SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------------------
FORM 10-Q
(MarkOne)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934,
For the quarterly period ended March 31, 2000
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934,
For the transition period from _____ to _____
Commission file number 0-8771
--------------------------------------------------
EVANS & SUTHERLAND COMPUTER CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Utah 87-0278175
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
600 Komas Drive, Salt Lake City, Utah 84108
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (801) 588-1000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____
The number of shares of the registrant's Common Stock (par value $0.20 per
share) outstanding at May 5, 2000 was 9,713,630.
1
<PAGE>
FORM 10-Q
Evans & Sutherland Computer Corporation
Quarter Ended March 31, 2000
<TABLE>
<CAPTION>
Page No.
PART I - FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999 3
Consolidated Statements of Operations for the three months ended March
31, 2000 and April 2, 1999 4
Consolidated Statements of Comprehensive Income for the three months
ended March 31, 2000 and April 2, 1999 5
Consolidated Statements of Cash Flows for the three months ended March
31, 2000 and, April 2, 1999 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------------- ----------------
(Unaudited)
<S> <C> <C>
Assets:
Cash and cash equivalents $ 16,696 $ 22,110
Short-term investments 67 748
Accounts receivable, less allowance for doubtful receivables of
$1,440 at March 31, 2000 and $1,338 at December 31, 1999 43,017 28,743
Inventories 39,273 40,588
Costs and estimated earnings in excess of billings on uncompleted contracts 87,909 80,457
Deferred income taxes 13,474 15,923
Prepaid expenses and deposits 7,907 7,844
--------------- ----------------
Total current assets 208,343 196,413
Property, plant and equipment, net 50,600 52,184
Investment securities 5,380 4,467
Deferred income taxes 4,669 4,418
Goodwill and other intangible assets, net 508 552
Other assets 918 430
--------------- ----------------
Total assets $ 270,418 $ 258,464
=============== ================
Liabilities and stockholders' equity:
Notes payable $ 8,268 $ 2,657
Accounts payable 24,159 19,575
Accrued expenses 35,373 39,057
Customer deposits 3,324 4,720
Income taxes payable - 1,062
Billings in excess of costs and estimated earnings on uncompleted contracts 23,348 12,412
--------------- ----------------
Total current liabilities 94,472 79,483
--------------- ----------------
Long-term debt 18,015 18,015
--------------- ----------------
Commitments and contingencies
Redeemable convertible preferred stock, class B-1, no par value; authorized
1,500,000 shares; issued and outstanding 901,408 shares 23,829 23,772
--------------- ----------------
Stockholders' equity:
Preferred stock, no par value; authorized 8,500,000 shares;
no shares issued and outstanding - -
Common stock, $.20 par value; authorized 30,000,000
shares; issued and outstanding 9,700,829 shares at
March 31, 2000 and 9,678,938 shares at December 31, 1999 1,940 1,936
Additional paid-in capital 24,272 24,086
Common stock in treasury, at cost; 352,500 shares (4,709) (4,709)
Retained earnings 112,587 115,816
Accumulated other comprehensive income 12 65
--------------- ----------------
Total stockholders' equity 134,102 137,194
--------------- ----------------
Total liabilities and stockholders' equity $ 270,418 $ 258,464
=============== ================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------
March 31, April 2,
2000 1999
------------- -------------
<S> <C> <C>
Sales $ 45,955 $ 49,746
Cost of sales 29,842 27,368
------------- -------------
Gross profit 16,113 22,378
------------- -------------
Operating expenses:
Selling, general and administrative 10,289 10,221
Research and development 11,532 11,080
Amortization of goodwill and other intangibles 45 713
------------- -------------
Operating expenses 21,866 22,014
------------- -------------
(5,753) 364
Gain on sale of business unit 1,102 -
------------- -------------
Operating income (loss) (4,651) 364
Other income (expense), net (176) 15
------------- -------------
Income (loss) before income taxes (4,827) 379
Income tax expense (benefit) (1,655) 118
------------- -------------
Net income (loss) (3,172) 261
Accretion of preferred stock 57 57
------------- -------------
Net income (loss) applicable to common stock $ (3,229) $ 204
============= =============
Income (loss) per common share:
Basic $ (0.35) $ 0.02
Diluted $ (0.35) $ 0.02
Weighted average common and common equivalent shares outstanding:
Basic 9,338 9,603
Diluted 9,338 9,873
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------
March 31, April 2,
2000 1999
----------- ------------
<S> <C> <C>
Net income (loss) $ (3,172) $ 261
Other comprehensive income (loss):
Foreign currency translation adjustments 35 244
Unrealized gains (losses) on securities (135) 1
----------- ------------
Other comprehensive income (loss) before income taxes (100) 245
Income tax expense (benefit) related to items of other
comprehensive income (loss) (47) 76
------------ ------------
Other comprehensive income (loss), net of income taxes (53) 169
------------ ------------
Comprehensive income (loss) $ (3,225) $ 430
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------
March 31, April 2,
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (3,172) $ 261
Adjustments to reconcile net income (loss) to net cash used in operating
activities:
Depreciation and amortization 3,332 3,980
Gain on sale of business unit (1,102) -
Provision for losses on accounts receivable 168 36
Provision for write down of inventories 244 314
Provision for warranty expense 253 183
Deferred income taxes 2,241 (187)
Other 49 470
Changes in assets and liabilities:
Accounts receivable (11,019) 12,986
Inventories 526 (5,697)
Costs and estimated earnings in excess of billings on uncompleted
contracts, net 3,486 (16,213)
Prepaid expenses and deposits (316) (1,631)
Accounts payable 4,600 (7,278)
Accrued expenses (4,329) (2,345)
Customer deposits (1,396) (320)
Income taxes (4,256) 401
------------ ------------
Net cash used in operating activities (10,691) (15,040)
------------ ------------
Cash flows from investing activities:
Proceeds from sale of short-term investments 684 23,356
Purchase of investment securities - (360)
Proceeds from sale of business unit 1,000 -
Purchases of property, plant and equipment (1,773) (2,048)
Proceeds from sale of property, plant and equipment 52 -
Increase in other assets (496) (38)
------------ ------------
Net cash provided by (used in) investing activities (533) 20,910
------------ ------------
Cash flows from financing activities:
Borrowings from notes payable 6,293 -
Payments of notes payable (526) (179)
Proceeds from issuance of common stock 162 355
Payments for repurchase of common stock - (769)
------------ ------------
Net cash provided by (used in) financing activities 5,929 (593)
------------ ------------
Effect of foreign exchange rate on cash and cash equivalents (119) 36
------------ ------------
Net change in cash and cash equivalents (5,414) 5,313
Cash and cash equivalents at beginning of year 22,110 1,834
------------ ------------
ash and cash equivalents at end of period $ 16,696 $ 7,147
============ ============
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest $ 540 $ 547
Income taxes 359 64
Accretion of preferred stock 57 57
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
EVANS & SUTHERLAND COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and, therefore, do not include
all information and footnotes necessary for a complete presentation of the
results of operations, the financial position, and cash flows, in conformity
with generally accepted accounting principles. This report on Form 10-Q for the
three months ended March 31, 2000 should be read in conjunction with the
Company's annual report on Form 10-K for the year ended December 31, 1999.
The accompanying unaudited consolidated balance sheets and statements of
operations, comprehensive income and cash flows reflect all normal recurring
adjustments which are, in the opinion of management, necessary for a fair
presentation of the Company's financial position, results of operations and cash
flows. The results of operations for the interim three month period ended March
31, 2000 are not necessarily indicative of the results to be expected for the
full year.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 established
new accounting and reporting standards for companies to report information about
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the balance sheet and measure those instruments at fair
value. For a derivative not designated as a hedging instrument, changes in the
fair value of the derivative are recognized in earnings in the period of change.
The Company intends to adopt SFAS No. 133 by January 1, 2001. The impact of
adopting SFAS No. 133 is not anticipated to be material to the financial
statements.
In December 1999, the Securities and Exchange Commission staff released Staff
Accounting Bulletin No. 101, "Revenue Recognition" ("SAB No. 101") to provide
guidance on the recognition, presentation and disclosure of revenue in financial
statements; however, SAB No. 101 does not change existing literature on revenue
recognition. SAB No. 101 explains the staff's general framework for revenue
recognition, stating that four criteria need to be met in order to recognize
revenue. The four criteria, all of which must be met, are: (i) there must be
persuasive evidence of an arrangement; (ii) delivery must have occurred or
services must have been rendered; (iii) the selling price must be fixed or
determinable; and (iv) collectibility must be reasonably assured. The Company
intends to adopt SAB No. 101 in the second quarter of fiscal 2000 and the
Company is currently evaluating the impact, if any, that this will have on its
financial statements.
The FASB issued Interpretation No. 44, "Accounting for Certain Transactions
Involving Stock Compensation--an Interpretation of APB Opinion No. 25" ("FIN No.
44") in March 2000. The interpretation clarifies the application of Opinion 25
for only certain issues such as the following: (i) the definition of employee
for purposes of applying Opinion 25, (ii) the criteria for determining whether a
plan qualifies as a noncompensatory plan, (iii) the accounting consequences of
various modifications to the terms of a previously fixed stock option or award,
and (iv) the accounting for an exchange of stock compensation awards in a
business combination. The Company intends to adopt FIN No. 44 by July 1, 2000.
The impact of adopting FIN No. 44 is not anticipated to be material to the
financial statements.
7
<PAGE>
EVANS & SUTHERLAND COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. BUSINESS DIVESTITURE
On March 28, 2000, the Company sold certain assets of its Applications Group
relating to digital video products to RT-SET Real Time Synthesized Entertainment
Technology Ltd. and its subsidiary, RT-SET America Inc., for $1.4 million in
cash, common stock of RT-SET Real Time Synthesized Entertainment Technology Ltd.
valued at approximately $1.0 million, and the assumption of certain liabilities.
The Company may receive additional common stock of RT-SET Real Time Synthesized
Entertainment Technology Ltd. valued up to $3.0 million in the event that a
product currently being developed and included in the purchased assets meets
certain specified performance criteria within a specified time period.
3. INVENTORIES
Inventories consist of the following (in thousands):
March 31, December 31,
2000 1999
----------------- ----------------
(Unaudited)
Raw materials $ 27,758 $26,803
Work-in-process 9,129 11,479
Finished goods 2,386 2,306
----------------- ----------------
$ 39,273 $40,588
================= ================
4. NOTES PAYABLE
On March 31, 2000, the Company entered into a financing facility with Zions
First National Bank (the "Facility"). The Facility provides for borrowings of up
to $15.0 million, which includes a $7.0 million sublimit for the issuance of
letters of credit. Borrowings under the Facility bear interest at an indexed
prime rate. If certain financial covenants are not met the interest rate will
increase to the indexed prime rate plus a margin of 2.5% per annum. The Facility
requires the Company to pay (a) letter of credit fees, which increase if the
Company fails to satisfy certain financial covenants, and (b) a commitment fee,
which increases if the Company fails to satisfy certain financial covenants. The
Facility expires on March 30, 2001. Except for certain permitted exceptions as
identified in the Facility, among other things, the Facility prevents the
Company from (a) declaring or paying any dividends except as are mandatorily
required on the Company's preferred stock, (b) making any distribution of assets
to the Company's shareholders, investors, or equity holders, whether in cash,
assets, or in obligations of the Company, (c) allocating or otherwise setting
apart any sum for the payment of any dividend or distribution on, or for the
purchase, redemption, or retirement of any shares of its capital stock or equity
interests in excess of $2.0 million for any year, (d) making any other
distribution by reduction of capital or otherwise in respect of any shares of
its capital stock or equity interests in excess of $250,000, or (e) creating,
incurring, assuming, or suffering to exist any debt or any encumbrance, mortgage
or lien upon certain real property of the Company. The Company's obligations
under the Facility are secured by substantially all of the Company's assets,
subject to other liens permitted under the Facility. As of March 31, 2000, $5.0
million was outstanding under the Facility and an additional $4.9 million was
reserved under the Facility due to the issuance of letters of credit. Such
amounts shall continue to be reserved and shall not otherwise be available to be
advanced to the Company, until the expiration or termination of such letters of
credit.
8
<PAGE>
EVANS & SUTHERLAND COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has a $5.0 million unsecured letter of credit facility with First
Security Bank, N.A., of which approximately $2.7 million was unused and
available as of March 31, 2000. The First Security Bank letter of credit
facility expires on September 30, 2000 and requires the Company to pay letter of
credit fees. In addition, the Company has unsecured letters of credit totaling
approximately $3.6 million outstanding with U.S. Bank, N.A. that expire between
July 2000 and June 2001.
As of March 31, 2000, the Company had a revolving line of credit agreement with
a foreign bank totaling approximately $4.6 million, of which approximately $1.3
million was unused and available. The Company had a letter of credit with Bank
One, N.A. for $4.6 million as a guarantee for the foreign line of credit
agreement. As of April 30, 2000, the Company had repaid the borrowings under the
line of credit with the foreign bank. The line of credit with the foreign bank
and the letter of credit with Bank One, N.A. expired April 30, 2000.
5. SEGMENT AND RELATED INFORMATION
The Company's business units have been aggregated into three reportable
segments: Simulation, REALimage Solutions, and Applications. These reportable
segments offer different products and services and are managed and evaluated
separately because each segment uses different technologies and requires
different marketing strategies. The Simulation segment provides a broad line of
visual systems for flight and ground simulators for training purposes to
government, aerospace and commercial airline customers. The REALimage Solutions
segment provides graphics accelerator products, including graphics chips and
subsystems, to the personal PC workstation marketplace. The Applications segment
provides digital video applications for entertainment, educational and
multimedia industries.
The Company evaluates segment performance based on income (loss) from operations
before income taxes, interest income and expense, other income and expense and
foreign exchange gains and losses. The Company's assets are not identifiable by
segment.
<TABLE>
<CAPTION>
(in thousands, unaudited) Simulation REALimage Applications Total
Solutions
--------------- --------------- -------------- ------------
<S> <C> <C> <C> <C>
Three months ended March 31, 2000
Sales $ 40,388 $ 1,491 $ 4,076 $ 45,955
Operating income (loss) (3,720) (1,432) 501 (4,651)
Three months ended April 2, 1999
Sales 40,263 8,119 1,364 49,746
Operating income (loss) 3,301 (1,515) (1,422) 364
</TABLE>
9
<PAGE>
EVANS & SUTHERLAND COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. GEOGRAPHIC INFORMATION
The following table presents sales by geographic location based on the location
of the use of the product or services. Sales to individual countries greater
than 10% of consolidated sales are shown separately (in thousands):
Three Months Ended
---------------------------------
March 31, April 2,
2000 1999
-------------- ---------------
(Unaudited)
United States $ 27,965 $ 25,491
United Kingdom 8,473 15,332
Europe (excluding United Kingdom) 5,362 6,279
Pacific Rim 3,010 2,459
Other 1,145 185
-------------- ---------------
$ 45,955 $ 49,746
============== ===============
The following table presents property, plant and equipment by geographic
location based on the location of the assets (in thousands):
March 31, December 31,
2000 1999
----------------- -----------------
(Unaudited)
United States $ 50,170 $ 51,715
Europe 430 469
----------------- -----------------
$ 50,600 $ 52,184
================= =================
7. NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed based on the weighted-average
number of common shares and, as appropriate, dilutive common stock equivalents
outstanding during the period. Stock options, warrants, Class B-1 Preferred
Stock and Convertible Subordinated Debentures are considered to be common stock
equivalents.
Basic net income (loss) per common share is the amount of net income (loss) for
the period available to each share of common stock outstanding during the
reporting period. Diluted net income (loss) per share is the amount of net
income (loss) for the period available to each share of common stock outstanding
during the reporting period and to each share that would have been outstanding
assuming the issuance of common shares for all dilutive potential common shares
outstanding during the period.
Following is a reconciliation between the basic and diluted weighted-average
number of common shares for all periods presented (in thousands):
Three Months Ended
---------------------------------
March 31, April 2,
2000 1999
-------------- ---------------
(Unaudited)
Basic weighted-average number of common shares
outstanding during the period 9,338 9,603
Weighted-average number of dilutive common
stock options outstanding during the period - 270
-------------- ---------------
Diluted weighted-average number of common
shares outstanding during the period 9,338 9,873
============== ===============
10
<PAGE>
EVANS & SUTHERLAND COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In calculating net income (loss) per common share, net income (loss) was the
same for both the basic and diluted calculations for all periods presented.
For the three months ended March 31, 2000, outstanding options to purchase
2,388,423 shares of common stock, 428,000 shares of common stock issuable upon
conversion of the 6% Convertible Subordinated Debentures, 901,000 shares of
common stock issuable upon conversion of the Company's Class B-1 Preferred Stock
and 378,000 shares of common stock upon the exercise and conversion of warrants
to purchase additional Class B-1 Preferred Stock were excluded from the
computation of the diluted net income (loss) per common share because to include
them would have been anti-dilutive.
For the three months ended April 2, 1999, outstanding options to purchase
213,000 shares of common stock, 428,000 shares of common stock issuable upon
conversion of the 6% Convertible Subordinated Debentures, 901,000 shares of
common stock issuable upon conversion of the Company's Class B-1 Preferred Stock
and 378,000 shares of common stock upon the exercise and conversion of warrants
to purchase additional Class B-1 Preferred Stock were excluded from the
computation of the diluted net income (loss) per common share because to include
them would have been anti-dilutive.
11
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the condensed
consolidated financial statements and notes included in Item 1 of Part I of this
Form 10-Q. Except for the historical information contained herein, this
quarterly report on Form 10-Q includes certain "forward-looking statements"
within the meaning of that term in Section 27A of the Securities Act of 1933 and
Section 21E of the Exchange Act of 1934, including, among others, those
statements preceded by, followed by or including the words "estimates,"
"believes," "expects," "anticipates," "plans," "projects" or similar
expressions.
These forward-looking statements are based largely on our current expectations
and are subject to a number of risks and uncertainties. Our actual results could
differ materially from these forward-looking statements. Important factors to
consider in evaluating such forward-looking statements include risk of product
demand, market acceptance, economic conditions, competitive products and
pricing, delays in the timely delivery of the Company's products, difficulties
in product development, commercialization and technology and other risks
detailed in this filing and in the Company's most recent Form 10-K. Although the
Company believes it has the product offerings and resources for continuing
success, future revenue and margin trends cannot be reliably predicted. Factors
external to the Company can result in volatility of the Company's common stock
price. Because of the foregoing factors, recent trends are not necessarily
reliable indicators of future stock prices or financial performance and there
can be no assurance that the events contemplated by the forward-looking
statements contained in this quarterly report will, in fact, occur.
OVERVIEW
Evans & Sutherland Computer Corporation ("Evans & Sutherland," "E&S(R)," or the
"Company"), is an established high-technology company with outstanding computer
graphics technology and a worldwide presence in high-performance 3D visual
simulation. In addition, E&S is now applying this core technology into
higher-growth personal computer ("PC") products for both simulation and
workstations. The Company's core computer graphics technology is shared among
the Company's Simulation, REALimage Solutions, and Applications Groups.
Simulation Group
The Simulation Group provides a broad line of visual systems for flight and
ground training and related services to the United States and international
armed forces, NASA and aerospace companies. E&S remains an industry leader for
visual systems sales to various United States government agencies and more than
20 foreign governments for the primary purpose of training military vehicle
operators. The Simulation Group is also a leading independent supplier of visual
systems for flight simulators for commercial airlines. This group provides over
50 percent of the visual systems installed in full-flight training simulators
for civil airlines, training centers, simulator manufacturers and aircraft
manufacturers.
The group's visual systems create dynamic, high quality, out-the-window scenes
that simulate the view vehicle operators see when performing tasks under actual
operating conditions. The visual systems are an integral part of full mission
simulators, which incorporate a number of other components, including cockpits
or vehicle cabs and large hydraulic motion systems.
REALimage Solutions Group
The REALimage Solutions Group develops and sells graphics chips and graphics
subsystems for the personal workstation marketplace. This group sells to
personal workstation OEMs and to end users.
In February 2000, the Company changed the strategic focus of the REALimage
Solutions Group to the high-end digital content creation ("DCC") segment. The
group will provide the base graphics and video processing technology to leading
hardware system-solution providers in the high-end DCC segment. The goal of the
group is to provide a "studio-on-a-chip" to bring together real-time graphics
and video in a unique and effective way to support all aspects of visual content
creation for broadcasting and netcasting applications.
12
<PAGE>
Applications Group
The Applications Group is composed of synergistic businesses that use E&S core
technology in growth markets. The group's products are applications that
leverage the technology of the Company's Simulation or REALimage Solutions
Groups and apply them to other growth markets.
The Applications Group's digital theater products include hardware, software,
and content for both the entertainment and educational marketplaces. Digital
theater focuses on immersive all-dome theater applications combining colorful
digitally-produced imagery, full-spectrum audio, and audience-participation
capability. The group provides turnkey solutions incorporating visual systems
and sub-systems from the Simulation and REALimage Solutions Groups. E&S
integrates these systems with projection equipment, audio components, and
audience-participation systems from other suppliers. Products include
Digistar(R), a calligraphic projection system designed to compete with analog
star projectors in planetariums, and StarRider(R), a full-color, interactive,
domed theater experience. The group is a leading supplier of digital display
systems in the planetarium marketplace.
The Applications Group's E&S RAPIDsite(TM) product is a photo-realistic
visualization tool designed for use by real-estate developers, consulting
engineers, architects and municipal planners involved with urban, suburban and
environmentally sensitive development projects. E&S RAPIDsite features fast
3D-model construction, accelerated graphics rendering performance and
easy-to-use interactive exploration of a proposed development on a Windows NT
computer with an Open GL(R) graphics accelerator.
Until March 28, 2000, the Application Group's digital video products provided
Windows NT, open system, standard platform based virtual studio systems for
digital content production in the television broadcast, film, video, corporate
training and multimedia industries. The E&S solution offered significant
improvement in cost, ease of use and flexibility compared with the traditional,
proprietary UNIX-based systems common in this developing market. The group's
products were all-inclusive system solutions that incorporate visual system
components and subsystems from the Simulation and REALimage Solutions Groups.
E&S MindSet(TM), Virtual Studio System(TM) and the FuseBox(TM) controlled
software with real-time, frame-accurate camera tracking and enabled live talent
to perform in real time on a virtual set generated using E&S 3D computer
technology. The video output of the set meets today's digital broadcast video
standards. Systems are installed worldwide in production, postproduction,
broadcast and educational applications. On March 28, 2000, certain assets of
this business unit were sold to RT-SET Real Time Synthesized Entertainment
Technology Ltd. and its subsidiary, RT-SET America Inc.
13
<PAGE>
RESULTS OF OPERATIONS
The following table presents the percentage of total sales represented by
certain items for the Company for the periods presented:
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------
March 31, April 2,
2000 1999
--------------- ---------------
(Unaudited)
<S> <C> <C>
Sales 100.0% 100.0%
Cost of sales 64.9 55.0
--------------- ---------------
Gross profit 35.1 45.0
Operating expenses:
Selling, general and administrative 22.4 20.6
Research and development 25.1 22.3
Amortization of goodwill and other intangible assets 0.1 1.4
--------------- ---------------
Operating expenses 47.6 44.3
--------------- ---------------
(12.5) 0.7
Gain on sale of business unit 2.4 -
--------------- ---------------
Operating income (loss) (10.1) 0.7
Other income (expense), net (0.4) -
--------------- ---------------
Income (loss) before income taxes (10.5) 0.7
Income tax expense (benefit) (3.6) 0.2
--------------- ---------------
Net income (loss) (6.9) 0.5
Accretion of preferred stock 0.1 0.1
--------------- ---------------
Net income (loss) applicable to common stock (7.0%) 0.4%
=============== ===============
</TABLE>
First Quarter 2000 Compared to First Quarter 1999
Sales
In the first quarter of 2000, sales decreased $3.7 million, or 8% ($46.0 million
in the first quarter of 2000 compared to $49.7 million in the first quarter of
1999). Sales in the Simulation Group increased $0.1 million, or less than 1%
($40.4 million in the first quarter of 2000 compared to $40.3 million in the
first quarter of 1999). Sales in the REALimage Solutions Group decreased $6.6
million, or 82% ($1.5 million in the first quarter of 2000 compared to $8.1
million in the first quarter of 1999). The decline in sales in the REALimage
Solutions Group is due to a decrease in the number of units sold and decreased
selling prices of existing products due to increased competition and delays in
introduction of new products. Management anticipates sales in the REALimage
Solutions Group for each of the remaining quarters of 2000 to be consistent with
sales in the first quarter of 2000. Sales in the Applications Group increased
$2.7 million, or 199% ($4.1 million in the first quarter of 2000 compared to
$1.4 million in the first quarter of 1999). The increase in sales in the
Applications Group was due to increased sales volume of planetarium systems and
large-format entertainment product contracts. This increase was partially offset
by a decline in the number of shipments of virtual studio systems.
14
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Gross Profit
Gross profit declined $6.3 million, or 28% ($16.1 million in the first quarter
of 2000 compared to $22.4 million in the first quarter of 1999). As a percent of
sales, gross profit declined to 35.1% in the first quarter of 2000 compared to
45.0% in the first quarter of 1999. The decrease in gross margin is due to lower
margins in the Simulation Group primarily due to higher costs on several
contracts to government customers which include the Harmony(TM) image generator.
In addition, gross margin in the REALimage Solutions Group decreased as a result
of decreased selling prices of existing products.
Selling, General and Administrative
Selling, general and administrative expenses increased $0.1 million, or 1%
($10.3 million in the first quarter of 2000 compared to $10.2 million in the
first quarter of 1999). As a percent of sales, selling, general and
administrative expenses were 22.4% in the first quarter of 2000 compared to
20.6% in the first quarter of 1999. The increase in these expenses is due to
increased expenses in the Simulation Group offset by lower expenses in the
REALimage Solutions Group due to the restructuring in the third quarter of 1999.
Research and Development
Research and development expenses increased $0.4 million, or 4% ($11.5 million
in the first quarter of 2000 compared to $11.1 million in the first quarter of
1999). As a percent of sales, research and development expenses increased to
25.1% in the first quarter of 2000 compared to 22.3% in the first quarter of
1999. The increase in these expenses is due to increased research and
development expenses related to the Harmony, iNTegrator(R) and Ensemble(TM)
products in the Simulation Group offset by lower research and development
expenses in the REALimage Solutions Group due to the restructuring in the third
quarter 1999.
Amortization of Goodwill and Other Intangible Assets
Amortization of goodwill and other intangible assets decreased $0.7 million, or
94% ($45,000 in the first quarter of 2000 compared to $0.7 million in the first
quarter of 1999). The decrease in this expense is due to the write-off of $9.3
million of goodwill and other intangible assets during the third quarter of
1999.
Gain on Sale of Business Unit
During the first quarter of 2000, the Company sold certain assets of its
Applications Group relating to digital video products resulting in a gain of
$1.1 million. There was no such event in the first quarter of 1999.
Other Income (Expense), Net
Other income (expense), net decreased $0.2 million (net expense of $0.2 million
in the first quarter of 2000 compared to net income of $15,000 in the first
quarter of 1999). The decrease is due to a decrease in interest income and
increase in miscellaneous expenses.
Income Taxes
The effective tax rate was 34.3% and 31.1% of pre-tax earnings for the first
quarter of 2000 and 1999, respectively. These rates are calculated based on an
estimated annual effective tax rate applied to earnings before income taxes.
15
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LIQUIDITY & CAPITAL RESOURCES
At March 31, 2000, the Company had working capital of $113.9 million, including
cash, cash equivalents and short-term investments of $16.8 million, compared to
working capital of $116.9 million at December 31, 1999 including cash, cash
equivalents and short-term investments of $22.9 million. During the first
quarter of 2000, the Company used $10.7 million in its operating activities,
used $0.5 million in its investing activities and generated $5.9 million from
its financing activities.
The primary uses of cash from the Company's operating activities included a
$11.0 million increase in accounts receivable, a $4.3 million decrease in
accrued expenses and a $4.3 million decrease in income taxes payable. These uses
of cash were partially offset by a $4.6 million increase in accounts payable and
a $3.5 million decrease in costs and estimated earning in excess of billings on
uncompleted contracts, net. The increase in accounts receivable and net decrease
in costs and estimated earnings in excess of billings on uncompleted contracts
were due to achieving certain billing milestones near the end of the quarter.
The Company's investing activities during the first quarter of 2000 included
capital expenditures of $1.8 million for building improvements and equipment and
proceeds of $1.0 million for the sale of certain assets of the Company's Digital
Video business unit.
The Company's financing activities during the first quarter of 2000 included
$6.3 million in borrowings from notes payable.
On March 31, 2000, the Company entered into a financing facility with Zions
First National Bank (the "Facility"). The Facility provides for borrowings of up
to $15.0 million, which includes a $7.0 million sublimit for the issuance of
letters of credit. Borrowings under the Facility bear interest at an indexed
prime rate. If certain financial covenants are not met the interest rate will
increase to the indexed prime rate plus a margin of 2.5% per annum. The Facility
requires the Company to pay (a) letter of credit fees, which increase if the
Company fails to satisfy certain financial covenants, and (b) a commitment fee,
which increases if the Company fails to satisfy certain financial covenants. The
Facility expires on March 30, 2001. Except for certain permitted exceptions as
identified in the Facility, among other things, the Facility prevents the
Company from (a) declaring or paying any dividends except as are mandatorily
required on the Company's preferred stock, (b) making any distribution of assets
to the Company's shareholders, investors, or equity holders, whether in cash,
assets, or in obligations of the Company, (c) allocating or otherwise setting
apart any sum for the payment of any dividend or distribution on, or for the
purchase, redemption, or retirement of any shares of its capital stock or equity
interests in excess of $2.0 million for any year, (d) making any other
distribution by reduction of capital or otherwise in respect of any shares of
its capital stock or equity interests in excess of $250,000, or (e) creating,
incurring, assuming, or suffering to exist any debt or any encumbrance, mortgage
or lien upon certain real property of the Company. The Company's obligations
under the Facility are secured by substantially all of the Company's assets,
subject to other liens permitted under the Facility. As of March 31, 2000, $5.0
million was outstanding under the Facility and an additional $4.9 million was
reserved under the Facility due to the issuance of letters of credit. Such
amounts shall continue to be reserved and shall not otherwise be available to be
advanced to the Company, until the expiration or termination of such letters of
credit.
The Company has a $5.0 million unsecured letter of credit facility with First
Security Bank, N.A., of which approximately $2.7 million was unused and
available as of March 31, 2000. The First Security Bank letter of credit
facility expires on September 30, 2000 and requires the Company to pay letter of
credit fees. In addition, the Company has unsecured letters of credit totaling
approximately $3.6 million outstanding with U.S. Bank, N.A. that expire between
July 2000 and June 2001.
As of March 31, 2000, the Company had a revolving line of credit agreement with
a foreign bank totaling approximately $4.6 million, of which approximately $1.3
million was unused and available. The Company had a letter of credit with Bank
One, N.A. for $4.6 million as a guarantee for the foreign line of credit
agreement. As of April 30, 2000, the Company had repaid the borrowings under the
line of credit with the foreign bank. The line of credit with the foreign bank
and the letter of credit with Bank One, N.A. expired April 30, 2000.
16
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On February 18, 1998, the Company's Board of Directors authorized the repurchase
of up to 600,000 shares of the Company's common stock, including the 327,000
shares still available from the repurchase authorization approved by the Board
of Directors on November 11, 1996. On September 8, 1998, the Company's Board of
Directors authorized the repurchase of an additional 1,000,000 shares of the
Company's common stock. Subsequent to February 18, 1998, the Company repurchased
1,136,500 shares of its common stock, leaving 463,500 shares available for
repurchase as of May 5, 2000. Stock may be acquired in the open market or
through negotiated transactions. Under the program, repurchases may be made from
time to time, depending on market conditions, share price, and other factors.
As of March 31, 2000, the Company had approximately $18.0 million of 6%
Convertible Subordinated Debentures due in 2012 (the "6% Debentures"). The 6%
Debentures are unsecured and are convertible at each bondholder's option into
shares of the Company's common stock at a conversion price of $42.10 or 428,000
shares of the Company's common stock subject to adjustment. The 6% Debentures
are redeemable at the Company's option, in whole or in part, at par.
Management believes that existing cash, cash equivalents and short-term
investment balances, borrowings available under its Facility and expected cash
from future operations will be sufficient to meet the Company's anticipated
working capital needs, routine capital expenditures and current debt service
obligations for the next twelve months. The Company's cash, cash equivalents and
short-term investments are available for working capital needs, capital
expenditures, strategic investments, mergers and acquisitions, stock repurchases
and other potential cash needs as they may arise. On a longer-term basis, if
future cash from operations and its existing Facility are not sufficient to meet
the Company's cash requirements, the Company may be required to renegotiate its
existing Facility or seek additional financing from the issuance of debt or
equity securities. There can be no assurances that the Company would be
successful in renegotiating its existing Facility or obtaining additional debt
or equity financing.
TRADEMARKS USED IN THIS FORM 10-Q
AccelGALAXY, AccelGMX, Digistar, E&S, E&S Lightning 1200, E&S RAPIDsite,
Ensemble, FuseBox, Harmony, iNTegrator, MindSet, REALimage, StarRider, and
Virtual Studio System are trademarks or registered trademarks of Evans &
Sutherland Computer Corporation. All other product, service, or trade names or
marks are the properties of their respective owners.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The principal market risks to which the Company is exposed are changes in
foreign currency exchange rates and changes in interest rates. The Company's
international sales, which accounted for 39% of the Company's total sales in the
three months ended March 31, 2000 are concentrated in the United Kingdom,
continental Europe and Asia. The Company manages its exposure to changes in
foreign currency exchange rates by entering into most of its sales and purchase
contracts for products and materials in U.S. dollars. Occasionally, the Company
enters into sales and purchase contracts for products and materials denominated
in currencies other than U.S. dollars and in those cases the Company enters into
foreign exchange forward sales or purchase contracts to offset those exposures.
Foreign currency purchase and sale contracts are entered into for periods
consistent with related underlying exposures and do not constitute positions
independent of those exposures. The Company does not enter into contracts for
trading purposes and does not use leveraged contracts. As of March 31, 2000, the
Company had no material sales or purchase contracts in currencies other than
U.S. dollars and had no foreign currency sales or purchase contracts.
The Company reduces its exposure to changes in interest rates by maintaining a
high proportion of its debt in fixed-rate instruments. As of March 31, 2000, 69%
of the Company's total debt was in fixed-rate instruments; however, the Company
has a financing facility that provides for borrowings by the Company of up to
$15.0 million. The borrowings bear interest at a variable rate at an indexed
prime rate. If the Company were to borrow all of the $15.0 million of the
financing facility, 55% of the Company's total debt would be in fixed-rate
instruments. In addition, the Company maintains an average maturity of its
short-term investment portfolio under twelve months to avoid large changes in
its market value.
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PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
----------- ---------------------------------------------------
10.1 Loan Agreement by and between Zions First National Bank, a
national banking association, and Evans & Sutherland
Computer Corporation, dated March 31, 2000.
10.2 $15,000,000 Promissory Note in favor of Zions First National
Bank, a national banking association, dated March 31, 2000.
10.3 Trust Deed, Assignment of Rents, Security Agreement and
Fixture Filing executed by Evans & Sutherland Computer
Corporation to Zions First National Bank, a national banking
association, in favor of Zions First National Bank, a
national banking association, dated March 31, 2000.
10.4 Assignment of Tenant's Interest in Ground Lease for Security
executed by Evans & Sutherland Computer Corporation and
Zions First National Bank, a national banking association,
dated March 31, 2000.
10.5 Assignment of Lease by Evans & Sutherland Computer
Corporation and Zions First National Bank, a national
banking association, dated March 31, 2000.
10.6 Commercial Credit and Security Agreement, dated
March 2, 1998, between Evans & Sutherland Computer
Corporation and First Security Bank, N.A.
10.7 Modification Agreement dated February 22, 2000, between
Evans & Sutherland Computer Corporation and First Security
Bank, N.A.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EVANS & SUTHERLAND COMPUTER CORPORATION
Date May 15, 2000 By: /S/ Richard J. Gaynor
-------------------------
Richard J. Gaynor, Vice President
and Chief Financial Officer
(Principal Financial Officer)
19
LOAN AGREEMENT
This Loan Agreement (the "Agreement") is made and entered into this
31st day of May, 2000, by and between Zions First National Bank, a national
banking association ("Lender") and Evans & Sutherland Computer Corporation, a
Utah corporation ("Borrower").
In exchange for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Lender agree as
follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. When used in this Agreement, the following terms
shall have the following meanings:
1.1.1 "Appraisal" means the appraisal of the Property prepared
by an appraiser and showing a value for the Property acceptable to Lender.
1.1.2 "Assignment of Ground Lease" means the Assignment of
Tenant's Interest in Ground Lease for Security dated the Closing Date and
entered into in connection with the Loan.
1.1.3 "Assignment of Leases" means the Assignment of Leases
dated the Closing Date and entered into in connection with the Loan.
1.1.4 "Building 540 Ground Lease" means the Lease Agreement
dated November 21, 1972, as amended by an Addendum to Lease Agreement dated
November 21, 1972, a Second Addendum to Lease Agreement dated June 4, 1973, a
Third Addendum to Lease Agreement dated December 7, 1973, and a Fourth Addendum
to Lease Agreement dated September 12, 1979, all entered into between Ground
Lessor, as lessor, and Mountain Co-Venture, a general partnership, as lessee,
and as amended by a Fifth Addendum to Lease Agreement dated April 9, 1987
entered into between Ground Lessor, as lessor, and Borrower, as lessee, wherein
Ground Lessor leases a portion of the Property known as Building 540 to
Borrower.
1.1.5 "Building 560 Ground Lease" means the Lease Agreement
dated September 4, 1979 entered into between Ground Lessor, as lessor, and Tri
Venture, a general partnership, as lessee, as amended by a First Addendum to
Lease Agreement dated April 9, 1987, and a Second Addendum to Lease Agreement
dated December 31, 1990, all entered into between Ground Lessor, as lessor, and
Borrower, as lessee, wherein Ground Lessor leases a portion of the Property
known as Building 560 to Borrower.
1.1.6 "Building 580 Ground Lease" means the Lease Agreement
dated November 21, 1973, as amended by a First Addendum to Lease Agreement dated
May 24, 1974, a Second Addendum to Lease Agreement dated March 23, 1977, a Third
Addendum to Lease Agreement dated September 12, 1979, all entered into between
1
<PAGE>
Ground Lessor, as lessor, and Park Enterprises, a general partnership, as
lessee, and as amended by a Fourth Addendum to Lease Agreement dated April 9,
1987 entered into between Ground Lessor, as lessor, and Borrower, as lessee,
wherein Ground Lessor leases a portion of the Property known as Building 580 to
Borrower.
1.1.7 "Building 600 Ground Lease" means the Lease Agreement
dated April 9, 1987, as amended by a First Addendum to Lease Agreement dated
December 31, 1990, all entered into between Ground Lessor, as lessor, and
Borrower, as lessee, wherein Ground Lessor leases a portion of the Property
known as Building 600 to Borrower.
1.1.8 "Building 650 Ground Lease" means the Lease Agreement
dated September 5, 1980 entered into between Ground Lessor, as lessor, and Black
Hawk Investment Company, a general partnership, as lessee, and as amended by a
First Amendment to Lease Agreement dated June 7, 1982, a Second Amendment to
Lease Agreement dated September 28, 1982, a Third Addendum to Lease Agreement
dated April 9, 1987, and a Fourth Addendum to Lease Agreement dated December 31,
1990, all entered into between Ground Lessor, as lessor, and Borrower, as
lessee, wherein Ground Lessor leases a portion of the Property known as Building
650 to Borrower.
1.1.9 "Building 770 Ground Lease" means the Lease Agreement
dated April 1, 1988, as amended by a First Addendum to Lease Agreement dated
December 31, 1990, all entered into between Ground Lessor, as lessor, and
Borrower, as lessee, wherein Ground Lessor leases a portion of the Property
known as Building 770 to Borrower.
1.1.10 "Building 790 Ground Lease" means the Lease Agreement
dated December 31, 1990 entered into between Ground Lessor, as lessor, and
Borrower, as lessee, wherein Ground Lessor leases a portion of the Property
known as Building 790 to Borrower.
1.1.11 "Closing Date" means the date of this Agreement set
forth in the first paragraph on the first page of this Agreement.
1.1.12 "Collateral" means the property described in Section
2.4 of this Agreement as collateral for the Loan.
1.1.13 "Environmental Compliance Audit" means an audit of the
Project for the purpose of determining whether Borrower's use of the Project and
the Project are in substantial compliance with all applicable Environmental
Laws. The audit shall include, without limitation, (i) a determination of all
environmental registrations and notices required to be filed by Borrower with
respect to the Project, (ii) a determination of all permits and approvals
required to be obtained or maintained by Borrower with respect to the Project,
(iii) an examination of the Project to determine whether there has been any
disposal of Hazardous Materials on or under the Project or any other violation
of any applicable Environmental Law affecting Borrower's use of the Project or
the Project which requires remediation to be in compliance with Environmental
Laws in effect as of the date of the audit, and (iv) a review of Borrower's
facilities, records, policies, procedures and ongoing operations to determine
whether Borrower's operations are being conducted in full compliance with all
applicable Environmental Laws.
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<PAGE>
1.1.14 "Environmental Compliance Audit Certificate" means a
certificate addressed to the Lender issued by a competent, independent
environmental consultant acceptable to the Lender certifying that the consultant
has completed an Environmental Compliance Audit of Borrower's use of the Project
and the Project, and that, except as otherwise disclosed in the Environmental
Report, (i) as of the effective date of the certificate, Borrower's use of the
Project and the Project are in substantial compliance with all applicable
Environmental Laws, (ii) there has been no known disposal of Hazardous Materials
at, in, on or under the Project which requires remediation to be in compliance
with Environmental Laws in effect as of the date of the audit, and (iii) in the
consultant's opinion after due inquiry, there is no basis for the consultant to
recommend or require further investigation or testing with respect to any
suspected or possible disposal of Hazardous Materials at the Project.
1.1.15 "Environmental Laws" means all federal, state and local
laws and ordinances pertaining to the generation, manufacture, refining,
recycling, treatment, handling, use, storage, transportation, disposal and
cleanup of hazardous, radioactive, reactive, flammable, infectious, toxic or
dangerous substances or materials or the protection of public health or of the
environment, including without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C. ss.ss. 9601, et
seq.); the Resource Conservation and Recovery Act of 1976 (42 U.S.C. ss.ss.
6901, et seq.); the Toxic Substances Control Act (15 U.S.C. ss.ss. 2601, et
seq.); the Clean Air Act (42 U.S.C.ss.ss. 7401, et seq.); the Federal Water
Pollution Control Act (33 U.S.C. ss.ss. 1251, et seq.); the Safe Drinking Water
Act (42 U.S.C. ss.ss.300(f) et seq.); the Hazardous Material Transportation Act
(49 U.S.C. ss.ss. 1801, et seq.); the Federal Insecticide, Fungicide and
Rodenticide Act (7 U.S.C. ss.ss. 136 et seq.); the Occupational Safety and
Health Act (29 U.S.C. ss.ss.651 et seq.); and any similar state law, including
all amendments thereto and all regulations promulgated thereunder, and further
including the conditions and requirements of all permits and regulatory
approvals issued thereunder.
1.1.16 "Environmental Report" means individually and
collectively (i) the environmental sensitivity questionnaire prepared by
Borrower and delivered to Lender in connection with the Property, and (ii) any
environmental reports acceptable to Lender prepared by an environmental engineer
acceptable to Lender and delivered to Lender in connection with the Property.
1.1.17 "Event of Default" has the meaning set forth in Article
6 of this Agreement.
1.1.18 "Ground Lease" means collectively the Building 540
Ground Lease, the Building 560 Ground Lease, the Building 580 Ground Lease, the
Building 600 Ground Lease, the Building 650 Ground Lease, the Building 770
Ground Lease, and the Building 790 Ground Lease.
1.1.19 "Ground Lease Estoppel Certificate" means the Ground
Lease Estoppel Certificate and Consent dated the Closing Date and executed by
Ground Lessor in connection with the Loan.
1.1.20 "Ground Lessor" means the University of Utah, a body
corporate and politic.
3
<PAGE>
1.1.21 "Hazardous Materials" means (a) "hazardous waste" as
defined by the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976 (42 U.S.C. Section 6901 et seq.), including any future
amendments thereto, and regulations promulgated thereunder; (b) "hazardous
substance" as defined by the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (42 U.S.C. Section 9601 et seq.), including any future
amendments thereto, and regulations promulgated thereunder; (c) asbestos; (d)
polychlorinated biphenyls; (e) underground storage tanks, whether empty or
filled or partially filled with any substance; (f) any substance the presence of
which is or becomes prohibited by any federal, state, or local law, ordinance,
rule, or regulation; and (g) any hazardous or toxic substance, material, or
waste which under any federal, state, or local law, ordinance, rule, or
regulation requires special handling or notification in its collection, storage,
treatment or disposal, and any matter or material defined as a "Hazardous
Material", or other similar term, under the Ground Lease.
1.1.22 "Leases" has the meaning described in Section 4.10 of
this Agreement.
1.1.23 "Loan" means the loan described in Article 2 of this
Agreement made by Lender to Borrower pursuant to the Loan Documents, which Loan
is in the amount of the Principal Amount.
1.1.24 "Loan Documents" means this Agreement, the Note, Trust
Deed, Assignment of Leases, and any other documents, whether now or hereafter
existing, executed in connection with the Loan.
1.1.25 "Loan Fee" means the loan fees described in Section 2.3
of this Agreement.
1.1.26 "Maturity Date" means March 30, 2001, the date on which
the Principal Indebtedness and all accrued and unpaid interest shall be due and
owing.
1.1.27 "Note" means the Promissory Note dated the Closing Date
and executed in connection with the Loan.
1.1.28 "Permitted Encumbrances" means the liens and
encumbrances that have been approved by Lender to appear as exceptions to title
in the Title Policy, pursuant to Lender's escrow instruction letter to the Title
Company executed in connection with the Loan and delivered to the Title Company,
and any other title matters approved by Lender in writing during the term of the
Loan.
1.1.29 "Principal Amount" means Fifteen Million Dollars
($15,000,000.00).
1.1.30 "Principal Indebtedness" means the Principal Amount
together with any additional advances, if any, and any additional amounts
advanced by Lender, if any, pursuant to the Loan Documents.
1.1.31 "Project" means the Property together with all
improvements on the Property, including all buildings.
4
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1.1.32 "Property" means the leasehold interest of Borrower in
that certain real property located in Salt Lake County, State of Utah, as that
property is described on the attached Exhibit A which is incorporated into this
Agreement by this reference.
1.1.33 "SNDA" means any Subordination, Non-Disturbance and
Attornment Agreement satisfactory in form and content to Lender and Lender's
counsel, from each tenant holding a leasehold interest in all or any part of the
Project.
1.1.34 "Title Commitment" means the commitment for title
insurance described in Section 4.2 of this Agreement.
1.1.35 "Title Company" means Landmark Title Company,
whose address is Plaza 7-21, 675 East 2100 South, Suite 200, Salt Lake City,
Utah 84106.
1.1.36 "Title Policy" means the policy of title insurance
described in Section 5.10 of this Agreement.
1.1.37 "Trust Deed" means the Term Loan Trust Deed, Assignment
of Rents, Security Agreement and Fixture Filing dated the Closing Date and
entered into in connection with the Loan which encumbers the Property.
1.1.38 "UCC-1 Financing Statement" means collectively the
UCC-1 Financing Statements dated the Closing Date and entered into in connection
with the Loan.
ARTICLE 2
AMOUNT AND TERMS OF LOAN
2.1 Nature and Duration of Loan. The Loan shall be a revolving loan
payable in full upon the date and upon the terms and conditions provided in the
Note. Lender and Borrower intend the Loan to be in the nature of a line of
credit under which Borrower may repeatedly draw funds on a revolving basis in
accordance with the terms and conditions of this Agreement and the Note. The
right of Borrower to draw funds and the obligation of Lender to advance funds
shall not accrue until all of the conditions set forth in Article 4 of this
Agreement (except as otherwise specified in Sections 4.4 and 4.5 of this
Agreement) have been fully satisfied, and shall terminate: (a) upon occurrence
of an Event of Default, or (b)upon maturity of the Note, unless the Note is
renewed or extended by Lender in which case such termination shall occur upon
the maturity of the final renewal or extension of the Note. Upon such
termination, at the election of Lender, any and all amounts owing to Lender
pursuant to the Note and this Agreement shall thereupon be due and payable in
full.
2.2 Interest Rate and Payment. The Loan shall be payable on the date
and upon the terms and conditions set forth in the Note. Borrower and Lender
agree that if any of the financial covenants for Tier I financing, as set forth
in Section 5.15 of this Agreement, are not fully and timely met, the interest
rate set forth in the Note shall be increased pursuant to the terms and
conditions set forth in the Note until such time, if ever, that Borrower
complies with all of said Tier I financing covenants.
2.3 Loan Fees.
5
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2.3.1 Origination Fee. Borrower agrees to pay to Lender from
the Loan proceeds, as a non-refundable fee for originating the Loan, an amount
equal to Three Hundred Thousand Dollars ($300,000.00), which sum is to be paid
on the Closing Date.
2.3.2 Quarterly Fees. If Borrower fails to fully or timely
meet any of the financial covenants for Tier I financing as set forth in Section
5.15 of this Agreement, Borrower shall pay to Lender from the Loan proceeds, as
a non-refundable fee, an amount equal to one-half of one percent (.50%) of the
Committed Amount within ten (10) days following Lender's delivery of a written
notice of assessment of such fee following the end of each quarter during the
term of the Loan during which time the Tier I financial covenants were not met.
"Committed Amount" shall mean the full amount of the Note then disbursed and
outstanding at the end of each quarter, as well as those amounts still held by
Lender and intended to be disbursed pursuant to the terms and conditions of this
Agreement.
2.4 Collateral. In addition to all other collateral described in any of
the Loan Documents, the Loan shall be secured by the following documents and all
of the collateral described in each of the following documents (the
"Collateral"):
2.4.1 Trust Deed. The Trust Deed.
2.4.2 Assignment of Ground Lease. The Assignment of Ground
Lease.
2.4.3 Assignment of Leases. The Assignment of Leases.
2.4.4 UCC-1 Financing Statement. The UCC-1 Financing
Statement.
2.5 Business Credit Card Obligations. In addition to the Loan, Borrower
shall grant to Lender a security interest in the Collateral to secure the full
and timely performance of all business credit card obligations heretofore or
hereafter undertaken by Borrower in favor of Lender pursuant to all business
bank card accounts issued by Lender to, at the request of, or for the benefit
of, Borrower.
2.6 Letter of Credit Facility. Borrower is authorized to utilize the
Loan for the purpose of obtaining the issuance of one or more letter(s) of
credit by Lender, up to an aggregate amount of Seven Million Dollars
($7,000,000) for use in Borrower's business operations. Upon issuance of any
letter of credit and continuing until the cancellation or termination thereof,
Lender shall reserve the amount of the letter of credit from the Loan proceeds,
which reserved amount shall not be available for other Borrower draws or
advances, whether or not any claim is actually made against the letter of
credit. Any amount reserved for a letter of credit facility shall not bear
interest unless and until any amounts are drawn thereon and then only to the
extent of said draws. In addition to any fees assessed under the Letter of
Credit Reimbursement Agreement to be executed by Borrower with issuance of any
letter of credit, Borrower shall pay to Lender a fee upon the issuance of any
letter of credit which shall be calculated as follows:
(a) If Borrower has fulfilled all of the Tier I financial
covenants set forth in Section 5.15 of this Agreement for the
immediately preceding quarter, Borrower shall pay a fee equal to two
percent (2%) per annum of the amount of said letter of credit.
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(b) If Borrower has failed to fulfill all of the Tier I
financial covenants set forth in Section 5.15 of this Agreement for the
immediately preceding quarter, Borrower shall pay a fee equal to four
and one-half percent (4.5%) per annum of the amount of said letter of
credit.
(c) If, having received the preferential pricing of the letter
of credit issuance fee, Borrower thereafter fails to maintain
compliance with all Tier I financial covenants set forth in Section
5.15 of this Agreement in any future quarter during the term of the
letter of credit, Borrower shall pay an additional fee of two and
one-half percent (2.5%) per annum of the amount of said letter of
credit.
The maturity of any letter of credit issued pursuant to this Section
2.6 may extend at the election of Borrower up to ninety (90) days beyond the
maturity date of the Loan. However, any such extension shall not effect any
extension upon any other obligation or other covenant under taken by Borrower in
the Loan Documents, except as specifically set forth in those certain documents
executed concurrently with the issuance of the letter of credit.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Lender:
3.1 Organization and Qualification. Borrower is a corporation duly
organized and existing in good standing under the laws of the State of Utah.
Except as set forth on the attached Exhibit B which is incorporated herein by
this reference, Borrower is duly qualified to do business in each jurisdiction
where the conduct of its business requires qualification, except as where the
failure to be so qualified would not have a material adverse effect on
Borrower's business. Borrower has the full power and authority to own its
properties and to conduct the business in which it engages and to enter into and
perform its obligations under the Loan Documents, and all agreements, documents,
obligations, and transactions contemplated by this Agreement.
3.2 Authorization. The execution, delivery, and performance by Borrower
of the Loan Documents and all agreements, documents, obligations, and
transactions contemplated by this Agreement have been duly authorized by all
necessary action on the part of Borrower and are not inconsistent with
Borrower's organizational documents or any resolution of the board of directors,
members, partners, or trustees, as the case may be, of Borrower, do not and will
not contravene any provision of, or constitute a default under, any indenture,
mortgage, contract, or other instrument to which Borrower is a party or by which
Borrower is bound, and that upon their execution and delivery the Loan Documents
will constitute legal, valid, and binding agreements and obligations of
Borrower, enforceable in accordance with their respective terms.
3.3 Pending Litigation. There is no action, suit or proceeding pending
against or to the best of Borrower's knowledge, threatened, against or affecting
Borrower or the Property, in any court of law or equity or before any
governmental or quasi-governmental instrumentality, whether federal, state,
county or municipal, which would materially and adversely affect Borrower's
ability to perform under the Loan Documents.
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3.4 Tax Returns. To the best of Borrower's knowledge, all state and
federal tax returns and reports of Borrower required by law to be filed have
been duly filed and all material taxes, assessments, and other governmental
charges upon Borrower and upon Borrower's properties, assets or income and upon
the Property, which are due and payable, have been paid and shall continue to be
so paid.
3.5 Compliance with Laws. The Project is in compliance with all
applicable environmental protection (including, without limitation, wetlands and
endangered species protection), use and building codes, planning, subdivision
covenants, conditions, and restrictions recorded against the Property, laws,
regulations and ordinances, including, without limitation to the extent
applicable, the Miller Act (40 USC Section 270a and following), the Davis-Bacon
Act (40 USC Section 276a and following), and all other federal law applicable to
federal projects, and Borrower has no knowledge or notice of any violation of
any laws, ordinances, codes, requirements or orders of any governmental
instrumentality having jurisdiction of the Property, including, without
limitation, all applicable federal, state and local laws, rules, ordinances and
regulations relating to the use, storage, transportation, and disposal of any
Hazardous Materials on, in or under the Project, and all applicable federal,
state and local laws, rules, ordinances and regulations relating to wetlands or
endangered species protection and the effect of the development, construction
and use of the Project on any wetlands or endangered species. Borrower has no
knowledge of any actions or proceedings pending before any court or
administrative agency with respect to the validity of such laws, regulations and
ordinances or with respect to any certificates issued thereunder.
3.6 Financial Statements and Other Information. Borrower has provided
Lender with copies of its audited financial statements (the "Audited Financial
Statements") for the fiscal year ended December 31, 1999. The audited
consolidated financial statements of Borrower included in the Form 10-K filed
with the Securities and Exchange Commission on March 30, 2000 (the "Form 10-K")
fairly present, in conformity with generally accepted accounting principles
("GAAP") applied on a consistent basis, the consolidated financial position of
Borrower as at the dates thereof and the consolidated results of its operations
and cash flows for the periods then ended. No material adverse change has
occurred in the financial condition of Borrower reflected in the Form 10-K since
the dates thereof and no additional borrowings in excess of $600,000.00 have
been made by Borrower since the dates thereof, other than the borrowing
contemplated hereby. All other documents and information delivered to Lender by
Borrower are accurate in all respects to Borrower's best knowledge.
3.7 Hazardous Materials and Wetlands. No Hazardous Materials other than
as set forth in the Environmental Report are now located on the Property, and
neither Borrower nor any other person has ever caused or permitted any Hazardous
Materials to be placed, held, located or disposed of on, under or at the
Property, or any part thereof, in each case, except in full compliance with all
applicable Environmental Laws. To the best of Borrower's knowledge, no
investigation, administrative order, consent order and agreement, litigation or
settlement with respect to Hazardous Materials is proposed, threatened,
anticipated or in existence with respect the Property. The representations and
warranties contained in this Section 3.7 shall survive the reconveyance of the
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Trust Deed. There are no wetlands on the Property, as wetlands are regulated
pursuant to Section 404 of the Federal Water Pollution Control Act (Clean Water
Act), and the regulations promulgated under the statute or its successor
statute.
3.8 Title to Property. To the best of Borrower's actual knowledge,
Ground Lessor has good and marketable title to the Property, subject to the
terms and conditions of the Ground Lease. Borrower has a leasehold interest in
the Property under the Ground Lease, subject only to the Permitted Encumbrances.
The Property, and any and all improvements thereon, are free and clear of all
liens and encumbrances, excepting the Permitted Encumbrances.
3.9 Commission. No brokerage or other fee, commission or compensation
is to be paid by Lender, and Borrower hereby indemnifies Lender against any and
all claims for brokerage fees or commissions which may be asserted against
Lender, and hereby agrees to pay all expenses incurred by Lender in connection
with the defense of any action or proceeding brought to collect any such
brokerage fees or commissions, including but not limited to costs and attorneys
fees.
3.10 Americans with Disabilities Act. The Project is accessible to and
usable by persons with disabilities pursuant to the accessibility requirements
of the Americans With Disabilities Act (the "Act"), and all applicable
regulations promulgated by the U.S. Architectural and Transportation Barriers
Compliance Board, by the U.S. Department of Justice, and by all other applicable
agencies. The Project will comply with all accessibility requirements of the Act
and regulations, together with the requirements of the Americans With
Disabilities Act Accessibility Guidelines for Buildings and Facilities.
ARTICLE 4
CONDITIONS PRECEDENT TO DISBURSEMENT
As a condition precedent to the first disbursement of any Loan
proceeds, all of the following conditions must be fully satisfied as determined
by Lender, in Lender's sole discretion:
4.1 Authority. Borrower has delivered to Lender a copy of Borrower's
organizational documents, together with all amendments, and an original
officer's certificate regarding the resolutions of Borrower's Board of Directors
which is acceptable to Lender. Borrower also has delivered to Lender such other
evidence of Borrower's good standing and authority as Lender may request.
4.2 Title Commitment. Borrower has delivered to Lender a current
commitment for title insurance No. 24036 on March 20, 2000, which has been
deemed satisfactory to Lender, in Lender's sole discretion, respecting the
Project from the Title Company on a current ALTA extended form coverage basis
which is acceptable to Lender (the "Title Commitment"). The Title Commitment
shall have attached copies of all instruments which appear as exceptions to
title in the Title Commitment. The Title Commitment shall also include a
judgment search respecting Borrower and any other party that holds title to all
or any portion of the Project.
4.3 Opinion of Counsel. If required by Lender, Borrower has delivered
to Lender an opinion from Borrower's counsel in form and content satisfactory to
Lender.
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4.4 Appraisal. Borrower shall deliver the Appraisal to Lender within
ninety (90) days after the Closing Date. The Appraisal shall be prepared by a
certified general M.A.I. appraiser satisfactory to Lender.
4.5 Environmental Report. Borrower shall deliver to Lender within
ninety (90) days after the Closing Date, the Environmental Report satisfactory
to Lender evidencing that there is no Hazardous Material on the Property and
certifying that the Property will not be affected by any environmental
regulations or ordinances of any municipal or state agency or board.
4.6 Delivery of Loan Documents. All of the Loan Documents requested by
Lender have been fully executed and the original executed documents delivered to
Lender.
4.7 Recording and Filing of Loan Documents. All of the Loan Documents
which require filing or recording have been properly filed and recorded so that
all of the liens and security interests granted to Lender in connection with the
Loan will be properly created and perfected and be first priority liens on the
Collateral.
4.8 First Lien on Collateral. The Trust Deed and other applicable Loan
Documents shall constitute and create a valid first lien upon the Collateral,
free of any prior mechanic's liens or materialmen's liens or special assessments
for work completed or under construction on or before the Closing Date, subject
only to the Permitted Encumbrances.
4.9 Ground Lease. Borrower has provided Lender with evidence
satisfactory to Lender that the Ground Lease is in full force and effect and
that no default has occurred under the Ground Lease and no events have occurred
nor do any conditions exist which with the giving of notice, the passage of
time, or both, would constitute a default under the Ground Lease. Borrower has
delivered to Lender the fully executed Ground Lease Estoppel Certificate from
Ground Lessor.
4.10 Leases. Borrower has entered into binding and enforceable leases
for all or a portion of the Project upon terms and in a form acceptable to
Lender, in Lender's sole discretion (the "Leases"). Borrower has delivered to
Lender a copy of all Leases and evidence satisfactory to Lender that the Leases
are in full force and effect and no event has occurred or condition exists which
with the passage of time, the giving of notice, or both, would constitute a
default under any of the Leases.
ARTICLE 5
COVENANTS OF BORROWER
Borrower agrees and covenants with Lender as follows:
5.1 Assignment. Borrower shall not, without the prior written consent
of Lender, mortgage, assign, convey, transfer, sell or otherwise dispose of or
encumber the Project, Borrower's interest in the Project, or any part of the
Project, or the income to be derived from the Project.
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5.2 Right of Inspection. Lender or Lender's agents shall at all times
during the term of the Loan and at Borrower's expense have the right of entry
upon and have free access to the Project and have the right to inspect all
books, contracts and records of Borrower relating thereto.
5.3 Insurance. Borrower shall provide and maintain, or cause to be
provided and maintained, at all times, the insurance policies required to be
provided and maintained pursuant to the Ground Lease, and the following
insurance policies:
5.3.1 Liability Insurance. Bodily injury and general liability
insurance with a single limit per accident or occurrence of not less than
$1,000,000.00 acceptable to Lender insuring against any and all liability of the
insured with respect to the Project or arising out of the maintenance, use or
occupancy thereof.
5.3.2 Property Hazard Insurance. Multi-peril property damage
insurance, including, without limitation, fixtures and personal property to the
extent they are maintained on the Property, and providing, as a minimum, fire
and extended coverage (including all perils normally covered by the standard
"all risk" endorsement, if such is available) on a full replacement cost basis
in an amount not less than 100% of the insurable value of the improvements,
exclusive of the Property, foundations and other items normally excluded from
coverage (based upon current replacement cost), with a single limit per accident
or occurrence of not less than $1,000,000.00.
5.3.3 Worker's Compensation Insurance. Worker's compensation
insurance against liability from claims of worker's with respect to and during
the period of any work on or about the Property. Borrower shall require the
Contractor and each of Borrower's subcontractors employed to perform work on the
Property to deliver a certificate of worker's compensation insurance prior to
the commencement of any work on the Property.
5.3.4 Flood Insurance. Flood insurance covering either the
Principal Amount or the maximum amount of insurance available, whichever is
more, or in lieu of such flood insurance, evidence, satisfactory to Lender, that
no part of the Project is, or will be, within an area designated as a flood
hazard area by the Federal Insurance Administration, Department of Housing and
Urban Development.
5.3.5 Policies and Premiums. All policies of insurance
required pursuant to this Section 5.3 shall be in form and substance acceptable
to Lender and issued by insurance companies acceptable to Lender. No insurance
company shall be acceptable to Lender unless it has a company rating of not less
than "A" and a financial rating of not less than Class VII in the most recent
edition of "Best's Insurance Reports". All policies of insurance required
pursuant to the provisions of this Section 5.3 shall contain a standard
"mortgagee protection clause", shall have attached a "lender's loss payable
endorsement", and shall name Lender as an additional insured or loss payee, as
appropriate. All such policies shall contain a provision that such policies will
not be cancelled or materially amended by reduction of coverage by more than ten
percent (10%) without at least thirty (30) days prior written notice to Lender.
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If Lender consents to Borrower providing any of the required insurance
through blanket policies carried by Borrower and covering more than one
location, then Borrower shall cause the insurance company to deliver to Lender a
certificate of insurance in the form ACORD 27 of such policy which sets forth
the coverage, the limits of liability, the name of the carrier, the policy
number, expiration date and a statement that the insurance company will not
cancel or materially modify by reduction of coverage by more than ten percent
(10%) the coverage evidenced by the endorsement without first affording Lender
at least thirty (30) days prior written notice. In the event Borrower fails to
provide, maintain, keep in force or deliver to Lender the policies of insurance
required by this Section 5.3, Lender may, but without any obligation to do so,
procure such insurance for such risks covering Lender's interest and Borrower
shall pay all premiums thereon promptly upon demand by Lender. If Borrower fails
to pay any premiums after demand by Lender, Lender, at Lender's option, may
advance any sums necessary to maintain and to keep in force such insurance. Any
sums so advanced, together with interest on such sums at the then current rate
under the Note, shall be secured by the Trust Deed.
Borrower shall deliver to Lender a copy of the original of each of the
policies of insurance that Borrower is required to obtain and maintain, or cause
to be provided and maintained, under this Agreement.
5.4 Repair and Restoration. If the Project is partially or wholly
damaged or destroyed by fire or any other cause, and (a) all insurance proceeds
received by Lender together with any cash funds delivered by Borrower to Lender
are sufficient to fully restore and repair the Project as determined by Lender,
in Lender's sole discretion, and (b) Borrower is not in default under any of the
Loan Documents, Lender shall disburse such proceeds in the manner provided
herein for the disbursement of the proceeds of the Loan toward the cost of such
restoration and repair. If Lender determines that such proceeds together with
any cash funds provided by Borrower are insufficient to fully restore the
Project, Lender will apply any sums received by Lender under this Section first
to the payment of all of Lender's costs and expenses (including but not limited
to legal fees and costs) incurred in obtaining those sums, and then, in Lender's
sole discretion and without regard to the adequacy of its security, to the
payment of the Loan. If the amount of such proceeds exceeds the cost of
restoration of the Project, Lender shall apply the excess proceeds to the
payment of the Loan. If the proceeds of insurance are used to restore the
Project and if the total estimated cost to restore the Project exceeds the
amount of the proceeds of insurance, Borrower shall deliver to Lender prior to
any disbursement of the proceeds of insurance, an amount equal to such
difference in cash or cash equivalents satisfactory to Lender. After all
obligations of Borrower under the Loan Documents have been paid in full, then
all proceeds in excess of such obligations will be paid to Borrower.
5.5 Taxes and Impositions. Borrower shall promptly pay and discharge
all lawful federal and state taxes and assessments imposed upon the Project or
upon Borrower before they become past due and delinquent in accordance with the
procedures and upon the terms set forth in the Trust Deed.
5.6 Hazardous Materials. Borrower shall not cause or permit any
Hazardous Materials to be placed, held, located or disposed of on, under or at
the Project or any part thereof which are in violation of any Environmental Laws
or the Ground Lease. Borrower further agrees to give notice to Lender
immediately upon Borrower's learning of the presence of any Hazardous Materials
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on the Property, to promptly comply with any governmental requirements requiring
the removal, treatment or disposal of such Hazardous Materials, and to defend,
indemnify and hold harmless Lender from any and all liabilities, claims, losses
or costs (including, without limitation attorneys' fees) which may now or in the
future be paid, incurred or suffered by or asserted against Lender by any
person, entity or governmental agency with respect to the presence of Hazardous
Materials on the Property or discharge of Hazardous Materials from the Property.
Borrower's covenants in this Section shall survive payment of the Loan and
foreclosure or other transfer of the Property.
At any time Lender, in good faith, has reason to believe Hazardous
Materials have been placed, held, located or disposed of on, under or at the
Property or any part thereof, other than as stated in the Environmental Report,
and upon written request by Lender and at Borrower's cost and expense, Borrower
shall provide Lender with an Environmental Compliance Audit Certificate,
effective as of a date no earlier than the date of the notice. Borrower shall
certify to Lender in writing within thirty (30) days of the notice that the
Project is in full compliance with Environmental Laws. In the event Borrower
fails or refuses promptly to provide Lender with an Environmental Compliance
Audit Certificate when required, Lender may, at Borrower's risk and expense,
arrange to obtain such a certificate. In the event the Project is in a condition
such that an Environmental Compliance Audit Certificate cannot be issued,
Borrower agrees, at its own cost and expense, to take all action necessary to
bring the Project into compliance with all Environmental Laws, including all
remediation and clean-up, so an Environmental Compliance Audit Certificate can
be issued. Lender and any consultant retained by or for the benefit of Lender
shall have the right, without further permission from or notice to Borrower, to
enter upon the Project for the purpose of performing any examination or testing
required in order to provide such a certificate, and Borrower shall provide the
consultant with reasonable access to Borrower's records for such purposes. Any
costs incurred by Lender in obtaining such a certificate shall be added to the
Principal Indebtedness and shall be immediately due and payable, and shall bear
interest at the default rate provided in the Note from the date incurred until
paid by Borrower.
5.7 No Disposition or Merger Without Lender's Consent. Borrower shall
not enter into any merger with any third party, or otherwise dispose of an
aggregate of more than ten percent (10%) of the total value of Borrower's assets
as of the date of disposition other than in the ordinary course of Borrower's
business.
5.8 Leases. Borrower shall not enter into any lease or leases of all or
any portion of the Project without the prior written consent of Lender. Borrower
shall maintain all such leases approved by Lender, which shall be included in
the definition of "Leases" under this Agreement, in full force and effect.
Borrower shall notify Lender of any breach of any of the terms and conditions of
any of the Leases within fifteen (15) days of such breach. Borrower agrees that
the Leases shall not be materially amended or modified without the prior written
consent of Lender.
5.9 Financial Statements. Borrower covenants that it shall timely file
with the Securities and Exchange Commission any and all reports required to be
filed pursuant to the Securities and Exchange Act of 1934, as amended, including
any applicable extension period. As to all financial statements and reports
which Borrower has furnished or may in the future furnish to Lender, Borrower
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acknowledges and agrees that it has a fiduciary duty to ensure that such
statements and reports are accurate and complete.
Until requested otherwise by Lender, Borrower shall provide the
following financial statements and reports to Lender:
5.9.1 Annual Reports. Furnish to Lender promptly following the
filing of such report with the Securities and Exchange Commission (i) a copy of
Borrower's Annual Report on Form 10-K for each fiscal year; and (ii) copies of
any final management letters or other final reports and schedules submitted by
Borrower's officers to Borrower's Board of Directors, which shall include a
consolidated balance sheet as of the end of such fiscal year, a consolidated
statement of income and a consolidated statement of cash flows of Borrower and
its subsidiaries for such year, setting forth in each case in comparative form
the figures from Borrower's previous fiscal year, all prepared in accordance
with generally accepted accounting principles and practices, consistently
applied, and audited by nationally recognized independent certified public
accounts. If Borrower is no longer required to file Annual Reports on Form 10-K,
Borrower shall, within ninety (90) days following the end of each respective
fiscal year, deliver to Lender a copy of such balance sheets, statements of
income and statements of cash flows.
5.9.2 Quarterly Reports. Furnish to Lender promptly following
the filing of such report with the Securities and Exchange Commission, a copy of
each of Borrower's Quarterly Reports on Form 10-Q, which shall include a
consolidated balance sheet as of the end of the respective fiscal quarter, a
consolidated statement of income and consolidated statements of cash flows of
Borrower and its subsidiaries for the respective fiscal quarter and for the
year-to-date, setting forth in each case in comparative form the figures from
the comparable periods in Borrower's immediately preceding fiscal year, all
prepared in accordance with generally accepted accounting principals and
practices (except as otherwise permitted by Form 10-Q), consistently applied,
but all of which may be unaudited. If Borrower is no longer required to file
Quarterly Reports on Form 10-Q, Borrower shall, within forty-five (45) days
following the end of each of the first three (3) fiscal quarters of each fiscal
year, deliver to Lender a copy of such balance sheets, statements of income and
statements of cash flows.
5.9.3 Monthly Reports. Monthly financial statements, limited
to an aging of payables and receivables, prepared by Borrower for each calendar
month in a form acceptable to Lender, shall be delivered to Lender within ten
(10) days of the end of each month during the term of the Loan. The complete
monthly financial statements shall be delivered to Lender within forty-five (45)
days of the end of each month (excepting sixty (60) days for December), which
shall be prepared consistently with accounting standards acceptable to Lender,
and shall accurately represent the actual financial condition of Borrower as of
the date thereof, and accurately represent the results of operations for the
period covered thereby.
5.9.4 Compliance Certificate. Concurrently with the submission
of the Form 10-Q, Borrower shall submit to Lender a compliance certificate in a
form acceptable to Lender certifying that Borrower is in compliance with all
terms and conditions of this Agreement, including compliance with the financial
covenants provided in this Section 5.9. The compliance certificate shall include
the data and calculations supporting all financial covenants, whether in
compliance or not, and shall be signed by the chief executive officer,
treasurer, or chief financial officer of Borrower.
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If any financial reports required to be provided by this Section 5.9
are not timely provided to Lender, then there shall be immediately due and owing
from Borrower to Lender a late fee of $100.00 per day for each delinquent
financial report, which late fee shall be payable in cash. Nothing in this
Section 5.9 shall be construed to alter, impair or infringe upon Lender's right
to declare an Event of Default as provided in this Agreement or to alter or
extend the time limits for cure of a non-monetary default as provided in Article
6 of this Agreement.
5.10 Title Policy. Within ten (10) days after the Closing Date,
Borrower shall deliver to Lender a policy of title insurance on the Property
which shall (a) be an ALTA extended coverage mortgagee's policy, (b) show Ground
Lessor as the sole owner of marketable, fee simple title to the Property and
Borrower as the sole ground lessee of the Property, (c) be in the total amount
of the Principal Amount, and (d) be issued by a title insurance company
satisfactory to Lender through the Title Company (the "Title Policy"). The Title
Policy shall insure that the Trust Deed is a valid first mortgage lien against
the Property and that the Property is free and clear of all liens, encumbrances
and other exceptions to title, except the Permitted Encumbrances. The Title
Policy shall include such additional terms and special endorsements upon
issuance as may be required by Lender, including, but not limited to, a
foundation endorsement (CLTA 102.5 or its equivalent) to the Title Policy
showing no encroachments.
5.11 Required Notices. Borrower shall give Lender prompt written
notice of the following:
5.11.1 Any asserted litigation of any kind which might subject
Borrower to any liability in an aggregate amount in excess of $1,000,000.00,
whether covered by insurance or not and any litigation involving the Property.
5.11.2 All complaints and charges made by any governmental
agency affecting the Property or exercising supervision or control of Borrower
or Borrower's business which may impair the security of Lender.
5.11.3 Any acceleration of any other indebtedness incurred by
Borrower.
5.11.4 Any event or conditions which constitute an Event of
Default or, with the passage of time or the giving of notice, or both, would
constitute an Event of Default.
5.11.5 Any material adverse change in the financial condition
of Borrower.
5.12 Change of Business. Borrower shall not materially modify or change
the nature or type of its business without the prior written consent of Lender.
5.13 Dividends and Loans. Borrower shall not (a) declare or pay any
dividends except as are mandatorily required on Borrower's preferred stock, (b)
purchase, redeem, retire or otherwise acquire for value any of its capital stock
now or hereafter outstanding in excess of $2,000,000.00 for any year, (c) make
any distribution of assets to its stockholders, investors, or equity holders,
whether in cash, assets, or in obligations of Borrower, (d) allocate or
otherwise set apart any sum for the payment of any dividend or distribution on,
or for the purchase, redemption, or retirement of any shares of its capital
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stock or equity interests in excess of $2,000,000.00 for any year, or (e) make
any other distribution by reduction of capital or otherwise in respect of any
shares of its capital stock or equity interests, in excess of $250,000.00. It is
expressly agreed upon between Borrower and Lender that this covenant does not
apply to any distributions made by Borrower to any of Borrower's non-borrowing
subsidiaries.
Borrower shall not make any loans or pay any advances of any nature
whatsoever to any person or entity, except advances in the ordinary course of
business to vendors, suppliers, and contractors. This covenant does not apply to
any loans or advances made by Borrower to any of Borrower's non-borrowing
subsidiaries.
5.14 Restriction of Debt. Except for the Trust Deed, during the term of
the Loan, Borrower shall not, without the prior written consent of Lender,
create, incur, assume, or suffer to exist any debt or any encumbrance, mortgage
or lien upon the Project except as permitted by this Section 5.14. Debt means
(1) indebtedness or liability for borrowed money; (2) obligations evidenced by
bonds, debentures, notes, or other similar instruments; (3) obligations for the
deferred purchase price of property or services (including trade obligations);
(4) obligations as lessee under capital leases; (5) current liabilities in
respect of unfunded vested benefits under Plans covered by ERISA; (6)
obligations under letters of credit; (7) obligations under acceptance
facilities; (8) all guarantees, endorsements (other than for collection or
deposit in the ordinary course of business), and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any person
or entity, or otherwise to assure a creditor against loss; and (9) obligations
secured by any mortgage, deed of trust, lien, pledge, or security interest or
other charge or encumbrance on property, whether or not the obligations have
been assumed.
Permitted exceptions to this covenant are: (1) debt contemplated by
this Agreement; (2) accounts payable to trade creditors for goods or services
which are not aged more than ninety (90) days from the due date (provided that
the due date is not more than sixty (60) days after the original invoice date)
to the extent that such accounts payable in excess of ninety (90) days past due
do not exceed twenty-five percent (25%) of the total accounts payable to trade
creditors; (3) current operating liabilities (other than for borrowed money)
which are not more than ninety (90) days past due, in each case incurred in the
ordinary course of business, as presently conducted, and paid within the
specified time, unless contested in good faith and by appropriate proceedings;
(4) debt due not in excess of $2,000,000.00 and not to exceed an aggregate,
outstanding principal amount of $2,000,000.00, for purchase money capital
leases; and (5) draws under the letter of credit or surety bond facilities
either heretofore arranged or anticipated to be established with First Security
Bank ($5,000,000.00) and AIG Insurance Company ($10,000,000.00). New or
replacement real property leases and operating leases are exempt from the
$2,000,000.00 limitation of this exception.
5.15 Net Earnings. Borrower shall achieve net after tax earnings
(losses) in each quarter during the term of the Loan so that on a cumulative
basis, the net year to date profit (loss) shall not be less (greater) than the
following amounts at each respective quarter end:
16
<PAGE>
<TABLE>
<CAPTION>
Tier First Quarter Second Quarter Third Quarter Fourth Quarter
2000 2000 2000 2000
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Tier I (3,750,000) (3,000,000) (1,750,000) 2,500,000
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
Tier II (4,250,000) (3,750,000) (3,750,000) (3,250,000)
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
</TABLE>
Borrower and Lender agree that if during any quarter of the term of the
Loan, Borrower fails to fully keep the covenants of Tier I financing as set
forth in this Section 5.15, Borrower, with respect to such non-qualifying
quarter, shall be subject to the interest rate and quarterly fee assessments for
Tier II financing as set forth in Sections 2.2 and 2.3.2 of this Agreement. If
at any time during the term of the Loan, Borrower fails to fully satisfy any of
the Tier II financial covenants, such violation shall constitute an Event of
Default under this Agreement and no further draws under the Loan shall be
allowed.
5.16 Net Working Capital. Borrower shall achieve and maintain minimum
Net Working Capital at each quarter end of the year 2000 as follows: (i)
$90,000,000 for the first quarter, (ii) $90,000,000 for the second quarter,
(iii) $95,000,000 for the third quarter, and (iv) $100,000,000 for the fourth
quarter. For purposes of this Section 5.16, net working capital is defined as
adjusted current assets less current liabilities. Adjusted current assets is
defined as current assets less that portion of unbilled costs which exceeds the
maximum unbilled costs allowed in each quarter as shown below:
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
2000 2000 2000 2000
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Maximum Unbilled Costs 90,000,000 80,000,000 70,000,000 70,000,000
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
</TABLE>
5.17 Limitations on Advances Under the Note. Notwithstanding anything
to the contrary in this Agreement, the Note, or any other Loan Document,
Borrower and Lender agree as follows: (i) At no time during the term of the Loan
shall any advances be made, or total amounts outstanding under the Loan, exceed
the amount of seventy percent (70%) of the gross trade accounts receivable owned
by Borrower, excluding any and all trade accounts receivable of Borrower's
subsidiaries and affiliates; and (ii) In no event shall the Loan to value ratio,
based on the Appraisal value of the Property, exceed the sum which is equal to
sixty percent (60%) of the Appraisal value of the Property.
ARTICLE 6
EVENTS OF DEFAULT
6.1 Event of Default. Fifteen (15) days after written notice from
Lender to Borrower for monetary defaults and thirty (30) days after written
notice from Lender to Borrower for non-monetary defaults, if such defaults are
not cured within such fifteen (15) day or thirty (30) day periods, respectively,
each of the following shall constitute an event of default ("Event of Default")
under this Agreement:
17
<PAGE>
6.1.1 Default in Payment. If Borrower fails to make any
payment due and payable under the terms of the Note, this Agreement or any other
Loan Document.
6.1.2 Representations and Warranties. If any of the
representations and warranties made by Borrower in this Agreement, or in any
other Loan Document, shall be materially false or misleading at any time during
the term of the Loan.
6.1.3 Covenants. If Borrower shall be in default under any of
the terms, covenants, conditions, or obligations in this Agreement, or in any
other Loan Document, including, but not limited, the financial covenants set
forth in Sections 5.15 and 5.16 of this Agreement.
6.1.4 Cross Default. If a default occurs or any event occurs
or condition exists, which with the passage of time, the giving of notice, or
both, would constitute a default, occurs on any indebtedness of Borrower to
Lender under any note, indenture, agreement, or undertaking, including, but not
limited to, Borrower's business bank cards.
6.1.5 Leases. If a default on the part of Borrower occurs
under any of the Leases, or any event occurs or condition exists, which with the
passage of time, the giving of notice, or both, would constitute a default under
any of the Leases.
6.1.6 Ground Lease. If any default on the part of Borrower
occurs under the Ground Lease, or any event occurs or condition exists, which
with the passage of time, the giving of notice, or both, would constitute a
default under the Ground Lease.
6.1.7 Dissolution. If Borrower becomes dissolved or
terminated.
6.1.8 Receiver. If a receiver, trustee, or custodian is
appointed for any material part of Borrower's property, or any material part of
Borrower's property is assigned for the benefit of creditors.
6.1.9 Impairment to Lien. If at any time the Trust Deed or any
other applicable Loan Document creating a lien on any of the Collateral may be
impaired by any lien, encumbrance or other defect other than the Permitted
Encumbrances.
6.1.10 Bankruptcy. If a petition in bankruptcy is filed
against Borrower, and such petition is not dismissed within one hundred twenty
(120) days of filing, a petition in bankruptcy is filed by Borrower or any
Guarantor of the Loan or a receiver or trustee of the property of Borrower is
appointed; or if Borrower files a petition for reorganization under any of the
provisions of the Bankruptcy Act or any law, State or Federal, or makes an
assignment for the benefit of creditors or is adjudged insolvent by any State or
Federal Court of competent jurisdiction.
6.1.11 Judgment or Attachment. If a judgment is entered
against Borrower or any attachment be made for an amount in excess of
$100,000.00 and such judgment or attachment is not paid or otherwise fully
satisfied within thirty (30) days of the date it is entered, or appealed to the
appropriate appellate court and obtains a stay from the execution on said
judgment by the posting of a supersedeas bond.
18
<PAGE>
ARTICLE 7
REMEDIES
7.1 Termination and Acceleration. Upon the occurrence of an Event of
Default under this Agreement, all obligations of Lender under this Agreement,
and under the other Loan Documents at the election of Lender, shall cease and
terminate and Lender may declare the entire unpaid Principal Indebtedness
immediately due and payable and may foreclose the Trust Deed and any other
Collateral in accordance with the Loan Documents, and exercise all remedies
available to a mortgagee under the Ground Lease, and may apply the undisbursed
Loan proceeds against the Principal Indebtedness owed to Lender by Borrower.
7.2 Rights and Remedies Cumulative. All rights, remedies, and powers
conferred in this Agreement are cumulative and not exclusive of any other rights
or remedies, and shall be in addition to every other right, power, and remedy
that Lender may have, whether specifically granted in this Agreement, the Ground
Lease, or existing at law, in equity, or by statute; and any and all such rights
and remedies may be exercised from time to time and as often and in such order
as Lender may deem expedient. Any forbearance or delay by Lender in exercising
any of its rights, remedies, and powers shall not be deemed to be a waiver and
the exercise or partial exercise of any right, remedy, or power, and shall not
preclude the further exercise of such right, remedy, and power and the same
shall continue in full force and effect until specifically waived by an
instrument in writing executed by Lender.
7.3 Attorney-in-Fact. Upon the occurrence of an Event of Default,
Borrower hereby irrevocably constitutes and appoints Lender Borrower's true and
lawful attorney-in-fact to execute, acknowledge and deliver any instruments with
respect to the Loan, except to increase the Principal Amount thereof for any
purpose other than the protection of the Collateral and Lender's interest
therein. This power of attorney is irrevocable and is coupled with an interest.
ARTICLE 8
ARBITRATION
8.1 Arbitration Disclosures.
8.1.1 ARBITRATION IS FINAL AND BINDING ON THE PARTIES AND
SUBJECT TO ONLY VERY LIMITED REVIEW BY A COURT.
8.1.2 EXCEPT AS OTHERWISE PROVIDED IN SECTION 8.2.4 OF THIS
AGREEMENT, IN ARBITRATION THE PARTIES ARE WAIVING THEIR RIGHT TO LITIGATE IN
COURT, INCLUDING THEIR RIGHT TO A JURY TRIAL.
8.1.3 DISCOVERY IN ARBITRATION IS MORE LIMITED THAN
DISCOVERY IN COURT.
8.1.4 ARBITRATORS ARE NOT REQUIRED TO INCLUDE FACTUAL FINDINGS
OR LEGAL REASONING IN THEIR AWARDS. THE RIGHT TO APPEAL OR TO SEEK MODIFICATION
OF ARBITRATORS' RULINGS IS VERY LIMITED.
19
<PAGE>
8.1.5 A PANEL OF ARBITRATORS MIGHT INCLUDE AN ARBITRATOR WHO
IS OR WAS AFFILIATED WITH THE BANKING INDUSTRY.
8.1.6 IF YOU HAVE QUESTIONS ABOUT ARBITRATION, CONSULT YOUR
ATTORNEY OR THE AMERICAN ARBITRATION ASSOCIATION.
8.2 Arbitration Provisions. This concerns the resolution of any
claim or controversy between or among the parties. In this regard:
8.2.1 Any claim or controversy ("Dispute") between or among
the parties, and their assigns, including, but not limited to, Disputes arising
out of or relating to the Loan, the Collateral, this Agreement, the Note, the
Loan Documents, this Article 8 Arbitration ("arbitration clause"), or any
related agreements or instruments relating hereto or delivered in connection
herewith ("Related Documents"), and including, but not limited to, a Dispute
based on or arising from an alleged tort, shall at the request of any party be
resolved by binding arbitration in accordance with the applicable arbitration
rules of the American Arbitration Association ("the Administrator"). The
provisions of this arbitration clause shall survive any termination, amendment,
or expiration of this Agreement or Related Documents. The provisions of this
arbitration clause shall supercede any prior arbitration agreement between or
among the parties. If any provision of this arbitration clause should be
determined to be unenforceable, all other provisions of this arbitration clause
shall remain in full force and effect.
8.2.2 The arbitration proceedings shall be conducted in Salt
Lake City, Utah, at a place to be determined by the Administrator. The
Administrator and the arbitrator(s) shall have the authority to the extent
practicable to take any action to require the arbitration proceeding to be
completed and the arbitrator(s)' award issued within one-hundred-fifty (150)
days of the filing of the Dispute with the Administrator. The arbitrator(s)
shall have the authority to impose sanctions on any party that fails to comply
with time periods imposed by the Administrator or the arbitrator(s), including
the sanction of summarily dismissing any Dispute or defense with prejudice. The
arbitrator(s) shall have the authority to resolve any Dispute regarding the
terms of this Agreement, this arbitration clause or Related Documents, including
any claim or controversy regarding the arbitrability of any Dispute. All
limitations periods applicable to any Dispute or defense, whether by statute or
agreement, shall apply to any arbitration proceeding hereunder and the
arbitrator(s) shall have the authority to decide whether any Dispute or defense
is barred by a limitations period and, if so, to summarily enter an award
dismissing any Dispute or defense on that basis. The doctrines of compulsory
counterclaim, res judicata, and collateral estoppel shall apply to any
arbitration proceeding hereunder so that a party must state as a counterclaim in
the arbitration proceeding any claim or controversy which arises out of the
transaction or occurrence that is the subject matter of the Dispute. The
arbitrator(s) may in the arbitrator(s)' discretion and at the request of any
party: (1) consolidate in a single arbitration proceeding any other claim or
controversy involving another party that is substantially related to the Dispute
where that other party is bound by an arbitration clause with the Lender, such
as borrowers, guarantors, sureties, and owners of collateral; (2) consolidate in
a single arbitration proceeding any other claim or controversy that is
substantially similar to the Dispute; and (3) administer multiple arbitration
claims or controversies as class actions in accordance with the provisions of
Rule 23 of the Federal Rules of Civil Procedure.
20
<PAGE>
8.2.3 The arbitrator(s) shall be selected in accordance with
the rules of the Administrator from panels maintained by the Administrator. A
single arbitrator shall have expertise in the subject matter of the Dispute.
Where three arbitrators conduct an arbitration proceeding, the Dispute shall be
decided by a majority vote of the three arbitrators, at least one of whom must
have expertise in the subject matter of the Dispute and at least one of whom
must be a practicing attorney. The arbitrator(s) shall award to the prevailing
party recovery of all costs and fees (including attorneys' fees and costs,
arbitration administration fees and costs, and arbitrator(s)' fees). The
arbitrator(s), either during the pendency of the arbitration proceeding or as
part of the arbitration award, also may grant provisional or ancillary remedies
including but not limited to an aware of injunctive relief, foreclosure,
sequestration, attachment, replevin, garnishment, or the appointment of a
receiver.
8.2.4 Judgment upon an arbitration award may be entered in any
court having jurisdiction, subject to the following limitation: the arbitration
award is binding upon the parties only if the amount does not exceed Four
Million Dollars ($4,000,000.00); if the award exceeds that limit, either party
may demand the right to a court trial. Such a demand must be filed with the
Administrator within thirty (30) days following the date of the arbitration
award; if such a demand is not made within that time period, the amount of the
arbitration award shall be binding. The computation of the total amount of an
arbitration award shall include amounts awarded for attorneys' fees and costs,
arbitration administration fees and costs, and arbitrator(s)' fees.
8.2.5 No provision of this arbitration clause, nor the
exercise of any rights hereunder, shall limit the right of any party to: (1)
judicially or non-judicially foreclose against any real or personal property
collateral or other security; (2) exercise self-help remedies, including but not
limited to repossession and setoff rights; or (3) obtain from a court having
jurisdiction thereover any provisional or ancillary remedies including but not
limited to injunctive relief, foreclosure, sequestration, attachment, replevin,
garnishment, or the appointment of a receiver. Such rights can be exercised at
any time, before or during initiation of an arbitration proceeding, except to
the extent such action is contrary to the arbitration award. The exercise of
such rights shall not constitute a waiver of the right to submit any Dispute to
arbitration, and any claim or controversy related to the exercise of such rights
shall be a Dispute to be resolved under the provisions of this arbitration
clause. Any party may initiate arbitration with the Administrator, however, if
any party initiates litigation and another party disputes any allegation in that
litigation, the disputing party-upon the request of the initiating party-must
file a demand for arbitration with the Administrator and pay the Administrator's
filing fee. The parties may serve by mail a notice of an initial motion for an
order of arbitration.
8.2.6 Notwithstanding the applicability of any other law to
this Agreement, the arbitration clause, or Related Documents between or among
the parties, the Federal Arbitration Act, 9 U.S.C. ss. 1 et seq., shall apply to
the construction and interpretation of this arbitration clause.
21
<PAGE>
ARTICLE 9
MISCELLANEOUS
9.1 Non-Waiver. No advance of Loan proceeds under this Agreement shall
constitute a waiver of any of the conditions to be performed by Borrower and in
the event Borrower is unable to satisfy any such conditions Lender shall not be
precluded from declaring such failure to be an Event of Default.
9.2 Derivative Rights. Any obligation of Lender to make disbursements
under this Agreement is imposed solely and exclusively for the benefit of
Borrower and no other person, firm or corporation shall, under any
circumstances, be deemed to be a beneficiary of such condition, nor shall it
have any derivative claim or action against Lender.
9.3 Survival. All representations, warranties and covenants by Borrower
shall survive the making of the disbursements under the Loan and the provisions
of this Agreement shall be binding upon Borrower, Borrower's successors and
assigns and inure to the benefit of Lender, Lender's successors and assigns.
9.4 Conflict. The Note, Trust Deed, and all other Loan Documents shall
be subject to all the terms, covenants, conditions, obligations, stipulations
and agreements contained in this Agreement. In the event there is any conflict
between the terms and conditions of this Agreement, the Note, Trust Deed, or any
other Loan Document, this Agreement shall prevail.
9.5 Assignment. Lender may assign the Loan Documents, in whole or in
part, to any other person, firm or corporation provided that all provisions of
this Agreement shall continue to apply in conjunction with the other Loan
Documents. Borrower shall not assign this Agreement, or any interest of Borrower
in or to this Agreement, the Loan proceeds, or any of the Loan Documents without
the prior written consent of Lender. Any dissolution of Borrower or any transfer
of any interest in the Borrower without the prior written consent of Lender
shall be assumed to be an assignment in violation of this Section.
9.6 Notices. All notices shall be in writing and shall be deemed to
have been sufficiently given or served when personally delivered, deposited in
the United States mail, by registered or certified mail, or deposited with a
reputable overnight mail carrier which provides delivery of such mail to be
traced, addressed as follows:
Lender: Zions First National Bank
Commercial Loan Department
P.O. Box 25822
One South Main Street
Salt Lake City, Utah 84125
Attn: Michael R. Brough
With copies to: Callister Nebeker & McCullough
Gateway Tower East, Suite 900
10 East South Temple
Salt Lake City, Utah 84133
Attn: T. Richard Davis
22
<PAGE>
Borrower: Evans & Sutherland Computer Corporation
600 Komas Drive
Salt Lake City, Utah 84108
Attn: Chief Financial Officer
Evans & Sutherland Computer Corporation
600 Komas Drive
Salt Lake City, Utah 84108
Attn: Treasurer
With copies to: Snell & Wilmer, L.L.P. Law Offices
15 West South Temple, Suite 1200
Gateway Tower West
Salt Lake City, Utah 84101
Attn: Brian D. Cunningham
Such addresses may be changed by notice to the other party given in the same
manner provided in this Section.
9.7 Indemnification. Borrower agrees to pay, protect, defend, indemnify
and hold harmless Lender for any and all claims and liabilities, and for damages
which may be awarded or incurred by Lender, and for all reasonable attorney
fees, legal expenses, and other out-of-pocket expenses incurred in defending
such claims, arising from or related in any manner to the negotiation,
execution, or performance by Lender of this Agreement, the Loan Documents, or
any of the agreements, documents, obligations, or transactions contemplated by
this Agreement, including, without limitation, any claims, liabilities, or
causes of actions related to any Hazardous Materials located on, in, or under
the Property, but excluding any such claims based upon breach or default by
Lender or gross negligence or willful misconduct of Lender. This indemnification
shall survive the payment of the Loan, reconveyance of the Trust Deed, and
termination of this Agreement.
Lender shall have the control of the defense of any such claims, but
agrees to act reasonably in the defense of any such claims. Lender is hereby
authorized to settle or otherwise compromise any such claims as Lender in good
faith determines shall be in its best interests.
Any indemnification amount owing to Lender pursuant to this Section 9.7
shall be secured by the Loan Documents and Collateral except that,
notwithstanding anything to the contrary in this Agreement or the Loan
Documents, any such indemnification amount owing to Lender shall not be secured
in any way by the Property on, in or under which any Hazardous Materials is
located.
9.8 Terms. Whenever used in this Agreement, the singular shall include
the plural, the plural the singular, and the use of any gender shall be
applicable to all genders.
9.9 Joint and Several Liability. All obligations and liabilities of
Borrower imposed in this Agreement, or in any of the other Loan Documents upon
Borrower shall be joint and several.
23
<PAGE>
9.10 Multiple Borrowers. If Borrower is comprised of more than one
person or entity, the term Borrower shall refer to each such separate person or
entity, and the obligations of Borrower shall apply individually and
collectively to each such person and entity, unless specifically provided
otherwise in this Agreement.
9.11 Disclosure of Financial and Other Information. Borrower hereby
consents to Lender disclosing to any other lender who may participate in the
Loan, any and all information, knowledge, reports, and records, including,
without limitation, financial statements, relating in any manner whatsoever to
the Loan and Borrower, provided that any other such lender execute a
confidentiality agreement in a form acceptable to Borrower and Lender.
9.12 Invalidity. The invalidity of any one or more or any part of the
conditions, covenants, articles, sections, phrases or sentences of this
Agreement shall not affect the remaining portions of this Agreement.
9.13 Governing Law. This Agreement and all matters relating to this
Agreement shall be governed by, construed and interpreted in accordance with the
laws of the State of Utah.
9.14 No Partnership. Nothing contained in this Agreement or in any of
the other Loan Documents shall be construed as creating a joint venture or
partnership between Borrower and Lender. There shall be no sharing of losses,
costs and expenses between Borrower and Lender, and Lender shall have no right
of control or supervision except as it may exercise its rights and remedies
provided in the Loan Documents.
9.15 Attorneys' Fees. Upon the occurrence of an Event of Default,
Lender may employ an attorney or attorneys to protect Lender's rights under this
Agreement, and Borrower shall pay Lender reasonable attorneys' fees and costs
actually incurred by Lender, whether or not action is actually commenced against
Borrower by reason of such breach. Borrower shall also pay to Lender any
reasonable attorneys fees and costs incurred by Lender with respect to any
insolvency or bankruptcy proceeding or other action involving Borrower or any
guarantor as a debtor. If Lender exercises the power of sale contained in the
Trust Deed or initiates foreclosure proceedings, Borrower shall pay all
reasonable costs incurred and attorney fees and costs as provided in the Trust
Deed.
9.16 Setoff. In addition to any rights and remedies of Lender provided
by law, if any Event of Default exists, Lender is authorized at any time and
from time to time, without prior notice to Borrower, any such notice being
waived by Borrower to the fullest extent permitted by law, to setoff and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held by Lender to or for the credit or the account of Borrower
against any and all obligations of Borrower under the Loan or any of the Loan
Documents, now or hereafter existing, irrespective of whether or not Lender
shall have made demand under the Loan, or otherwise, or under any Loan Document
and although such amounts owed may be contingent or unmatured. Lender agrees
promptly to notify Borrower after any such setoff and application made by
Lender; provided, however, that the failure to give such notice shall not affect
the validity of such setoff and application. The rights of Lender under this
Section 9.16 are in addition to the other rights and remedies (including other
rights of setoff) which Lender may have.
24
<PAGE>
9.17 Waiver of Claims. Borrower (i) represents that Borrower has no
defenses to or setoffs against any indebtedness or other obligations owing to
Lender or Lender's affiliates, nor claims against Lender or Lender's affiliates
for any matter whatsoever, related or unrelated to any indebtedness or other
obligations owing to Lender or Lender's affiliates, and (ii) releases Lender and
Lender's affiliates from all claims, causes of action, and costs, in law or
equity, existing as of the Closing Date, which Borrower has or may have by
reason of any matter of any conceivable kind or character whatsoever, related or
unrelated to any indebtedness or other obligations owing to Lender or Lender's
affiliates, including the subject matter of this Agreement. This provision shall
not apply to claims for performance of express contractual obligations owing to
Borrower by Lender or Lender's affiliates.
9.18 Severability of Invalid Provisions. With respect to this Agreement
and all other Loan Documents, any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction
only, be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
9.19 Integrated Agreement and Subsequent Amendment. The Loan Documents,
and the other agreements, documents, obligations, and transactions contemplated
by this Agreement constitute the entire agreement between Lender and Borrower
with respect to the subject matter of these agreements, and may not be altered
or amended except by written agreement signed by Lender and Borrower. PURSUANT
TO UTAH CODE SECTION 25-5-4, BORROWER IS NOTIFIED THAT THESE AGREEMENTS ARE A
FINAL EXPRESSION OF THE AGREEMENT BETWEEN LENDER AND BORROWER AND THESE
AGREEMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY ALLEGED ORAL AGREEMENT.
All prior and contemporaneous agreements, arrangements and
understandings between the parties to this Agreement as to the subject matter of
this Agreement, are, except as otherwise expressly provided in this Agreement,
rescinded.
DATED: March 31, 2000.
BORROWER
EVANS & SUTHERLAND COMPUTER CORPORATION,
a Utah corporation
By: /S/ R. GAYNOR
Richard J. Gaynor
Vice President and Chief Financial Officer
25
<PAGE>
LENDER
ZIONS FIRST NATIONAL BANK,
a national banking association
By: /S/ M. BROUGH
Michael R. Brough
Vice President
26
<PAGE>
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
The foregoing instrument was acknowledged before me this day of May,
2000, by Richard J. Gaynor, Vice President and Chief Financial Officer of Evans
& Sutherland Computer Corporation, a Utah corporation.
NOTARY PUBLIC
My Commission Expires: Residing At:
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
The foregoing instrument was acknowledged before me this _____ day of
May, 2000, by Michael R. Brough, Vice President of Zions First National Bank, a
national banking association.
NOTARY PUBLIC
My Commission Expires: Residing At:
27
<PAGE>
EXHIBIT A
REAL PROPERTY DESCRIPTION
The real property located in Salt Lake County, State of Utah, and more
particularly described as follows:
[SEE ATTACHED EXHIBIT A]
28
Loan No.
PROMISSORY NOTE
Salt Lake City, Utah
March 31, 2000
$15,000,000.00
1. Promise to Pay. For value received, Evans & Sutherland Computer
Corporation, a Utah corporation ( "Borrower"), promises to pay to the order of
Zions First National Bank, a national banking association ("Lender"), at its
office at P.O. Box 25822 One South Main Street, in Salt Lake City, Utah 84125,
or at such other place as Lender may from time to time designate, in lawful
money of the United States of America, the principal sum of Fifteen Million
Dollars ($15,000,000.00), or so much of that sum as may be advanced under this
Promissory Note by any holder, together with all other advances made pursuant to
this Promissory Note (collectively the "Principal Indebtedness"), plus interest
as computed below. This Promissory Note is referred to in and arises out of a
Loan Agreement dated the Closing Date (the "Loan Agreement") between Borrower
and Lender and is secured by the Collateral.
2. Interest. The outstanding balance of the Principal Indebtedness
shall bear interest from the Closing Date at Lender's Prime Rate (as defined
below). Interest shall accrue daily on the outstanding balance of the Principal
Indebtedness both before and after judgment, and shall be calculated on the
basis of a 360-day year. Interest is computed on a 360-day year simple interest
basis by applying the ratio for the annual interest rate over a year of 360 days
(365/360), multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding. The applicable
annual total interest rate, as computed in accordance with the foregoing, shall
be adjusted with each change of the Prime Rate, effective on the date of the
change in the Prime Rate.
If, at any time during the term of the Loan, Borrower fails to fully
satisfy any of the Tier I financial covenants as set forth in Section 5.15 of
the Loan Agreement, the interest rate of this Promissory Note shall be increased
for each calendar quarter thereafter until said Tier I financial covenants are
fully satisfied, to a variable interest rate of two and one-half percent (2.50%)
per annum above Lender's Prime Rate.
As used in this Promissory Note, the term "Prime Rate" shall be deemed
to mean an index which is determined daily by the published commercial loan
variable rate index held by any two of the following banks: Chase Manhattan
Bank, Wells Fargo Bank N.A., and Bank of America N.A. In the event no two of the
above banks have the same published rate, the bank having the median rate will
establish Lender's Prime Rate. If, for any reason beyond the control of Lender,
any of the aforementioned banks becomes unacceptable as a reference for the
purpose of determining the Prime Rate used herein, Lender may, five days after
posting notice in Lender's bank offices, substitute another comparable bank for
the one determined unacceptable. As used in this paragraph, "comparable bank"
shall mean one of the ten largest commercial banks headquartered in the United
States of America. This definition of Prime Rate is to be strictly interpreted
and is not intended to serve any purpose other than providing an index to
determine the variable interest rate used herein. It is not the lowest rate at
which Lender may make loans to any of its customers, either now or in the
future.
1
<PAGE>
3. Payments. Accrued interest computed in accordance with the foregoing
shall be due and payable on May 1, 2000 and thereafter on the first day of each
and every month thereafter to and including March 30, 2001, when the total
unpaid Principal Indebtedness and all accrued and unpaid interest thereon shall
be due and payable in full. Checks will constitute payment only when collected.
4. Lender's Expenditures. Borrower agrees to pay on demand any
reasonable expenditures made by Lender in accordance with the Loan Documents,
including, but not limited to, the payment of taxes, insurance premiums, costs
of maintenance and preservation of the Property, common expense and other
assessments relating to the Property, and attorney fees and costs incurred in
connection with any matter pertaining hereto or to the security pledged to
secure the Principal Indebtedness or any portion thereof (collectively the
"Lender Expenditures"). At the election of Lender, all Lender Expenditures may
be added to the unpaid balance of this Promissory Note and become a part of and
on a parity with the Principal Indebtedness secured by the Trust Deed and shall
accrue interest at such rate as may be computed from time to time in the manner
prescribed in this Promissory Note.
5. Prepayment. Borrower shall have the right, from time to time and at
any time, to prepay all, or any part, of the Loan at any time or times prior to
the maturity of the Loan without payment of any premium or penalty. Borrower
agrees that any prepayment shall be made to Lender in the form of cash or
equivalent prior to 3:00 p.m. Mountain Time to facilitate investment of such
prepayment funds for account of Lender. In the event this deadline is not met,
interest will continue to accrue on the unpaid loan balance at the rate
specified herein through and including Lender's next regular banking day.
6. Late Charge. If any payment is fifteen (15) days or more late,
Borrower will be charged five percent (5%) of the regularly scheduled payment or
$50.00, whichever is greater.
7. Default Interest Rate. If default occurs in the payment of any
principal or interest past any applicable grace or cure period, or if any Event
of Default occurs under the Loan Documents, time being the essence hereof, then
(a) the entire unpaid balance, shall, at the election of the holder of this
Promissory Note and without notice of such election, become immediately due and
payable in full, and (b) without notice and whether or not the principal balance
has been accelerated, all outstanding principal shall bear interest at a default
rate from the date when due until paid, both before and after judgment, which
default rate shall be four percent (4%) per annum above Lender's Prime Rate. If
this Promissory Note becomes in default or payment is accelerated, Borrower
agrees to pay to the holder of this Promissory Note all collection costs,
including reasonable attorney fees and legal expenses, in addition to all other
sums due under this Promissory Note.
8. Application of Payments. Any and all payments by Borrower under this
Promissory Note shall be applied as follows: first, to the repayment of any
Lender Expenditures advanced by Lender under this Promissory Note or pursuant to
the Loan Documents; second, to the payment of any late charges; third, to the
payment of accrued interest on the Principal Indebtedness; and fourth, to the
payment of the Principal Indebtedness.
2
<PAGE>
9. Extension. The time for any payment required under this Promissory
Note may be extended from time to time at the election of Lender. Acceptance by
Lender of additional security or guarantees for the performance of the terms and
provisions contained in this Promissory Note shall not in any way affect the
liability of Borrower.
10. Governing Law. This Promissory Note shall be governed by and
construed in accordance with the laws of the State of Utah.
11. Interest Limitation. All agreements between the parties to this
Promissory Note and the holder of this Promissory Note are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
deferment or advancement of the proceeds of the Loan evidenced by this
Promissory Note, acceleration of maturity of the Loan, or otherwise shall the
amount paid or agreed to be paid to holder for the use, forbearance or detention
of the money to be loaned under this Promissory Note exceed the maximum interest
rate permissible under applicable law. If, from any circumstance whatsoever,
fulfillment of any provision of this Promissory Note or of any other agreement
between the parties to this Promissory Note and the holder, at the time
performance of such provision shall be due, shall involve transcending the limit
of validity prescribed by law, then, ipso facto, the obligation to be fulfilled
shall be reduced to the limit of such validity. In the event that any payment is
received by the holder of this Promissory Note which would otherwise be deemed
to be a payment of interest in excess of the maximum allowed by law, such
payment shall be deemed to have been paid on account of principal at the time of
receipt. This provision shall never be superseded or waived and shall control
every other provision of this Promissory Note and all agreements between the
parties and the holder of this Promissory Note.
12. Defined Terms. Unless otherwise defined in this Promissory Note,
capitalized terms hereinafter used have the meanings given them in the Loan
Agreement.
DATED: March 31, 2000.
BORROWER
EVANS & SUTHERLAND COMPUTER CORPORATION,
a Utah corporation
By: /S/ R. GAYNOR
Richard J. Gaynor
Vice President and Chief Financial Officer
3
WHEN RECORDED, RETURN TO:
Zions First National Bank
Commercial Loan Department
P.O. Box 25822 One South Main Street
Salt Lake City, Utah 84125
Attention: Michael R. Brough
TRUST DEED,
ASSIGNMENT OF RENTS, SECURITY AGREEMENT
AND FIXTURE FILING
This Trust Deed, Assignment of Rents, Security Agreement and Fixture
Filing (the "Trust Deed") is made and executed this 31st day of May, 2000 (the
"Closing Date"), by Evans & Sutherland Computer Corporation, a Utah corporation
("Trustor") to Zions First National Bank, a national banking association
("Trustee"), in favor of Zions First National Bank, a national banking
association ("Beneficiary").
Beneficiary is making a loan to Trustor in an amount of up to Fifteen
Million Dollars ($15,000,000.00) (the "Loan"). The Loan is evidenced by the
Promissory Note dated the Closing Date in the original principal amount of the
Loan (the "Note"). The Loan will be advanced under a Loan Agreement between
Trustor and Beneficiary dated the Closing Date (the "Loan Agreement").
In exchange for good and valuable consideration, the sufficiency and
receipt of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1 GRANT AND CONVEYANCE
1.1 General Grant. Trustor hereby assigns, grants, bargains, sells,
conveys, warrants, and transfers to Trustee in trust, for the benefit of
Beneficiary, with power of sale, and right of entry and possession, the
following described interests in real property (the "Real Property"):
1.1.1 Real Property. All of the leasehold right, title,
interest and estate of Trustor, now owned or hereafter acquired, in and to the
real property located in Salt Lake County, State of Utah (the "Property") as
more particularly described in Exhibit A attached hereto and incorporated herein
by this reference, which leasehold interest is created pursuant to the following
ground lease agreements entered into between the University of Utah, a body
corporate and politic ("Ground Lessor"), as lessor, and Trustor, as lessee
(collectively the "Ground Lease"): (i) Lease Agreement dated November 21, 1972,
as amended by an Addendum to Lease Agreement dated November 21, 1972, a Second
Addendum to Lease Agreement dated June 4, 1973, a Third Addendum to Lease
Agreement dated December 7, 1973, and a Fourth Addendum to Lease Agreement dated
September 12, 1979, all entered into between Ground Lessor, as lessor, and
Mountain Co-Venture, a general partnership, as lessee, and as amended by a Fifth
Addendum to Lease Agreement dated April 9, 1987 entered into between Ground
Lessor, as lessor, and Trustor, as lessee, wherein Ground Lessor leases a
portion of the Property known as Building 540 to Trustor; (ii) Lease Agreement
dated September 4, 1979 entered into between Ground Lessor, as lessor, and Tri
Venture, a general partnership, as lessee, as amended by a First Addendum to
Lease Agreement dated April 9, 1987, and a Second Addendum to Lease Agreement
<PAGE>
dated December 31, 1990, all entered into between Ground Lessor, as lessor, and
Trustor, as lessee, wherein Ground Lessor leases a portion of the Property known
as Building 560 to Trustor; (iii) Lease Agreement dated November 21, 1973, as
amended by a First Addendum to Lease Agreement dated May 24, 1974, a Second
Addendum to Lease Agreement dated March 23, 1977, a Third Addendum to Lease
Agreement dated September 12, 1979, all entered into between Ground Lessor, as
lessor, and Park Enterprises, a general partnership, as lessee, and as amended
by a Fourth Addendum to Lease Agreement dated April 9, 1987 entered into between
Ground Lessor, as lessor, and Trustor, as lessee, wherein Ground Lessor leases a
portion of the Property known as Building 580 to Trustor; (iv) Lease Agreement
dated April 9, 1987, as amended by a First Addendum to Lease Agreement dated
December 31, 1990, all entered into between Ground Lessor, as lessor, and
Trustor, as lessee, wherein Ground Lessor leases a portion of the Property known
as Building 600 to Trustor; (v) Lease Agreement dated September 5, 1980 entered
into between Ground Lessor, as lessor, and Black Hawk Investment Company, a
general partnership, as lessee, and as amended by a First Amendment to Lease
Agreement dated June 7, 1982, a Second Amendment to Lease Agreement dated
September 28, 1982, a Third Addendum to Lease Agreement dated April 9, 1987, and
a Fourth Addendum to Lease Agreement dated December 31, 1990, all entered into
between Ground Lessor, as lessor, and Trustor, as lessee, wherein Ground Lessor
leases a portion of the Property known as Building 650 to Trustor; (vi) Lease
Agreement dated April 1, 1988, as amended by a First Addendum to Lease Agreement
dated December 31, 1990, all entered into between Ground Lessor, as lessor, and
Trustor, as lessee, wherein Ground Lessor leases a portion of the Property known
as Building 770 to Trustor; and (vii) Lease Agreement dated December 31, 1990
entered into between Ground Lessor, as lessor, and Trustor, as lessee, wherein
Ground Lessor leases a portion of the Property known as Building 790 to Trustor.
1.1.2 Buildings, Improvements and Interests. All right, title,
interest and estate of Trustor, now owned or hereafter acquired, in and to: (a)
All buildings, improvements, works, structures, facilities and fixtures,
including any future additions to, and improvements and betterments now or
hereafter constructed upon, and all renewals and replacements of, any of the
foregoing, which are now or hereafter shall be constructed or affixed or
constructively affixed to the Property, or to any portion of the Property (the
"Improvements"); (b) All easements, licenses, streets, ways, alleys, roads,
passages, rights-of-way, minerals, oil, gas and other hydrocarbon substances,
development rights, air rights, water, water courses, water rights, and water
stock (whether now owned or hereafter acquired by Trustor and whether arising by
virtue of land ownership, contract or otherwise), of any kind and nature,
relating to or in any way appurtenant or appertaining to the Property or to any
portion of the Property.
1.1.3 Tenements, Hereditaments. All right, title, interest and
estate of Trustor, now owned or hereafter acquired, in and to all of the
tenements, hereditaments, rights, privileges, and appurtenances belonging,
relating, or in any way appertaining to any of the Property or the Improvements,
or any portion of the Property or the Improvements, or which shall hereafter in
any way belong, relate, or in any way appertain thereto, whether now owned or
<PAGE>
hereafter acquired, and the reversion and reversions, remainder and remainders,
and estates, rights, titles, interests, possessions, claims, and demands of
every nature whatsoever, at law or in equity, which Trustor may have or may
hereafter acquire in and to the Property, the Improvements, or any portion
thereof.
1.1.4 Leases, Rents, Issues, Etc. All right, title, interest
and estate of Trustor, now owned or hereafter acquired, in and to all leases and
subleases of all or any portion of the Property or the Improvements now or
hereafter existing or entered into, and all lease agreements and documents
evidencing the same; and all right, title and interest of Trustor thereunder,
including without, limitation, all rents, subrents, and other amounts received
for use of any portion of the Property, including the Improvements, and all
proceeds from such rents, issues, royalties, security deposits, income and
profits of and from the Property, the Improvements, or any portion thereof.
1.2 Security Interest. Trustor hereby assigns and grants to Beneficiary
a security interest in the following described property (collectively the
"Personalty"), whether now or hereafter existing, and in which Trustor now has
or hereafter obtains any right, title, estate or interest, but only to the
extent of Trustor's ownership interest therein, together with all additions and
accessions thereto and all rents and proceeds thereof:
1.2.1 Tangible Personal Property. All right, title, interest
and estate of Trustor, now owned or hereafter acquired, in and to: (a) All
goods, inventory, specifically including, without limitation, materials,
furnishings and supplies, whether stored on or off the Property, delivered to
the Property for incorporation or use in any construction, renovation, operation
or maintenance of the Property or the Improvements, supplies, furnishings,
construction materials, equipment, vehicles, machinery, appliances, including
attached and unattached appliances, and other tangible personal property and
fixtures located in or upon the Property or the Improvements and used or useable
in connection therewith, or to be used in the construction, reconstruction,
remodeling, or repair of any of the Improvements now or hereafter located upon
the Property, however, specifically excluding any goods or inventory embodying
or incorporating the intellectual property of Trustor, including any copyrights,
patents, or trade secrets; (b) All furniture, fixtures and equipment as
equipment is defined in the Uniform Commercial Code, wherever located, and all
related right, title and interest of Trustor, now owned or hereafter acquired or
created, all proceeds and products of the foregoing and all additions and
accessions to, replacements of, insurance or condemnation proceeds of, and
documents covering any of the foregoing, all leases of any of the foregoing, and
all rents, revenues, issues, profits and proceeds arising from the sale, lease,
license, encumbrance, collection, or any other temporary or permanent
disposition of any of the foregoing or any interest therein, (c) All
architectural, development, construction and construction cost guarantee
contracts or bonds entered into in connection with the improvement of the
Property, all plans and specifications, building or use permits, subdivision
plats and any related subdivision development requirements and specifications
prepared by the engineer thereunder, relating to the construction, development,
ownership or maintenance of the Property or the Improvements; (d) All
engineering reports, surveys, soil reports and other documents relating to the
Property; (e) All modifications, parts, accessories, and accessions to each and
all of the foregoing and all renewals and replacements thereof; and (f) All
proceeds of each of the foregoing.
<PAGE>
1.2.2 Permits, Names, Rights, Etc. All right, title interest
and estate of Trustor, now owned or hereafter acquired, in and to: (a) All
contracts, permits, franchises, privileges, grants, consents, licenses,
authorizations, and approvals heretofore or hereafter granted by the United
States, by the State of Utah or by any departments or agencies thereof or any
other governmental or public bodies, agencies or authorities, to or for the
benefit of Trustor and utilized in connection with the Property and the
Improvements thereon or to be constructed thereon, to the extent the same are
transferable and subject to all terms, covenants and conditions thereof and to
applicable law; (b) All names under or by which the Property or any of the
Improvements may at any time be operated or known, and all rights to carry on
business under any such names or any variant thereof, and all service marks,
trademarks and goodwill in any way relating to Trustor's ownership and operation
of the Property; (c) All contracts, contract rights, rights to payment, general
intangibles, except to the extent that such general intangibles constitute or
consist of Borrower's patents, copyrights, trade secrets or other intellectual
property, documents, instructions, accounts, water stock arising in connection
with Trustor's ownership, legal or equitable claims, judgments, and awards now
or hereafter accruing to the benefit of Trustor respecting the Property and the
Improvements, specifically including, without limitation, all architectural,
development and construction contracts, and all construction cost guarantee
contracts relating to the Property or the Improvements; (d) All shares of stock,
partnership interests, or other evidence of ownership of any part of the
Property or the Improvements that is owned by Trustor in common with others; (e)
All documents and rights of membership in any owners' or members' association or
similar group having responsibility for managing or operating any part of the
Property; and (f) All amendments, modifications, additions, accessions,
substitutions, replacements and renewals to any of the foregoing and all
proceeds of the foregoing, whether voluntary or involuntary, including without
limitation, insurance proceeds.
1.2.3 Awards. All right, title, interest and estate of
Trustor, now owned or hereafter acquired, in and to: (a) All awards made for the
taking by eminent domain or by any proceeding or purchase in lieu thereof of the
Property or any portion of the Property, the Improvements or any portion of the
Improvements, or of any other Improvements now or hereafter situate thereon or
any estate or easement in the Property (including any awards for change of grade
of streets); (b) All insurance policies and all proceeds of insurance paid on
account of any partial or total destruction of the Improvements or any portion
thereof; (c) All causes of action and recoveries for any loss or diminution in
the value of the Property or the Improvements; and (d) All proceeds of each of
the foregoing.
1.2.4 Plans and Utility Taps. All right, title, interest and
estate of Trustor, now owned or hereafter acquired, in and to: All Plans and any
and all replacements, modifications, and amendments thereto and any and all
contracts, agreements or commitments between Trustor and any utility company,
water company or user association, or telephone company, to furnish electricity,
natural gas or oil, telephone, sewer, water or other such services, or to
provide hook-ups, connections, lines or other necessary taps to the Property and
the Improvements thereon. Trustor, upon a default, past any applicable cure or
grace period, under the Loan Documents, hereby irrevocably appoints Beneficiary
as Trustor's true and lawful attorney-in-fact to execute, acknowledge and
deliver any instruments and to do and perform any act in the name and on behalf
of Trustor necessary to maintain and continue all contracts, agreements or
<PAGE>
commitments with any such utility company and, otherwise, to perform all acts
necessary to assure uninterrupted utility service to the Property and the
Improvements thereon.
1.2.5 Loan Proceeds. All right, title, interest and estate of
Trustor, now owned or hereafter acquired, in and to all proceeds of the Loan
made by Beneficiary to Trustor which proceeds are held by Beneficiary, whether
or not disbursed.
1.2.6 Contracts. All right, title, interest and estate of
Trustor, now owned or hereafter acquired, under any other contract, subcontract
or agreement which have been or shall hereinafter be entered into relating to
the construction, development, sale, lease, operation, or use of all or a
portion of the Property or the Improvements.
1.2.7 General Intangibles. Excepting only intellectual
property rights and licenses, all general intangibles of Trustor, presently
existing or hereafter arising, including general intangibles as defined in the
Uniform Commercial Code, choses in action, proceeds, contracts, distributions,
dividends, refunds, security deposits, judgments, insurance claims, any right to
payment of any nature, any other rights or assets of Trustor customarily or for
accounting purposes classified as general intangibles, and all documentation and
supporting information related to any of the foregoing, all rents, profits and
issues thereof, and all proceeds thereof.
1.3 Security Agreement. This Trust Deed constitutes a Security
Agreement with respect to the Personalty, and Beneficiary shall have all of the
rights and remedies of a secured party under the Loan Documents and the Utah
Uniform Commercial Code as well as all other rights and remedies available at
law or in equity. Trustor and Beneficiary acknowledge their mutual intent that
all security interests contemplated herein are given as a contemporaneous
exchange for new value to Trustor, regardless of when advances to Trustor are
actually made or when the Trust Estate is acquired.
1.4 Trust Estate. The Real Property and the Personalty are
sometimes hereinafter collectively referred to as the "Trust Estate".
1.5 Fixture Filing. This Trust Deed constitutes a fixture filing
pursuant to Article 9 of the Utah Uniform Commercial Code, Utah Code Ann.
Section 70A-9-101, et. seq. The addresses of the secured party (Beneficiary) and
the debtor (Trustor) are set forth in Section 12.1 of this Trust Deed. This
Trust Deed is to be recorded in the real estate records in the County Recorder's
office of the county in which the Real Property is located. Ground Lessor is the
record owner of the Real Property and Trustor owns a leasehold interest in the
Real Property.
ARTICLE 2 OBLIGATION SECURED
2.1 Obligations. This Trust Deed is given for the purpose of securing
the following obligations (collectively the "Obligations") of Trustor:
2.1.1 Note. The payment and performance of each and every
agreement and obligation under the Note, including without limitation, the
payment of principal and interest under the Note when and as due.
<PAGE>
2.1.2 Business Credit Card Obligations. The payment and
performance of each and every agreement and obligation pursuant to all business
credit card accounts issued by Beneficiary to, at the require of, or for the
benefit of Trustor.
2.1.3 Other Loan Documents. The payment and performance of
each and every agreement and obligation of Trustor under this Trust Deed, the
Note, the Loan Agreement, and any other Loan Document.
2.1.4 Advances by Trustee or Beneficiary. The payment of all
sums expended and advanced by Trustee or Beneficiary pursuant to the terms of
this Trust Deed, the Loan Agreement, or any other Loan Document, together with
interest thereon as provided in this Trust Deed.
2.1.5 Extensions, Etc. The payment and performance of any
extensions of, renewals of, modifications of, or additional advances under the
Note, or any of the obligations evidenced by the Note, regardless of the extent
of or the subject matter of any such extension, renewal, modification or
additional advance.
2.1.6 Other Obligations. The payment and performance of any
other note or obligation reciting that it is secured by this Trust Deed.
2.1.7 Revolving Line of Credit. The Loan shall be a revolving
line of credit under which Trustor may repeatedly draw and repay funds, so long
as no Event of Default has occurred under this Trust Deed or under the Loan
Agreement or any other Loan Document, and so long as the aggregate, outstanding
Principal Indebtedness at any time does not exceed the principal amount of the
Note. Disbursements under the Note shall be made in accordance with the Loan
Agreement. If, at any time prior to the maturity of the Note, the Note shall
have a zero balance owing, this Trust Deed shall not be deemed satisfied or
terminated but shall remain in full force and effect for future draws unless
terminated upon other grounds.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
3.1 Property. Trustor represents and warrants to Beneficiary as
follows:
3.1.1 Title. To the best of Trustor's actual knowledge, Ground
Lessor is the owner of fee simple marketable title in and to the Real Property
and Trustor owns a leasehold interest in the Real Property pursuant to the terms
of the Ground Lease.
3.1.2 Defense of Leasehold. Trustor shall defend its leasehold
interest in the Real Property and the Improvements against all claims and
demands whatsoever.
3.1.3 Exceptions to Title. With the exception of such
exceptions to title as are identified in the Loan Agreement as Permitted
Encumbrances, if any (the "Permitted Encumbrances"), the Property and the
Improvements are free and clear of all liens, claims, encumbrances,
restrictions, encroachments and interests whatsoever in favor of any third
party.
<PAGE>
3.1.4 Lien Priority. With the exception of the Permitted
Encumbrances, the lien created by this Trust Deed upon the Property and the
Improvements is a good and valid first lien, free and clear of all adverse
liens, encumbrances and exceptions.
3.1.5 Hazardous Material. No Hazardous Materials have been
stored, or improperly used, disposed of, discarded, dumped, or abandoned by any
person or entity on, in or under the Property or the Improvements in violation
of any Environmental Laws. Trustor has complied with all applicable federal,
state and local laws, rules, ordinances and regulations relating to the storage,
transportation, and disposal of Hazardous Materials on, in or under the Property
or the Improvements.
3.1.6 Ground Lease. The Ground Lease is in good standing and
in full force and effect. No default has occurred under the Ground Lease and no
conditions exist nor have any events occurred which with the giving of notice,
the passage of time, or both, would constitute a default under the Ground Lease.
3.2 Personalty. Trustor further represents and warrants to
Beneficiary as follows:
3.2.1 Owner of Personalty. Trustor is the owner, or upon
acquisition thereof, will be the owner of the Personalty.
3.2.2 No Prior Liens. The Personalty is, or upon acquisition
thereof by Trustor, will be free and clear of all liens, claims, encumbrances,
restrictions, charges, and security interests in favor of any third party except
for the Permitted Encumbrances.
3.3 Location of Personalty. The Personalty associated with the Real
Property will be located in the State of Utah, and other than temporary (not to
exceed three (3) months) uses outside that state in the ordinary course of
Trustor's business, will not be removed from that state without the prior
written consent of Beneficiary.
ARTICLE 4 MAINTENANCE OF TRUST ESTATE
4.1 Maintenance. Trustor shall do each of the following, enforce its
rights under the Ground Lease, and to the extent of its ability, cause Ground
Lessor to do each of the following: (a) maintain the Trust Estate at all times
in good condition and repair; (b) not commit any material waste of the Trust
Estate, or remove, damage, demolish, or structurally alter any of the
Improvements; (c) complete promptly and in good and workmanlike manner any
Improvement on the Property; (d) except to the extent that insurance proceeds
are applied by Beneficiary to the satisfaction of the Obligations in accordance
with Article 5, restore promptly and in good and workmanlike manner any of the
Improvements or any portion thereof, which may for any reason be materially
damaged or destroyed; (e) comply at all times with all laws, ordinances,
regulations, covenants, and restrictions in any manner affecting the Trust
Estate; (f) not commit or permit any act upon the Trust Estate in violation of
law; and (g) do all acts which by reason of the character or use of the Trust
Estate may be reasonably necessary to maintain and care for the same, the
specific enumeration herein not excluding the general.
<PAGE>
ARTICLE 5 INSURANCE
5.1 Insurance. Trustor shall secure and maintain in force on the Trust
Estate (a) multi-peril property insurance; (b) public liability insurance; (c)
worker's compensation insurance; (d) flood insurance (unless Trustor provides
Beneficiary with evidence satisfactory to Beneficiary that no part of the Trust
Estate is located within an area designated by the Department of Housing and
Urban Development as a flood hazard area); and (e) such other insurance as may
be required by the Loan Agreement or by law. All such insurance policies must
cover all risks reasonably required to be covered by Beneficiary, comply with
any requirements set forth in the Loan Agreement and be approved by Beneficiary
as to amount, form, terms, deductibles and insurer. All such policies of
insurance shall name Beneficiary as an additional insured or loss payee, as
appropriate. All such insurance policies shall contain a provision that such
policies will not be cancelled or amended, which term shall include any
reduction in the scope or limits of coverage, without at least thirty (30) days
prior written notice to Beneficiary.
5.2 Notice of Casualty. In the event of loss or damage to the Trust
Estate, or any portion of the Trust Estate, Trustor shall immediately give
notice thereof to Beneficiary.
5.3 Proceeds of Insurance. All proceeds of insurance on the Trust
Estate, and all causes of action, claims, compensation, awards and recoveries
for any damage, condemnation or taking of all or any part of the Trust Estate,
or for any damage or injury to it or for any loss or diminution in the value of
the Trust Estate, are hereby assigned to and shall be paid to Beneficiary,
except as otherwise provided in the Loan Agreement. Beneficiary may participate
in any suits or proceedings relating to any such proceeds, causes of action,
claims, compensation, awards or recoveries.
5.4 Disposition of Policies on Foreclosure. In the event Beneficiary
exercises the power of sale or foreclosure provisions of this Trust Deed or
makes any other transfer of title or assignment of the Trust Estate in
extinguishment in whole or in part of the Obligations, all right, title and
interest of Trustor in and to the policies of insurance required by Section 5.1
of this Trust Deed shall inure to the benefit of and pass to the transferee of
the interests conveyed under this Trust Deed or to the purchaser at the
foreclosure sale, as the case may be.
ARTICLE 6 INDEMNIFICATION AND OFF-SET
6.1 Indemnification. Trustor hereby indemnifies and holds Beneficiary
harmless in accordance with the following:
6.1.1 General Indemnification. Trustor shall indemnify and
hold Beneficiary harmless from any and all losses, damages, claims, causes of
action, suits, debts, obligations, or liabilities which arise from or are
related to, the Note, the Loan Agreement, this Trust Deed, any other Loan
Documents evidencing or securing the Note, or the construction, use or
occupation of the Trust Estate, or any part thereof, or the Property, except for
claims based upon Beneficiary's gross negligence or willful misconduct. If
Beneficiary commences an action against Trustor to enforce any of the terms,
covenants or conditions of this Trust Deed or because of the breach by Trustor
<PAGE>
of any of the terms, covenants, or conditions, or for the recovery of any sum
secured hereby, Trustor shall pay to Beneficiary reasonable attorneys fees and
costs actually incurred by Beneficiary. The right to such attorneys fees and
costs shall be deemed to have accrued on the commencement of such action, and
shall be enforceable whether or not such action is prosecuted to judgment. If
Trustor breaches any term, covenant or condition of this Trust Deed, Beneficiary
may employ an attorney or attorneys to protect Beneficiary's rights hereunder
and in the event of such employment following any breach of Trustor, Trustor
shall pay Beneficiary reasonable attorneys fees and costs actually incurred by
Beneficiary, whether or not action is actually commenced against Trustor by
reason of such material breach.
6.1.2 Mechanics Liens. If Beneficiary or the Property is held
liable or could be held liable for, or is subject to any losses, damages, costs,
charges or expenses, directly or indirectly on account of any claims for work,
labor, or material furnished in connection with or arising from the construction
of any building, fixture and improvements, then Trustor shall indemnify, defend
and hold Beneficiary harmless from all liability or expense arising therefrom
including reasonable attorneys fees and costs.
6.1.3 Hazardous Materials. Trustor hereby agrees to indemnify,
hold harmless and defend (by counsel of Beneficiary's choice) Beneficiary, its
directors, officers, employees, agent, successors and assigns from and against
any and all claims, losses, damages, liabilities, fines, penalties, charges,
administrative and judicial proceedings and orders, judgments, remedial action
requirements, enforcement actions of any kind, and all costs and expenses
incurred in connection therewith (including but not limited to attorneys' fees
and expenses), arising directly or indirectly, in whole or in part, out of (a)
the presence on or under the Property of any Hazardous Materials, or any
releases or discharges of any Hazardous Materials on, under or from the
Property, or (b) any activity carried on or undertaken on or off the Property,
whether prior to or during the term of the Loan, and whether by Trustor or any
predecessor in title or any employees, agents, contractors or subcontractors of
Trustor or any predecessor in title, or any third persons at any time occupying
or present on the Property, in connection with the handling, treatment, removal,
storage, decontamination, clean-up, transport or disposal of any Hazardous
Materials at any time located or present on or under the Property. The foregoing
indemnity shall further apply to any residual contamination on or under the
Property, or affecting any natural resources, and to any contamination of any
property or natural resources arising in connection with the generation, use,
handling, storage, transport or disposal of any such Hazardous Materials, and
irrespective of whether any of such activities were or will be undertaken in
accordance with applicable laws, regulations, codes and ordinances. Trustor
hereby acknowledges and agrees that, notwithstanding any other provision of this
Trust Deed or any of the other Loan Documents to the contrary, the obligations
of Trustor under this Section 6.1.3 shall be unlimited personal obligations of
Trustor and shall survive any foreclosure under this Trust Deed, any transfer in
lieu thereof, and any satisfaction of the obligations of Trustor in connection
with the Loan. Trustor acknowledges that Beneficiary would not extend the Loan
but for the personal liability undertaken by Trustor for the obligations under
this Section 6.1.3.
6.2 Off-Set. All sums payable by Trustor under the Note and this Trust
Deed shall be paid without notices, demand, counterclaim, set-off, deduction or
defense and without abatement, suspension, deferment, diminution or reduction.
The Obligations and liabilities of Trustor hereunder shall in no way be
<PAGE>
released, discharged or otherwise affected (except as expressly provided herein)
by reason of: (a) any damage to or destruction of, or any condemnation or
similar taking of the Trust Estate or any part thereof; (b) any destruction or
prevention of or interference with any use of the Trust Estate or any part
thereof; (c) any title defect or encumbrance or any eviction from the Trust
Estate or any part thereof by title paramount or otherwise; (d) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation or
other like proceeding relating to Beneficiary, or any action taken with respect
to this Trust Deed by any trustee or receiver of Beneficiary, or by any court,
in any such proceeding; (e) any claim which Trustor has or might have against
Beneficiary; (f) the occurrence of an Event of Default or any default or failure
on the part of Beneficiary to perform or comply with any of the terms, covenants
or conditions of this Trust Deed beyond any applicable grace or cure period or
of any other agreement with Trustor; or (g) any other occurrence whatsoever,
whether similar or dissimilar to the foregoing.
ARTICLE 7 TAXES AND IMPOSITIONS
7.1 Payment of Taxes and Impositions. Trustor shall pay, or cause
Ground Lessor to pay, prior to delinquency, all real property taxes and
assessments, general and special, and all other taxes, assessments and other
governmental, municipal, or other charges or impositions of any kind or nature
whatsoever (including without limitation, charges and assessments on water or
water stocks used on or with the Property and levies or charges resulting from
covenants, conditions and restrictions affecting the Trust Estate) which are
assessed or imposed upon the Trust Estate, or become due and payable, and which
create, may create, or appear to create, a lien upon the Trust Estate or any
portion of the Trust Estate, or upon any equipment or other facility used in the
construction, operation or maintenance of the Trust Estate (all of which taxes,
assessments and other governmental charges of like nature are referred to as the
"Impositions"); provided, however, that if, by law, any such Imposition is
payable, or may at the election of the taxpayer be paid in installments, Trustor
may pay the same together with any accrued interest on the unpaid balance of
such Imposition in installments as the same become due and before any fine,
penalty, interest or cost may be added thereto for the nonpayment of any such
installment and interest.
7.2 Evidence of Payment. Unless such Imposition is paid directly by
Beneficiary pursuant to Section 8.4 of this Trust Deed, Trustor shall furnish
Beneficiary, within thirty (30) days after the date upon which such Imposition
is due and payable by Trustor, official receipts of the appropriate taxing
authority, or other proof satisfactory to Beneficiary, evidencing the payment
thereof.
7.3 Right to Contest. Trustor shall have the right before any
delinquency occurs to contest or object to the amount or validity of any
Imposition by appropriate legal proceedings, but such contest shall not be
deemed or construed in any way as relieving, modifying or extending Trustor's
covenant to pay any such Imposition at the time and in the manner provided in
Section 7.1 of this Trust Deed unless Trustor has given prior written notice to
Beneficiary of Trustor's intent to so contest or object to an Imposition, and
unless, at Beneficiary's option, (a) Trustor shall demonstrate to Beneficiary's
satisfaction that the legal proceedings shall conclusively operate to prevent
the sale of the Trust Estate, or any part thereof, to satisfy such Imposition
prior to final determination of such proceedings; or (b) Trustor shall furnish a
<PAGE>
good and sufficient undertaking and sureties or title insurance endorsement as
may be required or permitted by law to accomplish a stay of such proceedings.
ARTICLE 8 ADDITIONAL COVENANTS
8.1 Ground Lease. Trustor shall cause, to the extent of Trustor's
ability, Ground Lessor to perform all of its obligations under the Ground Lease
and maintain the Ground Lease in full force and effect.
8.2 Payment of Utilities. Trustor shall pay, or cause, to the extent of
Trustor's ability, Ground Lessor to pay, when due, all utility charges incurred
by Trustor for the benefit of the Trust Estate or which may become a charge or
lien against the Trust Estate for gas, electricity, water or sewer services
furnished to the Trust Estate and all assessments or charges of a similar
nature, whether public or private, affecting the Trust Estate or any portion
thereof, whether or not such assessments or charges are liens thereon.
8.3 Defense of Title. Trustor has and shall preserve good and
marketable fee title to the Trust Estate free of all liens, claims, charges,
security interests, encumbrances, easements or restrictions other than the
Permitted Encumbrances. Except as provided otherwise in Section 7.3 of this
Trust Deed and with the exception of the Permitted Encumbrances, Trustor shall
promptly discharge and remove any lien or security interest which has, or may
have, priority over or equality with the lien and security interest created by
this Trust Deed. Trustor shall furnish to Beneficiary written notice of any
litigation, default, lien, security interest or notice of default affecting the
Trust Estate or title thereto, within ten (10) days of initial receipt of notice
of such lien, security interest, litigation or default. Trustor shall appear in
and defend any action or proceeding purporting to affect the security hereof,
the Trust Estate, or the rights or powers of Beneficiary or Trustee. Should
Beneficiary elect to appear in or defend any such action or proceeding, Trustor
shall pay all reasonable costs and expenses, including costs of evidence of
title and reasonable attorney fees and costs, incurred by Beneficiary or
Trustee. Trustor shall, at its cost, do, execute, acknowledge, and deliver all
further deeds, conveyances, trust deeds, assignments, notices of assignments,
security agreements, financing statements, transfers, acts and assurances as
Beneficiary shall from time to time reasonably require, for the better
perfecting, continuing, assuring, granting, conveying, assigning, transferring,
and confirming unto Trustee and Beneficiary the Trust Estate, and all rights
hereby granted, conveyed or assigned or intended now or hereafter so to be, or
which Trustor may be or may hereafter become bound to grant, convey or assign to
Trustee or Beneficiary, or for carrying out the intention or facilitating the
performance of the terms of the Note or the other Loan Documents.
8.4 Reserves for Taxes and Insurance. In furtherance of Article 5 and
Article 7 of this Trust Deed and anything to the contrary herein
notwithstanding, if any Event of Default shall occur and be continuing, and at
Beneficiary's written request, Trustor shall deposit with Beneficiary in a
non-interest bearing account, on the first day of each month, until the Note is
paid in full, an amount equal to one-twelfth of the annual Impositions, as
defined in Article 7, as reasonably estimated by Beneficiary to pay the
installment of Impositions next due on the Trust Estate, and one-twelfth of the
estimated annual aggregate insurance premiums on all policies of insurance
required in Article 5. In such event, Trustor shall cause all bills, statements
<PAGE>
or other documents relating to the Impositions and insurance premiums to be sent
to Beneficiary. Providing Trustor has deposited sufficient funds with
Beneficiary pursuant to this Section 8.4, Beneficiary shall pay such amounts as
may be due thereunder out of the funds so deposited with Beneficiary. If at any
time and for any reason the funds deposited with Beneficiary are or will be
insufficient to pay such amounts as may then or subsequently be due, Beneficiary
shall notify Trustor and Trustor shall immediately deposit an amount equal to
such deficiency with Beneficiary. Nothing contained herein shall cause
Beneficiary to be deemed a trustee of such funds deposited with Beneficiary
pursuant to this Section 8.4. Beneficiary shall not be obligated to pay any
interest on any sums held by Beneficiary pending disbursement or application
hereunder, and Beneficiary may impound or reserve for future payment of
Impositions and insurance premiums such portion of such payments as Beneficiary
may, in Beneficiary's absolute discretion, deem proper, applying the balance on
the principal of or interest on the Obligations secured hereby. Should Trustor
fail to deposit with Beneficiary (exclusive of that portion of the payments
which has been applied by Beneficiary on the principal of or interest on the
Note) sums sufficient to fully pay such Impositions and insurance premiums at
least thirty (30) days before delinquency thereof, Beneficiary, at Beneficiary's
election, but without any obligation to do so, may advance any amounts required
to make up the deficiency, which advances, if any, shall be secured by this
Trust Deed and shall bear interest and be repayable to Beneficiary in the manner
specified in Section 8.6 of this Trust Deed.
8.5 Performance in Trustor's Stead. Should Trustor fail to make any
payment or to do any act as provided in this Trust Deed, then Beneficiary or
Trustee, but without any obligation to do so, and without notice to or demand
upon Trustor and without releasing Trustor from any obligation hereof, may: (a)
make or do the same in such manner and to such extent as either may deem
necessary to protect the security hereof (Beneficiary or Trustee being
authorized to enter upon the Trust Estate for such purposes); (b) commence,
appear in and defend any action or proceeding purporting to affect the security
hereof or the rights or powers of Beneficiary or Trustee; or (c) pay, purchase,
contest, or compromise any encumbrance, charge or lien which in the judgment of
either appears to be superior to the lien of this Trust Deed; and in exercising
any such powers, incur any liability, or expend such reasonable amounts as
Beneficiary may reasonably deem necessary therefor, including costs of evidence
of title, employment of attorneys, and payment of reasonable attorney fees and
costs. All such amounts expended by either or both Trustee or Beneficiary shall,
at the election of Beneficiary, be added to the principal indebtedness secured
by this Trust Deed and shall accrue interest in accordance with the terms of the
Note. Trustor hereby waives and releases all claims or causes of action which
may hereafter arise in favor of Trustor against Beneficiary by reason of any
action taken by Beneficiary pursuant to any power or authority granted in this
Section 8.5, except for Beneficiary's gross negligence or wilful misconduct.
8.6 Repayment of Advances. Trustor shall immediately repay to
Beneficiary sums, with interest thereon as provided in the Note, which at any
time may be paid or advanced by Beneficiary for the payment of insurance
premiums, Impositions, title searches, title reports or abstracts, and any other
advances made by Beneficiary which are reasonably necessary or desirable to
maintain this Trust Deed as a prior, valid, and subsisting lien upon the Trust
Estate, to preserve and protect Beneficiary's interest in this Trust Deed or to
preserve, repair, or maintain the Trust Estate. All such advances shall be
wholly optional on the part of Beneficiary, and Trustor's obligation to repay
<PAGE>
the same, with interest, to Beneficiary shall be secured by the lien of this
Trust Deed.
8.7 No Removal of Fixtures. Trustor shall not, and shall cause, to the
extent of Trustor's ability, Ground Lessor to not, during the existence of this
Trust Deed and without the written consent of Beneficiary, remove from the Real
Property or the Improvements, any fixture, structure, or other improvement at
any time affixed or constructively affixed to the Real Property or the
Improvements or any portion thereof, or any Personalty, except in the ordinary
course of Trustor's business.
8.8 Further Assurance. Trustor shall execute and deliver to Beneficiary
such further instruments, including without limitation Uniform Commercial Code
Financing Statements and Continuation Statements, and do such further acts as
may be necessary or as may be reasonably required by Beneficiary to carry out
more effectively the purposes of this Trust Deed and to subject to the lien,
security interest and mortgage created or intended to be created hereby any
property, rights, or interests covered or intended to be covered by this Trust
Deed. From and after the occurrence of an Event of Default, Trustor authorizes
(to the extent such authorization is valid under applicable law) Beneficiary to
execute and file, without Trustor's signature, such Uniform Commercial Code
Financing Statements and Continuation Statements as Beneficiary may deem
necessary in order to perfect, or continue the perfection of, the security
interests created by this Trust Deed.
8.9 Attornment. Trustor shall assign to Beneficiary, as additional
security for Trustor's performance of the Obligations, any and all existing or
future lease agreements entered into by Trustor, as landlord, which pertain to
the Property or the Improvements, or any portion thereof, and all such leases
shall contain a covenant on the part of the tenant thereunder, enforceable by
Beneficiary, obligating such tenant, upon request of Beneficiary, to attorn to
and become a tenant of Beneficiary, or any purchaser from Trustee or through
foreclosure of this Trust Deed, for the unexpired term, and subject to the terms
and conditions, of such future lease agreements. The assignments of lease shall
be in form and content satisfactory to Beneficiary.
8.10 No Further Encumbrances. As an express condition of Beneficiary
making the loan secured by this Trust Deed, Trustor shall not further encumber,
pledge, mortgage, hypothecate, place any lien, charge or claim upon, or
otherwise give as security the Trust Estate or any interest therein nor cause or
allow by operation of law the encumbrance of the Trust Estate or any interest
therein without the written consent of Beneficiary even though such encumbrance
may be junior to the encumbrance created by this Trust Deed. Encumbrance of the
Trust Estate contrary to the provisions of this Section 8.10 without the express
written consent of Beneficiary, shall constitute an Event of Default and at
Beneficiary's option, Beneficiary may declare the entire balance of principal
and interest immediately due and payable, whether the same be created by Trustor
or an unaffiliated third party asserting a judgment lien, mechanic's or
materialmen's lien or any other type of encumbrance or title defect.
8.11 Due on Sale. Other than (a) a transfer by devise, descent or by
operation of law upon the death of a joint tenant; (b) a transfer of Personalty
in the ordinary course of Trustor's business; or (c) the grant of any leasehold
interest of ten (10) years or less not containing an option to purchase, Trustor
<PAGE>
shall not sell, convey or otherwise transfer the Trust Estate or any part
thereof or interest therein, without the prior written consent of Beneficiary,
except as authorized in the Loan Agreement. If the Trust Estate, or any part
thereof, or any interest therein, is sold, conveyed or otherwise transferred
without the prior written consent of Beneficiary, or if Trustor be divested of
title to the Trust Estate, or any part thereof or interest therein, in any
manner, whether voluntarily or involuntarily, then the full principal
indebtedness of the Note and the other Obligations, at the option of Beneficiary
and without demand or notice, shall immediately become due and payable.
8.12 Evidence of Title. Trustor shall deliver to, pay for and maintain
with Beneficiary until the indebtedness secured hereby is paid in full, such
evidence of title as Beneficiary may require, including abstracts of title or
policies of title insurance and any extensions or renewals thereof or
supplements or endorsements thereto.
8.13 Additional Collateral. If, at any time, the value of all of the
Trust Estate, based on an MAI appraisal acceptable to Beneficiary, is not
sufficient to establish a ratio between the total amount of the Obligations then
due and owing and the value of all of the Trust Estate equal to or less than one
hundred percent (100%), Trustor shall provide Beneficiary with such additional
collateral as is necessary so that the total value of all collateral securing
Trustor's performance of the Obligations is sufficient to establish a ratio
between the total amount of the Obligations then due and owing and the value of
all such collateral of no more than one hundred percent (100%).
8.14 Compliance With Laws. Trustor shall comply, and shall enforce its
rights under the Ground Lease and cause Ground Lessor to comply, with all laws,
ordinances, regulations, easement agreements, covenants, conditions, and
restrictions (including laws relating to hazardous wastes and/or protection of
the environment, or species of plants or animals protected by federal, state,
local or other law) affecting the Trust Estate. Trustor shall not cause, permit
nor suffer any violation of any of the foregoing and shall pay all response
costs, fees, or charges of any kind in connection therewith and defend,
indemnify, and hold harmless Beneficiary with respect thereto.
8.15 Financial Statements. Trustor shall keep adequate books and
records of account of the Trust Estate and its own financial affairs sufficient
to permit the preparation of financial statements therefrom in accordance with
the requirements of the Loan Agreement. Beneficiary shall have the right to
examine, copy and audit Trustor's records and books of account at all reasonable
times. Trustor shall furnish to Beneficiary copies of its financial statements
and other financial information satisfactory to Beneficiary at the time and in
the manner provided in the Loan Agreement.
8.16 Inspections. Beneficiary, and its agents, representatives and
employees, are authorized, but not obligated, to enter at any reasonable time
upon the Real Property for the purpose of inspecting the same, and for the
purpose of performing any of the acts it or Trustor is authorized to perform
under the terms of this Trust Deed or any other Loan Document.
8.17 No Merger. If the Trust Estate is under any lease or any portion
thereof which constitutes a part of the Trust Estate shall at any time become
vested in one owner, this Trust Deed and the lien created hereby shall not be
destroyed or terminated by application of the doctrine of merger and, in such
<PAGE>
event, Beneficiary shall continue to have and enjoy all of the rights and
privileges of Beneficiary as to the separate estates. In addition, upon the
foreclosure of the lien created by this Trust Deed on the Trust Estate pursuant
to the provisions of this Trust Deed, any leases or subleases then existing and
created by Trustor shall not be destroyed or terminated by application of the
law of merger or as a matter of law or as a result of such foreclosure unless
Beneficiary or any purchaser at any such foreclosure sale shall so elect. No act
by or on behalf of Beneficiary or any such purchaser shall constitute a
termination of any lease or sublease unless Beneficiary or such purchaser shall
give written notice thereof to such tenant or subtenant.
ARTICLE 9 CONDEMNATION AWARDS
If the Trust Estate or any portion thereof should be taken or damaged
by reason of any public improvement or condemnation proceeding, Beneficiary
shall be entitled to all compensation, awards, and other payments or relief
therefor, and shall be entitled at Beneficiary's option to commence, appear in,
and prosecute in Beneficiary's own name any action or proceeding, and to make
any compromise or settlement, in connection with such taking. Trustor shall
promptly give notice to Beneficiary of any condemnation proceeding or any taking
for public improvement. All such compensation, awards, damages, causes of
action, proceeds, or other payments are hereby assigned to Beneficiary, which
may, after deducting therefrom all costs and expenses (regardless of the
particular nature thereof and whether incurred with or without suit or before or
after judgment), including reasonable attorney fees, incurred by Beneficiary in
connection with such compensation, awards, damages, rights of action, proceeds,
or other payments, release any and all moneys so received by Beneficiary or
apply the same, or any portion thereof, on any of the Obligations (whether or
not then due) secured by this Trust Deed. Beneficiary shall have no obligation
to apply proceeds of condemnation to restore or repair damage to the Trust
Estate regardless of whether such taking has a significant adverse impact on the
operation of the remaining portion of the Trust Estate. Trustor shall execute
and deliver to Beneficiary such further assignments of such compensation,
awards, damages, causes of action, proceeds, or other payments as Beneficiary
may from time to time require.
ARTICLE 10 ASSIGNMENT OF LEASES, RENTS AND INCOME
10.1 Assignment. Trustor hereby absolutely assigns to Trustee all
right, title and interest of Trustor in and to all leases now existing or
hereafter entered into by Trustor and demising the whole or any part of the
Trust Estate, and does hereby further assign any and all rents, subrents, and
other amounts received for the use of any portion of the Trust Estate, including
the Improvements, and all proceeds from such rents, covering the Trust Estate or
any portion thereof, now or hereafter existing or entered into, together with
issues, royalties, income, profits and security deposits of and from the Trust
Estate. Until the occurrence of an Event of Default, Trustor may, under a
temporary revocable license granted hereby, collect and use all such rents,
subrents, issues, royalties, income, and profits which become payable prior to
default. Upon the occurrence of an Event of Default, Trustor's license to
collect and use any of such proceeds shall immediately cease without further
action by or on behalf of any party, and Beneficiary shall have the right, with
or without taking possession of the Trust Estate, and either in person, by
<PAGE>
agent, or through a court-appointed receiver (Trustor hereby consents to the
appointment of Beneficiary or Beneficiary's designee as such receiver), to sue
for or otherwise collect all such rents, subrents, issues, royalties, income,
and profits, including those past due and unpaid. Any sums so collected, after
the deduction of all costs and expenses of operation and collection (regardless
of the particular nature thereof and whether incurred with or without suit or
before or after judgment), including reasonable attorney fees, shall be applied
toward the payment of the Obligations. Such right of collection and use of such
proceeds by Beneficiary shall obtain both before and after the exercise of the
power of sale provisions of this Trust Deed, the foreclosure of this Trust Deed
and throughout any period of redemption. The rights granted under this Section
10.1 shall in no way be dependent upon and shall apply without regard to whether
all or a portion of the Trust Estate is in danger of being lost, removed, or
materially injured, or whether the Trust Estate or any other security is
adequate to discharge the obligations secured by this Trust Deed. Beneficiary's
failure or discontinuance at any time to collect any of such proceeds shall not
in any manner affect the right, power, and authority of Beneficiary thereafter
to collect the same. Neither any provision contained herein, nor the
Beneficiary's exercise of Beneficiary's right to collect such proceeds, shall
be, or be construed to be, an affirmation by Beneficiary of any tenancy, lease,
sublease, option, or other interest in the Trust Estate, or an assumption of
liability under, or a subordination of the lien or charge of this Trust Deed to,
any tenancy, lease, sublease, option, or other interest in the Trust Estate. All
tenants, lessees, sublessees and other persons which have any obligation to make
any payment to Trustor in connection with the Trust Estate or any portion
thereof are hereby authorized and directed to pay the rents, subrents, issues,
royalties, income, and profits payable by them with respect to the Trust Estate,
or any part thereof, directly to Beneficiary on the demand of Beneficiary.
Beneficiary's receipt of such rents, subrents, issues, royalties, income, and
profits shall be a good and sufficient discharge of the obligation of the
tenant, lessee, sublessee, or other person concerned to make the payment
connected with the amount so received by the Trustee.
10.2 Application of Payments. If at any time during the term of this
Trust Deed Beneficiary receives or obtains a payment, installment, or sum which
is less than the entire amount then due under the Note secured by this Trust
Deed and under all other instruments further evidencing or securing the
Obligations, then Beneficiary shall, except as provided otherwise in the Note
and notwithstanding any instructions which may be given by Trustor, have the
right to apply such payment, installment, or sum, or any part thereof, to such
of the items or obligations then due from Trustor or to Beneficiary as
Beneficiary may in Beneficiary's sole discretion determine.
10.3 No Waiver of Rights by Collection of Proceeds. The entering upon
and taking possession of the Trust Estate or any portion of the Trust Estate or
the collection of rents, subrents, issues, royalties, income, profits, proceeds
of fire and other insurance policies, or compensation or awards for any taking
or damaging of the Trust Estate, or the application or release thereof as
aforesaid, shall not cure or waive any Event of Default or notice of default
hereunder, shall not invalidate any act done pursuant to such notice of default,
and shall not operate to postpone or suspend the obligation to make, or have the
effect of altering the size of, any scheduled installments provided for in any
of the Obligations secured by this Trust Deed.
<PAGE>
10.4 Indemnification. Trustor shall indemnify, pay, protect, defend and
hold Beneficiary harmless from and against all claims, demands, judgments,
liabilities, actions, costs, and fees (including reasonable attorney fees)
arising from or related to receipt by Beneficiary of the rents, subrents,
issues, royalties, income and profit from the Trust Estate or any portion of the
Trust Estate, except those liabilities arising from Beneficiary's own gross
negligence and wilful misconduct.
ARTICLE 11 EVENTS OF DEFAULT AND REMEDIES
11.1 Events of Default. Fifteen (15) days after written notice from
Beneficiary to Trustor for monetary defaults and thirty (30) days after written
notice from Beneficiary to Trustor for non-monetary defaults, if such defaults
are not cured within such fifteen (15) day or thirty (30) day periods,
respectively, each of the following shall constitute an event of default under
this Trust Deed (an "Event of Default"):
11.1.1 Failure to Make Payment. If Trustor shall fail to make
any payment due and payable under the terms of the Note, this Trust Deed, or any
other Loan Document.
11.1.2 Non-Monetary Default. Except as provided otherwise in
Section 11.1.1 of this Trust Deed, failure to observe and perform any of the
material terms, covenants, or conditions to be observed or performed in the
Note, this Trust Deed or any other Loan Document.
11.1.3 Loan Agreement. Any Event of Default occurs under
the Loan Agreement.
11.1.4 Ground Lease. If any default on the part of Trustor
occurs under the Ground Lease, or any event occurs or condition exists, which
with the passage of time, the giving of notice, or both, would constitute a
default under the Ground Lease.
11.1.5 False Warranty. Any material representation or warranty
of the Trustor contained in the Note, this Trust Deed or any other Loan Document
was untrue when made.
11.1.6 Insolvency, Etc. If (a) Trustor commences any case,
proceeding, or other action seeking reorganization, arrangement, adjustment,
liquidation, dissolution, or composition of Trustor or Trustor's debts under any
law relating to bankruptcy, reorganization, or relief of debtors, or seeking
appointment of a receiver, trustee, custodian, or other similar official for
Trustor or for all or any substantial part of Trustor's property; (b) any
guarantor of the Note commences any case, proceeding, or other action seeking
reorganization, arrangement, adjustment, liquidation, dissolution, or
composition of such guarantor or such guarantor's debts under any law relating
to bankruptcy, reorganization, or relief of debtors, or seeking appointment of a
receiver, trustee, custodian, or other similar official for such guarantor or
for any substantial part of such guarantor's property; or (c) any such case,
proceeding, or other action is commenced against either Trustor or any guarantor
of the Note.
11.1.7 Failure to Pay Debts. Trustor fails to pay Trustor's
material debts as they become due (or within the time reasonably allotted by
Trustor's creditors), admits in writing Trustor's inability to pay Trustor's
<PAGE>
debts, or makes a general assignment for the benefit of creditors.
11.1.8 Failure to Perform Other Obligations. A default by
Trustor under the terms of any other promissory note, deed of trust, security
agreement, undertaking or arrangement between Trustor and Beneficiary now
existing or entered into hereafter.
11.2 Acceleration; Notice. Time is of the essence hereof. Upon the
occurrence of any Event of Default under this Trust Deed, at Beneficiary's
option and in addition to any other remedy Beneficiary may have under the Note,
Beneficiary may declare all sums secured hereby immediately due and payable and
elect to have the Trust Estate sold in the manner provided herein. In the event
Beneficiary elects to sell the Trust Estate, Beneficiary may execute or cause
Trustee to execute a written notice of default and of election to cause the
Trust Estate to be sold to satisfy the obligations hereof, and Trustee shall
file such notice for record in the office of the County Recorder of the County
wherein the Trust Estate is located. Beneficiary shall also deposit with Trustee
the Note and all documents evidencing expenditures secured by this Trust Deed.
11.3 Exercise of Power of Sale. After the lapse of such time as may
then be required by law following the recordation of the notice of default, and
notice of default and notice of sale having been given as then required by law,
Trustee, without demand on Trustor, shall sell the Trust Estate on the date and
at the time and place designated in the notice of sale, either as a whole or in
separate parcels, and in such order as Beneficiary may determine (but subject to
any statutory right of Trustor to direct the order in which such property, if
consisting of several known lots or parcels, shall be sold), at public auction
to the highest bidder, the purchase price payable in lawful money of the United
States at the time of sale. The person conducting the sale may, for any cause
deemed expedient and in accordance with applicable law, postpone the sale from
time to time until it shall be completed and, in every such case, notice of
postponement shall be given by public declaration thereof by such person at the
time and place last appointed for the sale; provided, if the sale is postponed
for longer than seventy-two hours beyond the day designated in the notice of
sale, notice of the time, date and place of sale shall be given in the same
manner as the original notice of sale. Trustee shall execute and deliver to the
purchaser a Trustee's Deed conveying the Property so sold, but without any
covenant of warranty, express or implied. The recitals in the Trustee's Deed of
any matters or facts shall be conclusive proof of the truthfulness thereof. Any
person, including Beneficiary, may bid at the sale. Trustee shall apply the
proceeds of the sale to payment of (a) the costs and expenses of exercising the
power of sale and of the sale, including the payment of Trustee's and attorney's
fees and costs; (b) cost of any evidence of title procured in connection with
such sale; (c) all sums expended under the terms hereof in conjunction with any
default provision hereunder, not then repaid, with accrued interest at the rate
then provided for in the Note; (d) all sums then secured by this Trust Deed,
including interest and principal on the Note; and (e) the remainder, if any, to
the person or persons legally entitled thereto, or Trustee, in Trustee's
discretion, may deposit the balance of such proceeds with the County Clerk of
the County wherein the Trust Estate is located.
<PAGE>
11.4 Surrender of Possession. Trustor shall surrender possession of the
Trust Estate to the purchaser immediately after the sale of the Trust Estate as
provided in Section 11.3 of this Trust Deed, in the event such possession has
not previously been surrendered by Trustor.
11.5 UCC Remedies. Notwithstanding anything to the contrary in Sections
11.3 and 11.4 of this Trust Deed, Beneficiary, with regard to all Personalty,
including fixtures, chattels, equipment, inventory, and personal property,
conveyed to Trustee under Section 1.2 of this Trust Deed, shall have the right
to exercise, from time to time, any and all rights and remedies available to
Beneficiary, as a secured party under the Utah Uniform Commercial Code, and any
and all rights and remedies available to Beneficiary under any other applicable
law. Upon written demand from Beneficiary, Trustor shall, at Trustor's expense,
assemble such fixtures, chattels, equipment, inventory, and personal property
and make them available to Beneficiary at a reasonably convenient place
designated by Beneficiary. Beneficiary shall have the right to enter upon any
premises where the Personalty or records pertaining to the Personalty may be and
take possession of the Personalty and records relating to the Personalty.
Beneficiary may sell, lease or otherwise dispose of any or all of the Personalty
and, after deducting the reasonable costs and out-of-pocket expenses incurred by
Beneficiary, including, without limitation, (a) reasonable attorneys fees and
legal expenses, (b) transportation and storage costs, (c) advertising of sale of
the Personalty, (d) sale commissions, (e) sales tax, (f) costs for improving or
repairing the Personalty, and (g) costs for preservation and protection of the
Personalty, apply the remainder to pay, or to hold as a reserve against, the
Obligations.
11.6 Foreclosure as a Mortgage. If an Event of Default occurs
hereunder, Beneficiary shall have the option to foreclose this Trust Deed in the
manner provided by law for the foreclosure of mortgages on real property and
Beneficiary shall be entitled to recover in such proceedings all costs and
expenses incident thereto, including reasonable attorneys fees and costs in such
amounts as shall be fixed by the court.
11.7 Receiver. If an Event of Default occurs, Beneficiary, as a matter
of right and without regard to the interest of Trustor therein, shall have the
right upon notice to Trustor to apply to any court having jurisdiction to
appoint a receiver or receivers of the Trust Estate and Trustor hereby
irrevocably consents to such appointment. Any such receiver or receivers shall
have all the usual powers and duties of a receiver and shall continue as such
and exercise all such powers until completion of the sale of the Trust Estate or
the foreclosure proceeding, unless the receivership is sooner terminated.
11.8 No Remedy Exclusive. No remedy conferred upon or reserved to
Beneficiary under this Trust Deed shall be exclusive of any other available
remedy or remedies, but each and every such remedy shall be cumulative and shall
be in addition to every other remedy given under this Trust Deed or any other
Loan Document, or now or hereafter existing at law or in equity or by statute.
11.9 Rights upon Default. In making the Loan, Beneficiary has relied
upon the rights available to Beneficiary under this Trust Deed upon the
occurrence of an Event of Default, including, but not limited to, the rights to
accelerate the payment of any and all amounts secured by this Trust Deed, to
sell the Property encumbered by this Trust Deed pursuant to the power of sale
<PAGE>
granted hereunder, the right to foreclose this Trust Deed as a mortgage, and the
right to have a receiver appointed.
ARTICLE 12 GENERAL PROVISIONS
12.1 Notices. All notices shall be in writing and shall be deemed to
have been sufficiently given or served when personally delivered, deposited in
the United States mail, by registered or certified mail, or deposited with a
reputable overnight mail carrier which provides delivery of such mail to be
traced, addressed as follows:
Beneficiary and Trustee: Zions First National Bank
Commercial Loan Department
P.O. Box 25822
One South Main Street
Salt Lake City, Utah 84125
Attention: Michael R. Brough
With copies to: Callister Nebeker & McCullough
Gateway Tower East, Suite 900
10 East South Temple
Salt Lake City, Utah 84133
Attention: T. Richard Davis
Trustor: Evans & Sutherland Computer Corporation
600 Komas Drive
Salt Lake City, Utah 84108
Attn: Chief Financial Officer
Evans & Sutherland Computer Corporation
600 Komas Drive
Salt Lake City, Utah 84108
Attn: Treasurer
With copies to: Snell & Wilmer, L.L.P. Law Offices
15 West South Temple, Suite 1200
Gateway Tower West
Salt Lake City, Utah 84101
Attn: Brian D. Cunningham
Such addresses may be changed by notice to the other party given in the same
manner provided in this Section.
12.2 Severability. If any provision of this Trust Deed shall be held or
deemed to be or shall, in fact, be illegal, inoperative, or unenforceable, the
same shall not affect any other provision or provisions contained in this Trust
Deed or render the same invalid, inoperative, or unenforceable to any extent
whatever.
<PAGE>
12.3 Amendments, Changes, and Modifications. This Trust Deed may not be
amended, changed, modified, altered, or terminated without the written consent
of Beneficiary.
12.4 Governing Law. This Trust Deed shall be governed exclusively by
and construed in accordance with the applicable laws of the State of Utah.
12.5 Interpretation. Whenever the context shall include the singular,
the whole shall include any part thereof, and any gender shall include both
other genders. The section headings contained in this Trust Deed are for
purposes of reference only and shall not limit, expand, or otherwise affect the
construction of any provisions hereof.
12.6 Binding Effect. This Trust Deed shall be binding upon Trustor and
Trustor's successors and assigns. This Trust Deed shall inure to the benefit of
Beneficiary, and Beneficiary's successors and assigns, and the holders of any of
the Obligations secured hereby.
12.7 Waivers. No delay or failure to exercise any right or power
accruing upon any Event of Default, including Beneficiary requiring strict
performance by Trustor of any undertakings, agreements, or covenants contained
in this Trust Deed, shall impair any such right or power or shall be construed
to be a waiver thereof, including the right to demand strict compliance and
performance, but any such right and power may be exercised from time to time and
as often as may be deemed expedient. Any waiver by Beneficiary of any Event of
Default under this Trust Deed shall not waive or affect any other Event of
Default hereunder, whether such Event of Default is prior or subsequent thereto
and whether of the same or a different type. None of the undertakings,
agreements, or covenants of Trustor under this Trust Deed, shall be deemed to
have been waived by Beneficiary, unless such waiver is evidenced by an
instrument in writing signed by an officer of Beneficiary and directed to
Trustor specifying such waiver.
12.8 Successor Trustee. Beneficiary may appoint a successor trustee at
any time by filing for record in the office of the County Recorder of the county
wherein the Property is located, a substitution of trustee. From the time the
substitution is filed for record, the new Trustee shall succeed to all the
powers, duties, authority and title of Trustee. Each such substitution shall be
executed and acknowledged, and notice thereof shall be given and proof thereof
made in the manner provided by law.
12.9 Acceptance of Trust. Trustee accepts this Trust when this Trust
Deed, duly executed and acknowledged, is made a public record as provided by
law. Trustee is not obligated to notify any party hereto of any pending sale
under any other deed of trust or any action or proceeding in which Trustor,
Beneficiary, or Trustee shall be a party, unless brought by Trustee.
12.10 Attorneys' Fees and Expenses. Trustor agrees to reimburse
Beneficiary for any reasonable attorneys' fees and costs actually incurred by
Beneficiary with respect to any bankruptcy or insolvency proceeding, or other
action involving Trustor or any guarantor as a debtor. Trustor additionally
agrees to pay all reasonable costs and out-of-pocket expenses, including,
without limitation, (a) reasonable attorneys fees and legal expenses, (b)
transportation and storage costs, (c) advertising of sale of the Trust Estate,
(d) sale commissions, (e) sales tax, (f) costs for improving or repairing the
Trust Estate, and (g) costs for preservation and protection of the Trust Estate,
<PAGE>
incurred by Beneficiary in obtaining possession of Trust Estate, storage and
preparation for sale, sale or other disposition, and otherwise incurred in
foreclosing upon the Trust Estate. Any and all such costs and out-of-pocket
expenses shall be payable by Trustor upon demand, together with interest thereon
from the date of the advance until repaid, both before and after judgment, at
the rate provided in the Note.
Regardless of any breach or default, Trustor agrees to pay all
expenses, including reasonable attorneys fees and legal expenses, incurred by
Beneficiary in any bankruptcy proceedings of any type involving Trustor, the
Trust Estate, or this Trust Deed, including, without limitation, expenses
incurred in modifying or lifting the automatic stay, determining adequate
protection, use of cash collateral, or relating to any plan of reorganization.
12.11 Request for Notice. Trustor requests that a copy of any notice of
default and of any notice of sale hereunder be mailed to Trustor at the address
for Trustor specified in Section 12.1 of this Trust Deed.
12.12 Limitation on Damages. Beneficiary and its officers, directors,
employees, representatives, agents, and attorneys, shall not be liable to
Trustor or any Guarantor for consequential damages arising from or relating to
any breach of contract, tort, or other wrong in connection with or relating to
this Trust Deed or the Trust Estate.
12.13 Preferential Transfers. If the incurring of any debt by Trustor
or the payment of any money or transfer of property to Beneficiary by or on
behalf of Trustor or any Guarantor should for any reason subsequently be
determined to be "voidable" or "avoidable" in whole or in part within the
meaning of any state or federal law (collectively "voidable transfers"),
including, without limitation, fraudulent conveyances or preferential transfers
under the United States Bankruptcy Code or any other federal or state law, and
Beneficiary is required to repay or restore any voidable transfers or the amount
or any portion thereof, or upon the advice of Beneficiary's counsel is advised
to do so, then, as to any such amount or property repaid or restored, including
all reasonable costs, expenses, and attorneys fees of Beneficiary related
thereto, the liability of Trustor and Guarantor, and each of them, and this
Trust Deed, shall automatically be revived, reinstated and restored and shall
exist as though the voidable transfers had never been made.
12.14 Survival. All agreements, representations, warranties and
covenants made by Trustor shall survive the execution and delivery of this Trust
Deed, the filing and consummation of any bankruptcy proceedings, and shall
continue in effect so long as any obligation to Beneficiary contemplated by this
Trust Deed is outstanding and unpaid, notwithstanding any termination of this
Trust Deed. All agreements, representations, warranties and covenants in this
Trust Deed shall run with the land, shall bind the party making the same and its
heirs and successors, and shall be to the benefit of and be enforceable by each
party for whom made and their respective heirs, successors and assigns.
12.15 Defined Terms. Unless otherwise defined in this Trust Deed,
capitalized terms hereinafter used have the meanings given them in the Loan
Agreement.
<PAGE>
DATED: March 31, 2000.
TRUSTOR
EVANS & SUTHERLAND COMPUTER CORPORATION,
a Utah corporation
By: /S/ R. GAYNOR
Richard J. Gaynor
Vice President and Chief Financial Officer
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
The foregoing instrument was acknowledged before me this 31 day of May,
2000, by Richard J. Gaynor, Vice President and Chief Financial Officer of Evans
& Sutherland Computer Corporation, a Utah corporation.
NOTARY PUBLIC
My Commission Expires: Residing At:
<PAGE>
EXHIBIT A
REAL PROPERTY DESCRIPTION
The real property located in Salt Lake County, State of Utah, and more
particularly described as follows:
[SEE ATTACHED EXHIBIT A]
WHEN RECORDED, RETURN TO:
Zions First National Bank
Commercial Loan Department
P.O. Box 25822 One South Main Street
Salt Lake City, Utah 84125
Attn: Michael R. Brough
ASSIGNMENT OF TENANT'S INTEREST IN GROUND LEASE
FOR SECURITY
This Assignment of Tenant's Interest in Ground Lease for Security (the
"Assignment") is made and executed this 31st day of May, 2000 (the "Closing
Date"), by Evans & Sutherland Computer Corporation, a Utah corporation (
"Borrower") and Zions First National Bank, a national banking association
("Lender").
RECITALS
A. Pursuant to the Promissory Note dated the Closing Date in
which Borrower appears as "Borrower" and Lender appears as "Lender" and which is
in the original principal amount of Fifteen Million Dollars ($15,000,000) (the
"Note"), and pursuant to the Loan Agreement dated the Closing Date wherein
Borrower appears as "Borrower" and Lender appears as "Lender" (the "Loan
Agreement"), Lender has loaned the proceeds of the Note to Borrower.
B. Pursuant to the Trust Deed, Assignment of Rents, Security Agreement
and Fixture Filing dated the Closing Date (the "Trust Deed"), in which Borrower
appears as "Trustor", Lender appears as "Trustee" and "Beneficiary", and which
encumbers Borrower's leasehold interest in the real property together with the
improvements thereon located in Salt Lake County, State of Utah, and more
particularly described in Exhibit A attached hereto and incorporated herein by
this reference (the "Property"), Borrower has granted Lender a lien on
Borrower's leasehold interest in the Property to secure the Note.
C. The University of Utah, a body corporate and politic ("Ground
Lessor") and Borrower entered into those certain ground lease agreement as more
particularly described in Exhibit B attached hereto and incorporated herein by
this reference (collectively the "Ground Lease").
D. Lender desires and Borrower agrees to further secure the Note and
the Loan Agreement with an assignment of the Ground Lease.
AGREEMENT
In exchange for good and valuable consideration the sufficiency and
receipt of which are hereby acknowledged, Borrower and Lender agree as follows:
1
<PAGE>
1. Assignment. Borrower hereby absolutely and unconditionally
assigns and transfers unto Lender for security all the right, title, and
interest of Borrower in and to the Ground Lease, together with all extensions,
renewals, modifications or replacements thereof, as well as all guaranties of
Borrower's obligations under any provisions thereof and under any and all
extensions and renewals thereof (collectively the "Lease"). This Assignment
shall inure to the benefit of Lender, its successors and assigns as security for
the payment of the principal and interest provided to be paid in or by the Note,
the performance of the agreements of Borrower contained in the Loan Agreement,
and the performance of the agreements of Borrower contained in the Loan
Documents and any other document evidencing, securing, or relating to the
disbursal or administration of the proceeds of the Note (all of which agreements
and obligations are collectively referred to as the "Obligation").
2. Default Remedies of Lender. If Borrower defaults, past any
applicable cure or grace period, on the Obligation, or this Assignment or if an
Event of Default occurs, Lender shall be authorized at its option to enter and
take possession of all or part of the Property, to perform all acts reasonably
necessary for the operation and maintenance of the Property, and to perform the
obligations of Borrower under the Lease in the same manner and to the same
extent that Borrower might reasonably so act. Lender shall further be authorized
to replace Borrower as lessee under the Lease upon foreclosure of Borrower's
interest therein.
3. Termination of Assignment. When Borrower pays Lender for the full
amount of the Obligation and such payment is evidenced by a recorded
satisfaction or release of the Trust Deed, this Assignment shall no longer be in
effect and shall be void. Lender shall execute such instruments as may be
reasonably required to evidence the termination of this Assignment.
4. Notice to Ground Lessor of Borrower's Default. Borrower shall
irrevocably authorize Ground Lessor, upon demand and notice from Lender of
Borrower's default, past any applicable cure or grace period, under the Loan
Documents, to accept from Lender performance of Borrower's obligations under the
Lease. In such situation, Lender shall not be liable to Ground Lessor for the
determination of the actual existence of any default, past any applicable cure
or grace period, claimed by Lender. Ground Lessor shall have the right to rely
upon any such notices from Lender, without any obligation or right to inquire as
to the actual existence of the default, notwithstanding any claim of Borrower to
the contrary. Upon the curing of all such defaults caused by Borrower under the
Loan Documents, Lender shall give Ground Lessor written notice of such cure.
5. Assignment of Borrower's Interest in Lease. Lender shall have the
right to assign Borrower's right, title, and interest in the Lease to any
subsequent holder of the Note and to any person acquiring title to the Property
through foreclosure or otherwise consistent with the terms of the Ground Lease
and any recorded covenants and restrictions against the Property.
6. Indemnification of Lender. Borrower shall indemnify and hold Lender
harmless of and from any and all liability, loss, or damage that Lender may
incur under the Lease or by reason of this Assignment other than such liability,
loss, or damage as may be occasioned by Lender's gross negligence or willful
misconduct. Such indemnification shall also cover any and all claims that may be
asserted against Lender by reason of any alleged obligation to be performed by
Lender under the Lease or Assignment unless Lender has taken possession or
2
<PAGE>
control of the Property or has succeeded to Borrower's interest under the Ground
Lease. Nothing in this paragraph shall be construed to bind Lender to the
performance of any Lease provisions, or to otherwise impose any liability upon
Lender unless Lender has taken possession or control of the Property or has
succeeded to Borrower's interest under the Ground Lease. This Assignment shall
not impose liability upon Lender for the operation and maintenance of the
premises or for carrying out the Lease terms before Lender has entered and taken
possession of the premises. Any loss or liability incurred by Lender by reason
of actual entry and taking possession under the Lease or in the defense of any
claims shall, at Lender's request, be reimbursed by Borrower. Such reimbursement
shall include interest at the rate of three percent (3%) per annum above
Lender's Base Rate (as defined in the Note), costs, expenses, and reasonable
attorneys' fees.
7. Quality of Borrower's Title to Lease. Borrower represents itself to
be the absolute owner of the leasehold interest in the Lease, with right and
title to assign it consistent with the terms of the Ground Lease and upon the
consent of Ground Lessor; that the Ground Lease is valid, in full force and
effect, and has not been modified or amended except as stated herein; that there
is no outstanding assignment or pledge thereof; that there are no existing
defaults under the provisions thereof on the part of any party; and that
Borrower is in possession and paying rent and other charges under the Ground
Lease as provided therein. Borrower covenants not to cancel, abridge, surrender,
or terminate the Ground Lease or change, alter, or modify it without the prior
written consent of Lender, which shall not be unreasonably withheld or delayed.
Any attempt at cancellation, surrender, termination, change, alteration,
modification, assignment, or subordination of the Lease without the written
consent of Lender shall be null and void.
8. No Merger. If the Property is under any lease or any portion thereof
which constitutes a part of the Property shall at any time become vested in one
owner, this Assignment and the lien created hereby shall not be destroyed or
terminated by application of the doctrine of merger and, in such event, Lender
shall continue to have and enjoy all of the rights and privileges of Lender as
to the separate estates. In addition, upon the foreclosure of the lien created
by this Assignment on the Property pursuant to the provisions of this
Assignment, any leases or subleases then existing and created by Borrower shall
not be destroyed or terminated by application of the law of merger or as a
matter of law or as a result of such foreclosure unless Lender or any purchaser
at any such foreclosure sale shall so elect. No act by or on behalf of Lender or
any such purchaser shall constitute a termination of any lease or sublease
unless Lender or such purchaser shall give written notice thereof to such tenant
or subtenant.
9. Delivery of Necessary Instruments to Lender. Borrower shall execute
and deliver to Lender and hereby irrevocably appoints Lender, its successors,
and assigns from and after an Event of Default, as its attorney in fact to
execute and deliver during the term of this Assignment, all further instruments
as Lender may deem necessary to make this Assignment and any further assignment
effective. The power hereby granted is coupled with an interest in the Property
and is irrevocable.
10. Lease Guaranties; Assignment of Lease; Alterations of Premises.
Borrower shall not materially alter, modify, cancel or terminate any guaranties
of the Lease without the written consent of Lender. Borrower shall not consent
to any Lease assignment or subletting, nor agree to a subordination of the Lease
3
<PAGE>
to any mortgage or other encumbrance, other than that of Lender, now or
hereafter affecting the Property without Lender's prior written consent which
shall not be unreasonably withheld or delayed. Borrower shall not permit a
material alteration of or addition to the Property without Lender's prior
written consent.
11. Borrower to Ensure Continued Performance under Lease. Borrower
shall perform all of its material covenants as lessee under the Lease, including
the obligation to pay rent to Ground Lessor. Lender shall promptly deliver to
Borrower copies of all notices of default Borrower has received or may hereafter
receive from Ground Lessor.
12. Changes in Obligation Terms. Notwithstanding any variation of the
terms of the Loan Documents, including increase or decrease in the principal
amount thereof or in the rate of interest payable thereunder or any extension of
time for payment thereunder or any release of part or parts of the real property
subject to the Trust Deed, the Lease and the benefits hereby assigned shall
continue as additional security in accordance with the terms of this Assignment.
13. Additions to and Replacement of Obligation. Lender may take
security in addition to the security already given Lender for the payment of the
principal and interest provided to be paid in or by the Loan Documents or
release such other security, and may release any party primarily or secondarily
liable on the Loan Documents, may grant or make extensions, renewals,
modifications, or indulgences with respect to the Loan Documents and
replacements thereof, which replacement of the Loan Documents may be on the same
or on terms different from the present terms of the Loan Documents, and may
apply any other security thereof held by it to the satisfaction of the
Obligation, without prejudice to any of its rights hereunder.
14. Exercise of Lender's Rights. Lender's failure to avail itself of
any of its rights under this Assignment for any period of time, or at any time
or times, shall not constitute a waiver thereof. Lender's rights and remedies
hereunder are cumulative, and not in lieu of, but in addition to, any other
rights and remedies Lender has under the Obligation and Trust Deed. Lender's
rights and remedies hereunder may be exercised as often as Lender deems
expedient.
15. Amendment, Modification, or Cancellation of Assignment. No
amendment, modification, cancellation, or discharge hereof, or of any part
hereof, shall be enforceable without Lender's prior written consent.
16. Notices. All notices shall be in writing and shall be deemed to
have been sufficiently given or served when personally delivered or when
deposited in the United States mail, by registered or certified mail, addressed
as follows:
Lender: Zions First National Bank
Commercial Loan Department
P.O. Box 25822
One South Main Street
Salt Lake City, Utah 84125
Attn: Michael R. Brough
With copies to: Callister Nebeker & McCullough
Gateway Tower East, Suite 900
10 East South Temple
4
<PAGE>
Salt Lake City, Utah 84133
Attn: T. Richard Davis
Borrower: Evans & Sutherland Computer Corporation
600 Komas Drive
Salt Lake City, Utah 84108
Attn: Chief Financial Officer
Evans & Sutherland Computer Corporation
600 Komas Drive
Salt Lake City, Utah 84108
Attn: Treasurer
With copies to: Snell & Wilmer, L.L.P. Law Offices
15 West South Temple, Suite 1200
Gateway Tower West
Salt Lake City, Utah 84101
Attn: Brian D. Cunningham
Such addresses may be changed by notice to the other party given in the same
manner provided in this Section.
17. Binding Effect. All agreements herein shall inure to the benefit
of, and bind the respective heirs, executors, administrators, successors, and
assigns of Borrower and Lender.
18. Governing Law. This Assignment shall be governed by, construed and
interpreted in accordance with the laws of the State of Utah.
19. Attorneys' Fees. In the event Lender institutes legal action
against Borrower with respect to this Assignment, Lender shall be entitled to an
award of reasonable attorneys' fees from Borrower. Lender shall also be entitled
to collect all reasonable attorneys' fees and costs incurred with respect to any
insolvency or bankruptcy action or proceeding involving Borrower.
20. Defined Terms. Unless otherwise defined in this Assignment,
capitalized terms used in this Assignment shall have the meanings set forth in
the Loan Agreement.
5
<PAGE>
DATED: March 31, 2000.
BORROWER
EVANS & SUTHERLAND COMPUTER CORPORATION,
a Utah corporation
By: /S/ R. GAYNOR
Richard J. Gaynor
Vice President and Chief Financial Officer
LENDER
Zions First National Bank,
a national banking association
By: /S/ M. BROUGH
Michael R. Brough
Vice President
6
<PAGE>
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
The foregoing instrument was acknowledged before me this day of May,
2000, by Richard J. Gaynor, Vice President and Chief Financial Officer of Evans
& Sutherland Computer Corporation, a Utah corporation.
NOTARY PUBLIC
My Commission Expires: Residing At:
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
The foregoing instrument was acknowledged before me this _____ day of
May, 2000, by Michael R. Brough, Vice President of Zions First National Bank, a
national banking association.
NOTARY PUBLIC
My Commission Expires: Residing At:
7
<PAGE>
EXHIBIT A
REAL PROPERTY DESCRIPTION
The real property located in Salt Lake County, State of Utah, and more
particularly described as follows:
[SEE ATTACHED EXHIBIT A]
8
<PAGE>
EXHIBIT B
DESCRIPTION OF GROUND LEASES
1. Lease Agreement dated November 21, 1972, as amended by an Addendum
to Lease Agreement dated November 21, 1972, a Second Addendum to Lease Agreement
dated June 4, 1973, a Third Addendum to Lease Agreement dated December 7, 1973,
and a Fourth Addendum to Lease Agreement dated September 12, 1979, all entered
into between Ground Lessor, as lessor, and Mountain Co-Venture, a general
partnership, as lessee, and as amended by a Fifth Addendum to Lease Agreement
dated April 9, 1987 entered into between Ground Lessor, as lessor, and Borrower,
as lessee, wherein Ground Lessor leases a portion of the Property known as
Building 540 to Borrower.
2. Lease Agreement dated September 4, 1979 entered into between Ground
Lessor, as lessor, and Tri Venture, a general partnership, as lessee, as amended
by a First Addendum to Lease Agreement dated April 9, 1987, and a Second
Addendum to Lease Agreement dated December 31, 1990, all entered into between
Ground Lessor, as lessor, and Borrower, as lessee, wherein Ground Lessor leases
a portion of the Property known as Building 560 to Borrower.
3. Lease Agreement dated November 21, 1973, as amended by a First
Addendum to Lease Agreement dated May 24, 1974, a Second Addendum to Lease
Agreement dated March 23, 1977, a Third Addendum to Lease Agreement dated
September 12, 1979, all entered into between Ground Lessor, as lessor, and Park
Enterprises, a general partnership, as lessee, and as amended by a Fourth
Addendum to Lease Agreement dated April 9, 1987 entered into between Ground
Lessor, as lessor, and Borrower, as lessee, wherein Ground Lessor leases a
portion of the Property known as Building 580 to Borrower.
4. Lease Agreement dated April 9, 1987, as amended by a First Addendum
to Lease Agreement dated December 31, 1990, all entered into between Ground
Lessor, as lessor, and Borrower, as lessee, wherein Ground Lessor leases a
portion of the Property known as Building 600 to Borrower.
5. Lease Agreement dated September 5, 1980 entered into between Ground
Lessor, as lessor, and Black Hawk Investment Company, a general partnership, as
lessee, and as amended by a First Amendment to Lease Agreement dated June 7,
1982, a Second Amendment to Lease Agreement dated September 28, 1982, a Third
Addendum to Lease Agreement dated April 9, 1987, and a Fourth Addendum to Lease
Agreement dated December 31, 1990, all entered into between Ground Lessor, as
lessor, and Borrower, as lessee, wherein Ground Lessor leases a portion of the
Property known as Building 650 to Borrower.
6. Lease Agreement dated April 1, 1988, as amended by a First Addendum
to Lease Agreement dated December 31, 1990, all entered into between Ground
Lessor, as lessor, and Borrower, as lessee, wherein Ground Lessor leases a
portion of the Property known as Building 770 to Borrower.
9
<PAGE>
7. Lease Agreement dated December 31, 1990 entered into between Ground
Lessor, as lessor, and Borrower, as lessee, wherein Ground Lessor leases a
portion of the Property known as Building 790 to Borrower.
10
WHEN RECORDED, RETURN TO:
Zions First National Bank
Commercial Loan Department
P.O. Box 25822 One South Main Street
Salt Lake City, Utah 84125
Attn: Michael R. Brough
ASSIGNMENT OF LEASES
This Assignment of Leases (the "Assignment") is made and executed this
31st day of May, 2000 (the "Closing Date"), by Evans & Sutherland Computer
Corporation, a Utah corporation ("Assignor") and Zions First National Bank, a
national banking association ("Assignee").
RECITALS
A. Pursuant to the Promissory Note dated the Closing Date in which
Assignor appears as "Borrower" and Assignee appears as "Lender" and which is in
the original principal amount of Fifteen Million Dollars ($15,000,000.00) (the
"Note"), and pursuant to the Loan Agreement dated the Closing Date wherein
Assignor appears as "Borrower" and Assignee appears as "Lender" (the "Loan
Agreement"), Assignee has loaned the proceeds of the Note to Assignor.
B. Pursuant to the Trust Deed, Assignment of Rents, Security Agreement
and Fixture Filing dated the Closing Date (the "Trust Deed") in which Assignor
appears as "Trustor" and Assignee appears as "Trustee" and "Beneficiary" and
which encumbers Assignor's `right, title and interest in and to the real
property (the "Property") together with the improvements thereon located in Salt
Lake County, State of Utah, and more particularly described in Exhibit A
attached hereto and incorporated herein by this reference (the "Project"),
Assignor has granted Assignee a lien on its leasehold interest in the Project to
secure the Note.
C. The following leases currently affect the Project:
1. The Lease Agreement dated January 20, 1999, in which
Assignor, appears as "Landlord", and Parametric Technology Corporation,
a Massachusetts corporation, appears as "Tenant", and any and all
amendments thereto (the "Parametric Lease").
2. The Lease Agreement dated March 21, 1996, in which
Assignor, appears as "Landlord", and Westin Hotel Company, a Delaware
corporation, appears as "Tenant", and any and all amendments thereto
(the "Westin Hotel Lease").
3. The Lease Agreement dated June 3, 1999, in which Assignor,
appears as "Landlord", and Sanmina Corporation, a Delaware corporation,
appears as "Tenant", and any and all amendments thereto (the "Sanmina
Lease").
<PAGE>
4. The Lease Agreement dated May 19, 1995, in which Assignor,
appears as "Landlord", and DJH Engineering Center, Inc., a Utah
corporation, appears as "Tenant", and any and all amendments thereto
(the "DJH Engineering Lease").
5. The Lease Agreement dated November 1, 1997, in which
Assignor, appears as "Landlord", and Western Systems Coordinating
Council, a Utah corporation, appears as "Tenant", and any and all
amendments thereto (the "Western Systems Lease").
D. There have been and/or may be other lease agreements entered into by
Assignor and tenants of the Project, from time to time, all subject to the terms
and conditions of the Loan Documents.
E. Assignee desires and Assignor agrees to further secure the Note and
the Loan Agreement with an assignment of the leases, including, without
limitation, the Parametric Lease, Westin Hotel Lease, Sanmina Lease, DJH
Engineering Lease and Western Systems Lease.
AGREEMENT
In exchange for good and valuable consideration the sufficiency and
receipt of which are hereby acknowledged, Assignor and Assignee agree as
follows:
1. Assignment. Assignor hereby absolutely and unconditionally assigns
and transfers unto Assignee all right, title, and interest of Assignor in and to
all leases of the Project or any portion of the Project, now existing or
hereafter created, including, without limitation, the Parametric Lease, the
Westin Hotel Lease, the Sanmina Lease, the DJH Engineering Lease, and the
Western Systems Lease, together with all amounts received for the use of any
portion of the Project, and all proceeds from such leases, covering the Project
or any portion of the Project, now or hereafter existing or entered into,
together with all right, title and interest of Assignor in and to all other
leases or subleases covering the Project or any portion of the Project, now or
hereafter existing or entered into, together with all security deposits made by
the lessees thereunder (the "Lessee" or "Lessees") and together with all
extensions, renewals, modifications or replacements thereof, as well as all
guaranties of Lessee's obligations under any provisions thereof and under any
and all extensions and renewals thereof (collectively the "Lease").
2. License to Collect. This Assignment shall inure to the benefit of
Assignee, and its successors and assigns, for the payment of the principal and
interest provided to be paid in or by the Note, the performance of the
agreements of Assignor contained in the Loan Agreement and the Trust Deed, and
the performance of the agreements of Assignor contained in the Loan Documents
and any other document evidencing, securing, or relating to the disbursal or
administration of the proceeds of the Note (all of which agreements and
obligations are collectively referred to as the "Obligation"), reserving to
Assignor, however, a revocable, temporary right and license to collect and
apply, except as hereinafter provided, the rents, income, and profits accruing
by virtue of the Lease as they respectively become due (the "License"), but not
more than one month in advance, and to enforce the agreements of the Lease, as
<PAGE>
long as Assignor does not default beyond any applicable grace or cure period
under the Obligation, or this Assignment.
3. Assignee as Creditor of Lessee. From and after the occurrence of an
Event of Default, Assignee, and not Assignor, shall be the creditor of each
Lessee in respect of assignments for the benefit of creditors and bankruptcy,
reorganization, insolvency, dissolution, or receivership proceedings affecting
such Lessee. Assignee, however, shall not be the party obligated to make timely
filings of claims in such proceedings or to otherwise pursue creditor's rights
therein. Assignee shall have the option to apply any monies received by it as
such creditor towards the reduction of the principal or interest of the
Obligation.
4. Default Remedies of Assignee. If Assignor defaults beyond any
applicable grace or cure period on the Obligation or this Assignment, and until
such default shall have been fully cured, the License of Assignor to collect and
apply rents, income, and profits shall cease and terminate. Assignee would
thereby be authorized at its option to enter and take possession of all or part
of the Project, and to perform all acts necessary for the operation and
maintenance of the Project in the same manner and to the same extent that
Assignor might reasonably so act. In furtherance thereof, Assignee shall be
authorized, but shall be under no obligation (unless Assignee has taken
possession or control of the Project or any portion thereof or succeeded to
Assignor's interest in the Project), to collect the rents, income, and profits
arising from the Lease, and to enforce performance of any other terms of the
Lease including, but not limited to, Assignor's rights to fix or modify rents,
sue for possession of the Project, or any part thereof, relet all or part of the
Project, and collect all rents, income, and profits under such new lease.
Assignee shall, after payment of all proper costs, charges, and any damages,
apply the net amount of income to the sums then due to Assignee under the
Obligation as set forth in the Loan Agreement. Assignee shall have sole
discretion as to the manner in which such net income is applied to the amounts
outstanding under the Note, and the items that shall be credited thereby.
5. Termination of Assignment. When Assignor pays Assignee for the full
amount of the Obligation and such payment is evidenced by a recorded
satisfaction or release of the Trust Deed, this Assignment shall no longer be in
effect and shall be void.
6. Notice to Lessees of Assignor's Default. Assignor shall irrevocably
authorize each Lessee, upon demand and notice from Assignee of Assignor's
default beyond any applicable grace or cure period under the Obligation, to pay
all rents, income, and profits under the Lease to Assignee. In such situation,
Assignee shall not be liable to Lessee for the determination of the actual
existence of any default claimed by Assignee. Lessees shall have the right to
rely upon any such notices of Assignee that Lessees shall pay all rents, income,
and profits to Assignee, without any obligation or right to inquire as to the
actual existence of the default, notwithstanding any claim of Assignor to the
contrary and shall have assurance that payment to Assignee shall satisfy that
particular payment obligation under the Lease. Assignor shall have no claim
against Lessees for any rents paid by Lessees to Assignee. Upon the curing of
all defaults caused by Assignor under the Obligation, Trust Deed, or Assignment,
Assignee shall give Lessees written notice of such cure, and thereafter, until
further notice from Assignee, Lessees shall pay the rents, income, and profits
to Assignor.
<PAGE>
7. Assignment of Assignor's Interest in Lease. Assignee shall have the
right to assign Assignor's right, title, and interest in the Lease to any
subsequent holder of the Trust Deed and to any person acquiring title to the
Project through foreclosure or otherwise. After Assignor shall have been barred
and foreclosed of all right, title, interest, and equity of redemption in the
Project, no assignee of Assignor's interest in the Lease shall be liable to
account to Assignor for the rents, income and profits thereafter accruing.
8. Indemnification of Assignee. Assignor shall pay, protect, defend,
indemnify and hold Assignee harmless of and from any and all liability, loss, or
damage that Assignee may incur under the Lease or by reason of this Assignment
other than such liability, loss, or damage as may be occasioned by Assignee's
gross negligence or willful misconduct. Such indemnification shall also cover
any and all claims that may be asserted against Assignee by reason of any
alleged obligation to be performed by Assignee under the Lease or Assignment.
Nothing in this paragraph shall be construed to bind Assignee to the performance
of any Lease provisions, or to otherwise impose any liability upon Assignee
including, without limitation, any liability under the Lease's covenant of quiet
enjoyment in the event that any Lessee shall have been joined as party defendant
in any action to foreclose the Trust Deed and shall have been barred thereby of
all right, title, interest, and equity of redemption in the premises. This
Assignment shall not impose liability upon Assignee for the operation and
maintenance of the premises or for carrying out the Lease terms before Assignee
has entered and taken possession of the Project. Any loss or liability incurred
by Assignee in the defense of any claims shall, at Assignee's request, be
reimbursed by Assignor. Such reimbursement shall include interest at the default
rate set forth in the Note, all reasonable costs, expenses, and attorneys' fees.
Assignee may, upon entry and taking of possession, collect the rents, income,
and profits, and apply them toward reimbursement for the loss or liability.
9. Quality of Assignor's Title to Lease. Assignor represents itself to
be the absolute owner of the lessor's interest in and to the Lease, with
absolute right and title to assign it and the rents, income, and profits due or
to become due thereunder; that the Lease is valid, in full force and effect, and
has not been modified or amended except as stated herein; that there is no
outstanding assignment or pledge thereof or of the rents, income, and profits
due or to become due thereunder; that there are no existing defaults under the
provisions thereof on the part of any party; that Lessees have no defense,
setoff or counterclaim against Assignor, that Lessees are in possession and
paying rent and other charges under the Lease as provided therein; and that no
rents, income, and profits payable thereunder have been or will hereafter be
anticipated, discounted, released, waived, compromised, or otherwise discharged
except as may be expressly permitted by the Lease. Assignor covenants not to
cancel, abridge, surrender, or terminate the Lease or materially change, alter,
or modify it other than in the ordinary course of business, either to reduce the
amount of the rents, income, and profits payable thereunder, or otherwise
materially change, alter, abridge or modify the Lease, or make any subsequent
assignment of the Lease, or consent to subordination of the interest of any
Lessee in the Lease without the prior written consent of Assignee which consent
shall not be unreasonable withheld. Any attempt at cancellation, surrender,
termination, change, alteration, modification, assignment, or subordination of
the Lease without the written consent of Assignee shall be null and void.
<PAGE>
10. Delivery of Necessary Instruments to Assignee. Assignor shall
execute and deliver to Assignee and hereby irrevocably appoints Assignee, its
successors, and assigns, from and after the occurrence of an Event of Default,
as its attorney in fact to execute and deliver during the term of this
Assignment, all further instruments as Assignee may deem necessary to make this
Assignment and any further assignment effective. The power hereby granted is
coupled with an interest in the Project and is irrevocable.
11. Transfer of Title to Lessees; Cancellation of Lease. The Lease
shall remain in full force and effect despite any merger of Assignor's and any
Lessee's interest thereunder. In the event the Lease permits cancellation
thereof on payment of consideration and the privilege of cancellation is
exercised, the payments made or to be made by reason thereof are hereby assigned
to Assignee to be applied, at the election of Assignee, to reduce the amount of
the principal of the Obligation in the inverse order of maturity or to be held
in trust by Assignee as further security without interest for the payment of the
principal and interest provided to be paid by the Obligation.
12. Lease Guaranties; Assignment of Lease; Alterations of Premises.
Assignor shall not alter, modify, cancel or terminate any guaranties of the
Lease without the written consent of Assignee, which consent shall not be
unreasonably withheld. Assignor shall not consent to any Lease assignment or
subletting, nor agree to a subordination of the Lease to any mortgage or other
encumbrance, other than that of Assignee, now or hereafter affecting the Project
without Assignee's prior written consent, which consent shall not be
unreasonably withheld. Assignor shall not permit a material alteration of or
addition to the Project by any Lessee without Assignee's prior written consent
unless the right to alter or enlarge is expressly reserved by such Lessee in the
Lease.
13. Assignor to Ensure Continued Performance under Lease. Assignor
shall not execute any other assignment of the Lease, of any interest therein, or
of any rents payable thereunder. Assignor shall perform in all material respects
all of its covenants as Lessor under the Lease, and shall not permit to occur
any release of liability of any Lessee, or any withholding of rent payments by
any Lessee. Assignee shall promptly receive from Assignor copies of all notices
of default Assignor has sent any Lessee. Assignor shall, at Assignee's request,
enforce the Lease and all remedies available to Assignor thereunder upon any
Lessee's default thereunder.
14. Changes in Obligation Terms. Notwithstanding any variation of the
terms of the Obligation and/or the Trust Deed including increase or decrease in
the principal amount thereof or in the rate of interest payable thereunder or
any extension of time for payment thereunder or any release of part or parts of
the real property subject to the Trust Deed, the Lease and the benefits hereby
assigned shall continue as additional security in accordance with the terms of
this Assignment.
15. Additions to and Replacement of Obligation. Assignee may take
security in addition to the security already given Assignee for the payment of
the principal and interest provided to be paid in or by the Obligation or by the
Trust Deed or release such other security, and may release any party primarily
or secondarily liable on the Obligation, may grant or make extensions, renewals,
modifications, or indulgences with respect to the Obligation or Trust Deed and
<PAGE>
replacements thereof, which replacement of the Obligation or Trust Deed may be
on the same or on terms different from the present terms of the Obligation or
Trust Deed, and may apply any other security thereof held by it to the
satisfaction of the Obligation, without prejudice to any of its rights
hereunder.
16. Future and Additional Leases. This Assignment shall apply and be
effective with respect to any and all leases with respect to the Project entered
into by Assignor and any lessee which may cover or affect any portion of the
Project, which lease(s) may be entered into at any time during the period the
Obligation remains outstanding and secured by the Trust Deed, regardless of
whether such lease(s) is/are in effect on the date this Assignment is executed.
Upon the written request of Assignee, Assignor shall give Assignee prompt notice
and provide Assignee with a copy of any lease covering any portion of the
Project it enters into, if the lease is not listed in this Assignment or is not
in effect on the date of this Assignment. Upon notice from Assignee to that
effect, such lease shall be deemed included in this Assignment as though
originally listed therein, and shall be subject to this Assignment in all
respects.
17. Exercise of Assignee's Rights. Assignee's failure to avail itself
of any of its rights under this Assignment for any period of time, or at any
time or times, shall not constitute a waiver thereof. Assignee's rights and
remedies hereunder are cumulative, and not in lieu of, but in addition to, any
other rights and remedies Assignee has under the Obligation and Trust Deed.
Assignee's rights and remedies hereunder may be exercised as often as Assignee
deems expedient.
18. Amendment, Modification, or Cancellation of Assignment. No
amendment, modification, cancellation, or discharge hereof, or of any part
hereof, shall be enforceable without Assignee's prior written consent.
19. Notices. All notices shall be in writing and shall be deemed to
have been sufficiently given or served when personally delivered, deposited in
the United States mail, by registered or certified mail, or deposited with a
reputable overnight mail carrier which provides delivery of such mail to be
traced, addressed as follows:
Assignee: Zions First National Bank
Commercial Loan Department
P.O. Box 25822
One South Main Street
Salt Lake City, Utah 84125
Attn: Michael R. Brough
With copies to: Callister Nebeker & McCullough
Gateway Tower East, Suite 900
10 East South Temple
Salt Lake City, Utah 84133
Attn: T. Richard Davis
Assignor: Evans & Sutherland Computer Corporation
600 Komas Drive
Salt Lake City, Utah 84108
Attn: Chief Financial Officer
Evans & Sutherland Computer Corporation
600 Komas Drive
Salt Lake City, Utah 84108
Attn: Treasurer
With copies to: Snell & Wilmer, L.L.P. Law Offices
15 West South Temple, Suite 1200
Gateway Tower West
Salt Lake City, Utah 84101
Attn: Brian D. Cunningham
Such addresses may be changed by notice to the other party given in the same
manner provided in this Section.
20. Binding Effect. All agreements herein shall inure to the benefit
of, and bind the respective heirs, executors, administrators, successors, and
assigns of Assignor and Assignee.
21. Governing Law. This Assignment shall be governed by, construed and
interpreted in accordance with the laws of the State of Utah.
22. Attorney Fees. Upon the occurrence of an Event of Default, Assignee
may employ an attorney or attorneys to protect Assignee's rights under this
Assignment, and Assignor shall pay Assignee reasonable attorney fees and costs
actually incurred by Assignee, whether or not action is actually commenced
against Assignor by reason of such breach. Assignor shall also pay to Assignee
any reasonable attorney fees and costs incurred by Assignee with respect to any
insolvency or bankruptcy proceeding or other action involving Assignor or any
guarantor as a debtor. If Assignee exercises the power of sale contained in the
Trust Deed or initiates foreclosure proceedings, Assignor shall pay all
reasonable costs incurred and attorney fees and costs as provided in the Trust
Deed.
23. Defined Terms. Unless otherwise defined in this Assignment,
capitalized terms used in this Assignment shall have the meanings set forth in
the Loan Agreement.
DATED: March 31, 2000.
ASSIGNOR
EVANS & SUTHERLAND COMPUTER CORPORATION,
a Utah corporation
By: /S/ R. GAYNOR
Richard J. Gaynor
Vice President and Chief Financial Officer
ASSIGNEE
ZIONS FIRST NATIONAL BANK,
a national banking association
By: /S/ M. BROUGH
Michael R. Brough
Vice President
<PAGE>
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
The foregoing instrument was acknowledged before me this day of May,
2000, by Richard J. Gaynor, Vice President and Chief Financial Officer of Evans
& Sutherland Computer Corporation, a Utah corporation.
NOTARY PUBLIC
My Commission Expires: Residing At:
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
The foregoing instrument was acknowledged before me this _____ day of
May, 2000, by Michael R. Brough, Vice President of Zions First National Bank, a
national banking association.
NOTARY PUBLIC
My Commission Expires: Residing At:
<PAGE>
EXHIBIT A
REAL PROPERTY DESCRIPTION
The real property located in Salt Lake County, State of Utah, and more
particularly described as follows:
[SEE ATTACHED EXHIBIT A]
Commercial Credit and Security Agreement
THIS COMMERCIAL CREDIT AND SECURITY AGREEMENT (the "Agreement"), dated as
of the 2nd of March, 1998, is entered between Evans & Sutherland Computer
Corporation (the "Borrower") and First Security Bank, N.A. ("Lender").
Borrower has requested Lender to extend credit to Borrower for certain
purposes, and Lender is willing to make such a loan (hereinafter the "Loan") on
the terms and conditions of this Agreement. Therefore, the parties agree as
follows:
SECTION 1. AMOUNT AND TERMS OF THE LOAN.
1.1 The maximum principal amount of the Loan shall be Five Million Dollars
($5,000,000.00).
1.2 The Loan shall consist of two separate facilities:
(a) A Standby Letter of Credit Commitment ("L/C Line"), which may be
used up to a maximum amount of Four Million Dollars ($4,000,000.00). So
long as any amounts remain unutilized under this L/C Line, or if any
letter of credit issued under the L/C Line expires undrawn, Borrower
may have issued and reissued letters of credit up to and the maximum
amount listed above so long as no default exists under this Agreement.
Each letter of credit issued under the L/C Line shall be charged a fee
of 0.75% of the amount of the letter of credit issued, plus the
standard per item charges assessed by First Security.
(b) A Foreign Exchange Line of Credit (FX Line). From time to time from
the date hereof through and including the Termination Date, and upon
request of Borrower Lender will enter into Foreign Exchange Contracts
with Borrower of up to the maximum aggregate amount, at any time
subject to outstanding contracts (not yet settled), that will not cause
the FX Line amount outstanding to exceed One Million Dollars
($1,000,000.00), provided that there is sufficient availability under
the FX Line.
1.3 The Loan shall be evidenced by, or consist of the following:
(a) In the case of the L/C Line, for each letter of credit issued, an
Application, Agreement and Note for Standby Documentary Credit which
obligates Borrower to repay the Loan upon Demand should any draw be
made on a letter of credit (collectively the "Note"). The Loan shall be
repaid to Lender and shall accrue interest as set forth in the Note. In
particular, should an event of default occur under this Agreement,
which may include, but not be limited to, failure to repay any draw
upon a letter of credit upon Lender's demand, or the occurrence of any
event of default as outlined in Section 5.1 of this Agreement, Borrower
shall then be assessed a default rate of interest which shall be equal
to Lender's Prime Rate of interest plus two percentage points.
Notwithstanding any contradiction which may exist in the Note, the rate
herein stated to be assessed upon the occurrence of an event of default
of Borrower shall take precedence.
1
<PAGE>
(b) With respect to the FX Line, the Foreign Exchange Contract which
will be offered by Lender to Borrower shall be to fix, at the date that
it enters into purchase contracts with various foreign suppliers, the
dollar cost of various foreign currencies. Except as otherwise
provided, the Foreign Exchange Contracts which will be offered by
Lender shall be either spot or forward contracts. The terms of such
spot and forward contracts shall be the standard spot or forward
contact format then generally offered by Lender to its customers,
subject to the rights of Lender and Borrower to then negotiate special
terms and also to provide for the length of the forward contracts.
(Lender initially intends not to enter into Foreign Exchange Contracts
having terms longer than 12 months). Lender reserves the right to
require, in connection with such forward contracts or any other variety
of Foreign Exchange Contract between Lender and Borrower, that delivery
of foreign currencies to the party specified by Borrower, shall be
conditioned upon prior deposit of the dollar purchase price of said
foreign currencies with Lender immediately before the time that Lender
must wire or otherwise give instruction for foreign currency delivery.
The submission of a request for a Foreign Exchange Contract shall also
be deemed to constitute a reaffirmation of the representations and
warranties which are set forth hereunder.
The availability of all Foreign Exchange Contracts will be subject to the
condition of payment by Borrower of the fees, charges and contract amounts which
are required as a condition precedent by Lender for such contracts, provided
that Lender agrees that such fees charges and contract amounts shall be
reasonably related to such fees generally charged by Lender or charged by other
offerors of such contracts.
The obligations of Lender hereunder, are specifically conditioned upon the
Lender having normal access to foreign exchange markets and to facilities for
the purchase of foreign currencies for its own account and the account of other
customers.
1.4 Each facility shall be stated to mature on May 15, 1999.
1.5 All payments shall be made to Lender at the address specified in this
Agreement in lawful money of the United States of America. All payments
received by Lender shall be applied as follows: first, toward the
satisfaction of commitment fees, origination fees, attorneys' fees and
costs incidental thereto and to advances made and costs and expenses
incurred by Lender or its agent to enforce Borrower's Obligations
hereunder and under the Loan Documentation; second, toward the
reduction of any and all accrued and unpaid interest, including
uncollected late charges; third, toward the reduction of unpaid
principal; and fourth, to prepayment of Obligations which may arise
from any outstanding letters of credit.
1.6 To the extent of available credit under the L/C Facility, Lender hereby
agrees to issue letters of credit for the account of Borrower payable
to parties other than Borrower or its affiliates, upon such terms
relating to draws and other matters as are consented to in writing by
Lender. The amount of all letters of credit issued for the account of
Borrower, shall be deemed to be an advance under the Loan, whether or
not a draw on a letter of credit has been made. Such letters of credit
shall be issued only upon proper application therefore, in form and
substance satisfactory to Lender, including provisions for
reimbursement of any draws on issued letters of credit. No letter of
2
<PAGE>
credit shall be issued which has a termination date later than one year
beyond the maturity date of the Loan. Borrower shall pay all normally
charged application, origination and letter of credit fees with respect
to each letter of credit, in addition to the fees and interest charges
otherwise provided under this Agreement and the other Loan
Documentation. Each application for a letter of credit shall be deemed
to be a reaffirmation of all warranties and representations made in
this Agreement and the other Loan Documentation including without
limitation a warranty and representation that no event of default has
occurred.
Any acceleration of the Loan upon the occurrence of an event of default
shall be treated at Lender's option as a draw of the entire amount of all
outstanding letters of credit so as to impose an immediate and present
obligation to pay over to Lender sums equal to all such amounts. Thereafter, if
any outstanding letter should expire undrawn, Lender agrees, to the extent of
actual prior payment not previously paid out pursuant hereto, to pay the same
over the Borrower.
1.7 In addition to this Agreement, the Notes and any applicable Foreign
Exchange Contracts, references to "Loan Documentation" shall include
all instruments, trust deeds, mortgages, other assignments, other
security agreements, other pledge agreements, lien instruments,
guaranties, subordinations, financing statements, notices, lien
waivers, certificates (including hazardous waste certificates and
indemnities), certificates of title, applications for certificates of
title, environmental indemnities, and all other documents set forth in
or as otherwise required by Lender as a condition to or in connection
with the Loan, whether now or hereafter executed.
1.8 Any of the following persons is authorized to make a written or oral
request to Lender to advance funds under this Agreement: Mark McBride,
John Lamley, and Grant Schultz. Lender is under no obligation to verify
the identify of an individual representing to be one of the foregoing
persons. Any advance made pursuant to said written or oral request is
irrebuttably presumed to be made for Borrower's benefit. Lender shall
make disbursements on the Loan to Borrower or for the account of
Borrower unless Borrower directs otherwise in writing.
1.9 The obligations, indebtedness, covenants and liabilities of Borrower,
set forth or contemplated in the Loan Documentation shall be referred
to as the "Obligations," including without limitation any indebtedness
resulting from any overdraft on any account with Lender (provided that
nothing herein shall be a commitment by Lender to honor overdrafts).
1.10Any and all fees, costs and expenses, of whatever kind or nature,
including but not limited to attorneys' fees, incurred by Lender in
connection with this Agreement (whether or not a letter of credit is
issued for the Borrower or a Foreign Exchange Contract is written)
shall be borne and paid by Borrower on demand by Lender and until so
paid constitute part of the Obligations of Borrower and shall accrue
interest at the Note rate or, if applicable at the default rate.
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SECTION 2. CONDITIONS.
2.1 Lender shall not be required to issue letters of credit or foreign
exchange contracts under this Agreement unless Lender shall have
received from Borrower the following:
(a) Current financial statements in such form as Lender may require;
(b) The fully executed Loan Documentation;
(c) Corporate resolutions and documents evidencing the good standing of
Borrower and the due and proper execution of the Loan Documentation by
authorized representatives; and
(d) Such other documentation and information that Lender or it counsel
may request given the circumstances and terms of the Loan.
2.2 Lender shall not be required to make any advance under the Loan,
including the issuance of any additional letters of credit or provide a
foreign exchange contract if a default or an event of default under the
Loan Documentation exists or if an event has occurred that with the
passage of time would constitute such a default or event of default.
3. REPRESENTATIONS AND WARRANTIES OF BORROWER.
To induce Lender to make the Loan, Borrower warrants and represents as
follows:
(1) Borrower is in good standing under, and in full compliance with,
all applicable laws, codes, rules and regulations under federal, state
and municipal authority, including without limitation the proper use,
storage registration and disposal of any hazardous materials.
(2) Borrower has full power, authority and capacity to incur the
indebtedness described herein and to execute the Loan Documentation.
The person or persons executing this Agreement and the other Loan
Documentation on behalf of Borrower are a duly authorized to do so.
(3) The Loan Documentation is in all respects legal, valid, and binding
according to its terms. The execution and performance of the Loan
Documentation will not violate any applicable law, regulation, order,
judgment or decree, partnership agreement, article of incorporation,
bylaw, article of organization, operating agreement, indenture,
contract or agreement that purports to be binding on the Borrower or
its assets, and will not result in the creation of any encumbrance on
the assets of Borrower except as contemplated by the Loan
Documentation.
(4) Any financial statements of Borrower heretofore delivered to Lender
are true and correct in all respects. The most recent statements given
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to Lender accurately represent the current financial condition of
Borrower, and, since the date of such statements, the business,
properties, assets, and liabilities of Borrower have not been adversely
affected or changed in any material way.
(5) All written representations previously made and information
previously given by Borrower or Borrower's agents to Lender or its
agents remain true and correct.
(6) Borrower is not in default under any indebtedness, lease, contract,
license, undertaking, or other agreement which will affect the ability
of Borrower to perform under any of the Loan Documentation.
(7) There are no existing actions, suits, or proceedings pending or
threatened against Borrower or relating to the business, properties,
and assets of Borrower that may have an adverse effect upon the
financial condition, the business or the assets of Borrower, and no
judgment, order, or decree has been rendered which has not been
discharged, satisfied, or complied with other than those disclosed to
lender in writing.
(8) Borrower has filed all federal and state income tax returns which
are required to be filed (except returns for which extensions have been
properly filed) and has paid all taxes, assessments and governmental
charges or levies imposed upon Borrower or upon Borrower's income or
profits, or upon any property belonging to Borrower, to the extent that
such taxes and assessments have become due (except such taxes and
assessments that are being contested in good faith by appropriate
proceedings diligently prosecuted and that have been disclosed to
Lender in writing).
(9) Borrower has good title to its assets, and including the properties
and assets reflected in he most recent statements given to Lender.
SECTION 4. COVENANTS OF BORROWER.
4.1 Borrower shall promptly furnish Lender, during the term of the Loan,
copies of such tax returns and financial reports and statements as
requested by Lender, all prepared in a manner and form and at such
times as are acceptable to Lender. At a minimum Borrower shall provide
to lender a CPA audited annually within one hundred twenty (120) days
after the end of each fiscal year. Interim statements shall be provided
quarterly, forty-five (45) days after the end of each such interim
period. Upon request, Borrower shall provide to Lender a quarterly
report summarizing the Borrower's activities of that quarter and a
certification that Borrower is in compliance with this Agreement.
4.2 Borrower shall promptly give notice to Lender of (a) the occurrence of
any default or event of default under any of the Loan Documentation;
(b) any litigation, proceedings or event that may have an adverse
effect upon the financial condition, the business or the assets of
Borrower; (c) any dispute between Borrower and any governmental
regulatory body or other party that may interfere with the normal
business operation of Borrower or adversely affect the assets of
Borrower; and (d) any adverse change in the financial condition of
Borrower.
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4.3 Borrower will:
(a) duly observe and conform to all requirements of any governmental
authorities relative to the conduct of Borrower's business or to
Borrower's properties or assets, including without limitation the
proper use, storage, registration and disposal of any hazardous
materials;
(b) maintain and keep in full force and effect all licenses and permits
necessary to the property conduct of Borrower's business, including the
continuance of Borrower's good standing; and
(c) pay all obligations and liabilities when due, including without
limitation all taxes, assessments and governmental charges or levies
imposed upon Borrower or upon Borrower's income or profits, or upon any
property belonging to Borrower, and maintain appropriate reserves for
the accrual of the same in accordance with generally accepted
accounting principles.
4.4 Borrower will keep proper books and records in which fully, true and
correct entries (and in a manner acceptable to Lender) will be made of
all dealings or transactions relating to its business activities.
4.5 Borrower will maintain, with financially sound and responsible
companies, hazard and liability insurance in such form and in such
amounts and against such risks as is customarily carried by companies
engaged in the assume or similar business and operating like
properties.
4.6 Borrower will permit Lender or its agents to inspect the corporate
books and financial records of Borrower an to discuss the affairs,
finances and assets of Borrower with Borrower, all at such reasonable
items and as often as Lender may reasonably request.
4.7 Borrower will not create or suffer to exist any lien or encumbrance on
any of the assets of Borrower except (1) clients in favor of Lender;
(2) liens for taxes or assessments not yet payable; (3) mechanic's or
materialman's liens arising in the ordinary course of business that are
not overdue; (4) deposits or pledges to secure the payment of worker's
compensation, unemployment or other social security benefits, or to
secure the performance of bids, tenders, contracts (other than for
borrowed money), leases, public or statutory obligations, security or
appeal bonds or other obligations of a similar nature incurred in the
ordinary course of business; or (5) liens to which Lender has
previously consented in writing. Borrower shall notify Lender in
writing immediately upon receipt of notice of the imposition of any
lien, levy, attachment or execution on the business or assets of
Borrower. Borrower shall cause such liens or other process not
permitted by this Section to be satisfied immediately. Lender may
discharge such unpermitted liens and encumbrances, and any such amounts
shall become part of the Obligations, shall be repaid to Lender on
demand, and shall accrue interest as set forth as the default rate of
interests hereinabove.
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4.8 Borrower will not guarantee, endorse or otherwise become surety for the
obligations of any other person or entity without the prior written
consent of Lender, except with respect to consumer-related obligations
and with respect to checks, drafts and similar instruments for deposit
or collection in the ordinary course of Borrower's business. Without
prior written consent of Lender, Borrower agrees that it will not loan
to or provide credit accommodations to third parties, except as
associated with transactions in the ordinary course of business.
4.9 Borrower shall immediately notify Lender in writing of any change in
the location of Borrower's business or any change in Borrower's name,
any change in the key management or ownership of Borrower or any change
in the agreements affecting the structure of Borrower or the operation
of its business. Without the prior written consent of Lender, Borrower
will not become party to or involved in any merger, consolidation or
change of form or structure or other like change or acquisition.
Borrower shall not redeem or purchase its own stock. Furthermore,
Borrower shall not commingle its funds with any other entity.
SECTION 5. DEFAULT AND REMEDIES.
5.1 The occurrence of any of the following shall constitute an event of
default under this Agreement (references to "Borrower" in this Section
5.1 shall include each other party to the Loan Documentation):
(a) Failure to pay when due any principal or interest or other
monetary indebtedness under the Obligations;
(b) Any representation or warranty made by Borrower in the Loan
Documentation or in connection with any borrowing hereunder, or in any
certificate, financial statement or other statement furnished by
Borrower pursuant hereto is untrue in any respect at the time when
made;
(c) Failure of Borrower to observe or perform any of the covenants or
agreements contained in the Loan Documentation;
(d) Any material provisions of the Loan Documentation shall for any
reason cease to be in full force and effect;
(e) Borrower shall default on any other obligation owed to Lender or
other Lender;
(f) Filing by or against Borrower of a petition in bankruptcy or for
any other relief under the Bankruptcy Code, as amended, or under any
other insolvency act or law, state or federal, now or hereafter
existing, or any action by Borrower indicating Borrower's consent to,
approval of, or acquiescence in, any such petition or proceeding; the
application by Borrower, or the consent or acquiescence of Borrower to
the appointment of a receiver or trustee for Borrower or for all or a
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substantial part of Borrower's property; the making by Borrower of an
assignment for the benefit of creditors under state law; or the
admission of Borrower in writing of Borrower's inability to pay
Borrower's debts as they mature;
(g) The involuntary appointment of a receiver or trustee for Borrower
or for all or a substantial part of Borrower's property; or the
issuance of a warrant of attachment, execution or similar process
against any substantial part of the property of Borrower;
(h) All of any substantial part of the property of Borrower shall be
sold, assigned, transferred, or shall be condemned, seized or otherwise
appropriated, or custody or control of such property shall be assumed
by any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency;
(i) The occurrence of any adverse change in the financial condition of
Borrower or the status of the Collateral deemed material by Lender;
(j) Lender deems itself insecure.
5.2 If any of the events set forth in Section 5.1 occurs:
(a) Lender may (i) terminate any obligation to issue further letters of
credit or further Foreign Exchange Contracts under the Loan; (ii)
declare the entire Obligations outstanding hereunder to be immediately
due and payable, whereupon the amount of any outstanding letter of
credit, or the principal amount of any draw under any letter of credit,
together with accrued interest thereon, shall become immediately due
and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived, anything contained
herein or in the Note to the contrary notwithstanding; and/or (iii)
proceed to enforce any of its remedies under the Loan Documentation,
including this Agreement.
(b) All demands and presentments of any kind or nature are expressly
waived by Borrower. Borrower waives the right to require Lender to
pursue any other remedy for the benefit of Borrower and agrees that
Lender may proceed against Borrower for the amount of the Obligations
owed by Borrower to Lender without taking any action against any other
party. Borrower authorizes Lender, at its option, to apply toward the
payment of the obligations all balances of any deposit account in the
name of Borrower held by Lender.
(c) Lender may proceed to enforce any of its remedies under the Loan
Documentation, including this Agreement, or provided by law.
No remedy given to Lender in the Loan Documentation is intended to be exclusive
of any other available remedy or remedies, but each and every such remedy shall
be cumulative and shall be in addition to any other remedy given under the Loan
Documentation or now or hereafter existing at law or in equity or by statutes.
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5.3 The Borrower agrees to cooperate with Lender in effectuating Lender's
right notwithstanding any unanticipated inability of Borrower to pay the Loan or
otherwise perform the Obligations.
SECTION 6. MISCELLANEOUS.
6.1 Time is of the essence of this Agreement. No issuance of a letter of
credit or a Foreign Exchange Contract under the Loan shall constitute a
waiver of any of the conditions to Lender's obligation to make further
advances, nor, in the event Borrower is unable to satisfy any such
condition, shall any failure on Lender's part to immediately enforce
its remedies have the effect of precluding Lender from thereafter
declaring such inability to be an event of default under this
Agreement. No failure or delay on the part of Lender in exercising any
right, power or privilege hereunder or under the Loan Documentation
shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder or thereunder
preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The consent or approval by Lender to
or of any act by Borrower requiring further consent or approval shall
not be deemed to waive or render unnecessary the consent or approval to
or of any subsequent act. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies provided by law.
6.2 Borrower shall pay all attorneys' fees, paralegal fees, costs,
including without limitation costs and expenses incurred by Lender in
the enforcement of its rights hereunder and the other Loan
Documentation, whether any default is ultimately cured or Lender is
obligated to pursue its remedies hereunder, including such expenses
incurred before legal action, during the pendency of any such legal
action, during the enforcement of Lender's rights in any bankruptcy or
insolvency proceedings, and continuing to all such expenses in
connection with any appeal to higher courts arising out of matters
associated herewith. Until so paid, all such fees, costs, and expenses
shall constitute part of the obligations of Borrower and shall accrue
interest at the default rate.
6.3 Borrower hereby agrees to indemnify and hold harmless Lender, its
directors, officers and employees from any and all liability, expense,
costs, charges or assessments, including attorneys' fees and expenses,
whether incurred or imposed pursuant to local, state or federal law.
Borrower also agrees to indemnify and hold harmless Lender, its
directors, officers and employees from and against any and all
liability, expense, damage, demands, claims and lawsuits, including
attorneys' fees and expenses, arising out of this Agreement or the
other Loan Documentation or in connection therewith, unless arising
from Lender's willful misconduct.
6.4 In addition to this Agreement and the other Loan Documentation, this
finance transaction may include closing documentation such as
resolutions, waivers, notices, acknowledgments, statements, closing or
escrow instructions, loan purpose statements, and other documents that
Lender may customarily use in closing such transactions. Such
additional documents are incorporated herein by this reference. The
Loan Documentation and the closing documents to which this Section
refers, as applicable, express, embody and supersede any previous
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understandings, agreements or promises (whether oral or written) with
respect to this finance transaction, and said documents represent the
final expression of the agreement between Lender and Borrower, the
terms and conditions of which cannot hereafter be contradicted by any
oral understanding not reduced to writing and identified above. This
Section shall govern in the event it is inconsistent with any similar
provision in any other Loan Documentation.
6.5 Any notice required by any Loan Documentation will be deemed effective
if personally delivered to the party to which notice is being given,
or, in the alternative, on the date such notice is placed, first-class
mail, in the U.S. Mail addressed to the party to which notice is being
given, at such address as is set forth below. In the event another
agreement constituting part of the Loan Documentation sets forth a
notice procedure, such procedure shall govern for purposes of that
document and thus supersede the terms of this Section if inconsistent.
6.6 All representations and warranties made in this Agreement and the Note
and in any certificates delivered pursuant hereto and thereto shall
survive the execution and delivery of this Agreement and the making of
the Loan hereunder and shall survive payment of the Loan. This
Agreement shall be binding upon and inure to the benefit of Borrower
and Lender and their respective successors and assigns, except that the
Borrower may not assign or transfer its right hereunder without the
written consent of Lender. It is understood that Lender may sell the
Loan and its interests under the Loan Documentation without the need
for Borrower's consent and may procure other Lenders to participate in
the Loan, and Lender may issue participation certificates to such other
Lenders.
6.7 Borrower agrees to execute any other documentation and provide such
other information and documentation as Lender may reasonably require.
Any provision of this Agreement or any other constituents of the Loan
Documentation, which may be found to be invalid, shall be deemed
separable and shall not invalidate the remainder of the provisions. No
third party shall, under any circumstances, be deemed to be a
beneficiary under the Loan Documentation or any condition set forth
therein. Nothing in the Loan Documentation shall create a partnership
or joint venture between Lender and Borrower.
6.8 This Agreement may be signed in any number of counterparts, each of
which shall be deemed an original, and such counterparts together shall
constitute one and the same instrument. This Agreement and the other
Loan Documentation shall be governed by, and construed and interpreted
in accordance with, the laws of the State of Utah. If Borrower is not a
resident of the State of Utah, Borrower hereby consents to the
jurisdiction of the courts of the State of Utah to enforce this
Agreement and the other Loan Documentation.
6.9 The obligations of Borrower (if there is more than one Borrower) under
the Loan Documentation, including warranties and representations, shall
be joint and several.
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DATED this 9th day of March, 1998.
BORROWER:
Evans & Sutherland Computer Corporation
By:/S/ JOHN LEMLEY
Its:CHIEF FINANCIAL OFFICER
Address:600 Komas Drive
P.O. Box 58700
Salt Lake City, Utah 84158
LENDER:
First Security Bank, N.A.
By:/S/ TROY AKAGI
Its:VICE PRESIDENT
Address:15 East 100 South, 2nd Floor
Salt Lake City, Utah 84111
MODIFICATION AGREEMENT
Borrower: Lender:
Evans & Sutherland Computer Corporation First Security Bank, N.A.
600 Komas Drive Commercial Banking
Salt Lake City, Utah 84158 15 East 100 South, 2nd Floor
Salt Lake City, Utah 84111
First Security Bank, N.A. ("Lender") has extended credit (the "Loan") to Evans &
Sutherland Computer Corporation (individually and collectively "Borrower")
pursuant to a promissory note dated March 2, 1998 (the "Note") in the stated
principal amount of $5,000,000.00. The Loan is unsecured.
The Note and any loan agreements, guaranties, subordinations, Collateral
Documents, and other instruments and documents executed in connection therewith,
together with any previous modifications to any of those instruments or
documents, shall be referred to as the "Loan Documents."
Borrower has requested certain modifications to the Loan Documents and Lender is
willing to grant such modifications on the following terms and conditions:
1. Provided that all conditions stated herein are satisfied, the terms of
the Loan Documents are hereby modified as follows:
Modifications to the Term of the Note:
This Agreement does not constitute a repayment or extinguishment of the
Note, but only a modification thereof.
Other Modifications to the Loan Documents:
The Loan Documents shall be amended as follows:
Several portions of Section 1 of the Commercial Credit and
Security Agreement dated March 2, 1998 (the "Credit Agreement")
shall be modified in the following manner:
Subsection 1.1 shall remain unchanged.
The main heading of Subsection 1.2 shall be amended to read:
"1.2 The Loan shall consist of the following facility:"
Thereafter, changes shall be made to subitem (a) so that the
maximum amount of the L/C Line shall be changed to Five Million
Dollars ($5,000,000.00) and the fee charged for each letter of
credit issued under the line shall be modified to be 0.70% of the
amount of each letter of credit issued, plus the standard per item
charges assessed by First Security; and all references to subitem
(b) concerning the FX Line shall be deleted from the Agreement,
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and any further dealings concerning a foreign exchange line shall
be dealt with in a separate agreement.
Subsection 1.3 shall be amended by delaying subitem (b) in its
entirety.
Subsection 1.4 shall be amended to state:
"1.4 The facility shall be stated to mature on September 30, 2000,
after which no further letters of credit may be issued."
Subsection 1.8 shall be modified to amend the names of the
individuals eligible to request an advance under the Loan, and
thus shall read:
1.8 Any of the following persons is authorized to make a written
or oral request to Lender to advance funds under this Agreement:
Mark Steele and Richard J. Gaynor. Lender is under no obligation
to verify the identity of an individual representing to be one of
the foregoing persons. Any advance made pursuant to said written
or oral request is irrebuttably presumed to be made for Borrower's
benefit. Lender shall make disbursements on the Loan to Borrower
or for the account of Borrower unless Borrower directs otherwise
in writing.
The warranty and representation rehearsed by Borrower in Section
3.7 of the Credit Agreement concerning the absence of any actions,
suits or proceedings against Borrower which may have an adverse
effect upon its financial condition is modified so as to disclose
to Lender the existence of one lawsuit threatened against Borrower
by CAE, the details of which are attached hereby to this
Modification Agreement as Exhibit "A."
Section 4.7 of the Credit Agreement shall be deleted in its
entirety.
Section 4.8 of the Credit Agreement shall be deleted in its
entirety.
Section 4.9 of the Credit Agreement shall be restated to read as
follows:
4.9 Borrower shall immediately notify Lender in writing of any
change in the location of Borrower's business or any change in
Borrower's name, any change in the key management of Borrower or
any change in the agreements affecting the structure of Borrower
or the operation of its business. Furthermore, Borrower shall not
commingle its funds with any other entity.
Subitem 5.1 (h) shall be restated to read as follows:
(h) Borrower shall sell, transfer or assign substantially all of
its assets, which shall mean more than fifty percent (50%) of such
assets, to any third party, or all or any material part of the
assets of Borrower is attached, levied, or otherwise seized by
legal process, and such attachment, levy, or seizure is not
quashed, stayed or released within sixty (60) days of the date
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thereof. Borrower and Lender acknowledge, however, that Borrower
is currently seeking additional financing from other sources in
the approximate aggregate amount of $60,000,000.00 (the
"Financing"), which Financing may be secured by assignments from
time to time of Borrower's accounts receivable, inventory, real
estate, or other personal property assets. Borrower and Lender
further agree and acknowledge that any pledge, mortgage,
assignment, sale, transfer or hypothecation of the
above-referenced assets of Borrower to provide collateral security
for the Financing shall be disregarded with respect to the
determination of the foregoing default provisions. In the event
that Borrower secures the Financing, Borrower consents that it
shall (i) at all times during the term of the Loan maintain on an
undrawn basis, a portion of the available commitment amount of the
Financing equal to or greater than the aggregate credit then
outstanding under the L/C Line and FX Line and (ii) submit to
Lender on a monthly basis, a compliance certificate in form and
content reasonably acceptable to Lender, indicating the aggregate
undrawn commitment available under the Financing.
Subitem 5.1 (i) shall be further clarified to define a material
adverse change in the financial condition of Borrower to mean any
change which would have an effect on Borrower exceeding
$10,000,000.00.
Subsection 5.1 (j) shall be deleted in its entirety as an event of
default.
2. As preconditions to the terms of this Agreement, Borrower shall complete
or provide the following:
Borrower shall pay or shall have paid all reasonable fees, costs, and
expenses, of whatever kind or nature, incurred by Lender in connection
with this Agreement, including but not limited to attorney's fees, lien
search fees, title reports and policies, and recording and filing fees.
3. It is the intention and agreement of Borrower and Lender that: (i) all
collateral security in which Lender has acquired a security interest or
other lien pursuant to the Loan Documents shall continue to serve as
collateral security for payment and performance of all the obligations
of the Borrower under the Loan Documents, and (ii) all agreements,
representations, warranties, and covenants contained in the Loan
Documents are hereby reaffirmed in full by Borrower except as
specifically modified by this Agreement.
4. Borrower hereby acknowledges that: (i) the Loan Documents are in full
force and effect, as modified by this Agreement, and (ii) by entering
into this Agreement, Lender does not waive any existing default or any
default hereunder occurring or become obligated to waive any condition
or obligation under the Loan Documents.
5. Borrower hereby acknowledges that Borrower has no claim, demand,
lawsuit, cause of action, claim for relief, remedy, or defense against
enforcement of the Loan Documents that could be asserted against
Lender, its affiliates, directors, officers, employees, or agents,
whether known or unknown, for acts, failures to act (whether such act
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or failure to act is intentional or negligent), representations,
commitments, statements or warranties, including without limitation
any such conduct arising out of or in any way connected with the Loan
Documents. Notwithstanding the foregoing, Borrower hereby waives,
releases, and relinquishes any and all claims, demands, lawsuits,
causes of action, claims for relief, remedies, or defenses against
enforcement of the Loan Documents that could be asserted against
Lender, its affiliates, directors, officers, employees, or agents,
whether known or unknown.
6. In addition to this Agreement, the Loan Documents, and any additional
documents that this Agreement requires, this finance transaction may
include other written closing documentation such as resolutions,
waivers, certificates, financing statements, filings, statements,
closing or escrow instructions, loan purposes statements and all other
documents that Lender may customarily use in such transactions. Such
documents are incorporated herein by this reference. All the documents
to which this paragraph makes reference express, embody, and supersede
any previous understandings, agreements, or promises (whether oral or
written) with respect to this finance transaction, and represent the
final expression of the agreement between Lender and Borrower, the
terms and conditions of which cannot hereafter be contradicted by any
oral understanding (if any) not reduced to writing and identified
above.
FINAL AGREEMENT. Borrower understands that the loan documents signed in
connection with this loan are the final expression of the agreement between
Lender and Borrower and may not be contradicted by evidence of any alleged oral
agreement.
Effective as of February 22, 2000.
LENDER:
First Security Bank, N.A.
By: /s/ Troy Akagi
Authorized Officer
BORROWER:
Evans & Sutherland Computer Corporation
By: /s/ Mark Steele
Mark Steele, Vice President and Treasurer
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EXHIBIT "A"
TO
MODIFICATION AGREEMENT
Reference is made to that certain Commercial Credit and Security
Agreement, dated March 2, 1998 (as amended and modified from time to time, the
"Agreement"), as the same was amended effective as of February 22, 2000,
pursuant to that certain Modification Agreement ("Modification") to which this
Exhibit "A" is attached and hereby incorporated into in its entirety.
Section 3.7 of the Agreement, as amended and supplemented by the
Modification, references a certain lawsuit by CAE Electronics, Ltd. ("CAE")
against Borrower. Borrower and Lender hereby acknowledge that such reference is
in error and that there are no "existing actions, suits, or proceedings pending
or threatened against Borrower" to the best of the actual knowledge of
Borrower's directors and officers.
However, Borrower hereby discloses to Lender that CAE has asserted that
certain monetary amounts constituting liquidated damages are owing from Borrower
to CAE pursuant to the provisions of one or more agreements between Borrower and
CAE. In addition to the liquidated damages provisions of such contracts, the
contracts provide for arbitration of disputes among the parties thereto.
However, no such arbitration proceeding has been commenced as of the date
hereof. Moreover, Borrower and CAE are currently negotiating to mutually resolve
the amount of any such liquidated damages, the purported disputes or breaches of
contract related to the assertion that liquidated damages are owing and any
other claims or disputes among the parties.
Borrower and Lender further agree and acknowledge that Section 3.7 of
the Agreement, as amended by the Modification, is hereby amended to be
consistent with the foregoing.
All capitalized terms used without definition shall have the meaning
given to such terms in the Agreement.
Dated as of March 15, 2000.
Evans and Sutherland Computer Corporation
a Utah corporation
By:/S/ R. GAYNOR
Name: Richard J. Gaynor
Title: Vice President and Chief Financial Officer
First Security Bank, N.A.
a Utah corporation
By: /s/ TROY AKAGI
Name Troy Akagi
Title: Vice President
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