UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-7445
DATRON SYSTEMS INCORPORATED
- -----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-2582922
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
304 Enterprise Street, Escondido, California 92029-1297
- ------------------------------------------------------------
(Address of principal executive offices) (zip code)
(760) 747-3734
- ---------------------------------------------------
(Registrant's telephone number, including area code)
(Former name, former address and formal fiscal year, if changed
since last report)
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.
[ X ] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15 (d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
[ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
As of October 24, 1997, the Registrant had only one class
of common stock, par value $0.01, of which there were 2,669,858 shares
outstanding.
<PAGE>1
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
DATRON SYSTEMS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(In thousands)
Sept 30, March 31
1997 1997
-------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $376 $1,072
Accounts receivable, net 16,555 17,896
Inventories 13,834 14,309
Deferred income taxes 2,788 2,788
Prepaid expenses and other current assets 1,254 1,168
-------- --------
Total current assets 34,807 37,233
Property, plant and equipment, net 11,293 12,030
Goodwill, net 5,749 5,851
Investment 1,113 1,113
Other assets 204 249
-------- --------
Total assets $53,166 $56,476
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $7,263 $7,647
Accrued expenses 2,798 3,103
Customer advances 2,501 744
Income taxes payable 194 194
Current portion of restructuring reserve 592 789
-------- --------
Total current liabilities 13,348 12,477
Long-term debt 5,300 8,900
Restructuring reserve 180 435
Deferred income taxes 2,056 2,056
-------- --------
Total liabilities 20,884 23,868
-------- --------
Stockholders' equity:
Preferred stock -- par value $0.01; authorized
2,000,000 shares, none issued or outstanding --- ---
Common stock -- par value $0.01; authorized
10,000,000 shares, 3,063,937 shares issued
in September and March 31 31
Additional paid-in capital 10,610 10,602
Retained earnings 24,018 24,417
Treasury stock, at cost; 394,079 and 404,521
shares in September and March, respectively (2,133) (2,198)
Stock option plan and stock purchase plan notes rec (244) (244)
-------- --------
Total stockholders' equity 32,282 32,608
-------- --------
Total liabilities and stockholders' equity $53,166 $56,476
======== ========
See notes to consolidated financial statements.
</TABLE>
<PAGE>2
<TABLE>
<CAPTION>
DATRON SYSTEMS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per-share amounts)
Three Months Ended Six Months Ended
September 30, September 30,
1997 1996 1997 1996
----------------- ------------------
<S> <C> <C> <C> <C>
Net sales $14,937 $14,620 $25,278 $27,077
Cost of sales 11,326 10,711 19,312 19,712
----------------- ------------------
Gross profit 3,611 3,909 5,966 7,365
Selling, general and admin. 2,797 2,991 5,545 5,722
Research and development 471 482 860 1,040
----------------- ------------------
Operating income (loss) 343 436 (439) 603
Interest expense (81) (177) (199) (294)
Other expense (4) --- (10) ---
----------------- ------------------
Income (loss) before income taxes 258 259 (648) 309
Income taxes (benefit) 109 104 (249) 125
----------------- ------------------
Net income (loss) $149 $155 ($399) $184
================= ==================
Net income (loss) per share $0.06 $0.06 ($0.15) $0.07
================= ==================
Weighted average number of
common and common equivalent
shares outstanding 2,689 2,681 2,677 2,687
================= ==================
See notes to consolidated financial statements.
</TABLE>
<PAGE>3
<TABLE>
<CAPTION>
DATRON SYSTEMS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Six Months Ended
September 30,
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income ($399) $184
Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,284 1,429
Restructuring (452) (801)
Changes in operating assets and liabilities:
Accounts receivable 1,341 (3,458)
Inventories 475 517
Prepaid expenses and other assets (50) 1,712
Accounts payable and accrued expenses (689) (2,444)
Customer advances 1,757 406
Income taxes payable --- 121
--------- ---------
Net cash provided by (used in) operating activities 3,267 (2,334)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (436) (194)
Purchase of investment --- (223)
--------- ---------
Net cash used in investing activities (436) (417)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) increase in long-term debt (3,600) 1,400
Stock options exercised 126 264
Purchase of treasury stock (53) ---
--------- ---------
Net cash (used in) provided by financing activities (3,527) 1,664
--------- ---------
DECREASE IN CASH (696) (1,087)
Cash at beginning of period 1,072 1,393
--------- ---------
CASH AT END OF PERIOD $376 $306
========= =========
See notes to consolidated financial statements.
</TABLE>
<PAGE>4
Datron Systems Incorporated
Notes to Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
---------------------
The unaudited consolidated financial statements included herein
contain the accounts of Datron Systems Incorporated and its
wholly owned subsidiaries (the "Company") and have been prepared
in accordance with the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and regulations.
It is suggested that these financial statements be read in
connection with the financial statements and notes thereto
included in the Company's annual report on Form 10-K for the
fiscal year ended March 31, 1997.
In the opinion of the Company's management, the accompanying
unaudited financial statements contain all adjustments,
consisting only of normal recurring adjustments, unless otherwise
stated, which are necessary to present fairly its financial
position at September 30, 1997 and the results of its operations
and its cash flows for the periods presented. Results of
operations for the periods presented herein are not necessarily
indicative of what results will be for the entire fiscal year.
The balance sheet at March 31, 1997 has been derived from audited
financial statements.
2. Income (Loss) per Share
-----------------------
Shares used in computing income (loss) per share include the
weighted average of common stock outstanding plus equivalent
shares issuable under the Company's stock option plans when such
amounts are dilutive. In February 1997, the Financial Accounting
Standards Board issued SFAS No. 128, Earnings Per Share ("EPS").
This statement requires presentation of income per share to
reflect both "Basic EPS" as well as "Diluted EPS" on the face of
the income statement. In general, Basic EPS excludes dilution
created by stock equivalents and is a function of the weighted-
average number of common shares outstanding for the period.
Diluted EPS reflects potential dilution created by stock
equivalents as if such equivalents are converted into common
stock and is calculated in substantially the same manner as Fully
Diluted EPS illustrated in Accounting Principles Board ("APB")
Opinion No. 15, "Earnings Per Share."
The Company will be required to adopt the new method of reporting
income per share in the three-month period ending December 31,
1997. Based on the Company's existing capital structure,
implementation of SFAS No. 128 is not expected to have a
material effect on the Company's income (loss) per share.
3. Accounts Receivable
-------------------
At September 30, 1997 and March 31, 1997, accounts receivable
were as follows:
<TABLE>
<CAPTION>
September 30, March 31,
1997 1997
------------- -----------
<S> <C> <C>
Billed $11,749,000 $14,019,000
Unbilled 5,032,000 4,103,000
------------- -----------
Subtotal 16,781,000 18,122,000
Allowance for doubtful accounts (226,000) (226,000)
------------ -----------
Total $16,555,000 $17,896,000
============ ===========
</TABLE>
<PAGE>5
4. Inventories
-----------
At September 30, 1997 and March 31, 1997, inventories were as
follows:
<TABLE>
<CAPTION>
September 30, March 31,
1997 1997
------------- -------------
<S> <C> <C>
Raw materials $ 9,193,000 $ 9,316,000
Work-in-process 3,516,000 2,753,000
Finished goods 1,125,000 2,240,000
------------ ------------
Total $13,834,000 $14,309,000
============ ============
</TABLE>
Inventories are presented net of allowances for obsolescence of
$1,453,000 and $1,350,000 at September 30, 1997 and March 31,
1997, respectively.
5. Property, Plant and Equipment
-----------------------------
At September 30, 1997 and March 31, 1997, property, plant and
equipment was as follows:
<TABLE>
<CAPTION>
September 30, March 31,
1997 1997
-------------- --------------
<S> <C> <C>
Land and buildings $ 8,529,000 $ 8,529,000
Machinery and equipment 14,981,000 14,590,000
Furniture and office equipment 1,457,000 1,443,000
Leasehold improvements 820,000 815,000
Construction-in-process 66,000 66,000
------------ -------------
Subtotal 25,853,000 25,443,000
Accumulated depreciation and
amortization (14,560,000) (13,413,000)
------------ -------------
Total $11,293,000 $12,030,000
============ =============
</TABLE>
6. Long-Term Debt
--------------
On August 8, 1997, the Company amended and restated its credit
agreement and note with its bank. Under the amended agreement,
the Company has a committed revolving line of credit with the
bank of $19,500,000, of which up to $15,000,000 may be used for
letters of credit and up to $9,500,000 may be used for direct
working capital advances. Total credit extended may not exceed
$19,500,000. The letter of credit facility expires on June 30,
1999 and the working capital facility expires on December 31,
1998. Interest is payable on borrowings under the working
capital line at the bank's prime rate plus 0.85% or at LIBOR plus
1.85% at the option of the Company. At September 30, 1997, the
bank's prime rate was 8.50%. The line of credit is secured by
assets of the Company and contains certain financial covenants
with which the Company is in compliance. A commitment fee of
0.25% per annum is payable to the bank on the unused portion of
the working capital facility. At September 30,1997, there were
borrowings of $5,300,000 under the working capital line and the
bank had issued letters of credit against the line totaling
$7,255,000.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Datron Systems Incorporated and its wholly owned subsidiaries
(the "Company") report operations in two business segments:
Antenna and Imaging Systems, and Communication Products and
Services. The Antenna and Imaging Systems business segment
designs and manufactures specialized satellite communication
systems, subsystems and antennas that are sold worldwide to
commercial and governmental customers, including the U.S.
Department of Defense (DoD). This segment also sells remote
sensing satellite earth stations to worldwide commercial,
scientific and military organizations. In fiscal 1996, this
segment introduced the DBS-3000, a mobile satellite television
reception system for recreational vehicles and long-haul trucks.
This system was the Company's first consumer product. Several
additional direct broadcast satellite ("DBS") antenna products
were introduced in fiscal 1997. The Communication Products and
Services business segment designs, manufactures and distributes
high frequency and very high frequency radios and accessories for
worldwide military and civilian purposes.
This Management's Discussion and Analysis of Financial Condition
and Results of Operations contains certain forward-looking
statements. Actual results could differ materially. Reference
is hereby made to the statement of Investment Considerations
contained in Part I, Item 1, of the Company's Form 10-K, which is
available from the Company upon request.
Results of Operations
- ---------------------
Net income for the second quarter of fiscal 1998 was $149,000, or
$0.06 per share, compared with net income of $155,000, or $0.06
per share, in the second quarter of fiscal 1997. Net sales in
the second quarter of fiscal 1998 were $14,937,000, a 2% increase
from second quarter net sales last fiscal year of $14,620,000.
The increase in sales was primarily due to higher sales of
military antennas and remote sensing systems, partially offset by
lower sales of direct broadcast satellite (DBS) antenna products.
Although net income in the recent quarter was not materially
different from net income in the second quarter last fiscal year,
the Company experienced lower gross profits in the recent
quarter, partially offset by lower selling, administrative and
interest expenses.
Net loss for the six months ended September 30, 1997 was
$399,000, or $0.15 per share, compared with net income of
$184,000, or $0.07 per share, for the comparable period last
fiscal year. Net sales for the six months were $25,278,000, a 7%
decrease from net sales of $27,077,000 for the first six months
last fiscal year. The decrease in sales was primarily due to
lower sales of DBS antenna products and radio products. The net
loss resulted from lower gross profits on the lower sales,
partially offset by lower operating and interest expenses.
Operating results for each business segment were as follows:
Antenna and Imaging Systems
- ---------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1997 1996 1997 1996
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $9,769,000 $9,377,000 $16,988,000 $17,761,000
========== ========== =========== ===========
Gross profit $1,876,000 $2,493,000 $3,235,000 $4,587,000
========== ========== =========== ===========
Operating income
(loss) $234,000 $556,000 ($108,000) $560,000
========== ========== =========== ==========
</TABLE>
Sales of Antenna and Imaging Systems products increased 4% in the
second quarter of fiscal 1998 compared with the second quarter of
fiscal 1997. The increase was due to higher sales of military
antennas and remote sensing systems, partially offset by lower
sales of DBS antenna products. Sales in the first six months of
fiscal 1998 were 4% lower than in the first six months of fiscal
1997. The decrease was primarily due to lower sales of DBS
antenna products, partially offset by higher sales of military
antennas.
Gross profit percentage on sales of Antenna and Imaging Systems
products was 19.2% in the second quarter of fiscal 1998 compared
with 26.6% in the second quarter last fiscal year. The decrease
was primarily due to higher engineering costs, manufacturing
inefficiencies and severance costs associated with a reduction in
personnel. Gross profit percentage for the first six months of
fiscal 1998 was 19.0% of sales compared with 25.8% of sales for
the first six months of fiscal 1997. The decrease was primarily
due to higher engineering costs and manufacturing inefficiencies.
Several personnel changes were made in the second quarter of
fiscal 1998 in an effort to improve operational efficiencies. A
short-term effect of these changes was to increase expenses.
<PAGE>7
Operating income percentage on sales of Antenna and Imaging
Systems products was 2.4% in the second quarter of fiscal 1998
compared with 5.9% in the second quarter last fiscal year. The
decrease resulted from lower gross profits, partially offset by
lower selling, product development and administrative expenses.
Operating loss percentage for the first six months of fiscal 1998
was 0.6% of sales compared with an operating income percentage of
3.2% of sales for the first six months of fiscal 1997. The
decrease was primarily due to lower gross profits, partially
offset by lower product development, selling and administrative
expenses.
Communication Products and Services
- -----------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1997 1996 1997 1996
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales $5,168,000 $5,243,000 $8,290,000 $9,316,000
========== ========== =========== ==========
Gross profit $1,735,000 $1,416,000 $2,731,000 $2,778,000
========== ========== =========== ==========
Operating income $468,000 $222,000 $381,000 $777,000
========== ========== =========== ==========
</TABLE>
Sales of Communication Products and Services decreased 1% in the
second quarter of fiscal 1998 compared with the second quarter of
fiscal 1997. The difference in sales between the two periods is
not meaningful. Sales in the first six months of fiscal 1998
were 11% lower than in the first six months of fiscal 1997. The
decrease was primarily due to low sales of radio products in the
first quarter of fiscal 1998 resulting from low order bookings
due to delays in new product introduction. The Company
introduced two new radio products in the latter part of fiscal
1997 and an additional new radio was introduced in the second
quarter of fiscal 1998.
Gross profit percentage on sales of Communication Products and
Services was 33.6% in the second quarter of fiscal 1998 compared
with 27.0% in the second quarter last fiscal year. The increase
was primarily due to labor efficiencies and to a more favorable
product mix. Gross profit percentage for the first six months of
fiscal 1998 was 32.9% of sales compared with 29.8% of sales for
the first six months of fiscal 1997 for the same reason.
Operating income percentage on sales of Communication Products
and Services was 9.1% in the second quarter of fiscal 1998
compared with 4.2% in the second quarter last fiscal year. The
increase resulted primarily from higher gross profits, partially
offset by higher product development expenses. Operating income
percentage for the first six months of fiscal 1998 was 4.6% of
sales compared with 8.3% of sales for the first six months of
fiscal 1997. The decrease was primarily due to higher
administrative and product development expenses, partially offset
by higher gross profits.
Consolidated expenses were as follows:
Selling, general and administrative expenses were $2,797,000 in
the second quarter of fiscal 1998, a 6% decrease compared with
second quarter of fiscal 1997 expenses of $2,991,000. The
decrease was primarily due to lower selling and administrative
expenses at the Antenna and Imaging Systems business segment.
Selling, general and administrative expenses for the first six
months of fiscal 1998 were $5,545,000, a 3% decrease compared
with first six months of fiscal 1997 expenses of $5,722,000. The
decrease was primarily due to lower selling expenses, partially
offset by higher administrative expenses.
Research and development (R&D) expenses were $471,000 in the
second quarter of fiscal 1998 compared with $482,000 in the
second quarter last fiscal year. The 2% decrease resulted from
lower spending on development programs for mobile DBS antenna
products being almost offset by increased spending on development
programs for new radio products. R&D expenses in the first six
months of fiscal 1998 were $860,000, a 17% decrease compared with
first six months of fiscal 1997 expenses of $1,040,000. The
decrease resulted from lower spending on development programs for
mobile DBS antenna products, partially offset by increased
spending on development programs for new radio products.
<PAGE>8
Order backlog at September 30 was as follows:
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Antenna and Imaging Systems $23,971,000 $18,589,000
Communication Products and Services 5,988,000 4,519,000
------------ -----------
Total $29,959,000 $23,108,000
=========== ===========
</TABLE>
The 29% increase in Antenna and Imaging Systems backlog at
September 30, 1997 compared with September 30, 1996 was primarily
due to higher order bookings for remote sensing systems and
military antennas.
The 33% increase in Communication Products and Services backlog
at September 30, 1997 compared with September 30, 1996 was
primarily due to improved order bookings in the fourth fiscal
quarter ended March 31, 1997.
Liquidity and Capital Resources
- -------------------------------
At September 30, 1997, working capital was $21,459,000 compared
with $24,756,000 at March 31, 1997, a decrease of $3,297,000 or
13%. Major changes affecting working capital during this period
were the following: accounts receivable decreased $1,341,000 as
collections exceed sales; inventories decreased $475,000
primarily due to reductions in radio products inventories;
accounts payable and accrued expenses decreased $689,000; and
customer advances increased $1,757,000. The Company's cash
position at September 30, 1997 was $376,000 compared with
$1,072,000 at March 31, 1997, a decrease of 65%. At September
30, 1997, the Company had borrowed $5,300,000 in term debt from
its bank to meet operating cash requirements. These borrowings
represent a 40% decrease in term debt from the $8,900,000 of
borrowings at March 31, 1997.
Capital equipment expenditures were $436,000 during the first six
months of fiscal 1998 compared with $194,000 in the first six
months last fiscal year. The increase was primarily due to
higher purchases of equipment for the Antenna and Imaging Systems
business segment.
At September 30, 1997, the Company had a $19,500,000 committed
revolving line of credit with its bank, of which up to
$15,000,000 may be used for the issuance of letters of credit and
up to $9,500,000 may be used for direct working capital advances
provided that total credit extended does not exceed $19,500,000.
See Note 6 to Consolidated Financial Statements. The Company
believes that its existing working capital, anticipated future
cash flows from operations and available credit with its bank are
sufficient to finance presently planned capital and working
capital requirements.
<PAGE>9
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
In August 1992, Trans World Communications, Inc. (Trans World), a
wholly owned subsidiary of the Company and which was renamed
Datron World Communications Inc. on March 31, 1995, was named as
defendant in a lawsuit filed by ATACS Corporation (ATACS) and
AIRTACS Corporation (AIRTACS) relating to a contract to provide
radio communication shelters. ATACS and AIRTACS contend that
Trans World entered into an agreement to team with them on the
contract and then wrongfully failed to use them as
subcontractors. They seek damages in excess of $2,000,000. In
a May 28, 1997 ruling, the court found Trans World in breach of a
teaming agreement but was not able to determine what damages, if
any, were incurred by ATACS and AIRTACS. The court ordered both
parties to submit supplemental findings to support their
positions regarding damages. On September 3, 1997, the court
awarded ATACS and AIRTACS one dollar ($1.00) in damages. ATACS
and AIRTACS have appealed the court's decision. The Company
has taken a cross appeal with respect to the issue of whether
the Company was in breach of any teaming agreement. The Company
believes that final resolution of this matter will not materially
affect the consolidated financial position of the Company.
Item 2. Changes in Securities.
Pursuant to a business loan agreement with a bank, the Company
must comply with certain financial covenants. The agreement also
prohibits the Company from declaration or payment of dividends or
other distributions on the Company's stock, except under certain
conditions specified in the agreement. The Company is in
compliance with both requirements.
Item 4. Submission of Matters to a Vote of Security Holders
On August 18, 1997, the Company held its annual meeting of
stockholders, proxies for which were solicited pursuant to
Regulation 14a under the Act. All existing directors were re-
elected. The stockholders also approved the Company's Employee
Stock Purchase Plan, voting on which as follows:
Votes for the plan 1,257,157
Votes against the plan 72,392
No. of abstentions 13,272
No. of non-votes 1,092,975
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10.59 Amended and Restated Credit Agreement and Note
between the Registrant and Union Bank of California
dated August 8, 1997.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter.
<PAGE>10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
DATRON SYSTEMS INCORPORATED
Date October 28, 1997 By: /s/ WILLIAM L. STEPHAN
Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
AMENDED AND RESTATED CREDIT AGREEMENT AND NOTE
THIS AMENDED AND RESTATED CREDIT AGREEMENT AND N0TE, made
and entered into as of the 8th day of August, 1997, by and
between DATRON SYSTEMS INCORPORATED, a Delaware corporation
("Company"), and UNION BANK OF CALIFORNIA, N.A., a national
banking association ("Bank"),
W I T N E S S E T H:
WHEREAS, on May 11, 1994, the Company and the Bank
entered into a certain Credit Agreement and Note (as amended
by those certain First, Second, Third, Fourth, Fifth, Sixth,
Seventh, Eighth and Ninth Amendments to Credit Agreement and
Note, dated as of October 26, 1994, December 29, 1994,
February 28, 1995, March 31, 1995, August 17, 1995, January
3, 1996, January 31, 1996, May 24, 1996 and November 25,
1996, respectively, the "Original Agreement") pursuant to
which the Bank agreed to extend to the Company and the
Company agreed to accept from the Bank certain credit
facilities more particularly described therein; and
WHEREAS, the Company and the Bank desire to amend and
restate the Original Agreement in its entirety (i) to extend
the maturity of the Revolving Loan Facility through and
including December 31, 1998, (ii) to extend the maturities
of the Standby Facility and the L/C Facility through and
including June 30, 1999, (iii) to decrease the maximum
amount available under the Revolving Loan Facility from Ten
Million Five Hundred Thousand Dollars ($10,500,000.00) to
Nine Million Five Hundred Thousand Dollars ($9,500,000.00),
(iv) to increase the maximum aggregate amount available
under the Standby Facility and the L/C Facility from Twelve
Million Dollars ($12,000,000.00) to Fifteen Million Dollars
($15,000,000.00), and (v) to provide for certain additional
matters; and
WHEREAS, it is the intent of the Company and the Bank
that from and after the Effective Date the indebtedness of
the Company under the Original Agreement shall be evidenced
by, and be subject to the terms and conditions of, this
Agreement; and
WHEREAS, the Original Agreement is being amended and
restated for the convenience of the parties hereto;
NOW, THEREFORE, for and in consideration of the
premises hereof, and other good and valuable consideration
the receipt and adequacy of which are hereby acknowledged,
the parties hereto hereby amend and restate the Original
Agreement in its entirety as follows:
SECTION I. THE FACILITIES.
1.01 Availability of the Facilities. Subject to the
terms and conditions of this Agreement, the Bank shall (x)
from time to time during the period commencing on the
Effective Date and ending on December 31, 1998 (the
"Revolving Loan Facility Termination Date"), advance to the
Company such loans as the Company may request under the
Revolving Loan Facility (individually a "Revolving Loan" and
collectively the "Revolving Loans"), and (y) from time to
time during the period commencing on the Effective Date and
ending on June 30, 1999 (the "Letter of Credit Facilities
Termination Date"), issue for the account of the Company
such standby letters of credit as the Company may request
under the Standby Facility (individually a "Standby L/C" and
collectively the "Standby L/C's"), and such commercial
documentary letters of credit as the Company may request
under the L/C Facility (individually a "Commercial L/C" and
collectively the "Commercial L/C's"); provided, however,
that:
(a) Except as otherwise provided in Subsections
1.01(b), (c), (d), (e) and (f) hereof, the sum of:
(i) the aggregate principal amount of all outstanding
Revolving Loans ("Revolving Loan Utilization");
(ii) the aggregate amount available to be drawn under
all Standby L/C's;
(iii) the aggregate amount of unpaid reimbursement
obligations in respect of all drafts drawn under Standby
L/C's (the sum of the aggregate amounts described in
Subsection 1.01(a)(ii) hereof and in this Subsection 1.01(a)
(iii) being hereinafter referred to as "Standby L/C
Utilization");
(iv) the aggregate amount available to be drawn under
all Commercial L/C's; and
(v) the aggregate amount of unpaid reimbursement
obligations in respect of all drafts drawn under Commercial
L/C's (the sum of the aggregate amounts described in
Subsection 1.01(a)(iv) hereof and in this Subsection
1.01(a)(v) being hereinafter referred to as "Commercial L/C
Utilization");
shall not exceed in the aggregate at any one time Nineteen
Million Five Hundred Thousand Dollars ($19,S00,000.00);
(b) Revolving Loan Utilization shall not exceed in the
aggregate at any one time the lesser of (i) Nine Million
Five Hundred Thousand Dollars (59,500,000.00), or (ii) the
difference between Nineteen Million Five Hundred Thousand Dollars
($19,500,000.00) and the sum of Standby L/C Utilization and
Commercial L/C Utilization;
(c) Commercial L/C Utilization shall not exceed in the
aggregate at any one time the least of (i) Two Million
Dollars ($2,000,000.00), (ii) the difference between Fifteen
Million Dollars ($15,000,000.00) and Standby L/C
Utilization, or (iii) the difference between Nineteen
Million Five Hundred Thousand Dollars ($19,500,000.00) and
the sum of Revolving Loan Utilization and Standby L/C
Utilization;
(d) Standby L/C Utilization shall not exceed in the
aggregate at any one time the lesser of (i) the difference
between Fifteen Million Dollars ($15,000,000.00) and
Commercial L/C Utilization, or (ii) the difference between
Nineteen Million Five Hundred Thousand Dollars
($19,500,000.00) and the sum of Revolving Loan Utilization
and Commercial L/C Utilization;
(e) Standby L/C Utilization relating to Standby L/C's
issued in favor of beneficiaries located in countries listed
in Column B or Column C of Exhibit A hereto shall not
exceed, as to all beneficiaries located in any given country
listed in Column B or Column C of Exhibit A hereto, Three
Million Five Hundred Thousand Dollars ($3,500,000.00) in the
aggregate at any one time; and
(f) Standby L/C Utilization relating to Standby L/C's
issued in favor of beneficiaries located in countries listed
in Column D of Exhibit A hereto (individually a "Column D
Country" and collectively the "Column D Countries") shall
not exceed in the aggregate at any one time (i) in the case
of all beneficiaries located in any given Column D Country,
Five Hundred Thousand Dollars ($500,000.00), and (ii) in the
case of all beneficiaries located in all Column D Countries,
the least of (A) Two Million Five Hundred Thousand Dollars
($2,500,000.00), (B) the difference between (1) Fifteen
Million Dollars ($15,000,000.00), and (2) the sum of (I)
Standby L/C Utilization relating to Standby L/C's issued in
favor of all beneficiaries located in all countries other
than Column D Countries, and (II) Commercial L/C
Utilization, or (C) the difference between (1) Nineteen
Million Five Hundred Thousand Dollars ($19,500,000.00), and
(2) the sum of (I) Standby L/C Utilization relating to
Standby L/C's issued in favor of all beneficiaries located
in all countries other than Column D Countries, (II)
Commercial L/C Utilization, and (III) Revolving Loan
Utilization.
Within the limits set forth above, and except as otherwise
provided herein, the Company may utilize the Facilities,
repay amounts owing thereunder, and reutilize the
Facilities.
1.02 Matters Pertaining to the Revolving Loan Facility.
(a) Purpose. Revolving Loans shall be made only for
general working capital purposes of the Company or to
finance reimbursement obligations of the Company incurred in
connection with drafts drawn, or deferred payment
obligations incurred, under Letters of Credit as and to the
extent provided in Subsection 1.03(d) or 1.04(d) hereof, as
applicable.
(b) Notice of Revolver Borrowing. The Company shall
request the Bank to make each Revolving Loan by an
irrevocable notice to the Bank (a "Notice of Revolver
Borrowing") which specifies:
(i) Whether the requested loan is to be (A) a loan
which bears interest as provided in Subsection 1.02(d)(i)
hereof (individually a "Reference Rate Revolving Loan" and
collectively the "Reference Rate Revolving Loans"), or (B)
loan which bears interest as provided in Subsection
1.02(d)(ii) hereof (individually a "LIBOR Revolving Loan"
and collectively the "LIBOR Revolving Loans");
(ii) The amount of the requested loan, which (A) in the
case of a Reference Rate Revolving Loan shall be a minimum
of Twelve Thousand Five Hundred Dollars ($12,500.00), or (B)
in the case of a LIBOR Revolving Loan shall be a minimum of
One Hundred Thousand Dollars ($100,000.00) or an integral
multiple of Twelve Thousand Five Hundred Dollars
($12,500.00) in excess thereof;
(iii) The date of the requested loan, which shall be a
Banking Day;
(iv) If the requested loan is to be a LIBOR Revolving
Loan, the initial Interest Period selected by the Company
for such loan in accordance with Subsection 1.02(f) hereof;
and
(v) If the requested loan is to be used, in whole or in
part, to finance reimbursement obligations arising in
connection with drafts drawn, or deferred payment
obligations incurred, under Letters of Credit, the drafts or
deferred payment obligations with respect to which such loan
is to be made.
The Company shall give each Notice of Revolver Borrowing to
the Bank (x) in the case of a LIBOR Revolving Loan, not
later than the third (3rd) Banking Day prior to the date of
the requested loan, or (y) in the case of a Reference Rate
Revolving Loan, not later than the date of the requested
loan, and shall do so by telephone, telex or telecopy to the
Bank's Orange County Commercial Portfolio Administration
Office, located at the address shown in Subsection 8.01(a)
hereof, during the hours specified in Subsection 8.01(b)
hereof. The Company shall immediately confirm all such
Notices of Revolver Borrowing in a writing to the Bank in
the form appended hereto as Exhibit B.
(c) Funding. The Bank shall, on the date any given
Revolving Loan is made, (i) charge against account no. 40001-
39411 maintained by the Company with the Bank's San Diego
Commercial Banking Office (the "Designated Account") an
amount equal to the sum of all unpaid reimbursement
obligations, if any, arising in connection with the draft(s)
or deferred payment obligation(s) with respect to which such
Revolving Loan is being made, (ii) apply the amount so
charged to the reimbursement obligations arising in
connection with such draft(s) or such deferred payment
obligation(s), and (iii) credit to the Designated Account an
amount equal to the principal amount of such Revolving Loan.
(d) Revolving Loan Interest Rate Options. The Company
shall pay interest on the unpaid principal amount of each
Revolving Loan from the date of such loan (if such loan is
made on or after the Effective Date), from the Effective
Date (if such loan is a Reference Rate Revolving Loan made
prior to the Effective Date), or from the first day of the
first Interest Period for such loan which commences on or
after the Effective Date (if such loan is a LIBOR Revolving
Loan made prior to the Effective Date), until the maturity
thereof (whether by acceleration or otherwise), at one of
the following rates per annum:
(i) Reference Rate Option - During such periods as such
Revolving Loan is a Reference Rate Revolving Loan, a rate
per annum equal to the Reference Rate plus eighty-five one
hundredths of one percent (0.85%), such rate to change from
time to time as the Reference Rate shall change; or
(ii) LIBO Rate Option - During such periods as such
Revolving Loan is a LIBOR Revolving Loan, a rate per annum
equal at all times during each Interest Period for such loan
to the LIBO Rate for such Interest Period Plus one and
eighty five one-hundredths percent (1.85%);
provided, however, that the rates set forth in Subsections
1.02(d)(i) and (ii) hereof shall each be reduced by thirty-
five one-hundredths of one percent (0.35%) per annum (x) on
the tenth (l0th) Banking Day following the first date
subsequent to the Effective Date on which a monthly
Financial Statement delivered by the Company to the Bank
pursuant to Subsection 4.01(a)(i) hereof reflects
profitability for each of the two (2) consecutive fiscal
quarters of the Company most recently ended and the Company
is in compliance with each and all of the terms and
conditions set forth in this Agreement and the other
Facility Documents in the case of any Reference Rate
Revolving Loan or in the case of a LIBOR Revolving Loan
which is first made on or after such date, or (y) on the
first day of the first Interest Period which commences on or
after such tenth (10th) Banking Day in the case of a LIBOR
Revolving Loan which was made prior to, and is outstanding
on, such tenth (l0th) Banking Day.
Each Revolving Loan shall, at any given time prior to
maturity, bear interest at one, and only one, of the above
rates.
(e) Conversion of Revolving Loans. The Company may
convert any Reference Rate Revolving Loan into a LIBOR
Revolving Loan or any LIBOR Revolving Loan into a Reference
Rate Revolving Loan; provided, however, that any conversion
of a LIBOR Revolving Loan into a Reference Rate Revolving
Loan shall be made on, and only on, the last day of an
Interest Period for such loan. The Company shall request the
Bank to make such a conversion by an irrevocable notice to
the Bank (a "Notice of Revolver Conversion"), which
specifies (i) the Revolving Loan to be converted, (ii) the
date of the requested conversion (which shall be a Banking
Day), and (iii) if such Revolving Loan is to be converted
into a LIBOR Revolving Loan, the initial Interest Period
selected by the Company for such loan in accordance with
Subsection 1.02(f) hereof. The Company shall give each
Notice of Revolver Conversion to the Bank (x) in the case of
a conversion to a LIBOR Revolving Loan, not later than the
third (3rd) Banking Day prior to the date of the requested
conversion, or (y) in the case of a conversion to a
Reference Rate Revolving Loan, not later than the date of
the requested conversion, and shall do so by telephone,
telex or telecopy to the Bank's Orange County Commercial
Portfolio Administration Office, located at the address
shown in Subsection 8.01(a) hereof, during the hours
specified in Subsection 8.01(b) hereof. The Company shall
immediately confirm all such Notices of Revolver Conversion
in a writing to the Bank.
(f) LIBOR Revolving Loan Interest Periods.
(i) The initial and each subsequent Interest
Period selected by the Company for a LIBOR Revolving Loan
shall be one (1), two (2), three (3) or six (6) months;
provided, however, that:
(A) Any Interest Period which would
otherwise end on a day which is not a Banking Day shall be
extended to the next succeeding Banking Day unless such next
succeeding Banking Day falls in another calendar month, in
which case such Interest Period shall end on the immediately
preceding Banking Day;
(B) Any Interest Period which begins on the
last Banking Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the
last Banking Day of a calendar month; and
(C) The Company shall not select an Interest
Period which would end after the Revolving Loan Facility
Termination Date.
(ii) The Company shall notify the Bank by an
irrevocable notice given not later than the third (3rd)
Banking Day prior to the last day of each Interest Period
for a LIBOR Revolving Loan of the Interest Period selected
by the Company for the next succeeding Interest Period for
such loan. Each such notice (a "Notice of Revolver Interest
Period Selection") shall be given by telephone, telex or
telecopy to the Bank's Orange County Commercial Portfolio
Administration Office, located at the address shown in
Subsection 8.01(a) hereof, during the hours specified in
Subsection 8.01(b) hereof, and shall immediately be
confirmed by the Company in a writing to the Bank. If the
Company fails to notify the Bank of a new Interest Period
for a LIBOR Revolving Loan in accordance with this
Subsection 1.02(f), such loan shall automatically convert
into a Reference Rate Revolving Loan on the last day of the
then current Interest Period for such loan.
(g) Payments.
(i) If not sooner repaid, the Company shall repay
the aggregate unpaid principal amount of all Revolving Loans
on the Revolving Loan Facility Termination Date; provided,
however, that on the Effective Date, the Company shall repay
such portion of the aggregate unpaid principal amount of all
Revolving Loans as shall be necessary to reduce such
aggregate unpaid principal amount to an amount not greater
than Nine Million Five Hundred Thousand Dollars
($9,500,000.00). The Company shall pay accrued interest on
the unpaid principal amount of each Revolving Loan in
arrears on the last day in each month (commencing on the
first such day to occur after the Effective Date), and at
maturity (whether by acceleration or otherwise).
(ii) The Company may prepay any Revolving
Loan, in whole or in part, provided (A) that a LIBOR
Revolving Loan may voluntarily be prepaid only on the last
day of an Interest Period therefor, (B) that each partial
prepayment shall be in a principal amount equal to Twelve
Thousand Five Hundred Dollars ($12,500.00) or an integral
multiple thereof, and (C) that no partial prepayment of a
LIBOR Revolving Loan shall reduce the remaining principal
balance thereof to an amount less than One Hundred Thousand
Dollars ($100,000.00).
If, notwithstanding the foregoing, a LIBOR Revolving Loan is
for any reason prepaid in whole or in part on any day other
than the last day of an Interest Period for such loan
(whether such prepayment is required in connection with an
acceleration of the Obligations or otherwise), the Company
shall pay to the Bank a prepayment fee in an amount equal to
the present value (determined by using the Yield Rate as the
annual discount factor) of the product of (x) the difference
(but not less than zero) between the rate of interest
applicable to such loan during the then current Interest
Period therefor and the Yield Rate (determined as of the
date of such prepayment), (y) a fraction, the numerator of
which is the number of days in the period between the date
of prepayment and the last day of the then current Interest
Period for such loan, and the denominator of which is 360,
and (z) the amount of principal so prepaid. The Bank shall
deliver to the Company a certificate setting forth the
amount of any applicable prepayment fee and the Company
acknowledges and agrees that such a certificate so delivered
to the Company shall, in the absence of manifest error, be
conclusive and binding as to the amount of such fee for all
purposes.
(h) Revolving Loan Commitment Fee. During the period
commencing on July 1, 1997 and ending on the Effective Date,
the Company shall pay to the Bank a commitment fee of one-
quarter of one percent (1/4 of 1%) per annum on the
difference between Ten Million Five Hundred Thousand Dollars
(510,500,000.00) and the average daily principal amount of
outstanding Revolving Loans during each calendar quarter or
portion thereof. Thereafter, and until the Revolving Loan
Facility Termination Date, the Company shall pay to the Bank
a commitment fee of one-quarter of one percent (1/4 of 1%)
per annum on the difference between Nine Million Five
Hundred Thousand Dollars (59,500,000.00) and the average
daily principal amount of outstanding Revolving Loans during
each calendar quarter or portion thereof. Such fee shall be
payable quarterly in arrears on the last day in each March,
June, September and December (commencing on the first such
day to occur after the Effective Date), and at maturity
(whether by acceleration or otherwise).
1.03 Matters Pertaining to the Standby Facility.
(a) Provisions of and Issuance Procedures for Standby
L/C's.
(i) Standby L/C's shall be issued to provide
required assurance to suppliers and, in connection with
advance deposits and the like, customers of the Company, and
for such other corporate purposes as the Company may request
and to which the Bank, in its sole option and discretion,
may consent. All such Standby L/C's may provide either for
payment against sight drafts or for deferred payment (if,
but only if, the Bank shall be under no obligation to make
any payment with regard thereto prior to the maturity
thereof), but may not provide for payment against usance
drafts.
(ii) The Company shall request the Bank to
issue each Standby L/C by delivering to the Bank a duly
completed and executed Application for Irrevocable Standby
Letter of Credit (a "Standby Application") in the form
appended hereto as Exhibit C (or such other form as the Bank
may hereafter adopt for Bank-wide use), which Standby
Application shall specify, among other matters, the proposed
purpose of the Standby L/C, the date on which the Standby
L/C is to expire (which shall be on or prior to the Letter
of Credit Facilities Termination Date), the name of the
beneficiary under the Standby L/C, the exact amount of the
Standby L/C (which shall be denominated in Dollars), and
whether the Standby L/C is to provide for payment against
sight drafts or, subject to the provisions of Subsection
1.03(a)(i) hereof, for deferred payment. Each such Standby
Application shall be delivered in person, by messenger or by
telecopy to the Bank's Southern California International
Operations Center, located at the address shown in
Subsection 8.01(a) hereof, and each such Standby Application
shall become irrevocable upon such delivery. If such Standby
Application is in form acceptable to the Bank, the Bank
shall use its best reasonable efforts to issue the requested
Standby L/C (A) in the case of a Standby Application
received by the Bank during the hours specified in
Subsection 8.01(b) hereof, by the close of business of the
first Banking Day following the Banking Day on which such
Standby Application is received by the Bank, or (B) in the
case of a Standby Application received by the Bank after the
hours specified in Subsection 8.01(b) hereof, by the close
of business of the first Banking Day following the Banking
Day on which such Standby Application is deemed received by
the Bank as provided in said Subsection 8.01(b). The terms
and conditions contained in such Standby Application shall,
to the extent not inconsistent with the terms and conditions
hereof, be incorporated herein as though set forth at
length.
(b) Fees and Other Charges.
(i) For each Standby L/C issued under the Standby
Facility, the Company shall pay to the Bank, in advance on
the day such Standby L/C is issued and quarterly thereafter,
an issuance fee of one and one-quarter percent (1-1/4%) per
annum on the amount available to be drawn under such Standby
L/C on the day such Standby L/C is issued or on the first
day of such subsequent quarterly period, as the case may be;
provided, however, that (A) an issuance fee installment due
in respect of a given Standby L/C for a given quarterly
period shall not thereafter be adjusted because of draws
made under such Standby L/C during such quarterly period,
and (B) the minimum issuance fee payable in respect of each
Standby L/C shall be Two Hundred Dollars ($200.00). The
issuance fee rate specified in this Subsection 1.03(b)(i)
shall remain fixed through the Letter of Credit Facilities
Termination Date.
(ii) In addition to the issuance fees
provided for in Subsection 1.03(b)(i) hereof, the Company
shall also pay to the Bank, as and when the same are payable
under the Bank's standard operating procedures, any and all
payment, amendment, transfer and other similar fees and
commissions which may be or become payable in respect of,
and shall reimburse the Bank on demand for all of its out-of-
pocket costs and expenses (not otherwise covered, in the
normal course of the Bank's business, by such payment,
amendment, transfer or other similar fees or commissions, or
the issuance fees provided for in Subsection 1.03(b)(i)
hereof) incurred in connection with, each Standby L/C or the
draft or drafts drawn thereunder. All such payment,
amendment, transfer and other similar fees and commissions
shall be computed and paid at the Bank's standard rates, as
such rates may be changed from time to time.
(c) Draws Under Standby L/C's. Each deferred payment
obligation which the Bank is to incur under a Standby L/C
which provides for deferred payment shall (i) have a term of
not more than ninety (90) days, (ii) mature on or prior to
the Letter of Credit Facilities Termination Date, and (iii)
be payable in Dollars. The Bank shall be under no obligation
to notify the Company prior to paying any sight draft drawn
under a Standby L/C or incurring or paying any deferred
payment obligation under a Standby L/C which provides for
deferred payment, and the Bank's failure so to notify the
Company shall not relieve the Company of any of its
obligations arising under Subsection 1.03(d) hereof;
provided, however, that the Bank shall use its best
reasonable efforts to notify the Company (whether by
telephone or otherwise) prior to incurring any such deferred
payment obligation or making any such payment.
(d) Reimbursement. The Company agrees that on the date
the same shall become due, or on such earlier date as may be
required pursuant to other provisions of this Agreement, it
will provide the Bank with funds to meet all disbursements
and payments of any kind and character, together with
interest (if any), fees, commissions and charges, which the
Bank has or will pay, become liable for or become entitled
to under or in relation to any given Standby L/C or the
draft or drafts drawn thereunder; provided, however, that
prior to the Revolving Loan Facility Termination Date, to
the extent availability (computed as provided in Subsection
1.01(b) hereof) shall exist under the Revolving Loan
Facility and so long as no Event of Default or Unmatured
Event of Default shall have occurred and be continuing, the
Company shall have the option to finance all or any portion
of the reimbursement obligations arising in connection with
any sight draft drawn under a Standby L/C, or in connection
with any deferred payment obligation incurred by the Bank
under a Standby L/C, through a Revolving Loan on the terms
and conditions set forth in Section 1.02 hereof.
1.04 Matters Pertaining to the L/C Facility.
(a) Provisions of and Issuance Procedures for
Commercial L/C's.
(i) Commercial L/C's shall be issued for no purpose
other than the purchase of inventory or equipment by the
Company. All such Commercial L/C's shall provide for payment
against sight drafts only; provided, however, that
Commercial L/C's may provide for payment against usance
drafts, or for deferred payment, if, but only if, the Bank
shall be under no obligation to make payment with regard
thereto (whether by discount or otherwise) prior to the
maturity thereof.
(ii) The Company shall request the Bank to issue each
Commercial L/C by delivering to the Bank a duly completed
and executed Application and Agreement for Commercial Letter
of Credit (a "Commercial L/C Application") in the form
appended hereto as Exhibit D (or such other form as the Bank
may hereafter adopt for Bank-wide use), which Commercial L/C
Application shall specify, among other matters, the date on
which the Commercial L/C is to expire (which shall be on or
prior to the Letter of Credit Facilities Termination Date),
the name of the beneficiary under the Commercial L/C, the
exact amount of the Commercial L/C (which shall be
denominated in Dollars), and whether the Commercial L/C is
to provide for payment against sight drafts or, subject to
the provisions of Subsection 1.04(a)(i) hereof, for payment
against usance drafts or for deferred payment. Each such
Commercial L/C Application shall be delivered in person, by
messenger or by telecopy to the Bank's Southern California
International Operations Center, located at the address
shown in Subsection 8.01(a) hereof, and each such Commercial
L/C Application shall become irrevocable upon such delivery.
If such Commercial L/C Application is in form acceptable to
the Bank, the Bank shall use its best reasonable efforts to
issue the requested Commercial L/C (A) in the case of a
Commercial L/C Application received by the Bank during the
hours specified in Subsection 8.01(b) hereof, by the close
of business of the first Banking Day following the Banking
Day on which such Commercial L/C Application is received by
the Bank, or (B) in the case of a Commercial L/C Application
received by the Bank after the hours specified in Subsection
8.01(b) hereof, by the close of business of the first
Banking Day following the Banking Day on which such
Commercial L/C Application is deemed received by the Bank as
provided in said Subsection 8.01(b). The terms and
conditions contained in such Commercial L/C Application
shall, to the extent not inconsistent with the terms and
conditions hereof, be incorporated herein as though set
forth at length.
(b) Fees and Other Charges.
(i) The Company shall pay to the Bank, as and when the
same are-payable under the Bank's standard operating
procedures, any and all issuance fees, full detail telex
charges (for issuance), amendment fees (in connection with
increases or extensions), payment commissions and acceptance
commissions in respect of each Commercial L/C or the draft
or drafts drawn thereunder at the rates or in the amounts
specified in Exhibit E hereto, such rates and amounts to
remain fixed through the Letter of Credit Facilities
Termination Date.
(ii) In addition to the fees, charges and
commissions provided for in Subsection 1.04(b)(i) hereof,
the Company shall also pay to the Bank, as and when the same
are payable under the Bank's standard operating procedures,
any and all narrative amendment, transfer and other similar
fees and commissions which may be or become payable in
respect of, and shall reimburse the Bark on demand for all
of its out-of-pocket costs and expenses (not otherwise
covered, in the normal course of the Bank's business, by
such narrative amendment, transfer or other similar fees or
commissions, or the fees, charges and commissions
specifically provided for in Subsection 1.04(b)(i) hereof)
incurred in connection with, each Commercial L/C or the
draft or drafts drawn thereunder. All such narrative
amendment, transfer and other similar fees and commissions
shall be computed and paid at the Bank's standard rates, as
such rates may be changed from time to time.
(c) Draws Under Commercial L/C's. Each usance draft
presented to the Bank for acceptance under the terms and
conditions of a Commercial L/C, and each deferred payment
obligation which the Bank is to incur under a Commercial L/C
which provides for deferred payment, shall (i) grow out of
one (1) transaction involving the purchase of inventory or
equipment by the Company, (ii) have a tenor or term, as the
case may be, of not more than ninety (90) days or such
shorter period as shall be commensurate with the purchase
transaction being financed, (iii) mature on or prior to the
Letter of Credit Facilities Termination Date, and (iv) be
payable in Dollars. In addition, each usance draft so
presented to the Bank shall be in a form acceptable to the
Bank, be drawn on the Bank, be signed by the beneficiary-of
the related Commercial L/C and comply with all applicable
rules and regulations of the Federal Reserve System
governing bankers' acceptances and meet the requirements for
eligibility for discount with Federal Reserve Banks. The
Bank shall be under no obligation to notify the Company
prior to accepting or paying any usance draft, or paying any
sight draft, drawn under a Commercial L/C, or prior to
incurring or paying any deferred payment obligation under a
Commercial L/C which provides for deferred payment, and the
Bank's failure so to notify the Company shall not relieve
the Company of any of its obligations arising under
Subsection 1.04(d) hereof; provided, however, that the Bank
shall use its best reasonable efforts to notify the Company
(whether by telephone or otherwise) prior to so accepting
any such usance draft, incurring any such deferred payment
obligation or making any such payment.
(d) Reimbursement. The Company agrees that on the date
the same shall become due, or on such earlier date as may be
required pursuant to other provisions of this Agreement, it
will provide the Bank with funds to meet all disbursements
and payments of any kind and character, together with
interest (if any), fees, commissions and charges, which the
Bank has or will pay, become liable for or become entitled
to under or in relation to any given Commercial L/C or the
draft or drafts drawn thereunder; provided, however, that
prior to the Revolving Loan Facility Termination Date, to
the extent availability (computed as provided in Subsection
1.01(b) hereof) shall exist under the Revolving Loan
Facility and so long as no Event of Default or Unmatured
Event of Default shall have occurred and be continuing, the
Company shall have the option to finance all or any portion
of the reimbursement obligations arising in connection with
any draft drawn under a Commercial L/C (whether a sight
draft or, upon the maturity thereof, a usance draft), or in
connection with any deferred payment obligation incurred by
the Bank under a Commercial L/C, through a Revolving Loan on
the terms and conditions set forth in Section 1.02 hereof.
1.05. Matters Common to Each of the Facilities.
(a) Facility Account. The obligation of the Company to
repay the Revolving Loans and to reimburse the Bank for all
amounts drawn under Letters of Credit (together with
appropriate fees, commissions, interest and other expenses
with regard to all of the foregoing) shall be evidenced by
an account or accounts maintained by the Bank on its books
(collectively, the "Facility Account"). The Company hereby
authorizes the Bank to record in the Facility Account (i)
the principal amount and the date of each Revolving Loan,
(ii) the interest rates applicable to each Revolving Loan
and the effective dates of all changes in such rates, (iii)
the date of issue, the date of expiration and the face
amount of, and all fees and commissions payable with respect
to, each Letter of Credit, (iv) the date of payment and the
face amount of,-and all fees and commissions payable with
respect to, each sight draft presented to and paid by the
Bank which is drawn under a Letter of Credit, (v) the date
of creation, the date of maturity and the face amount of,
and all fees and commissions payable with respect to, each
usance draft presented to and accepted by the Bank which is
drawn under a Commercial L/C, (vi) the date of incurrence,
the date of maturity and the face amount of, and all fees
and commissions payable with respect to, each deferred
payment obligation incurred by the Bank under a Letter of
Credit which provides for deferred payment, (vii) the date
and amount of each payment of principal, interest,
reimbursement obligations, fees, commissions or other
expenses made by or on behalf of the Company with respect to
any of the Facilities, and (viii) such other matters as the
Bank shall deem necessary or desirable for the computation
of amounts required to be paid by the Company under this
Agreement or the other Facility Documents. The Company
agrees that all notations made by the Bank in the Facility
Account shall constitute prima facie evidence of the matters
noted.
(b) Other Payment Terms.
(i) Except as otherwise provided in Subsection
1.02(f)(i) hereof with respect to a LIBOR Revolving Loan,
whenever any payment due hereunder (whether pursuant to the
provisions of Section 1.02, 1.03 or 1.04 hereof or
otherwise) shall fall due on a day other than a Banking Day,
such payment shall be made on the next succeeding Banking
Day, and such extension of time shall be included in the
computation of interest, fees or commissions, as the case
may be.
(ii) The Company shall make all payments hereunder in
lawful money of the United States of America and in
immediately available funds. The Company hereby authorizes
the Bank to charge from time to time against the Designated
Account (or, to the extent sufficient collected funds are
not available in the Designated Account, against any or all
other deposit accounts maintained by the Company with the
Bank) any amounts payable by the Company hereunder as and
when the same become due.
(iii) If any amounts required to be paid by the Company
under this Agreement or the other Facility Documents
(including without limitation principal, accrued interest,
reimbursement obligations, fees and commissions) remain
unpaid after maturity (whether by acceleration or
otherwise), the Company shall pay interest on the aggregate
outstanding balance of such amounts from maturity until
those amounts are paid in full at a rate per annum equal to
the Reference Rate plus five percent (5%), such rate to
change from time to time as the Reference Rate shall change
(iv) All computations of interest, fees or commissions
under this Agreement shall be based on a year of 360 days
for actual days elapsed.
(c) Security. All amounts due or to become due
hereunder are secured by (i) a Security Agreement (Chattel
Mortgage), dated April 21, 1994, executed by the Company,
(ii) a Continuing Guaranty, dated August 1, 1995, executed
by Datron/Transco Inc. ("D/T"), which Continuing Guaranty is
in turn secured by (A) a Security Agreement (Chattel
Mortgage), dated April 21, 1994, executed by D/T, and (B) a
Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing, dated February 28, 1995, executed by D/T, as
amended by that certain First Amendment Deed of Trust,
Assignment of Rents, Security Agreement and Fixture Filing,
dated August 17, 1995, and (iii) a Continuing Guaranty,
dated August 1, 1995, executed by Datron World
Communications Inc. ("DWC"), which Continuing Guaranty is in
turn secured by a Security Agreement (Chattel Mortgage),
dated March 31, 1995, executed by DWC. In addition, and as
security for all Obligations of the Company to the Bank, the
Company hereby grants to the Bank a continuing security
interest in:
(1) All Deposits in which the Company now or at any
time hereafter has an interest; and
(2) All proceeds and products of, and all accessions
to, such Deposits.
(d) Banking Relationship. In consideration of the
interest rates payable with respect to Revolving Loans, and
the fees and commissions payable with respect to Letters of
Credit, and to afford the Bank the benefit of the security
interest in Deposits granted by the Company to the Bank in
Subsection 1.05(c) hereof, the Company hereby agrees that it
will maintain all of its major deposit accounts with the
Bank until the termination of this Agreement and the
satisfaction in full of all Obligations.
SECTION II. CONDITIONS PRECEDENT.
2.01. Conditions Precedent to the Effectiveness of this
Agreement. This Agreement shall become effective on the date
on which the Bank shall have received the following, each in
form and substance satisfactory to the Bank and its counsel:
(a) This Agreement, duly executed by the Company;
(b) A certificate of the Company's secretary or an
assistant secretary, dated on or prior to the date of this
Agreement, certifying the following documents, copies of
which shall be attached to or incorporated in such
certificate: (i) resolutions, adopted by the Company's Board
of Directors and continuing in effect, which authorize the
execution, delivery and performance by the Company of this
Agreement and the other Facility Documents, and (ii) all
other documents evidencing additional corporate action and
governmental or other approvals, if any, necessary for the
execution, delivery and performance by the Company of this
Agreement and the other Facility Documents;
(c) A certificate of the Company's secretary or an
assistant secretary, dated on or prior to the date of this
Agreement, certifying the incumbency and signatures of the
officers of the Company authorized to execute, deliver and
perform this Agreement and the other Facility Documents on
behalf of the Company;
(d) A copy of the audited Financial Statement of the
Company for the fiscal year ended March 31, 1997, prepared
by independent certified public accountants selected by the
Company and acceptable to the Bank, together with the
unqualified opinion of such accountants;
(e) A copy of the Financial Statement of the Company
for the year-to-date fiscal period ended May 31, 1997,
certified by the chief executive officer, the president or
the chief financial officer of the Company to have been
prepared in accordance with generally accepted accounting
principles consistently applied, except for any
inconsistencies explained in such certificate;
(f) A copy Percent of Completion Analysis and the
Contract Profitability Report of D/T as at March 31, 1997;
(g) [Reserved]
(h) A Teletransmission Agreement on the Bank's standard
form, dated on or prior to the date of this Agreement and
duly completed and executed by the Company;
(i) Two (2) written consents to entry by the Company
into this Agreement, one (1) duly executed by each of D/T
and DWC;
(j) Such repayment of the unpaid principal amount of
Revolving Loans, if any, as is required pursuant to
Subsection 1.02(g)(i) hereof;
(k) A facility modification and renewal fee in the
amount of One Thousand Five Hundred Dollars ($1,500.00); and
(1) Such other documents and agreements as the Bank may
reasonably require to effectuate the intent and purpose of
this Agreement and to establish the accuracy and
completeness of the representations and warranties, and
compliance with the terms and conditions, contained in this
Agreement and the other Facility Documents.
2.02. Conditions Precedent to the Making of Each Revolving
Loan. The obligation of the Bank to make each Revolving Loan
shall be subject to the conditions precedent set forth in
Section 2.01 hereof and shall be subject to the following
further conditions precedent:
(a) The Company shall have given the Bank a Notice of
Revolver Borrowing; and
(b) On the date such Revolving Loan is to be made, the
following shall be true and correct:
(i) The representations and warranties set forth in
Section 3.01 hereof are true and correct; provided, however,
that the representations and warranties set forth in
Subsection 3.01(g) hereof shall be deemed to be made with
respect to the Company's most recent Financial Statement,
Annual Report on Form 10-K or Quarterly Report on Form 10-Q
delivered to the Bank;
(ii) No Event of Default or Unmatured Event of Default
shall have occurred and be continuing; and
(iii) Each of the Facility Documents remains in full
force and effect.
The submission by the Company to the Bank of each Notice of
Revolver Borrowing shall be deemed to be a representation
and warranty by the Company as of the date of each such
notice as to the matters set forth in this Subsection
2.02(b).
2.03. Conditions Precedent to the Issuance of each Letter
of Credit. The obligation of the Bank to issue each Letter
of Credit shall be subject to the conditions precedent set
forth in Section 2.01 hereof and shall be subject to the
following further conditions precedent:
(a) The Company shall have delivered to the Bank a duly
completed and executed Standby Application or Commercial L/C
Application, as applicable;
(b) The Company shall have paid the Bank all applicable
issuance fees as provided in Subsection 1.03(b)(i) or
1.04(b)(i) hereof, as applicable; and
(c) On the date such Letter of Credit is to be issued,
the following shall be true and correct:
(i) The representations and warranties set forth in
Section 3.01 hereof are true and correct; provided, however,
that the representations and warranties set forth in
Subsection 3.01(g) hereof shall be deemed to be made with
respect to the Company's most recent Financial Statement,
Annual Report on Form 10-K or Quarterly Report on Form 10-Q
delivered to the Bank;
(ii) No Event of Default or Unmatured Event of Default
shall have occurred and be continuing; and
(iii) Each of the Facility Documents remains in full
force and effect.
The submission by the Company to the Bank of each Standby
Application or Commercial L/C Application shall be deemed to
be a representation and warranty by the Company as of the
date of each such Standby Application or Commercial L/C
Application as to the matters set forth in this Subsection
2.03(c).
SECTION III. REPRESENTATIONS AND WARRANTIES.
3.01. The Company's Representations and Warranties. To
induce the Bank to enter into this Agreement and to make
available the Facilities hereunder, the Company represents
and warrants to the Bank that:
(a) Due Incorporation, Qualification, etc. The Company
and its Subsidiaries (i) are corporations duly organized,
validly existing and in good standing under the laws of
their respective jurisdictions of incorporation, (ii) have
the power and authority to own their property and carry on
their businesses as now being conducted, and (iii) are duly
qualified and in good standing as foreign corporations in
each jurisdiction where the failure to qualify would have a
material adverse effect on their operations or condition
(financial or otherwise).
(b) Authority. The execution, delivery and performance
by the Company of this Agreement and the other Facility
Documents, and the execution, delivery and performance by
D/T and DWC, as the case may be, of such corporation's
Continuing Guaranty and Security Agreement (Chattel
Mortgage) (and, in the case of D/T, the Deed of Trust), are
within the corporate power of the Company, D/T or DWC, as
the case may be, have been duly authorized by all necessary
corporate action, do not require any registration with,
consent or approval of, license or permit from, or notice to
any Person, do not contravene any law, rule or regulation,
any order, writ, decree or judgment of any Person, or the
constitutive documents of the Company, D/T, or DWC, as the
case may be, do not violate or constitute a default under
any mortgage, indenture, lease, contract or other agreement
or instrument binding upon the Company, D/T, DWC or any
other Subsidiary, and will not result in or require the
creation of any lien on the property, assets or revenue of
the Company, D/T, DWC or any other Subsidiary (except such
liens as may be created in favor of the Bank pursuant to
this Agreement and the other Facility Documents).
(c) Enforceability. This Agreement and the other
Facility Documents constitute legal, valid and binding
obligations of the Company, enforceable against the Company
in accordance with their terms, and the Continuing
Guaranties and the Security Agreements (Chattel Mortgage) of
D/T and DWC, and the Deed of Trust, constitute legal, valid
and binding obligations of D/T or DWC, as the case may be,
enforceable against it in accordance with their terms,
except, in each case, as limited by bankruptcy, insolvency
or other laws of general application relating .o or
affecting the enforcement of creditors' rights and general
principles of equity.
(d) Compliance with Laws Other Agreements etc. Neither
the Company nor any Subsidiary is in violation or default
with respect to any applicable laws, rules or regulations
which materially affect the operations or condition
(financial or otherwise) of the Company or such Subsidiary,
nor are they, or any of them, in violation or default with
respect to any order, writ, decree or judgement of any
Person or in violation or default (nor is there any waiver
in effect which, if not in effect, would result in a
violation or default) under any mortgage, indenture, lease,
contract or other agreement or instrument binding upon the
Company or any Subsidiary, where such violation or default
might have a material adverse effect on the operations or
condition (financial or otherwise) of the Company or such
Subsidiary.
(e) Litigation. Except as set forth (with estimates of
the dollar amounts involved) in a schedule heretofore
furnished by the Company to the Bank, no litigation
(including, without limitation, derivative actions),
arbitration proceedings or governmental proceedings are
pending or, to the knowledge of the Company, threatened
against the Company or any Subsidiary which would, if
adversely determined, have a material adverse effect on the
operations or condition (financial or otherwise) of the
Company or such Subsidiary.
(f) Title. The Company and each Subsidiary have good
and marketable title to the assets and properties reflected
in the Financial Statement referred to in Subsection 3.01(g)
hereof (except those assets and properties disposed of in
the ordinary course of business since the date of such
Financial Statement) and all assets and properties acquired
by it since such date (except those disposed of in the
ordinary course of business). Such assets and properties are
subject to no mortgage, pledge, encumbrance, lien, or charge
of any kind, except for Permitted Liens and liens created in
favor of the Bank.
(g) Financial Statements. The Company's audited
Financial Statement and Annual Report on Form 10-K for the
fiscal year ended March 31, 1997, and any subsequent
Financial Statements, Annual Reports on Form 10-K or
Quarterly Reports on Form 10-Q which have been furnished to
the Bank, were prepared in conformity with generally
accepted accounting principles applied on a consistent basis
and fairly present the financial condition of the Company as
at their respective dates and the results of operations for
the fiscal year period or portion thereof then ended. Since
the date of the most recent Financial Statement, Annual
Report on Form 10-K or Quarterly Report on Form 10-Q
furnished to the Bank, there has been no material adverse
change in the operations or condition (financial or
otherwise) of the Company.
(h) Subsidiaries. Exhibit F hereto is a complete and
accurate list of all Subsidiaries, showing as of the date of
this Agreement as to each such Subsidiary the jurisdiction
of its incorporation and the proportionate ownership by the
Company, whether direct or indirect, of its voting stock.
Except as disclosed in Exhibit F, the Company directly or
indirectly owns, free and clear of all liens, charges and
encumbrances, all the outstanding shares of each such
Subsidiary, and all such shares are validly issued, fully
paid and nonassessable.
(i) ERISA. Each pension, profit-sharing or other
employee benefit plan maintained by the Company and each
Subsidiary (individually a "Plan") is in material compliance
with the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), the Internal Revenue Code of 1986, as
amended (the "Code"), and all applicable rules and
regulations promulgated thereunder, and the Company has
filed or caused to be filed all material reports required to
be filed by ERISA, the Code and such rules and regulations
with respect to each Plan. There is no accumulated funding
deficiency, as defined in Section 412(a) of the Code, with
respect to any Plan subject to Section 412 of the Code, and
neither the Company nor any Subsidiary has any termination
or withdrawal liability under Title IV of ERISA.
(j) Other Regulations. Neither the Company nor any
Subsidiary is subject to regulation under the Investment
Company Act of 1940, the Public Utility Holding Company Act
of 1935, the Federal Power Act, the Interstate Commerce Act,
any state public utilities code or any Federal, state or
foreign statute or regulation limiting its ability to incur
Indebtedness.
(k) Patent and Other Rights. The Company and each
Subsidiary possess or have the right to use all patents,
licenses, trademarks, trade names, trade secrets, service
marks, copyrights and all rights with respect thereto which
are required to conduct their businesses as now conducted
without known conflict with the rights of others which would
materially affect such businesses.
(1) Taxes. The Company has filed or caused to be filed
all tax returns which are required to be filed by it and
each Subsidiary pursuant to the laws, regulations and orders
of each Person with taxing power over the Company and such
Subsidiaries and the assets thereof. The Company and each
Subsidiary have paid, or made provision for the payment of,
all taxes, assessments, fees and other governmental charges
which have or may have become due pursuant to said returns,
or otherwise, or pursuant to any assessment received by the
Company or any Subsidiary, except such taxes, if any, as are
being contested in good faith and as to which adequate
reserves (determined in accordance with generally accepted
accounting principles) have been provided.
(m) Margin Stock. Neither the Company nor any
Subsidiary owns any Margin Stock which, in the aggregate,
would constitute a substantial part of the assets of the
Company or such Subsidiary.
(n) Compliance with Securities Laws. All offers and
sales of the stock and other securities of the Company have
been made in compliance with or pursuant to available
exemptions from all applicable Federal and state securities
laws, including without limitation the Securities Act of
1933, as amended, and the Securities Exchange Act of 1934,
as amended.
(o) Drafts. All drafts presented or to be presented to
the Bank for acceptance under the terms and conditions of a
Commercial L/C are or will be in compliance with the
provisions of Subsection 1.04(c) hereof.
(p) Licensing. All import, export and/or shipping
licenses and other governmental approvals required in
connection with the transactions contemplated by each Letter
of Credit have or will have been duly, and in timely
fashion, obtained by or on behalf of the Company, and the
transactions contemplated by each Letter of Credit comply or
will comply in all respects with all applicable domestic and
foreign laws, rules and regulations.
3.02. Continuation. The representations and warranties set
forth in Section 3.01 hereof are continuing in character
and, when the context so permits, shall continue in effect
as representations and warranties throughout the term of
this Agreement.
SECTION IV. COVENANTS.
4.01. Affirmative Covenants. Until the termination of this
Agreement and the satisfaction in full by the Company of all
Obligations, the Company agrees that it will comply, and as
appropriate will cause each Subsidiary to comply, with the
following affirmative covenants unless the Bank shall
otherwise consent in writing:
(a) Financial Statements, Reports, etc. The Company
will furnish to the Bank:
(i) Within thirty (30) days after the close of each
calendar month, a copy of the Financial Statement of the
Company for such calendar month certified by the chief
executive officer, the president or the chief financial
officer of the Company to have been prepared in accordance
with generally accepted accounting principles consistently
applied, except for any inconsistencies explained in such
certificate:
(ii) Within forty-five (45) days after the close of
each fiscal quarter of the Company, a copy of the Company's
Quarterly Report on Form 10-Q for such fiscal quarter;
(iii) Within ninety (90) days after the close of each
fiscal year of the Company, a copy of the audited Financial
Statement of the Company for such fiscal year, prepared by
independent certified public accountants selected by the
Company and acceptable to the Bank, together with the
unqualified opinion of such accountants;
(iv) Within ninety (90) days after the close of each
fiscal year of the Company, a copy of the Company's Annual
Report on Form 10-K for such fiscal year;
(v) Contemporaneously with each Quarterly Report on
Form 10-Q required by Subsection 4.01(a)(ii) hereof and each
annual Financial Statement required by Subsection
4.01(a)(iii) hereof, a certificate of the chief executive
officer, the president or the chief financial officer of the
Company stating that no Event of Default and no Unmatured
Event of Default has occurred and is continuing, or, if any
such Event of Default or Unmatured Event of Default has
occurred and is continuing, a statement as to the nature
thereof and what action the Company has taken, is taking or
proposes to take with respect thereto;
(vi) Promptly upon receipt thereof, copies of all
reports submitted to the Company by independent certified
public accountants in connection with each annual or special
audit of the Financial Statements of the Company made by
such accountants, including, without limitation, the comment
letter submitted to management by such accountants in
connection with their annual audit;
(vii) Within forty-five (45) days after the
commencement of each fiscal year of the Company, copies of
the Company's annual budget, projections and operating plans
for such fiscal year;
(viii) Promptly after the sending, making available or
filing thereof, copies of all reports, proxy statements and
financial statements which the Company sends or makes
available to its stockholders or the holders of any other
securities of the Company and all registration statements
and reports which the Company files with the Securities and
Exchange Commission, or any successor Person thereto, or
with any national securities exchange;
(ix) Within thirty (30) days after the close of each
calendar month (A) statements showing, as at the end of such
calendar month, the aging of the accounts receivable of D/T
and the accounts receivable of DWC, and (B) consolidating
statements showing, as at the end of such calendar month,
the aging of the accounts receivable of the Company and its
Subsidiaries, each in form and detail satisfactory to the
Bank;
(x) Within forty-five (45) days after the close of each
fiscal quarter of the Company, a copy of the Percent of
Completion Analysis and the Contract Profitability Report of
D/T as at the end of such fiscal quarter;
(xi) Promptly after the occurrence of any reportable
event under Section 4043(b)(5), (6) or (9) of ERISA with
respect to any Plan or any decision by the Company or a
Subsidiary to terminate or withdraw from any Plan, a
certificate signed by an officer of the Company describing
any such event or decision accompanied by a copy of any
materials sent to or filed with the Internal Revenue
Service, the Department of Labor or the Pension Benefit
Guaranty Corporation relating thereto;
(xii) As soon as possible and in no event later than
five (5) days after the occurrence of an Event of Default or
an Unmatured Event of Default, the statement of the chief
executive officer, the president or the chief financial
officer of the Company setting forth the details of such
Event of Default or Unmatured Event of Default and the
action which the Company has taken, is taking or proposes to
take with respect thereto;
(xiii) Prompt notice of the commencement against the
Company or any Subsidiary of any litigation, arbitration
proceedings or governmental proceedings involving potential
or asserted liability of the Company or such Subsidiary in
an amount in excess of Two Hundred Fifty Thousand Dollars
($250,000.00);
(xiv) Prompt notice of any attachment or other legal
process levied, or any notice of tax lien filed, against any
of the Collateral and of any information received by the
Company relating to matters which could have a material
adverse effect upon the value of the Collateral taken as a
whole or the rights and remedies of the Bank in respect
thereto;
(xv) Prompt notice of any change in the location at
which any inventory of the Company, D/T or DWC is or will be
kept, other than for temporary processing, temporary storage
or similar purposes, or at which records relating to the
accounts receivable of the Company, D/T or DWC are or will
be kept; and
(xvi) Such other information respecting the operations
or condition (financial or otherwise) of the Company or any
Subsidiary as the Bank may reasonably request.
(b) Insurance. The Company will maintain, and will
cause each Subsidiary to maintain, insurance with
responsible and reputable insurance companies and
associations in such amounts and covering such risks as is
usually carried by companies engaged in similar businesses
and owning similar properties in the same general areas in
which the Company or such Subsidiary operates.
(c) Taxes and Other Indebtedness. The Company will
promptly pay and discharge, and will cause each Subsidiary
promptly to pay and discharge, when due, any and all
Indebtedness, liens, charges, taxes, assessments and
governmental charges or levies imposed upon it or upon its
income or profits, or upon any of its properties, prior to
the date upon which penalties accrue thereon, and lawful
claims which, if unpaid, might become a lien or charge upon
the property of the Company or such Subsidiary, except such
as may in good faith be contested or disputed, or for which
arrangements for deferred payment have been made, provided
appropriate reserves are maintained to the satisfaction of
the Bank.
(d) Maintenance of Existence; Conduct of Business. The
Company will preserve and maintain, and will cause each
Subsidiary to preserve and maintain, its corporate
existence, its business as presently conducted, and all of
its rights, privileges and franchises necessary or desirable
in the normal conduct of said business, provided, however,
that nothing herein contained shall prevent the Company or
any Subsidiary from exercising any of its rights under
Subsection 4.02(b) hereof. The Company will, and will cause
each Subsidiary to, conduct its business in an orderly,
efficient and regular manner, keep its properties useful or
necessary in its business in good working order and
condition, and from time to time make all needed repairs,
renewals and replacements thereto, so that the efficiency of
its properties shall be usefully preserved. The Company will
comply, and will cause each Subsidiary to comply, with all
applicable laws, rules, regulations, orders, writs, decrees
and judgments, with its constitutive documents, and with the
terms of all mortgages, indentures, leases, contracts and
other agreements and instruments binding upon the Company or
such Subsidiary, except where contested in good faith and by
appropriate proceedings.
(e) Financial Records etc. The Company at all times
will keep and maintain, and will cause each Subsidiary to
keep and maintain, accurate books of record and account in
accordance with generally accepted accounting principles
consistently applied. The Company will permit, and will
cause each Subsidiary to permit, the Bank or representatives
thereof to inspect, audit and examine its books and records
and to take extracts therefrom and to inspect the properties
and assets of the Company and each Subsidiary.
(f) Use of Facilities. The Company will use the
Facilities and the proceeds of Revolving Loans only for the
purposes, and in the manner, specifically set forth in the
applicable sections of Section I hereof. No part of the
proceeds of any of the Facilities hereunder will be used,
directly or indirectly, for the purpose of purchasing or
carrying any Margin Stock or for the purpose of purchasing
or carrying or trading in any securities under such
circumstances as to involve the Company or the Bank in a
violation of Regulations G, T, U or X issued by the Board of
Governors of the Federal Reserve System.
(g) ERISA. The Company will, and will cause each
Subsidiary to, (i) comply with the minimum funding
requirements of ERISA for each Plan, (ii) file all material
reports with respect to each Plan required to be filed by
ERISA, the Code and all applicable rules and regulations
promulgated thereunder, and (iii) otherwise maintain each
Plan in material compliance with ERISA, the Code and such
rules and regulations.
(h) Documents and Related Goods Released to the
Company. The Company will hold all documents of title which
are obtained by the Bank from beneficiaries under Commercial
L/C's or others and which are thereafter released to the
Company, together with such of the goods represented thereby
as constitute inventory of the Company, and-all additions or
accessions to, or products of, such goods, in trust for the
Bank and subject to any security interest granted by the
Company to the Bank therein, to be used solely for the
purpose of ultimate sale or exchange or for the purpose of
loading, unloading, storing, shipping, transshipping,
manufacturing, processing or otherwise dealing with the
goods in a manner preliminary to their sale or exchange and
for no other purpose.
4.02. Negative Covenants. Until the termination of this
Agreement and the satisfaction in full by the Company of all
Obligations, the Company agrees that it will comply, and as
appropriate will cause each Subsidiary to comply, with the
following negative covenants:
(a) Liens. The Company will not, and will not permit
any Subsidiary to, create or assume, or permit to exist, any
mortgage, lien, charge or encumbrance on, pledge of, or
other security interest in, any property or assets of any
kind of the Company or such Subsidiary, except for Permitted
Liens and liens created in favor of the Bank.
(b) Sale of Assets. Without the prior written consent
of the Bank, which consent shall be timely (if given) and
not unreasonably withheld, the Company will not, and will
not permit any Subsidiary to, sell, lease, transfer or
otherwise dispose of any of its property or assets;
provided, however, that the Company and its Subsidiaries may
sell, lease, transfer or otherwise dispose of assets in the
ordinary course of business.
(c) Consolidation or Merger. The Company will not, and
will not permit any Subsidiary to, consolidate with or merge
into any other Person or permit any other Person to merge
into it; provided, however, that so long as no Event of
Default and no Unmatured Event of Default shall have
occurred and be continuing either immediately prior to or
immediately after the taking of any such action, or shall be
caused thereby, then (i) any wholly-owned Subsidiary may be
merged into any other wholly-owned Subsidiary, and (ii) any
wholly-owned Subsidiary may be merged into the Company (but
only if the Company is the surviving corporation).
(d) Dividends and Redemptions. The Company will not (i)
declare or pay dividends on, or declare or make
distributions on account of, any shares of any class of its
stock now or hereafter outstanding, or set apart any sums
for any such purpose (except for dividends payable solely in
shares of the Company's stock), or (ii) directly or
indirectly redeem, retire, purchase, or otherwise acquire
beneficially any shares of any class of its own stock now or
hereafter outstanding, or set apart any sums for any such
purpose, unless, in the case of each such action, no Event
of Default and no Unmatured Event of Default shall have
occurred and be continuing either immediately prior to or
immediately after the taking of such action, or shall be
caused thereby.
(e) Acquisitions. Without the prior written consent of
the Bank, which consent shall be timely (if given) and not
unreasonably withheld, the Company will not, and will not
permit any Subsidiary to, acquire by purchase of stock or by
purchase of assets, in exchange for cash or shares of
capital stock or other securities of the Company or any
other Person, all or any substantial division or portion of
the assets or business of any other Person.
(f) Unsecured Indebtedness Investments Advances and
Guaranties. The Company will not, and will not permit any
Subsidiary to, incur any unsecured Indebtedness, advance
funds to (whether by way of loan, stock purchase, capital
contribution, or otherwise) or incur any Indebtedness with
respect to the obligations of, any Person; provided,
however, that the Company and its Subsidiaries may (i) make
acquisitions, whether by purchase of stock or by purchase of
assets, of all or any substantial division or portion of the
assets and business of another Person as and to the extent
permitted by Subsection 4.02(e) hereof, (ii) make advances
to finance sales in the ordinary course of business, (iii)
incur trade debt in the ordinary course of business, and
(iv) purchase certificates of deposit from banks with
deposits in excess of Five Hundred Million Dollars
($500,000,000.00), securities issued by the United States
government and commercial paper rated A-1 by Standard &
Poor's or Prime-1 by Moody 's.
(g) Change of Name etc. The Company will not, and will
not permit any Subsidiary to, change its name unless, in
each instance, the Company shall have given the Bank not
fewer than thirty (30) days prior written notice of such
change and shall have executed and delivered to the Bank, or
shall have caused to be executed and delivered to the Bank,
such documents and instruments as the Bank may reasonably
require to maintain perfected the security interests
theretofore granted by the Company or such Subsidiary to the
Bank pursuant to the terms and conditions of this Agreement
and the other Facility Documents. Additionally, the Company
will not, and will not permit D/T or DWC to, establish its
chief executive office or keep its records relating to
Collateral at any location outside the State of California.
(h) Capital Expenditures. The Company will not, and
will not permit any Subsidiary to, make any expenditures for
fixed or capital assets (including, without limitation,
expenditures under capital leases) which would cause the
aggregate of all expenditures for fixed or capital assets
made by the Company and all Subsidiaries (including, without
limitation, expenditures under capital leases) to exceed Two
Million Dollars ($2,000,000.00) during any fiscal year of
the Company.
(i) Tangible Net Worth. The Company will not, as at the
end of any fiscal quarter of the Company, permit its
consolidated Tangible Net Worth to be less than the sum of
(i) Twenty-four Million Two Hundred Fifty Thousand Dollars
($24,250,000.00), (ii) seventy-five percent (75%) of the
cumulative consolidated net after tax profits of the Company
for all fiscal quarters of the Company ending after March
31, 1996 and on or prior to the date of computation (without
reduction, however, for consolidated net after tax losses
sustained by the Company for any of such fiscal quarters),
and (iii) the aggregate amount of all infusions of equity
made on or after April 1, 1996.
(j) Total Liabilities to Tangible Net Worth. The
Company will not permit the ratio of its consolidated total
liabilities to its consolidated Tangible Net Worth to be
greater than 1.60:1.00 as at the end of any fiscal quarter
of the Company.
(k) Profitability. The Company will not (i) suffer or
incur a consolidated net after tax loss in excess of Seven
Hundred Thousand Dollars ($700,000.00) for the fiscal
quarter of the Company ending June 30, 1997, (ii) permit its
consolidated net after tax profits to be less than Five
Hundred Thousand Dollars ($500,000.00) for the fiscal
quarter of the Company ending September 30, 1997, or suffer
or incur a consolidated net after tax loss in excess of
Eighty-eight Thousand Dollars ($88,000.00) for the year-to-
date fiscal period of the Company ending September 30, 1997,
(iii) permit its consolidated net after tax profits to be
less than Five Hundred Fifty Thousand Dollars ($550,000.00)
for the fiscal quarter of the Company ending December 31,
1997, or less than Six Hundred Five Thousand Dollars
($605,000.00) for the year-to-date fiscal period of the
Company ending December 31, 1997, and (iv) permit its
consolidated net after tax profits to be less t0han Six
Hundred Fifty-one Thousand Dollars ($651,000.00) for the
fiscal quarter of the Company ending March 31, 1998, or less
than One Million Four Hundred Thousand Dollars
($1,400,000.00) for the fiscal year of the Company ending
March 31, 1998.
(1) Current Ratio. The Company will not permit the
ratio of its consolidated current assets (excluding prepaid
expenses) to its consolidated total current liabilities to
be less than 1.60:1.00 as at the end of any fiscal quarter
of the Company; provided, however, that for purposes of
making such calculation (i) advance payments related to
contracts which are accounted for as current deferred
credits shall be netted against consolidated current assets
and excluded from consolidated total current liabilities,
and (ii) any portion of the aggregate principal amount of
Revolving Loans outstanding under the Revolving Loan
Facility which would otherwise constitute a current
liability shall be excluded from consolidated total current
liabilities.
(m) Cash Flow Coverage Ratio. The Company will not
permit the ratio of (i) the sum of (A) its consolidated
after tax net profits, (B) its consolidated interest
expenses, and (C) its consolidated depreciation and
amortization expenses, to (ii) the sum of (A) the current
portion of its consolidated long term debt (but excluding
any portion of the aggregate principal amount of Revolving
Loans outstanding under the Revolving Loan Facility which
would otherwise constitute long term debt), (B) its
consolidated interest expenses, (C) its consolidated capital
expenditures, and (D) its dividends and stock repurchases,
to be less than 2.25:1.00 as at the end of any fiscal year
of the Company.
SECTION V.
CHANGE IN CIRCUMSTANCES.
5.01. Unavailability of LIBOR Funding or Inability to
Determine Rates. If, on or before the first day of any
Interest Period for a LIBOR Revolving Loan, the Bank
determines that (a) deposits in the amount of such loan for
such Interest Period are not available to the Bank in the
offshore interbank market(s) from which the Bank is then
funding such loans, or (b) the LIBO Rate for such Interest
Period cannot be adequately and reasonably determined due to
circumstances affecting such offshore interbank market(s),
which determination by the Bank shall be conclusive and
binding upon the Company, the Bank shall immediately give
notice thereof to the Company. After the giving of any such
notice and until the Bank shall otherwise notify the Company
that the circumstances giving rise to such condition no
longer exist, the Company's right to request the making of
or conversion to, and the Bank's obligation to make or
convert to, a LIBOR Revolving Loan shall be suspended. Any
LIBOR Revolving Loan outstanding at the commencement of any
such suspension shall be converted, at the end of the then
current Interest Period for such loan, to a Reference Rate
Revolving Loan unless such suspension has then ended.
5.02. Illegality. If, after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any
change therein, or change in the interpretation or
administration thereof by any governmental authority,
central bank, comparable agency or other Person charged with
the interpretation or administration thereof, or compliance
by the Bank with any request or directive (whether or not
having the force of law) of any such authority (a "Change of
Law") shall make it unlawful or impossible for the Bank to
make or maintain a LIBOR Revolving Loan, the Bank shall
immediately notify the Company of such Change of Law. After
the Company's receipt of such notice, the Company's right to
request the making of or conversion to, and the Bank's
obligation to make or convert to, a LIBOR Revolving Loan
shall be terminated, and the Company shall either (a) at the
end of the then current Interest Period for any LIBOR
Revolving Loan then outstanding, convert such loan to a
Reference Rate Revolving Loan, or (b) immediately repay or
convert any LIBOR Revolving Loan then outstanding if the
Bank shall notify the Company that the Bank may not lawfully
continue to fund and maintain such loan.
5.03. Increased Costs. any Change of Law:
If, after the date of this Agreement,
(a) Shall subject the Bank to any tax, duty or other
charge with respect to a LIBOR Revolving Loan or the Bank's
obligation to make such a loan, or shall change the basis of
taxation of payments by the Company to the Bank on or in
respect of such a loan under this Agreement (except for
changes in the rate of taxation on the overall net income of
the Bank); or
(b) Shall impose, modify or hold applicable any
reserve, special deposit or similar requirement against
assets held by, deposits or other liabilities in or for the
account of, advances or loans by, or any other acquisition
of funds by the Bank for a LIBOR Revolving Loan (except for
any reserve, special deposit or other requirement included
in the determination of the LIBO Rate); or
(c) Shall impose on the Bank any other condition
directly related to any LIBOR Revolving Loan;
and the effect of any of the foregoing is to increase the
cost to the Bank of making, renewing or maintaining a LIBOR
Revolving Loan beyond any adjustment made by the Bank in
determining the applicable interest rate for such loan, or
to reduce any amount receivable by the Bank hereunder, then
the Company shall from time to time, upon demand by the
Bank, pay to the Bank additional amounts sufficient to
reimburse the Bank for such increased costs or to compensate
the Bank for such reduced amounts. A certificate as to the
amount of such increased costs or reduced amounts, submitted
to the Company by the Bank, shall, in the absence of
manifest error, be conclusive and binding on the Company for
all purposes.
5.04. Capital Adequacy. If, after the date of this
Agreement, any Change of Law shall have the effect of
reducing the rate of return on the Bank's capital as a
consequence of its obligations hereunder to a level below
that which the Bank could have achieved but for such Change
of Law (taking into consideration the Bank's policies with
respect to capital adequacy) by an amount deemed by the Bank
to be material, then from time to time, upon demand by the
Bank, the Company shall pay to the Bank such additional
amount or amounts as will compensate the Bank for such
reduction. The Bank shall deliver to the Company a
certificate setting forth the amount of any reduction for
which the Bank has so demanded compensation, and the Company
acknowledges and agrees that such a certificate so delivered
to the Company shall, in the absence of manifest error, be
conclusive and binding as to the amount of such reduction
for all purposes.
SECTION VI. DEFAULT.
6.01. Events of Default. The occurrence or existence of an
one or more of the following shall constitute an "Event of
Default" hereunder:
(a) The Company shall fail to pay when due any
principal payment or reimbursement obligation, or shall fail
to pay within five (5) days of the due date thereof any
interest, fee, commission or other payment, required under
the terms of this Agreement or any of the other Facility
Documents; or
(b) The Company shall fail to observe or perform any
covenant, obligation, condition or agreement set forth in
Section 4.02 hereof or in Subsection 4.01(a)(xii) hereof; or
(c) The Company shall fail to observe or perform any
other covenant, obligation, condition or agreement contained
in this Agreement or the other Facility Documents, and such
failure shall continue for ten (10) days after written
notice thereof to the Company from the Bank; or
(d) Any representation, warranty, certificate, or other
statement (financial or otherwise) made or furnished by or
on behalf of the Company to the Bank in or in connection
with this Agreement or any of the other Facility Documents,
or as an inducement to the Bank to enter into this
Agreement, shall be false, incorrect, incomplete or
misleading in any material respect when made or furnished;
or
(e) The Company, any Subsidiary or any Guarantor shall
fail to pay when due any principal or interest payment
required under the terms of any bond, debenture, note or
other evidence of Indebtedness required to be paid by the
Company, such Subsidiary or such Guarantor (except for
payments required hereunder or under the other Facility
Documents) beyond any period of grace provided with respect
thereto, or shall default in the observance or performance
of any other agreement, term or condition contained in any
such bond, debenture, note or other evidence of
Indebtedness, and the effect of such failure or default is
to cause, or permit the holder or holders thereof to cause,
the Indebtedness evidenced by such bond, debenture, note or
other evidence of Indebtedness to become due prior to its
stated date of maturity; or
(f) The Company, any Subsidiary or any Guarantor shall
(i) apply for or consent to the appointment of a receiver,
trustee, liquidator or custodian of itself or of all or a
substantial part of its property, (ii) be unable, or admit
in writing its inability, to pay its debts generally as they
mature, (iii) make a general assignment for the benefit of
its or any of its creditors, (iv) be dissolved or liquidated
in full or in part, (v) commence a voluntary case or other
proceedings seeking liquidation, reorganization or other
relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter
in effect or consent to any such relief or to the
appointment of or taking possession of its property by any
official in an involuntary case or other proceeding
commenced against it, or (vi) take any corporate action for
the purpose of effecting any of the foregoing; or
(g) Proceedings for the appointment of a receiver,
trustee, liquidator or custodian of the Company, any
Subsidiary or any Guarantor or of all or a substantial part
of the property thereof, or an involuntary case or other
proceedings seeking liquidation, reorganization or other
relief with respect to the Company, any Subsidiary or any
Guarantor or the debts thereof under any bankruptcy,
insolvency or other similar law now or hereafter in effect
shall be commenced and shall not be dismissed or discharged
within thirty (30) days of commencement; or
(h) A final judgment or order for the payment of money
in excess of Two Hundred Fifty Thousand Dollars
($2SO,000.00) shall be rendered against the Company, any
Subsidiary or any Guarantor and the same shall remain
undischarged for a period of twenty (20) days during which
execution shall not be effectively stayed, or any judgment,
writ, warrant of attachment, or execution or similar process
shall be issued or levied against a substantial part of the
property of the Company, any Subsidiary or any Guarantor and
such judgment, writ, or similar process shall not be
released, stayed, vacated, bonded or otherwise dismissed
within twenty (20) days after its issue or levy; or
(i) Any other event or condition which has a material
adverse effect on the operations or condition (financial or
otherwise) of the Company shall occur or exist, or any
Guaranty shall be revoked in whole or in part, or shall
cease at any time to be in full force and effect in
accordance with its terms, or a Guarantor shall so assert in
writing.
6.02. Remedies. Immediately and without notice upon the
occurrence of an Event of Default specified in Subsection
6.01(f) or (g) hereof, or, at the option and upon the
declaration of the Bank, upon the occurrence of any other
Event of Default, all Obligations owed to the Bank
(including without limitation amounts payable in respect of
Letters of Credit which have not expired, whether or not the
beneficiaries thereof have presented the drafts and other
documents required thereunder) shall immediately become due
and payable and the obligation of the Bank under this
Agreement and the other Facility Documents to make any
Revolving Loan or to issue any Letter of Credit shall be
terminated, without presentment, demand, protest, or notice
of any kind, all of which are hereby expressly waived, and
the Bank may immediately, and without the expiration of any
other period of grace, enforce payment of the Obligations
and exercise any and all other rights and remedies granted
to it by this Agreement, any of the other Facility Documents
or at law, in equity or otherwise. All amounts paid to the
Bank in respect of the obligations of the Bank to the
beneficiaries of Letters of Credit which have not expired or
with respect to which presentment for honor shall not have
occurred shall be deposited in an account as cash collateral
(and the Company hereby grants to the Bank a security
interest in any such account which may hereafter be
established) and the unused portion thereof, if any, shall
be returned to the Company after the later to occur of the
latest expiry date of such Letters of Credit or the date on
which all Obligations shall have been paid in full.
6.03 Unmatured Events of Default. Upon the occurrence of any
Unmatured Event of Default, the obligation of the Bank under
this Agreement and the other Facility Documents to make any
Revolving Loan or to issue any Letter of Credit shall be
suspended until such event is either waived by the Bank or,
to the extent allowed hereunder, cured by the Company.
SECTION VII. INTERPRETATION.
7.01. Definitions. As used herein, the following terms shall
have the respective meanings set forth below or set forth in
the Section or Subsection reference following such term:
"Affiliate" shall mean, with respect to any Person, any
other Person directly or indirectly controlling, controlled
by, or under direct or indirect common control with such
Person; a Person shall be deemed to control another Person
if such Person owns, directly or indirectly, ten percent
(10%) or more of the outstanding capital stock or similar
interests of the other Person or otherwise possesses,
directly or indirectly, the power to direct or cause the
direction of the management and policies of the other
Person, whether through ownership of voting securities, by
contract or otherwise.
"Agreement" shall mean this Amended and Restated Credit
Agreement and Note, as amended, modified, extended, renewed
or supplemented from time to time.
"Bank" shall have the meaning given to that term in the
introductory paragraph hereof.
"Banking Day" shall mean a day (other than a Saturday or
Sunday) on which commercial banks are open for business in
San Diego, California, and, with respect to a LIBOR
Revolving Loan, a day which is also a day on which dealings
in Dollar deposits outside of the United States may be
carried on by the Bank, and "Banking Days" shall mean two
(2) or more such days.
"Change of Law" shall have the meaning given to that term in
Section 5.02.
"Code" shall have the meaning given to that term in
Subsection 3.01(i).
"Collateral" shall mean all real and/or personal property of
the Company, D/T or DWC which is now or hereafter assigned
to the Bank as security or in which the Bank now has or
hereafter acquires a security interest.
"Column D Country" and "Column D Countries" shall have the
meanings given to those terms in Subsection 1.01(f).
"Commercial L/C" and "Commercial L/C's" shall have the
meanings given to those terms in Section 1.01.
"Commercial L/C Application" shall have the meaning given to
that term in Subsection 1.04(a)(ii).
"Commercial L/C Utilization" shall have the meaning given
to that term in Subsection l.Ol(a)(v).
"Company" shall have the meaning given to that term in the
introductory paragraph hereof.
"Deed of Trust" shall mean the Deed of Trust, Assignment of
Rents, Security Agreement and Fixture Filing referred to in
Subsection 1.05(c)(ii)(B) hereof, as the same has heretofore
been amended, and as it may hereafter be amended, modified,
extended, renewed, supplemented or replaced from time to
time.
"Deposits" shall mean all demand, time, savings or similar
accounts maintained with any office of the Bank, whether a
general or special account and whether containing proceeds
of the Collateral or other property of the Company, together
with all certificates of deposit, passbooks and other
instruments or documents evidencing or relating to the
foregoing.
"Designated Account" shall have the meaning given to that
term in Subsection 1.02(c).
"Dollar", "Dollars" and "$" each shall mean lawful currency
of the United States of America.
"D/T" shall have the meaning given to that term in
Subsection 1.05(c) (ii).
"DWC" shall have the meaning given to that term in
Subsection 1.05(c)(iii).
"Effective Date" shall mean the date on which this Agreement
becomes effective as provided in Section 2.01 hereof.
"ERISA" shall have the meaning given to that term in
Subsection 3.01(i).
"Event of Default" shall have the meaning given to that term
in Section 6.01.
"Facility" shall mean the Revolving Loan Facility, the
Standby Facility or the L/C Facility, and "Facilities" shall
mean any two (2), or all, of the Revolving Loan Facility,
the Standby Facility and the L/C Facility.
"Facility Account" shall have the meaning given to that term
in Subsection 1.05(a).
"Facility Documents" shall mean this Agreement and all other
documents, instruments and agreements delivered or to be
delivered in connection with the transactions contemplated
hereby.
"Financial Statement" shall mean (i) with respect to any
nonfiscal quarter accounting period for the Company,
consolidated and consolidating statements of income of the
Company and its consolidated Subsidiaries for such period,
and consolidated and consolidating balance sheets of the
Company and its consolidated Subsidiaries as at the end of
such period, setting forth in the consolidated statements of
income in comparative form figures for the corresponding
period in the preceding fiscal year and setting forth in the
consolidated balance sheets in comparative form figures from
the preceding fiscal year end, all prepared in reasonable
detail and in accordance with generally accepted accounting
principles consistently applied, and (ii) with respect to
any fiscal quarter accounting period for the Company,
financial statements of the Company and its consolidated
Subsidiaries prepared in accordance with Securities and
Exchange Commission requirements for Form 10-Q or Form 10-K,
as the case may be, and consolidating statements of income
of the Company and its consolidated Subsidiaries for such
period and consolidating balance sheets of the Company and
its consolidated Subsidiaries as at the end of such period,
prepared in reasonable detail and in accordance with
generally accepted accounting principles consistently
applied.
"Guarantor" shall mean any Person obligated on a Guaranty.
"Guaranty" shall mean either of the Continuing Guaranties
referred to in Subsections 1.05(c)(ii) and (iii) hereof, or
any other guaranty which may hereafter be given to the Bank
with respect to the Obligations of the Company arising
hereunder or under the other Facility Documents, as each of
the same may be amended, modified, extended, renewed or
supplemented from time to time.
"Indebtedness" shall mean and include, with respect to any
Person, all items of indebtedness which, in accordance with
generally accepted accounting principles and practices,
would be included in determining liabilities as shown on the
liability side of the balance sheet of such Person as of the
date on which indebtedness is to be determined and shall
also include all indebtedness and liabilities of others
assumed or guarantied by such Person or in respect of which
such Person is secondarily or contingently liable (other
than by endorsement of instruments in the course of
collection) whether by reason of any agreement to acquire
such indebtedness or to supply or advance funds or
otherwise.
"Interest Period" shall mean, with respect to a LIBOR
Revolving Loan, the time period selected by the Company
pursuant to Subsection 1.02(b)(iv) or 1.02(e)(iii) hereof
which commences on the first day of such loan and ends on
the last day of such time period and, thereafter, each
subsequent time period selected by the Company pursuant to
Subsection 1.02(f)(ii) hereof which commences on the last
day of the immediately preceding time period and ends on the
last day of that time period.
"L/C Facility" shall mean the Facility more particularly
described in Section 1.04 hereof pursuant to which the Bank
will issue Commercial L/C's for the account of the Company.
"Letter of Credit" shall mean either a Standby L/C or a
Commercial L/C, and "Letters of Credit" shall mean two (2)
or more Standby L/C's, two (2) or more Commercial L/C's, or
any combination of Standby L/C's and Commercial L/C's.
"Letter of Credit Facilities Termination Date" shall have
the meaning given to that term in Section 1.01.
"LIBO Rate" shall mean, for each Interest Period with
respect to a LIBOR Revolving Loan, the adjusted per annum
rate determined by the Bank to be the rate at which Dollar
deposits can be acquired by the Bank outside of the United
States two (2) Banking Days before the commencement of such
Interest Period in an amount comparable to such loan and for
a time period comparable to such Interest Period, adjusted
to reflect the cost to the Bank of reserve requirements and
broker's fees directly related to the acquisition and
maintenance by the Bank of such deposits. The Bank's
determination of such adjusted per annum rate shall be
conclusive in the absence of manifest error, whether or not
such deposits are actually acquired by the Bank.
"LIBOR Revolving Loan" and "LIBOR Revolving Loans" shall
have the meanings given to those terms in Subsection
1.02(b)(i)(B).
"Mar-tin Stock" shall have the meaning given to that term in
Regulation U issued by the Board of Governors of the Federal
Reserve System, as amended from time to time, and any
successor regulation thereto.
"Notice of Revolver Borrowing" shall have the meaning given
to that term in Subsection 1.02(b).
"Notice of Revolver Conversion" shall have the meaning given
to that term in Subsection 1.02(e).
"Notice of Revolver Interest Period Selection" shall have
the meaning given to that term in Subsection 1.02(f)(ii).
"Obligations" shall mean and include all loans, advances,
debts, liabilities and obligations, howsoever arising, owed
by the Company to the Bank of every kind and description
(whether or not evidenced by any note or instrument and
whether or not for the payment of money), direct or
indirect, absolute or contingent, due or to become due, now
existing or hereafter arising pursuant to the terms of this
Agreement or any of the other Facility Documents, including
without limitation all interest, fees, charges, expenses,
attorneys' fees and accountants' fees chargeable to the
Company or incurred by the Bank in connection with its
dealings with the Company and payable by the Company
hereunder and thereunder.
"Permitted Liens" shall mean and include:
(i) Liens for taxes, assessments or other governmental
charges or levies not at the time delinquent thereafter
payable without penalty or being contested in good faith,
provided provision is made to the reasonable satisfaction of
the Bank for the eventual payment thereof subsequently found
payable by the Company or a Subsidiary, as the case may be;
(ii) Liens of carriers, warehousemen, mechanics,
materialmen, vendors and landlords incurred in the ordinary
course of business for sums not overdue or being contested
in good faith, provided provision is made to the reasonable
satisfaction of the Bank for the eventual payment thereof if
subsequently found payable by the Company or a Subsidiary,
as the case may be;
(iii) Deposits under workers' compensation,
unemployment insurance and social security laws or to secure
the performance of bids, tenders, contracts (other than for
the repayment of borrowed money) or leases, or to secure
statutory obligations of surety or appeal bonds or to secure
indemnity, performance or other similar bonds in the
ordinary course of business;
(iv) Liens arising out of a judgment or award not
exceeding Two Hundred Fifty Thousand Dollars ($250,000.00)
with respect to which an appeal is being prosecuted, a stay
of execution pending appeal having been secured;
(v) Liens created to secure the payment of the purchase
price of properties or assets (other than 1nventory)
acquired by the Company or a Subsidiary, provided that such
liens do not at any time encumber any property or asset
other than the property or asset financed by such
Indebtedness;
(vi) Liens on real property owned by the Company or
Subsidiary and created to secure the repayment of money
borrowed by the Company or such Subsidiary, provided that
(A) no Event of Default and no Unmatured Event of Default
shall have occurred and be continuing either immediately
prior to or immediately after the borrowing of such money or
the creation of such lien, or shall be caused thereby, (B)
all money so borrowed shall be retained by the Company or
such Subsidiary, as the case may be, and used solely for the
ordinary business purposes of the Company or such Subsidiary
(but under no circumstances for payment of dividends), and
(C) the Company or such Subsidiary, as the case may be,
shall have given the Bank notice of its intent so to borrow
such money and so to create such lien within five (5) days
of its first entering into discussions with a potential
broker or lender; and
(vii) Liens created to secure the payment of rentals of
properties or assets leased by the Company or a Subsidiary,
whether for a term which is less than, equal to or greater
than one (1) year, provided the aggregate rentals in respect
of capital leases, computed on an annual basis, do not
exceed at any given time the amount permitted pursuant to
Subsection 4.02(h) hereof.
"Person" shall mean any natural person, corporation,
partnership, firm, association, government, governmental
agency, court or any other entity whether acting in an
individual, fiduciary or other capacity.
"Plan" shall have the meaning given to that term in
Subsection 3.01(i).
"Reference Rate" shall mean the per annum rate publicly
announced by the Bank from time to time at its Head Office
in San Francisco, California as its "reference rate". The
Reference Rate is determined by the Bank from time to time
as a means of pricing credit extensions to some customers
and is neither directly tied to any external rate of
interest or index nor necessarily the lowest rate of
interest charged by the Bank at any given time for any
particular class of customers or credit extensions.
"Reference Rate Revolving Loan" and "Reference Rate
Revolving Loans" shall have the meanings given to those
terms in Subsection 1.02(b)(i)(A).
"Revolving Loan" and "Revolving Loans" shall have the
meanings given to those terms in Section 1.01.
"Revolving Loan Facility" shall mean the Facility more
particularly described in Section 1.02 hereof pursuant to
which the Bank will make Revolving Loans to the Company.
"Revolving Loan Facility Termination Date" shall have the
meaning given to that term in Section 1.01.
"Revolving Loan Utilization" shall have the meaning given to
that term in Subsection l.Ol(a)(i).
"Standby Application" shall have the meaning given to that
term in Subsection 1.03(a)(ii).
"Standby Facility" shall mean the Facility more particularly
described in Section 1.03 hereof pursuant to which the Bank
will issue Standby L/C's for the account of the Company.
"Standby L/C" and "Standby L/C's" shall have the meanings
given to those terms in Section 1.01.
"Standby L/C Utilization" shall have the meaning given to
that term in Subsection l.Ol(a)(iii).
"Subsidiary" shall mean any corporation more than fifty
percent (50%) of the outstanding voting stock of which is
directly or indirectly owned by the Company, or by one (1)
or more of its Subsidiaries, or by the Company and one (1)
or more of its Subsidiaries, and "Subsidiaries" shall mean
two (2) or more such corporations.
"Tangible Net Worth" shall mean, with respect to any given
Person, the difference between (i) the gross book value of
the assets of such Person, and (ii) the sum of (A) the
amount of all intangibles such as goodwill, patents,
trademarks, organization expense, unamortized debt discount
and expense, deferred charges and deferred tax assets in
excess of Two Million Six Hundred Thousand Dollars
($2,600,000.00), (B) the amount of all treasury stock, (C)
the amount of reserves established by such Person for
anticipated losses and expenses, (D) all amounts due to such
Person from officers, directors, shareholders and/or
Affiliates of such Person, and (E) the amount of all
liabilities of such Person, including accrued but deferred
income taxes.
"Unmatured Event of Default" shall mean any event or
occurrence not yet constituting an Event of Default but
which, with the giving of notice or the passage of time or
both, would constitute an Event of Default.
"Yield Rate" shall mean, as of any date for a LIBOR
Revolving Loan being prepaid (in whole or in part) on such
date, the per annum rate at which the Bank could, on or
about such date, purchase marketable securities issued by
the United States Treasury in an amount comparable to the
amount of principal of such LIBOR Revolving Loan so being
prepaid and for a term comparable to the remainder of the
then current Interest Period for such LIBOR Revolving Loan.
The Bank's determination of such per annum rate shall be
conclusive in the absence of manifest error, whether or not
such securities are actually purchased by the Bank.
7.02. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance
with generally accepted accounting principles consistently
applied. If any changes in accounting principles from those
used in the preparation of the Financial Statements referred
to in Subsection 3.01(g) hereof which are hereafter
occasioned by the promulgation of rules, regulations,
pronouncements and opinions by or required by the Financial
Accounting Standards Board or the American Institute of
Certified Public Accountants (or any successor Person
thereto or any Person with similar functions) result in a
change in the method of calculation of the financial
covenants, standards or terms found in Sections 3.01, 4.01,
4.02 or 7.01 hereof, the parties hereto agree to enter into
negotiations in order to amend such provisions so as to
equitably reflect such changes with the desired result that
the criteria for evaluating the Company's financial
condition shall be the same after such changes as if such
changes had not been made.
7.03. Headings. Headings in this Agreement are for
convenience of reference only and are not part of the
substance hereof.
7.04. References. References in this Agreement to
"Sections", "Subsections" and "Exhibits" are to sections,
subsections and exhibits herein and hereto unless otherwise
indicated.
7.05. Generality. Unless the context clearly indicates
otherwise, any use of the singular in this Agreement shall
include the plural and vice versa. Additionally, any use of
the masculine gender includes both the feminine and neuter
genders and any use of the neuter gender includes both the
masculine and feminine genders.
7.06. Governing Law. This Agreement and each of the other
Facility Documents shall be governed by and construed in
accordance with the laws of the State of California.
SECTION VIII. MISCELLANEOUS.
8.01. Notices.
(a) Except as otherwise provided herein, all notices,
requests, demands or other communications to or upon the
parties hereto shall be addressed to the parties at the
respective addresses indicated below or at such other
address as either party hereto may designate by written
notice to the other party, and shall be deemed to have been
given (i) if by mail, when deposited in the mails registered
or certified and return receipt requested, (ii) if delivered
in person or by messenger, when delivered, or (iii) if by
telex or telecopy, when sent; provided, however, that
notices to the Bank under Section I hereof shall not be
effective until received by the Bank:
Bank:
(as to notices, requests and other communications
regarding Letters of Credit)
Union Bank of California, N.A.
Southern California
International Operations Center
1980 Saturn Street
Monterey Park, California 91755
(as to notices, requests and other communications
regarding Revolving Loans)
Union Bank of California, N.A.
Orange County Commercial Portfolio
Administration
500 South Main Street, Suite 201
Orange, California 92668
Attention: Mr. Jack Lenhof
(as to all other notices, requests and communications)
Union Bank of California, N.A.
San Diego Commercial Banking Office
530 "B" Street, 4th Floor
San Diego, California 92101
Attention: Ms. Luanne B. Bas
Company:
Datron Systems Incorporated
304 Enterprise Street
Escondido, California 92029
Attention: Mr. William Stephan
(b) The Company shall give each Notice of Revolver
Borrowing, Notice of Revolver Conversion and Notice of
Revolver Interest Period Selection, and shall deliver each
Standby Application and Commercial L/C Application, to the
office of the Bank specified in the applicable section of
Section I hereof between 8:30 a.m. and 3:00 p.m., California
time, on a Banking Day. Any such notice, Standby Application
or Commercial L/C Application not received by the Bank
during such hours shall be deemed received on the next
Banking Day. In the case of the foregoing, or in any other
case where this Agreement authorizes notices, requests,
demands or other communications by the Company to the Bank
to be made by telephone, telex or telecopy, the Bank may
conclusively presume that anyone purporting to be a person
designated in the certificate received by the Bank pursuant
to Subsection 2.01(c) hereof or, with respect to Letters of
Credit, in the Teletransmission Agreement received by the
Bank pursuant to Subsection 2.01(h) hereof, or in any
replacement, amendment, modification or supplement to either
of such documents delivered by the Company to the Bank, is
such a person.
8.02. Expenses. The Company shall pay (a) all reasonable
fees and expenses incurred by the Bank in connection with
the administration of this Agreement and the other Facility
Documents, (b) all reasonable fees and expenses, including
reasonable attorneys' fees, incurred by the Bank in
connection with the preparation of amendments to and waivers
under this Agreement and the other Facility Documents, (c)
all reasonable fees and expenses, including reasonable
attorneys' fees, incurred by the Bank in the enforcement or
attempt to enforce any of the Obligations which is not
performed when due, and (d) all taxes, if any, upon any
documents or transactions entered into pursuant to this
Agreement. As used herein, the term "reasonable attorneys'
fees" shall include allocable costs of the Bank's in-house
legal counsel and staff.
8.03. Nonwaiver. No failure or delay on the Bank's part in
exercising any right hereunder shall operate as a waiver
thereof or of any other right nor shall any single or
partial exercise of any such right preclude any other
further exercise thereof or of any other right. Each waiver
or consent under any provision hereof shall be effective
only in the specific instance and for the specific purpose
for which given.
8.04. Amendments and Waivers. This Agreement and the other
Facility Documents may not be amended or modified, nor may
any of their terms be waived, except by a written instrument
signed by the party or parties against which enforcement
thereof is sought.
8.05. Assignments. This Agreement and the other Facility
Documents shall be binding upon and inure to the benefit of
the Bank and the Company and their respective successors and
assigns; provided, however, that the Company may not assign
its rights or delegate its duties hereunder without the
prior written consent of the Bank. The Bank may assign,
through the sale of participation interests or otherwise,
all or any part of its interest under this Agreement or any
of the other Facility Documents without notice to the
Company. The Bank may disclose the Facility Documents and
any financial or other information relating to the Company
and its Subsidiaries to any potential assignee or
participant.
8.06. Severability. Should any one or more of the provisions
of this Agreement or of any of the other Facility Documents
be determined to be illegal or unenforceable in any respect,
all other provisions of this Agreement and of each of the
other Facility Documents shall be given effect separately
from the provision or provisions determined to be illegal or
unenforceable and shall not in any way be affected or
impaired thereby.
8.07. Integration. This Agreement and the other Facility
Documents are intended by the Company and the Bank as the
complete and final expression of their understanding
regarding the subject matter hereof and thereof and
supersede and replace all prior understandings and
agreements with respect thereto.
8.08 Dispute Resolution. That certain Alternative Dispute
Resolution Agreement, dated as of November 25, 1996, by and
between the Company and the Bank, is hereby made a part of
this Agreement. Said Alternative Dispute Resolution
Agreement was entered into in substitution and replacement
for the Judicial Reference Agreement entered into by the
Company on August 17, 1995.
8.09. Service of Process; Waiver of Immunity. The Company
hereby irrevocably consents to the service of process by any
means authorized under the laws of the State of California.
To the extent that the Company has or hereafter may acquire
any immunity from jurisdiction of any court or from any
legal process with respect to itself or its property, the
Company hereby irrevocably waives such immunity in respect
of the Obligations.
8.10. Counterparts. This Agreement may be executed in any
number of identical counterparts, any set of which signed by
both parties hereto shall be deemed to constitute a
complete, executed original for all purposes.
IN WITNESS WHEREOF, the Bank and the Company have
caused this Agreement to be executed as of the day and year
first above written.
UNION BANK OF CALIFORNIA, N.A. DATRON SYSTEMS
INCORPORATED
By: s/s JACK LENHOF By: s/s DAVID A. DERBY
Title: Vice President Title: President and CEO
By: s/s LUANNE B. BAS By: s/s WILLIAM L. STEPHAN
Title: Vice President Title: Vice President and CFO
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 376
<SECURITIES> 0
<RECEIVABLES> 16,781
<ALLOWANCES> 226
<INVENTORY> 13,834
<CURRENT-ASSETS> 34,807
<PP&E> 25,853
<DEPRECIATION> 14,560
<TOTAL-ASSETS> 53,166
<CURRENT-LIABILITIES> 13,348
<BONDS> 0
0
0
<COMMON> 31
<OTHER-SE> 32,251
<TOTAL-LIABILITY-AND-EQUITY> 53,166
<SALES> 25,278
<TOTAL-REVENUES> 25,278
<CGS> 19,312
<TOTAL-COSTS> 19,312
<OTHER-EXPENSES> 6,415
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 199
<INCOME-PRETAX> (648)
<INCOME-TAX> (249)
<INCOME-CONTINUING> (399)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (399)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
