the rate of interest established and
quoted by the Bank as its Prime Rate, such rate to change contemporaneously with
each change in such established and quoted rate; provided that it is understood
the Prime Rate shall not necessarily be representative of the rate of interest
actually charged by the Bank on any loan or class of loans. The Bank shall be
subrogated to the rights of the holder of each lien or claim paid with moneys
secured hereby. Upon written request by Bank, Mortgagor shall appear in and
prosecute or defend any action or proceeding that may affect the lien or the
priority of the lien of this Mortgage or the rights of Bank hereunder and shall
pay all costs, expenses (including the cost of searching title) and attorneys'
fees incurred in such action or proceeding. Bank may appear in and defend any
action or proceeding purporting to affect the lien or the priority of the lien
of this Mortgage or the rights of Bank.
6. If all or any part of the Mortgaged Premises is damaged, taken, or
acquired, either temporarily or permanently, in any condemnation proceeding, or
by exercise of the right of eminent domain, or by the alteration of the grade of
any street affecting the Mortgaged Premises, the amount of any award or other
payment for such taking or damages made in consideration thereof, to the extent
of the full amount of the then remaining unpaid Obligations, is hereby assigned
to the Bank, which is empowered to collect and receive the same and to give
proper receipts therefor in the name of the Mortgagor, and all such sums shall
be paid forthwith directly to the Bank. Any award or payment so received by the
Bank may, at the option of the Bank: (a) be applied to the satisfaction of the
Obligations, whether or not then due and payable, or to the establishment of a
cash collateral account for the Obligations, or (b) be released, in whole or in
part, to the Mortgagor for the purpose of altering, restoring, or rebuilding any
part of the Mortgaged Premises which may have been altered, damaged or destroyed
as a result of such taking, alteration, or proceeding.
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7. At any time a Default (as hereafter defined) has occurred and is
continuing, the Bank may enter upon and take possession of the Real Estate or
any part thereof, and at any such time, or if the Bank in the reasonable
exercise of its discretion determines that payment or performance of any of the
Obligations is insecure, the Bank may demand, sue for, receive and give
receipts, releases and satisfactions for all Rents. At any time that the Bank
has not exercised its right to take possession of the Real Estate and there is
not in effect any demand by the Bank for the direct payment of Lease Payments to
the Bank given pursuant to the immediately preceding sentence, the Mortgagor may
collect Lease Payments provided that no Rents shall be collected by the
Mortgagor more than thirty (30) days in advance of the period of occupancy to
which they relate. Lease Payments collected by the Mortgagor pursuant to the
license granted in the immediately preceding sentence shall be held by the
Mortgagor as trustee for the benefit of the Bank and shall be applied to the
satisfaction of Obligations to the extent that any are then due and payable. Any
balance remaining after satisfaction of all Obligations which are then due and
payable may be used by the Mortgagor for any proper purpose. Any demand by the
Bank upon any tenant of the Mortgaged Premises accompanied by a copy of this
Mortgage shall be sufficient authority for such tenant thereafter to make all
Lease Payments directly to the Bank and any such tenant shall have no obligation
or authority to inquire into the propriety of any such demand. Upon making Lease
Payments to the Bank pursuant to the Bank's demand, any tenant of the Mortgaged
Premises shall be as fully discharged of its obligations under any Lease to the
extent of such payments as if such payments had been made directly to the
Mortgagor. If at any time Lease Payments are required to be made directly to the
Bank under the terms of this paragraph and notwithstanding such requirement such
payments are made to the Mortgagor, the Mortgagor will receive such payments in
trust for the Bank and will forward them immediately to the Bank in the form in
which received, adding only such endorsements or assignments as may be necessary
to perfect the Bank's title thereto. Any amounts collected by the Bank pursuant
to the assignment of rents contained in this Mortgage shall be applied by the
Bank to the payment of such of the Obligations as are then due and payable as
the Bank in its sole discretion shall determine. If no Obligations are then due
and payable, such amounts may be held by the Bank as cash collateral for the
Obligations, without liability for interest thereon, provided that the Bank
will, at the direction of the Mortgagor, invest such amounts for the account and
at the risk of the Mortgagor in U.S. Treasury Bills with less than 60 days
remaining to maturity or in similar essentially risk-free, cash equivalent
investments as the Mortgagor may reasonably direct and any earnings derived from
such investments will become a part of the cash collateral account. Any portion
or all of the cash collateral account which is not applied to Obligations
pursuant to the terms of this paragraph may at the discretion of the Bank be
released to the Mortgagor. The authority given to collect Rents conferred upon
the Bank under the terms of this Mortgage is irrevocable.
8. The Mortgagor grants to the Bank as secured party a security interest
in the Personal Property in accordance with the provisions of the Uniform
Commercial Code as enacted in Massachusetts. The Mortgagor authorizes the Bank
at the expense of the Mortgagor to execute on its behalf and file any other
financing statements deemed necessary by the Bank to perfect its security
interest in the Personal Property and to file such financing statements in those
public offices deemed necessary by the Bank. Such financing statements may be
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signed by the Bank alone. In addition, the Mortgagor shall execute and deliver
any financing statement or other document that the Bank may request to perfect
or to further evidence the security interest created by this Mortgage.
9. If, after the execution of this Mortgage, applicable law requires
the taxation of this Mortgage, the Mortgagor, upon demand by the Bank, shall pay
such taxes or reimburse the Bank therefor unless it is unlawful to require the
Mortgagor to do so. Notwithstanding the foregoing, the Mortgagor shall not be
obligated to pay any portion of any of the Bank's federal or state income taxes.
10. As used in this paragraph, the following terms have the meanings
indicated:
(a) Clean-up. "Clean-up" means the removal or remediation of
Contamination or other response to Contamination in compliance with all
Environmental Laws and to the satisfaction of all applicable governmental
agencies, and in compliance with good commercial practice.
(b) Contamination. "Contamination" means the Release of any
Hazardous Substance on, in or under the Real Estate or the presence of any
Hazardous Substance on, in or under the Real Estate as the result of a
Release, or the emanation of any Hazardous Substance from the Real Estate.
(c) Environmental Laws. "Environmental Laws" means all federal,
state and local laws, statutes, codes, ordinances, regulations, rules or
other requirements with the force of law, including but not limited to
consent decrees and judicial or administrative orders, relating to the
environment, including but not limited to those applicable to the use,
storage, treatment, disposal or Release of any Hazardous Substances, all
as amended or modified from time to time including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") as amended by the Superfund Amendments and Reauthorization Act
of 1986 ("SARA"); the Resource Conservation and Recovery Act of 1976, as
amended ("RCRA"); the Clean Water Act, as amended; the Clean Air Act, as
amended; the Federal Insecticide, Fungicide and Rodenticide Act, as
amended; the Hazardous Materials Transportation Act, as amended, and any
and all environmental statutes of the State of Massachusetts statutes and
all regulations promulgated under or pursuant to such federal and
Massachusetts statutes.
(d) Hazardous Substance. "Hazardous Substance" means any hazardous
waste or hazardous substance, or any pollutant or contaminant or toxic
substance or other chemicals or substances including, without limitation,
asbestos, petroleum, polychlorinated biphenyls, and any other substance
regulated by any Environmental Laws.
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(e) Release. "Release" means the spilling, leaking, disposing,
discharging, dumping, pouring, emitting, depositing, injecting leaching,
escaping or other release or threatened release, whether intentional or
unintentional, of any Hazardous Substance.
(f) Regulatory Actions. "Regulatory Actions" means any claim,
demand, action or proceeding brought or instigated by any governmental
authority in connection with any Environmental Law including, without
limitation, any civil, criminal or administrative proceeding whether or
not seeking costs, damages, penalties or expenses.
(g) Third-party Claims. "Third-party Claims" means any claim,
action, demand or proceeding, other than a Regulatory Action, based on
negligence, trespass, strict liability, nuisance, toxic tort or detriment
to human health or welfare due to Contamination, whether or not seeking
costs, damages, penalties, or expenses, and including any action for
contribution to Clean-up costs.
The Mortgagor shall indemnify, defend and hold harmless the Bank and its
affiliates, shareholders, directors, officers, employees and agents (all being
included in the word "Bank" for purposes of this paragraph) from any and all
claims, causes of action, damages, demands, fines, liabilities, losses,
penalties, judgments, settlements, expenses and costs, however defined, and of
whatever nature, known or unknown, absolute or contingent, including, but not
limited to, attorneys' fees, consultant's fees, fees of environmental or other
engineers, and related expenses including, without limitation, expenses related
to site inspections and soil and water analyses, which may be asserted against,
imposed on, suffered or incurred by the Bank arising out of or in any way
related to (a) any actual, alleged or threatened Release of any Hazardous
Substance on, in or under the Real Estate, (b) any related injury to human
health or safety (including wrongful death) or any actual or alleged injury to
the environment by reason of the condition of, or past or present activities on
the Real Estate, (c) any actual or alleged violation of Environmental Law
related to the Real Estate, (d) any lawsuit or administrative proceeding brought
or threatened by any person, including any governmental entity or agency,
federal, state or local, including any governmental order relating to or
occasioned by any actual or alleged Contamination or threat of Contamination,
(e) any lien imposed upon the Real Estate in favor of any governmental entity as
a result of any Contamination or threat of Contamination, and (f) all costs and
expenses of any Clean-up. The Mortgagor represents and covenants that the
Mortgagor's storage, generation, transportation, handling or use, if any, of
Hazardous Substances on or from the Real Estate is currently, and will remain at
all times, in compliance with all applicable Environmental Laws. If any Clean-up
is required with respect to the Real Estate, the Mortgagor shall expeditiously
complete such Clean-up at the Mortgagor's expense and without the necessity of
demand by the Bank. If the Mortgagor should fail to initiate and diligently
pursue any Clean-up or should otherwise fail to perform any obligation under the
terms of this paragraph, the Bank may, at its sole discretion and without any
obligation to complete any Clean-up which it may cause to be commenced, cause
the Clean-up or partial Clean-up of the Real Estate and pay on behalf of the
Mortgagor any costs, fines or penalties imposed on the Mortgagor pursuant to any
Environmental Laws or make
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any other payment or perform any other action which will prevent a lien in favor
of any federal, state or local government authority or any other person from
attaching to the Real Property pursuant to the provisions of any Environmental
Law, and all costs and expenses of the Bank incurred in pursuing any of the
remedies provided in this paragraph shall be added to the obligations secured by
this Mortgage, which costs and expenses shall become due and payable without
notice as incurred by the Bank, together with interest thereon at the Prime Rate
plus five and one half percent (5.5%) per annum until paid.
11. Without obtaining the prior written consent of Bank, Mortgagor shall
not sell, transfer, convey, assign or otherwise dispose of, or further encumber,
all or any part of the Mortgaged Premises or any interest therein, voluntarily
or involuntarily, by operation of law or otherwise. If Mortgagor is a
corporation, limited liability company, partnership, joint venture or trust, any
material change in the ownership or management of, or interest in, Mortgagor, or
any pledge or encumbrance of any interest in Mortgagor, shall be deemed to be a
transfer of the Mortgaged Premises. Upon the occurrence of any such transaction
with Bank's consent, or without Bank's consent if Bank elects not to exercise
its rights and remedies for an Event of Default, Bank (i) may increase the
interest rate on all or any part of the Obligations to its then current market
rate for similar indebtedness; (ii) may charge a loan fee and a processing fee
in connection with the change; and (iii) shall not be obligated to release
Mortgagor from any liability hereunder or for the Obligations except to the
extent required by law. Consent to any such transaction shall not be deemed to
be consent or a waiver of the requirement of consent to any other such
transaction.
12. The occurrence of any of the following events shall be deemed a
"Default" under this Mortgage:
(a) an "Event of Default" as defined in the Loan Agreement shall
have occurred and be continuing or the Borrower shall otherwise fail to
pay or perform any of the Obligations promptly when such payment or
performance is due or within such grace period as may be applicable;
(b) the Mortgagor shall otherwise fail to observe and perform the
terms and conditions of this Mortgage and such failure continues
unremedied for a period of thirty (30) days after notice to Mortgagor;
(c) the Mortgagor shall abandon the Mortgaged Premises;
(d) Any levy or execution upon, or judicial seizure of, any portion
of the Mortgaged Premises;
(e) Any attachment or garnishment of, or the existence or filing of
any lien or encumbrance other than as consented to by Bank against, any
portion of the Mortgaged Premises, that is not removed or released within
forty-five (45) days after its creation;
(f) The institution of any legal action or proceedings to enforce
any lien or encumbrance upon any portion of the Mortgaged
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Premises, that is not dismissed within forty-five (45) days after
its institution;
(g) The existence of any encroachment upon the Mortgaged Premises
that has occurred without the approval of Bank that is not removed or
corrected within thirty (30) days after its creation; or
(h) The demolition or destruction of, or any substantial damage to,
any portion of the Mortgaged Premises that is not adequately covered by
insurance.
13. Upon the occurrence and continuance of a Default, all indebtedness
secured hereby shall, at the option of the Bank, become immediately due and
payable and this Mortgage may be foreclosed accordingly. Upon the occurrence and
continuance of a Default, the Bank shall be entitled to the appointment of a
receiver for the Mortgaged Premises to collect the rents and profits and to
maintain the Mortgaged Premises without regard to the adequacy of any security
for the Obligations or the solvency of Mortgagor or any other person or entity.
The Bank shall have the option of proceeding as to both the Real Estate and the
Personal Property in accordance with its rights and remedies in respect of the
Real Estate, in which event the default provisions of the Uniform Commercial
Code shall not apply. If the Bank elects to proceed with respect to the Personal
Property separately from the Real Estate, the requirement of the Uniform
Commercial Code as to reasonable notice of any proposed sale or disposition of
the Personal Property shall be met if such notice is delivered or mailed to the
Mortgagor at its address stated above at least five (5) days prior to such sale
or disposition. In any action to foreclose this Mortgage, the Bank shall be
entitled to recover, in addition to all reasonable attorney and related
paraprofessional expenses incurred in connection therewith, all other reasonable
costs and expenses associated with foreclosure including, without limitation,
all expenses incurred for title searches, abstracts of title, title insurance,
appraisals, surveys and environmental assessments reasonably deemed necessary by
the Bank, all of which costs and expenses shall be additional amounts secured by
this Mortgage. As used in the preceding sentence, the term "environmental
assessments" means inspections and reports of environmental engineers or firms
of environmental engineers or other appropriate experts, and associated
samplings and testings of soil or groundwater, the purpose of which is to
determine whether there is any Contamination associated with the Real Estate and
if so, the extent thereof, and to estimate of the cost of Clean-up of any
Contamination, and to determine whether there are any underground storage tanks
or any asbestos in, on, or under the Real Estate and if so, whether there are
any violations of Environmental Laws in connection therewith. As used in this
paragraph, the terms "Contamination," "Clean-up" and "Environmental Laws" are
used as defined in numbered Paragraph 10.
14. All rights, powers and remedies granted Bank herein, or otherwise
available to Bank, are for the sole benefit and protection of Bank, and Bank may
exercise any such right, power or remedy at its option and in its sole and
absolute discretion without any obligation to do so. In addition, if, under the
terms hereof, Bank is given two or more alternative courses of action, Bank may
elect any alternative or combination of alternatives, at its option and in its
sole and absolute discretion. All monies advanced by Bank under the terms hereof
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and all amounts paid, suffered or incurred by Bank in exercising any authority
granted herein, including reasonable attorneys' fees, shall be added to the
Obligation, shall be secured by this Mortgage, shall bear interest at a rate
equal to the Prime Rate plus five and one half percent (5.5%) per annum until
paid, and shall be due and payable by Mortgagor to Bank immediately without
demand.
15. In order to insure the payment of taxes and assessments that are now,
or hereafter may be, a lien upon the Mortgaged Premises, and to insure the
payment of all premiums on policies of insurance required herein, Mortgagor, if
required by Bank after the occurrence of a Default, shall pay to Bank each
month, in addition to any other payments required hereunder, an amount equal to
the taxes and special assessments levied or to be levied against the Mortgaged
Premises and the premium or premiums that will become due and payable to
maintain the insurance on the Mortgaged Premises, all as reasonably estimated by
Bank (giving due consideration to the previous year's taxes, assessments and
premiums) less all deposits therefore already made, divided by the number of
months remaining before one month prior to the date when the taxes, assessments
and premiums become delinquent. If amounts paid to Bank under the terms of this
paragraph are insufficient to pay all taxes, assessments and premiums as they
become due, Mortgagor shall pay to Bank upon demand all additional sums
necessary to fully pay and discharge these items. All moneys paid to Bank under
the terms of this paragraph may be either held by Bank to pay the taxes,
assessments and premiums before the same become delinquent or applied to the
Obligation upon payment by Bank from its own funds of the taxes, assessments and
premiums. To the extent provision is not made for payment pursuant to this
paragraph, Mortgagor shall remain obligated to pay all taxes, assessments and
premiums as they become due and payable. Deposits made under this paragraph may
be commingled with Bank's general funds; Bank shall have no liability to
Mortgagor for interest on any deposits.
16. The Bank, at its option and on such terms as it may desire, may renew,
compromise, accelerate, extend or otherwise change the time of payment or
performance, or otherwise change the terms, of any part or all of the
Obligations or release any obligated party or collateral, or any part of the
Mortgaged Premises from the lien of this Mortgage without impairing the lien of
this Mortgage except as to the portion of the Mortgaged Premises expressly
released and without releasing the Mortgagor or any guarantors or sureties of or
from any of the obligations. No delay by the Bank in the exercise of any of its
rights under this Mortgage shall preclude the subsequent exercise thereof so
long as any Default continues uncured, and no waiver by the Bank of any Default
of the Mortgagor shall operate as a waiver of subsequent or other Defaults. The
making of any payment by the Bank for any of the purposes herein permitted shall
not constitute a waiver of any breach of the Mortgagor's covenant to perform
such act. Notice by the Bank of its intention to exercise any right or option
under this Mortgage is expressly waived by the Mortgagor, and any one or more of
the Bank's rights or remedies under this Mortgage may be enforced successively
or concurrently. Mortgagor waives and agrees not to assert: (i) any right to
require Bank to proceed against Borrower or any guarantor, to proceed against or
exhaust any other security for the Obligations, to pursue any other remedy
available to Bank, or to pursue any remedy in any particular order or manner;
(ii) the benefits of any legal or equitable doctrine or principle of
marshalling;
-10-
<PAGE> 11
(iii) the benefits of any statute of limitations affecting the enforcement
hereof; (iv) demand, diligence, presentment for payment, protest and demand, and
notice of extension, dishonor, protest, demand and nonpayment, relating to the
Obligations; (v) any benefit of, and any right to participate in, any other
security now or hereafter held by Bank (vi) the benefits of any statutory
provision limiting the liability of a surety, including without limitation the
benefit of Section 12-1641, et seq., of the Arizona Revised Statutes; and (vii)
any defense arising by reason of any disability or other defense of Borrower or
by reason of the cessation from any cause whatsoever of the liability of
Borrower. Mortgagor shall have no right of subrogation and hereby waives any
right to enforce any remedy which Bank now has, or may hereafter have, against
Borrower. Time is of the essence of this Mortgage.
17. All advances of principal under the Note shall be made to Borrower
subject to and in accordance with the terms thereof. If Borrower is a
corporation or partnership, it is not necessary for Bank to inquire into the
powers of Borrower or the officers, directors, partners or agents acting or
purporting to act on its behalf. Mortgagor is and shall continue to be fully
informed as to all aspects of the business affairs of Borrower that it deems
relevant to the risks it is assuming and hereby waives and fully discharges Bank
from any and all obligations to communicate to Mortgagor any facts of any nature
whatsoever regarding Borrower and Borrower's business affairs.
18. Bank shall have the right to inspect the Mortgaged Premises at all
reasonable times.
19. Notwithstanding anything to the contrary contained herein, Bank
acknowledges that a prior mortgage has been recorded against the Mortgaged
Premises (herein called the "Prior Mortgage"). The indebtedness and obligations
secured by the Prior Mortgage are hereinafter called the "Prior Obligation."
Mortgagor shall make all payments of principal and interest on the Prior
Obligation as they become due. Without the prior written consent of Bank,
Mortgagor shall not consent or agree to or request any increase in the amount of
the Prior Obligation, any extension of time for the payment thereof, any
reduction in any payment required thereon, or any postponement, modification or
indulgence thereof, and shall not sign a renewal note or notes therefor.
20. Should there occur any default in any payment or performance of the
Prior Obligation, then Bank, without notice to or demand upon Mortgagor and
without releasing Mortgagor from any obligation, may pay or perform the Prior
Obligation in such manner and to such extent as it may deem necessary; Bank is
hereby authorized to enter upon the Mortgaged Premises for such purposes. In
addition, upon the occurrence of any Default and at any time while such Default
is continuing, Bank, at any time and from time to time, may prepay the Prior
Obligation in whole or in part together with all premiums, penalties or other
payments required in connection with any such prepayment. The exercise of any
right or authority herein granted shall not cure or waive any Default nor
invalidate any act done hereunder because of any Default.
21. The occurrence of a default in any of the terms, conditions or
provisions of the Prior Mortgage shall constitute a Default hereunder that shall
-11-
<PAGE> 12
entitle Bank to immediately exercise its rights and remedies set forth herein
for a Default.
22. All obligations of the Mortgagor under this Mortgage shall extend to
and be binding upon the successors and assigns of the Mortgagor, and shall inure
to the benefit of the Bank and its successors and assigns.
23. This Mortgage secures indebtedness incurred for a business purpose.
24. The Obligations and the agreements of any person or entity to pay or
perform the Obligations shall be governed by and construed according to the laws
of the State of Arizona, provided, that this Mortgage shall be governed by and
construed according to the substantive laws of the State of Massachusetts,
notwithstanding the fact that Massachusetts conflicts of law rules might
otherwise require the substantive rules of law of another jurisdiction to apply.
Each term, condition and provision of this Mortgage shall be interpreted in such
manner as to be effective and valid under applicable law but if any term,
condition or provision of this Mortgage shall be held to be void or invalid, the
same shall not affect the remainder hereof which shall be effective as though
the void or invalid term, condition or provision had not been contained herein.
Any procedures provided herein for such remedies shall be modified by and
replaced with, where inconsistent with or required by, any procedures or
requirements of the laws of the State of Massachusetts.
25. This Mortgage is upon the STATUTORY CONDITION for breach of which and
for breach of any other condition herein, the Bank shall have the STATUTORY
POWER OF SALE.
Dated: August 28, 1995.
BOWMAR/ALI, INC., a Massachusetts
corporation
By: /s/ Thomas K. Lanin
Name: Thomas K. Lanin
Title: President
By: /s/ Joe G. Warren, Jr.
Name: Joe G. Warren, Jr.
Title: Treasurer
-12-
<PAGE> 13
STATE OF ARIZONA )
) ss:
County of Maricopa )
Before me, a Notary Public in and for the above County and State,
personally appeared Thomas K. Lanin, the President, of BOWMAR/ALI, INC., a
Massachusetts corporation, who as such officer acknowledged the execution of the
foregoing Mortgage for and on behalf of the corporation.
WITNESS my hand and Notarial seal this 31st day of August, 1995.
Signature: /s/ Diane Lopez
Printed: Diane Lopez
Notary Public
My Commission Expires: My Commission Expires Sept. 23, 1995
My County of Residence: Maricopa
STATE OF ARIZONA )
) ss:
County of Maricopa )
Before me, a Notary Public in and for the above County and State,
personally appeared Joe G. Warren, Jr., the Treasurer, of BOWMAR/ALI, INC., a
Massachusetts corporation, who as such officer acknowledged the execution of the
foregoing Mortgage for and on behalf of the corporation.
WITNESS my hand and Notarial seal this 31st day of August, 1995.
Signature: /s/ Diane Lopez
Printed: Diane Lopez
Notary Public
My Commission Expires: My Commission Expires Sept. 23, 1995
My County of Residence: Maricopa
THIS INSTRUMENT PREPARED BY: ____________________________________________
Attorney-at-law
Streich Lang
Renaissance One
Two North Central Avenue
Phoenix, Arizona 85004-2391
Telephone: (602) 229-5200
-13-
<PAGE> 14
SCHEDULE
All that real estate in Middlesex County, Massachusetts, described as
follows:
<PAGE> 1
EXHIBIT 11
BOWMAR INSTRUMENT CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
- --------------------------------------------------------------------------------------------------
<CAPTION>
Fiscal Year
1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET INCOME PER COMMON SHARE - PRIMARY:
INCOME:
Net Income $3,903,000 $2,175,000 $ 755,000
Less: Dividends on Preferred Stock 360,000 362,000 384,000
---------- ---------- ----------
Net Income Applicable to Common Stock $3,543,000 $1,813,000 $ 371,000
========== ========== ==========
SHARES:
Weighted Average Number of Common
Shares Outstanding 6,426,378 6,390,408 6,121,679
Number of Common Stock Equivalents
Assuming Exercise of Options Reduced
by the Number of Shares Which Could
Have Been Purchased With the Proceeds
From Exercise of Such Options 188,863 164,033 114,911
---------- ---------- ----------
Weighted Average Number of Shares
and Common Stock Equivalents 6,615,241 6,554,441 6,236,590
========== ========== ==========
NET INCOME PER COMMON SHARE - PRIMARY $0.54 $0.28 $0.06
========== ========== ==========
----------------------------------------------------------------
NET INCOME PER COMMON SHARE - FULLY DILUTED:
INCOME:
Net Income $3,903,000 $2,175,000 $ 755,000
========== ========== ==========
SHARES:
Weighted Average Number of Shares and
Common Stock Equivalents 6,615,241 6,556,826 6,236,590
Number of Shares of Common Stock Issued
Upon Conversion of Preferred Stock 1,599,467 1,600,027 1,716,904
---------- ---------- ----------
Weighted Average Number of Shares and
Common Stock Equivalents Assuming
Conversion of Preferred Stock 8,214,708 8,156,853 7,953,494
========== ========== ==========
NET INCOME PER COMMON SHARE - FULLY DILUTED $0.48 $0.27 $0.09
========== ========== ==========
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference, in the registration statements of
Bowmar Instrument Corporation and Subsidiaries on Forms S-8 (File nos.
33-57230, 33-62247, 33-9776 and 2-67645) of our report dated December 15, 1995,
on our audits of the consolidated financial statements of Bowmar Instrument
Corporation and Subsidiaries, as of September 30, 1995, and October 1, 1994,
and for each of the three years in the period ended September 30, 1995, which
report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Phoenix, Arizona
December 27, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 739
<SECURITIES> 0
<RECEIVABLES> 3,984
<ALLOWANCES> 102
<INVENTORY> 5,420
<CURRENT-ASSETS> 12,196
<PP&E> 7,110
<DEPRECIATION> 5,775
<TOTAL-ASSETS> 17,432
<CURRENT-LIABILITIES> 5,307
<BONDS> 3,992
0
120
<COMMON> 646
<OTHER-SE> 7,029
<TOTAL-LIABILITY-AND-EQUITY> 17,432
<SALES> 26,869
<TOTAL-REVENUES> 26,869
<CGS> 16,716
<TOTAL-COSTS> 16,716
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 723
<INCOME-PRETAX> 577
<INCOME-TAX> (3,326)
<INCOME-CONTINUING> 3,903
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,903
<EPS-PRIMARY> .54
<EPS-DILUTED> .48
</TABLE>
