SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-Q
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 1997
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 0-11691
ELEXSYS INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 95-3534864
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4405 Fortran Court, San Jose, California 95134
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(Address of principal executive offices) (Zip Code)
(408) 935-6300
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(Registrant's telephone number, including area code)
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
--- ---
At July 24, 1997 there were 9,509,476 outstanding shares of common stock.
This report consists of 15 pages
<PAGE>
ELEXSYS INTERNATIONAL, INC.
FORM 10-Q
INDEX
Page
----
Part I. Financial Information:
Item 1.
Consolidated Balance Sheets as of June 28, 1997 and September 30,
1996 ............................................................... 3
Consolidated Statements of Operations for the Three and Nine Months
Ended June 28, 1997 and June 29, 1996............................... 4
Consolidated Statements of Cash Flows for the Nine Months
Ended June 28, 1997 and June 29, 1996............................... 5
Notes to the Consolidated Financial Statements...................... 6
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................... 10
Part II. Other Information:
Item 5.
Other Information .................................................. 13
Item 6a.
Exhibits............................................................ 14
2
<PAGE>
ELEXSYS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 28, September 30,
1997 1996
----------- -------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 1,063 $ 1,075
Accounts receivable, net 24,813 20,463
Inventories 16,737 10,690
Prepaid expenses and other current assets 1,744 1,447
------- -------
Total current assets 44,357 33,675
------- -------
Property, plant and equipment, net 32,526 24,818
Other assets 4,043 3,612
======= =======
Total assets $80,926 $62,105
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $14,444 $12,629
Accrued payroll and related costs 4,272 2,611
Other current liabilities 1,006 1,321
Short-term borrowings 4,633 5,310
Current portion of long-term debt 883 1,234
------- -------
Total current liabilities 25,238 23,105
------- -------
Long-term debt 12,154 2,448
Convertible subordinated debentures 12,000 12,000
Stockholders' equity:
Preferred stock, $1.00 par value, 1,000,000
shares authorized, none issued and outstanding at
June 28, 1997 and September 30, 1996
Common stock, $1.00 par value, 20,000,000 shares
authorized, 9,488,826 shares outstanding at June
28, 1997 and 9,300,810 shares outstanding at
September 30, 1996 9,489 9,301
Additional paid-in capital 7,925 7,294
Cumulative foreign currency translation adjustment 135 (22)
Retained earnings 13,985 7,979
------- -------
Total stockholders' equity 31,534 24,552
======= =======
Total liabilities and stockholders' equity $80,926 $62,105
======= =======
The accompanying notes are an integral part of these
consolidated financial statements.
3
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ELEXSYS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
-------- -------- -------- --------
Net sales $ 44,826 $ 30,841 $118,802 $ 90,140
Cost of sales 36,505 25,312 98,362 73,527
-------- -------- -------- --------
Gross profit 8,321 5,529 20,440 16,613
Operating expenses:
Selling, general and administrative 4,903 3,091 12,274 9,165
Research and development 91 71 201 211
-------- -------- -------- --------
Total operating expenses 4,994 3,162 12,475 9,376
-------- -------- -------- --------
Income from operations 3,327 2,367 7,965 7,237
Interest expense, net 596 354 1,590 982
-------- -------- -------- --------
Income before income taxes 2,731 2,013 6,375 6,255
Provision for income taxes 132 49 369 52
-------- -------- -------- --------
Net Income $ 2,599 $ 1,964 $ 6,006 $ 6,203
======== ======== ======== ========
Earnings per share:
Primary $ 0.26 $ 0.20 $ 0.61 $ 0.65
Fully Diluted $ 0.26 $ 0.20 $ 0.61 $ 0.65
-------- -------- -------- --------
Weighted average common shares and
common equivalent shares outstanding:
Primary 10,002 9,619 9,844 9,548
Fully Diluted 10,002 9,619 9,844 9,548
======== ======== ======== ========
The accompanying notes are an integral part of these
consolidated financial statements.
4
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ELEXSYS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
June 28, June 29,
1997 1996
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,006 $ 6,203
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 5,309 3,924
Increase in accounts receivable (3,152) (2,501)
Increase in inventories (5,802) (3,237)
Increase in prepaid expenses and other current assets (285) (488)
Increase in accounts payable 1,518 2,629
Increase in accrued payroll and related taxes 1,638 514
Decrease in other current liabilities (320) (611)
Other 42 (318)
------- -------
Net cash provided by operating activities 4,954 6,115
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Neutronic Stampings, Inc., net of cash acquired (1,234) -
Purchase of Anetec Technologies - (1,400)
Purchase of property, plant and equipment (10,039) (6,685)
Proceeds from sale of property, plant and equipment 102 -
Decrease other long-term assets 109 -
------- -------
Net cash used by investing activities (11,062) (8,085)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 819 545
Net change in short-term borrowings (677) 809
Borrowings under long term debt 8,032 118
Principal payments on debt (2,083) (175)
------- -------
Net cash provided by financing activities 6,091 1,297
------- -------
Effects of exchange rate changes on cash and cash equivalents 5 -
------- -------
Net decrease in cash and cash equivalents (12) (673)
Cash and cash equivalents, beginning of period 1,075 903
------- -------
Cash and cash equivalents, end of period $ 1,063 $ 230
======= =======
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Equipment acquired under capital leases $ 1,007 $ -
------- -------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest payments $ 1,283 $ 513
======= =======
Income tax payments $ 427 $ 330
======= =======
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE>
ELEXSYS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements of Elexsys
International, Inc. and its subsidiaries (the "Company") contain all
adjustments, consisting of only normal recurring accruals, which, in
the opinion of management, are necessary to present fairly the
financial position of the Company as of June 28, 1997 and September 30,
1996 and the results of its operations and cash flows for the three and
nine months ended June 28, 1997 and June 29, 1996. Certain information
and footnote disclosures normally included in the financial statements
have been condensed or omitted pursuant to rules and regulations of the
Securities and Exchange Commission, although the Company believes that
the disclosures in the consolidated financial statements are adequate
to make the information presented not misleading.
The consolidated financial statements included herein should be read in
conjunction with the consolidated financial statements of the Company
included in the Company's Annual Report on Form 10-K for the year ended
September 30, 1996.
Note 2 - Inventories
Inventories consist of the following (in thousands):
June 28, September 30,
1997 1996
----------- -------------
(Unaudited)
Raw materials $ 8,532 $ 5,434
Work in progress 8,205 5,256
------- -------
Totals $16,737 $10,690
======= =======
Note 3 - Goodwill
Goodwill relates to acquired subsidiaries and is being amortized on a
straight-line basis over estimated useful life of ten years. The
Company evaluates its long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying value of an
asset may not be recoverable.
Note 4 - Earnings Per Share
Primary and fully diluted earnings per common share for the three and
nine months ended June 28, 1997 and June 29, 1996 have been computed
based on weighted average common shares outstanding and common stock
equivalents (stock options) as of the above dates and do not include
the assumed conversion of the 5 1/2 percent Convertible Subordinated
Debentures due 2012 into common stock as such effect would have been
antidilutive.
6
<PAGE>
ELEXSYS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 5 - Borrowing Arrangements
In December 1996, the Business Finance Authority of the State of New
Hampshire (the "Issuer') issued a tax-exempt qualified small issue
private placement bond, the proceeds of which were loaned to the
company on January 27, 1997 to reimburse the Company for the $2.3
million it paid to purchase its Nashua, New Hampshire manufacturing
facility in November 1996, with approximately another $400,000
available to reimburse the Company for improvements it intends to make
to the premises. In connection with the loan, the Company entered into
a Loan Agreement among the Issuer, GE Capital Public Finance, Inc., as
lender to the Issuer, and the Company, as borrower, dated as of
December 1, 1996 (the "Loan Agreement"). Under the terms of the Loan
Agreement, the loan has a ten year term with interest payable monthly
in arrears at a rate of 6.33%. Principal payments are also due monthly
based on a twenty years amortization schedule. The loan is secured by a
standby letter of credit issued by Sanwa Bank of California under the
Company's line of credit facility of 100% of the principal amount plus
120 days interest.
On January 17, 1997, the Company terminated its existing working
capital line of credit and entered into a series of new loan agreements
with Sanwa Bank California. The Accounts Receivable Credit Agreement
consists of a $13 million working capital line of credit. The Term Loan
Credit Agreement consists of $7 million term loan to be used for
acquisition financing. The borrowings under the working capital line of
credit and the term loan bear interest at prime rate plus 1/2 percent
and 1 percent, respectively. At the Company's request, interest on the
line of credit or the term loan can be converted to a fixed rate at 250
basis points and 300 basis point, respectively, over the cost of funds.
The line of credit and the term loan are collateralized by
substantially all of the Company's assets. The Accounts Receivable
Credit Agreement and the Line of Credit will remain in effect until
January 31, 1998. The amount outstanding on the Term Loan Credit
Agreement can fluctuate and interest only will be payable until January
31, 1998, at which point the amount outstanding will become due and
payable in 36 equal monthly installments of principal and interest
ending on January 31, 2001. These credit facilities contain covenants
including the maintenance of certain levels of working capital,
tangible net worth and certain financial ratios. In addition, the
company is restricted from incurring additional indebtedness,
dividends, and certain other payments.
On May 14, 1997 the Company amended and restated its Term Loan Credit
agreement and its Accounts Receivable Credit Agreement with its
principal lender Sanwa Bank modifying certain loan covenants giving
recognition of the Company's need for additional capital spending. In
addition, on May 14, 1997 the Company entered in an a Line of Credit
Agreement, with essentially the same terms and termination date as its
Accounts Receivable Credit Agreement, allowing the company to borrow up
to $5.0 million in a foreign currency within the borrowing limits of
the Accounts Receivable Credit Agreement.
7
<PAGE>
ELEXSYS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 6 - Income Taxes
In the first nine months of fiscal 1997, the Company provided $369,000
for income taxes. This tax provision primarily relates to federal
alternative minimum tax and state taxes. As of September 30, 1996, the
Company had net operating loss carryforwards for federal, state, and
foreign income tax purposes of approximately $24,416,000, $19,402,000,
and $672,000, respectively. These carryforwards, for which future
benefits are not assured, expire in various amounts through 2008.
Note 7 - Purchase of the assets of Neutronic Stampings, Inc.
On April 14, 1997, the Company acquired, pursuant to a Stock Purchase
Agreement, Neutronic Stampings, Inc. including the remaining 50%
interest not already owned by the Company in two partnerships,
Neutronic Plating Services and H&V Services, plus other production
equipment leased by the above entities for approximately $4.6 million.
These entities are engaged in stamping spools of metal to create parts
and/or plating spools of metal parts used in various industries such as
backplane assemblies.
The purchase price included cash of $2.0 million and promissory notes
payable over one year for $2.3 million. The acquisition was accounted
for using the purchase method of accounting with the purchase price
allocated to assets and goodwill upon completion of an appraisal of the
assets acquired. The total purchase price of approximately $4.6 million
was allocated as described in the following table (in millions):
Cash $ .8
Accounts receivable 1.1
Inventories .2
Prepaid expenses and other current assets .2
Property, plant and equipment 1.5
Goodwill 1.5
Accounts payable (.1)
-----
Total assets acquired 5.2
Less pre-existing investment in partnerships (.6)
-----
Net assets acquired $ 4.6
=====
Note 8 - Recently Issued Accounting Standard
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share" (SFAS 128). The Company is required to adopt SFAS 128 in the
fourth quarter of fiscal 1997 and will restate at that time earnings
per share (EPS) data for the prior periods to conform with SFAS 128.
Earlier application is not permitted.
8
<PAGE>
ELEXSYS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 8 - Recently Issued Accounting Standard (continued)
SFAS 128 replaces current EPS reporting requirements and requires a
dual presentation of basic and diluted EPS. Basic EPS excludes dilution
and is computed by dividing net income, available to common
stockholders, by the weighted average of common shares outstanding for
the period. Diluted EPS reflects the potential dilution that could
occur if securities or other contracts to issue common stock were
exercised or converted into common stock.
If SFAS had been in effect during the current and prior year periods,
basic EPS would have been $.27 and $.21 for the quarters ended June 28,
1997 and June 29, 1996 respectively, and $.64 and $.68 for the nine
month periods ending June 28, 1997 and June 29, 1996, respectively.
Diluted EPS under SFAS 128 would not have been significantly different
than fully diluted EPS currently reported for the periods.
Note 9 - Subsequent Event
On July 22, 1997, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Sanmina Corporation providing that
each outstanding share of common stock of the Company would be
converted into 0.33 shares of Sanmina common stock in a transaction
valued at approximately $220 million. The merger is subject to certain
conditions, including the approval of Elexsys's shareholders. The
Merger Agreement contains a provision that should the Company terminate
the Merger Agreement because of receipt of a "Superior Proposal" (as
defined in the Merger Agreement), the Company would pay to Sanmina
Corporation an aggregate amount of $7.5 million cash in three equal
payments on days 5, 180 and 270 after the termination date. The
transaction is intended to be a tax-free reorganization and intended to
be accounted for as a pooling of interests (see Part II, Item 5, Other
Information).
9
<PAGE>
ELEXSYS INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto contained elsewhere
within this Report on Form 10-Q. Except for the historical information
contained herein, the following discussion contains forward-looking
statements that involve risks and uncertainties. The actual future
results of the Company could differ materially from those discussed here.
Factors that could cause or contribute to such differences include, but
are not limited to, those discussed in this section and those discussed
in the Company's Form 10-K for the year ended September 30, 1996.
Results of Operations
Net Sales
Net sales for the three months ended June 28, 1997 were $44.8 million, an
increase of 45%, compared to the $30.8 million reported in the three
months ended June 29, 1996. This increase resulted primarily from an
increase in demand in the Company's assembly business.
Net sales for the nine months ended June 28, 1997 were $118.8 million, an
increase of 32%, compared to the $90.1 reported in the nine months ended
June 29, 1996. This increase resulted primarily from an increase in
demand in the Company's assembly business.
Gross Margin
Gross margin, as a percentage of net sales for the three months ended
June 28, 1997 was 18.6% versus 17.9 % for the three months ended June 29,
1996. The increase in gross margin was primarily due to lower costs in
relation to higher net sales.
Gross margin, as a percentage of net sales for the nine months ended June
28, 1997 was 17.2% versus 18.4 % for the nine months ended June 29, 1996.
The decrease in gross margin was due to higher costs and lower
efficiencies resulting from materials related issues that lead to higher
production costs to replace and rebuild products as reported in the
quarter ended March 29, 1997.
Selling, General and Administrative
SG&A was 10.9% and 10.0% of net sales for the three month periods ended
June 28, 1997 and June 29, 1996, respectively. The increase in SG&A in
relation to net sales was due primarily to expenses associated with
employee terminations, increased goodwill amortization, and costs
associated with acquisitions that were investigated but not completed.
Offsetting these increased expenses were lower selling and marketing
costs in relation to net sales.
SG&A was 10.3% and 10.2% of net sales for the nine month periods ended
June 28, 1997 and June 29, 1996 respectively. The increase in SG&A in
relation to sales was due primarily to the same factors mentioned above,
offset by lower selling and marketing costs in relation to net sales.
Interest Expense, Net
Net Interest expense for the three month period ended June 28, 1997 was
$0.6 million versus $0.4 million for the three months ended June 29,
1996. Net interest expense for the nine month period ended June 28, 1997
was $1.6 million versus $1.0 million for the nine months ended June 29,
1996. The increases are mainly attributable to increased long term debt
to finance working capital needs and for the purchase of Neutronic
Stampings, Inc. on April 14, 1997 and the Company's New Hampshire
facility and adjacent space in November 1996.
10
<PAGE>
ELEXSYS INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Factors That May Affect Future Results
The Company's future operating results may be adversely affected by a
number of factors, including general economic conditions, foreign
competition, industry consolidation, the Company's ability to develop,
manufacture, and sell its products profitably, and the cyclical nature of
the business of some of the Company's customers.
The Company participates in a highly competitive industry. The printed
circuit board industry has been characterized by stringent customer
demands for timely deliveries, service and quality of products and by
aggressive pricing practices. The Company's operating results could be
materially adversely affected should the Company be unable to meet
customer demands.
Liquidity and Capital Resources
The Company had cash flows from operating activities of $5.0 million
during the first nine months of fiscal 1997 compared to $6.1 million
during the same period of the previous year. This decrease was primarily
attributable to additional working capital required to support the growth
in operations. The increase in inventories of $5.8 million in the first
nine months of fiscal 1997 was primarily due to the build-up of the
Company's assembly inventory to support additional customers on a turn
key basis. Accounts receivable grew $3.2 million due to higher sales
levels. Working capital during the first nine months of fiscal 1997 was
positively impacted by an aggregate increase of $2.9 million for accounts
payable, accrued expenses, and other current liabilities.
Cash provided by operating activities of $5.0 million during the first
nine months of fiscal 1997 was offset by cash used by investing
activities of $11.1 million during the same period. Cash from investing
activities was used for the purchase of $10.0 million of property, plant
and equipment (including the $2.3 million purchase of the Company's
Nashua, New Hampshire facility) and for a $1.2 million payment (net of
cash acquired) related to the purchase of Neutronic Stampings, Inc.
Property, plant and equipment were purchased for the enhancement of
manufacturing capabilities and for normal replacement of equipment.
Investing activities were also funded by financing activities of $6.1
million, with bank borrowings, capital leases and tax exempt bonds as the
primary sources of borrowings. As of June 28, 1997, the Company's ratio
of current assets to current liabilities was 1.8 to 1.0.
The additional cash requirement to meet the obligations of the April 14,
1997 Neutronic Stampings, Inc. acquisition, was provided for by a draw
down under the Company's Term Loan Credit Agreement which is designated
for Company acquisitions.
On May 14, 1997 the Company amended and restated its Term Loan Credit
agreement and its Accounts Receivable Credit Agreement with its principal
lender modifying certain loan covenants to reflect the Company's need for
additional capital spending. The total borrowing limits, interest terms
and termination dates under these agreements remained unchanged (See Note
5, Borrowing Arrangements).
11
<PAGE>
ELEXSYS INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Liquidity and Capital Resources (continued)
As of June 28, 1997, the Company had borrowed $4.8 million under the
Company's $13 million Accounts Receivable Credit Agreement, with an
additional $3.4 million pledged under letters of credit. The remaining
borrowing capacity under this line is approximately $4.8 million. As of
June 28, 1997 the Company was in compliance with all of the covenants as
defined within the agreement.
As of June 28, 1997, the Company had borrowed $5.4 million under the
Company's $7 million Term Loan Agreement with an additional $1.6 million
available for payment of outstanding notes of $1.8 million, related to
previous acquisitions.
As of June 28, 1997 there were no borrowings under the Line of Credit
Agreement (See Note 5, Borrowing Arrangements).
12
<PAGE>
Part II. OTHER INFORMATION
Item 5. Other Information
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. The forward-looking statements contained herein involve risks
and uncertainties, including those relating to the possible inability to
complete the merger transaction involving the Company and Sanmina
Corporation, a Delaware corporation ("Sanmina"), as scheduled, if at all,
and those associated with the ability of the combined company to achieve
the anticipated benefits of the merger. Actual results and developments
may differ materially from those described or incorporated by reference
in this Report. For more information about the Company and risks arising
when investing in the Company, investors are directed to the Company's
most recent report on Form 10-K as filed with the Securities and Exchange
Commission (the "SEC").
On July 22, 1997, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement"), among the Company, Sanmina and SANM
Acquisition Subsidiary, Inc., a Delaware corporation and a wholly-owned
subsidiary of Sanmina ("Merger Sub"). The description contained in this
Item 5 of the transactions contemplated by the Merger Agreement is
qualified in its entirety by reference to the full text of the Merger
Agreement, a copy of which is referenced in this Report as Exhibit 10.54.
The Merger Agreement contemplates that, subject to the satisfaction of
certain conditions set forth therein, including the approval and adoption
of the Merger Agreement by the requisite vote of the Company's
stockholders and the expiration or early termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, Merger Sub would be merged into the Company. As a result of the
merger of Merger Sub into the Company (the "Merger"), the Company would
become a wholly-owned subsidiary of Sanmina. Under the terms of the
Merger Agreement, each outstanding share of the Company's common stock
would be converted into thirty-three hundredths (0.33) of a share of
Sanmina common stock. The Merger is intended to be a tax-free
reorganization under the Internal Revenue Code of 1986, as amended, and
is intended to be accounted for as a pooling of interests.
In connection with the execution of the Merger Agreement, each of the
directors of the Company, who collectively beneficially own approximately
45% of the outstanding shares of common stock of the Company, entered
into a Stockholder Agreement pursuant to which such director agreed to
vote his shares in favor of the Merger. The description contained in this
Item 5 of the transactions contemplated by the Stockholder Agreement is
qualified in its entirety by reference to the full text of the
Stockholder Agreement, the form of which is attached to this Report as
Exhibit 10.55. A registration statement relating to the Sanmina common
stock to be issued in connection with the Merger has not yet been filed
with the SEC, nor has a proxy statement relating to a vote of the
Company's stockholders on the Merger been filed with the SEC. The Sanmina
common stock may not be offered, nor may offers to acquire such stock be
accepted, prior to the time such a registration statement becomes
effective. This report shall not constitute an offer to sell or the
solicitation of an offer to buy any Sanmina common stock or any other
security, and shall not constitute the solicitation of any vote with
respect to the Merger.
13
<PAGE>
Item 6 a. Exhibits
10.50 Amendment To Anetec Lease dated June 26, 1997
10.51 Amended and Restated Accounts Receivable Credit Agreement
dated May 14, 1997
10.52 Line of Credit Agreement dated May 14, 1997
10.53 Amended and Restated Term Loan Credit Agreement dated May 14,
1997
10.54 Agreement and Plan of Merger, dated as of July 22, 1997, among
Sanmina Corporation, a Delaware corporation, SANM Acquisition
Subsidiary, Inc., a Delaware corporation, and Elexsys
International, Inc., a Delaware corporation (incorporated by
reference to Exhibit 7.4 of Amendment 10 to the Schedule 13D
filed by Milan Mandaric with the Commission on or about July
30, 1997.
10.55 Stockholder Agreement, as of July 22, 1997, between Sanmina
Corporation, a Delaware corporation, and each director of
Elexsys International, Inc., a Delaware corporation.
11.1 Computations of Earnings Per Share and Common Equivalent Share
for the Three and Nine Month Periods Ending June 28, 1997 and
June 29, 1996
27 Financial Data Schedule
b. Current reports on Form 8-K
None
14
<PAGE>
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.
ELEXSYS INTERNATIONAL, INC.
---------------------------
(Registrant)
Date: July 31, 1997 By: W.F. Hegarty
------------- ------------
W.F. Hegarty
President and Chief Operating Officer
By: Robert DeLaurentis
------------------
Robert DeLaurentis
Chief Financial Officer
15
EXHIBIT 10.50
AMENDMENT TO LEASE
THIS THIRD AMENDMENT TO LEASE is dated for reference purposes only as
June 26, 1997, and is part of that Lease dated March 26, 1992, together with the
Summary of Basic Lease Terms, the First Addendum To Lease, the Acceptance
Agreement, the First Amendment to Lease, dated July 21, 1992, the Right of First
Refusal Agreement, dated November 12, 1992, the Memorandum Agreement, dated
November 12, 1992, the Second Amendment to Lease, dated November 12, 1992, the
Assignment of Lease, dated June 7, 1996, and the Guaranty, dated June 7, 1996
thereto (collectively, the "Lease") by and between SSMRT Pacific Business Center
(1), Inc., a Delaware corporation, ("Landlord") Successor-In-Interest to
Catellus Development Corporation, ("Landlord"), and ELXI Acquistion, Inc., a
California corporation as Successor-in-Interest to Anetec Technology, Inc., a
California corporation is made with reference to the following facts:
A. The Premises currently leased by Tenant pursuant to the Lease
consists of 17,220 rentable square feet commonly known as 6082 Stewart Avenue,
City of Fremont, California.
B. The Lease Term for said Premises currently expires on September 30,
1997.
C. Tenant and Landlord have agreed to extend the Term of the Lease.
NOW, THEREFORE, Landlord and Tenant hereby agree that the Summary of
Basic Lease Terms is amended as follows:
1. Lease Term: Article 2 is hereby amended to provide that the
Lease Term shall be extended through and including January 31, 1998.
2. Base Monthly Rent: Commencing October 1, 1997, Article 3.1,
is hereby amended to provide for the Base Monthly Rent as follows:
October 1, 1997 through and including January 31, 1998: $10,676.40 per
month
3. Security Deposit: Article 3.3 is hereby amended to provide
for an increase in the Security Deposit of $ 1,894.20 which Tenant has provided
Landlord upon signature hereon, for a total of $ 10,676.40.
4. Retained Real Estate Brokers: Article 18.7 is amended to
provide that Tenant warrants that it has not had any dealings with any real
estate brokers or salesmen or incurred any obligations for the payment of real
estate brokerage commissions or finder's fees which would be earned or due and
payable by reason of the execution of this Lease Amendment.
5. Delivery and Acceptance of Premises: Delivery and
acceptance of the Premises shall be "as is".
6. Except as expressly set forth in this Amendment, all terms
and conditions of the Lease remain in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Third
Amendment to be effective as of the date first set forth above.
<PAGE>
LANDLORD: TENANT:
SSMRT Pacific Business Center (1), Inc. ELXI Acquisition, Inc.
a Delaware corporation a California corporation
By: AMB Insitutional Realty Advisors
Its: Asset Manager
By: ______________________________ By: ____________________________
John L. Rossi, Vice President [Name]
Title: ____________________________
Dated: __________________________ Dated: ____________________________
EXHIBIT 10.51
AMENDED AND RESTATED
ACCOUNTS RECEIVABLE CREDIT AGREEMENT
This Accounts Receivable Credit Agreement (the "Agreement") is made and
entered into this ___________________ day of May, 1997, by and between SANWA
BANK CALIFORNIA (the "Bank") and ELEXSYS INTERNATIONAL, INC. (the "Borrower") ,
on the terms and conditions that follow:
Whereas Bank and Borrower entered into an Accounts Receivable Credit
Agreement dated as of January 17, 1997, (the "Prior Agreement"); and
Whereas, Bank and Borrower wish to amend and restate the Prior
Agreement/
Now, therefore, the parties hereto agree as follows:
SECTION I
DEFINITIONS
1.01 Certain Defined Terms: Unless elsewhere defined in this Agreement,
the following terms shall have the following meanings (such meanings to be
generally applicable to the singular and plural forms of the terms defined):
(a) "Account Debtor": shall mean the person or entity
obligated to the Borrower upon an account.
(b) "Advance": shall mean an advance to the Borrower under the
Line of Credit.
(c) "Average Unused Portion of the Line of Credit": shall mean
for any quarter: (a) the Line of Credit less, (b) the average daily
balance of Advances under the Line of Credit that were outstanding
during that quarter less, (c) Letters of Credit.
(d) "Borrowing Base": shall mean, the lesser of: (i) 80% of
the aggregate amount of Eligible Accounts of the Borrower; or (ii)
$13,000,000, this is the total loan commitment.
(e) "Business Day": shall mean a day, other than a Saturday or
Sunday, on which commercial banks are open for business in California.
(f) "Collateral": shall mean the property described in Section
5.01.
(g) "Debt": shall mean all liabilities of the Borrower less
Subordinated Debt.
(h) "Effective Tangible Net Worth": shall mean the Borrower's
stated net worth plus Subordinated Debt less all intangible assets of
the Borrower (i.e., goodwill, trademarks, patents, copyrights,
organization expense and similar intangible items)..
(i) "Eligible Account": shall mean, at any time, the gross
amount, less returns, discounts, credits or offsets of any nature, of
the trade accounts owing to the Borrower by Account Debtors but
excluding the following:
(1) Accounts with respect to which the Account Debtor
is an officer, employee or agent of the Borrower.
(2) Accounts with respect to which goods are placed
on consignment, guarantied sale or other terms by reason of
which the payment by the Account Debtor may be conditional.
<PAGE>
(3) Accounts with respect to which the Account Debtor
is not a resident of the United States except to the extent
such accounts are supported by adequate Eximbank insurance or
other insurance acceptable to the Bank or by irrevocable
letters of credit issued by banks satisfactory to the Bank,
and except in the case of United States Dollar denominated
invoices to Northern Telecom, or any of its Canadian
subsidiaries (collectively "Northern Telecom").
(4) Accounts with respect to which the Account Debtor
is the United States or any department or agency thereof.
(5) Accounts with respect to which the Account Debtor
is a subsidiary of, or affiliated with, the Borrower or its
shareholders, officers or directors.
(6) Net amount of accounts with respect to which the
Borrower is or may become liable to the Account Debtor for
goods sold or services rendered by the Account Debtor to the
Borrower.
(7) That portion of the accounts of any single
Account Debtor that exceeds 15% of all of the Borrower's
accounts, except for Northern Telecom which may not exceed 20%
of all of the Borrower's accounts.
(8) Accounts which have not been paid in full within
60 days from the date payment was due or 90 days from the
original date of invoice, whichever is less.
(9) All accounts of any single Account Debtor if 25%
or more of the dollar amount of all such accounts are
represented by accounts which have not been paid in full
within 60 days from the date payment was due or 90 days from
the original date of invoice, whichever is less.
(10) Accounts which are subject to dispute,
counterclaim or setoff.
(11) Accounts with respect to which the goods have
not been shipped or delivered, or the services have not been
rendered, to the Account Debtor.
(12) Accounts with respect to which the Bank, in its
reasonable sole discretion, deems the creditworthiness or
financial condition of the Account Debtor to be
unsatisfactory.
(13) Accounts of any Account Debtor who has filed or
had filed against it a petition in bankruptcy, or an
application for relief under any provision of any state or
federal bankruptcy, insolvency or debtor-in-relief acts; or
who has had appointed a trustee, custodian or receiver for the
assets of such Account Debtor; or who has made an assignment
for the benefit of creditors or has become insolvent or fails
generally to pay its debts (including its payrolls) as such
debts become due.
(14) Accounts which represent credits or refunds due
to the Borrower's customers.
(j) "ERISA": shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time, including (unless
the context otherwise requires) any rules or regulations promulgated
thereunder.
(k) "Event of Default": shall have the meaning set forth in
Section 9.
(l) "Expiration Date": shall mean January 31, 1998 or the date
of termination of the Bank's commitment to lend under this Agreement
pursuant to Section 8, whichever shall occur first.
(m) "Indebtedness": shall mean, with respect to the Borrower,
(i) all indebtedness for borrowed money or for the deferred purchase
price of property or services in respect of which the Borrower is
liable, contingently or otherwise, as obligor, guarantor or otherwise,
or in respect of which the Borrower otherwise assures a creditor
against loss and (ii) obligations under leases which shall have been or
should be, in accordance with generally accepted accounting principles,
reported as capital leases in respect of which the Borrower is liable,
contingently or otherwise, or in respect of which the Borrower
otherwise assures a creditor against loss.
(n) "Line of Credit": shall mean the credit facility described
in Section 2.
<PAGE>
(o) "Obligations": shall mean all amounts owing by the
Borrower to the Bank pursuant to this Agreement including, but not
limited to, the unpaid principal amount of Advances.
(p) "Permitted Indebtedness": shall mean (i) Indebtedness of
Borrower in favor of Bank arising under this Agreement or any other
Loan Document; (ii) Indebtedness existing on the date hereof and
disclosed in writing to the Bank; (iii) Subordinated Debt; (iv)
Indebtedness to trade creditors, including, without limitation,
affiliates of Borrower, incurred in the ordinary course of business;
(v) Other Indebtedness of Borrower not exceeding $1,000,000.00 in the
aggregate outstanding at any time; (vi) Contingent obligations of
Borrowing consisting of guarantees (and other credit support) of the
obligations of vendors and suppliers of Borrower in respect of
transactions entered into in the ordinary course of business; (vii)
Indebtedness with respect to capital lease obligations and purchase
money indebtedness incurred in connection with the acquisition of
assets secured by Permitted Liens; (viii) Extensions, renewals,
refundings, refinancings, modifications, amendments and restatements of
any of the items of Permitted Indebtedness.
(q) "Permitted Investment": shall mean (i) investments
existing on the date hereof and disclosed in writing to the Bank; (ii)
marketable direct obligations issued or unconditionally guaranteed by
the United States of America or any agency or any State thereof
maturing within one (1) year from the date of acquisition thereof;
(iii)commercial paper maturing no more than one (1) year from the date
of creation thereof and currently having the highest rating obtainable
from either Standard & Poor's Corporation or Moody's Investors Service,
Inc.; (iv) investments consisting of deposits maturing no more than one
(1) year from the date of investment therein issued by Bank; (v)
extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the
ordinary course of business; (vi) investments consisting of the
endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; (vii)
investments, including debt obligations, received in connection with
the bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with,
customers or suppliers arising in the ordinary course of business;
(viii) investments consisting of compensation of employees, officers
and directors of Borrower so long as the Board of Directors of Borrower
determines that such compensation is in the best interest of Borrower,
and travel advances, employee relocation loans and other employee loans
and advances in the ordinary course of business; (ix) other investments
aggregating not in excess of $250,000.00 at any time.
(r) "Permitted Liens": shall mean: (i) liens and security
interests securing indebtedness owed by the Borrower to the Bank; (ii)
liens for taxes, assessments or similar charges either not yet due or
being contested in good faith; (iii) liens of materialmen, mechanics,
warehousemen, or carriers or other like liens arising in the ordinary
course of business and securing obligations which are not yet
delinquent; (iv) purchase money liens or purchase money security
interests upon or in any property acquired or held by the Borrower in
the ordinary course of business to secure Indebtedness outstanding on
the date hereof or permitted to be incurred under Section 8.09 hereof;
(v) liens and security interests which, as of the date hereof, have
been disclosed to and approved by the Bank in writing; (vi) those liens
and security interests which in the aggregate constitute an immaterial
and insignificant monetary amount with respect to the net value of the
Borrower's assets; liens securing capital lease obligations on assets
subject to such capital leases; (vii) liens arising from judgments,
decrees or attachments to the extent and only so long as such judgment,
decree or attachment has not caused or resulted in an Event of Default,
(viii) easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar liens affecting
real property not interfering in any material respect with the ordinary
conduct of the business of Borrower, (ix) liens in favor of customs and
revenue authorities arising as a mater of law to secure payment of
customs duties in connection with the importation of goods, (x) liens
arising solely by virtue of any statutory or common law provision
relating to banker's liens, rights of setoff or similar rights and
remedies as to deposit accounts or other funds maintained with a
creditor depository institutions; (xi) liens not otherwise permitted
which liens do not in the aggregate exceed $250,000.00 at any time.
(s) "Reference Rate": shall mean an index for a variable
interest rate which is quoted, published or announced from time to time
by the Bank as its reference rate and as to which loans may be made by
the Bank at, below or above such reference rate.
(t) "Subordinated Debt": shall mean such liabilities of the
Borrower which have been subordinated to those owed to the Bank in a
manner acceptable to the Bank including, but not limited to, that
certain Indenture dated as of February 15, 1987 between Borrower and
Manufacturers Hanover Trust Company, as trustee, with respect to the 5
1/2% Convertible Subordinated Debentures due March 1, 2012.
<PAGE>
1.02 Accounting Terms: All references to financial statements, assets,
liabilities, and similar accounting items not specifically defined herein shall
mean such financial statements or such items prepared or determined in
accordance with generally accepted accounting principles consistently applied
and, except where otherwise specified, all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles.
1.03 Other Terms: Other terms not otherwise defined shall have the
meanings attributed to such terms in the California Uniform Commercial Code.
SECTION 2
THE LINE OF CREDIT
2.01 The Line of Credit: On terms and conditions as set forth herein,
the Bank agrees to make Advances to the Borrower from time to time from the date
hereof to the Expiration Date, provided the aggregate amount of such Advances
outstanding at any time does not exceed the Borrowing Base. Within the foregoing
limits, the Borrower may borrow, partially or wholly prepay, and reborrow under
this Section 2.01.
2.02 Making Line Advances: Each Advance shall be conclusively deemed to
have been made at the request of and for the benefit of the Borrower (i) when
credited to any deposit account of the Borrower maintained with the Bank or (ii)
when paid in accordance with the Borrower's written instructions. Subject to the
requirements of Section 6, Advances shall be made by the Bank upon telephonic or
written request in form acceptable to the Bank received from the Borrower, which
request shall be received not later than 2:00 p.m. (California time) on the date
specified for such Advance, which date shall be a Business Day. Requests for
Advances received after such time may, at the Bank's option, be deemed to be a
request for an Advance to be made on the next succeeding Business Day.
2.03 Mandatory Repayments:
(a) If at any time the aggregate principal amount of the
outstanding Advances shall exceed the applicable Borrowing Base, the
Borrower hereby promises and agrees, immediately upon written or
telephonic notice from the Bank, to pay to the Bank an amount equal to
the difference between the outstanding principal balance of the
Advances and the Borrowing Base.
(b) On the Expiration Date, the Borrower hereby promises and
agrees to pay to the Bank in full the aggregate unpaid principal amount
of all Advances then outstanding, together with all accrued and unpaid
interest thereon.
2.04 Interest on Advances: Interest shall accrue from the date of each
Advance under the Line of Credit at one of the following rates, as quoted by the
Bank and as elected by the Borrower pursuant to paragraph 2.05 or paragraph 2.06
below:
(a) Variable Rate Advances: A variable rate per annum
equivalent to an index for a variable interest rate which is quoted,
published or announced from time to time by the Bank as its reference
rate and as to which loans may be made by the Bank at, below or above
such reference rate (the "Reference Rate") plus 0.50% (the "Variable
Rate"). Interest shall be adjusted concurrently with any change in the
Reference Rate. An Advance based upon the Variable Rate is hereinafter
referred to as a "Variable Rate Advance".
(b) Fixed Rate Advances: A fixed rate quoted by the Bank for
30, 60, or 90 days or for such other period of time that the Bank may
quote and offer (provided that any such period of time does not extend
beyond the Expiration Date) [the "Interest Period"] for Advances in the
minimum amount of $100,000 and in $50,000 increments thereafter. Such
interest rate shall be a percentage approximately equivalent to 2.50%
per annum in excess of the rate which the Bank determines in its sole
and absolute discretion to be equal to the Bank's cost of acquiring
funds (adjusted for any and all assessments, surcharges and reserve
requirements pertaining to the borrowing or purchase by the Bank of
such funds) in an amount approximately equal to the amount of the
relevant Advance and for a period of time approximately equal to the
relevant Interest Period (the "Fixed Rate"). Advances based upon the
Fixed Rate are hereinafter referred to as "Fixed Rate Advances".
Interest on any Advance shall be computed on the basis of 360 days per
year, but charged on the actual number of days elapsed.
Interest on Variable Rate Advances shall be paid in monthly
installments commencing on the first day of the month following the date of the
first such Advance and continuing on the first day of each month thereafter.
Interest on any Fixed Rate Advance shall be paid on the last day of the
Interest Period pertaining to such Fixed Rate Advance.
<PAGE>
2.05 Notice of Election to Adjust Interest Rate: The Borrower may
elect:
(a) That interest on a Variable Rate Advance shall be adjusted
to accrue at the Fixed Rate; provided, however, that such notice shall
be received by the Bank no later than two business days prior to the
day (which shall be a business day) on which the Borrower requests that
interest be adjusted to accrue at the Fixed Rate.
(b) That interest on a Fixed Rate Advance shall continue to
accrue at a newly quoted Fixed Rate or shall be adjusted to commence to
accrue at the Variable Rate; provided, however, that such notice shall
be received by the Bank no later than two business days prior to the
last day of the Interest Period pertaining to such Fixed Rate Advance.
If the Bank shall not have received notice (as prescribed herein) of
the Borrower's election that interest on any Fixed Rate Advance shall
continue to accrue at the newly quoted Fixed Rate the Borrower shall be
deemed to have elected that interest thereon shall be adjusted to
accrue at the Variable Rate upon the expiration of the Interest Period
pertaining to such Advance.
2.06 Prepayment: The Borrower may prepay any Advance in whole or in
part, at any time and without penalty, provided, however, that: (i) any partial
prepayment shall first be applied, at the Bank's option, to accrued and unpaid
interest and next to the outstanding principal balance; and (ii) during any
period of time in which interest is accruing on any Advance on the basis of the
Fixed Rate, no prepayment shall be made except on a day which is the last day of
the Interest Period pertaining thereto. If the whole or any part of any Fixed
Rate Advance is prepaid by reason of acceleration or on a day which is not the
last day of the interest period pertaining thereto, the Borrower shall, upon the
Bank's request, promptly pay to and indemnify the Bank for all costs and any
loss (including interest) actually incurred by the Bank and any loss (including
loss of profit resulting from the re-employment of funds) sustained by the Bank
as a consequence of such prepayment.
2.07 Indemnification for Fixed Rate Costs: During any period of time in
which interest on any Advance is accruing on the basis of the Fixed Rate the
Borrower shall, upon the Bank's request, promptly pay to and reimburse the Bank
for all costs incurred and payments made by the Bank by reason of any future
assessment, reserve, deposit or similar requirement or any surcharge, tax or fee
imposed upon the Bank or as a result of the Bank's compliance with any directive
or requirement of any regulatory authority pertaining or relating to funds used
by the Bank in quoting and determining the Fixed Rate. Borrower shall not be
obligated to pay to or reimburse Bank for any reimbursable amounts which arose
or were incurred during or are otherwise attributable to any period of time more
than 180 days prior to the date on which Bank delivered its written statement
for indemnification or reimbursement of such reimbursable amounts.
2.08 Conversion from Fixed Rate to Variable Rate: In the event that the
Bank shall at any time determine that the accrual of interest on the basis of
the Fixed Rate (i) is infeasible because the Bank is unable to determine the
Fixed Rate due to the unavailability of U.S. dollar deposits, contracts or
certificates of deposit in an amount approximately equal to the amount of the
relevant Advance and for a period of time approximately equal to the relevant
Interest Period or (ii) is or has become unlawful or infeasible by reason of the
Bank's compliance with any new law, rule, regulation, guideline or order, or any
new interpretation of any present law, rule, regulation, guideline or order,
then the Bank shall give telephonic notice thereof (confirmed in writing) to the
Borrower, in which event the Fixed Rate Advance, shall be deemed to be a
Variable Rate Advance and interest shall thereupon immediately accrue at the
Variable Rate.
2.09 Commitment Fee: The Borrower agrees to pay to Bank a commitment
fee of .25% per annum on the Average Unused Portion of the Line of Credit
payable quarterly in arrears and computed on a year of 360 days for actual days
elapsed.
2.10 Line Account:
(a) The Bank shall maintain on its books a record of account
in which the Bank shall make entries for each Advance and such other
debits and credits as shall be appropriate in connection with the Line
of Credit (the "Line Account"). The Bank shall provide the Borrower
with a monthly statement of the Borrower's Line Account, which
statement shall be considered to be correct and conclusively binding on
the Borrower unless the Borrower notifies the Bank to the contrary
within 60 days after the Borrower's receipt of any such statement which
it deems to be incorrect, or unless there is a manifest error.
(b) The Borrower hereby authorizes the Bank, if and to the
extent payment owed to the Bank under the Line of Credit is not made
when due, to charge, from time to time, against any or all of the
Borrower's deposit accounts with the Bank any amount so due.
<PAGE>
2.11 Late Payment: If any payment of principal (other than a principal
payment due pursuant to Section 2.03(b)) or interest, or any portion thereof,
under this Agreement is not paid within ten (10) calendar days after it is due,
a late payment charge equal to five percent (5%) of such past due payment may be
assessed and shall be immediately payable.
SECTION 3
LETTERS OF CREDIT SUBLIMIT
In addition to making Advances under the Line of Credit, the Bank
hereby agrees to make the following credit accommodations available to the
Borrower:
3.01 Letter of Credit Subfacility: The Bank agrees to issue commercial
and standby letters of credit (each a "Letter of Credit") on behalf of the
Borrower for general corporate purposes. At no time, however, shall the total
face amount of all Letters of Credit outstanding, less any partial draws paid by
the Bank, exceed the sum of $7,000,000 and, together with the total principal
amount of all Advances outstanding, exceed the Borrowing Base.
(a) Upon the Bank's request, the Borrower shall promptly pay
to the Bank standby letter of credit issuance fees of 1% per annum and
commercial letter of credit issuance fees of .25% and such other fees,
commissions, costs and any out-of-pocket expenses charged or incurred
by the Bank with respect to any Letter of Credit.
(b) The commitment by the Bank to issue Letters of Credit
shall, unless earlier terminated in accordance with the terms of the
Agreement, automatically terminate on the Expiration Date and no
commercial letter of credit shall expire on a date which is more than
90 days after the Expiration Date and no standby letter of credit shall
expire on a date after the Expiration Date.
(c) Each Letter of Credit shall be in form and substance
satisfactory to the Bank and in favor of beneficiaries satisfactory to
the Bank, provided that the Bank may refuse to issue a Letter of Credit
due to the nature of the transaction or its terms or in connection with
any transaction where the Bank, due to the beneficiary or the
nationality or residence of the beneficiary, would be prohibited by any
applicable law, regulation or order from issuing such Letter of Credit.
(d) Prior to the issuance of each Letter of Credit, but in no
event later than 10:00 a.m. (California time) on the day such Letter of
Credit is to be issued (which shall be a Business Day), the Borrower
shall deliver to the Bank a duly executed form of the Bank's standard
form of application for issuance of a Letter of Credit with proper
insertions.
(e) The Borrower shall, upon presentment of a Letter of Credit
or upon the Bank's request, promptly pay to and reimburse the Bank for
all draws under the Letters of Credit, costs incurred and payments made
by the Bank by reason of any future assessment, reserve, deposit or
similar requirement or any surcharge, tax or fee imposed upon the Bank
or as a result of the Bank's compliance with any directive or
requirement of any regulatory authority pertaining or relating to any
Letter of Credit.
SECTION 4
FOREIGN EXCHANGE FACILITY SUBLIMIT
4.01 Foreign Exchange Subfacility. Borrower may from time to time
request Bank to purchase or sell foreign currency in a specified amount, at a
fixed price, and for delivery at a future date no greater than 365 days from the
date of purchase (each a "Foreign Exchange Contract"). At no time, however,
shall 20% of the aggregate settlement price of all Foreign Exchange Contracts
outstanding exceed $2,000,000 as determined by Bank at the time of entering into
each Foreign Exchange Contract and, together with outstanding Advances and
issued and unexpired Letters of Credit, exceed the Borrowing Base.
(a) Requests for Foreign Exchange Contracts. Each request for
a Foreign Exchange Contract shall be made by telephone or rapifax,
confirmed in writing (each a "Request"). Each Request shall be
delivered or communicated to the Bank no later than 3:00 p.m.
(California time) on the day (which shall be a Business Day) on which
the Foreign Exchange Contract is requested. By making any such Request,
Borrower agrees that all matters relating to each such Foreign Exchange
Contract shall be governed by this Agreement and Borrower restates all
warranties and representations made by Borrower herein as if made on
the date the Foreign Exchange Contract is entered into.
<PAGE>
(b) Expiration Date. The commitment by the Bank to enter into
Foreign Exchange Contracts shall, unless earlier terminated in
accordance with this Agreement, automatically terminate on the
Expiration Date and no Foreign Exchange Contract shall expire on a date
which is after the Expiration Date.
(c) Availability. Bank may refuse to enter into a Foreign
Exchange Contract with the Borrower where the Bank, in its sole
discretion, determines that such foreign currency is unavailable, or
where Bank would be prohibited by any applicable law, regulation or
order from purchasing such foreign currency.
(d) Purpose. The Foreign Exchange Contract shall be used to
hedge foreign exchange exposure and/or risk.
(e) Payment. Payment is due on the settlement date of any
Foreign Exchange Contract (the "Payment Date"). Bank is hereby
authorized by Borrower to charge the full settlement price of any
Foreign Exchange Contract against the depository account or accounts
maintained by the Borrower with Bank on the Payment Date.
(f) Assessments. Borrower shall, upon the Bank's request,
promptly pay to and reimburse the Bank for all costs incurred and
payments made by the Bank by reason of any assessment, reserve,
deposit, capital maintenance or similar requirement or any surcharge,
tax or fee imposed upon the Bank or as a result of the Bank's
compliance with any directive or requirement of any regulatory
authority pertaining or relating to any Foreign Exchange Contract.
SECTION 5
COLLATERAL
5.01 The Collateral: To secure payment and performance of all the
Borrower's Obligations under this Agreement and all other liabilities, loans,
guarantees, covenants and duties owed by the Borrower to the Bank, whether or
not evidenced by this or by any other agreement, absolute or contingent, due or
to become due, now existing or hereafter and howsoever created, the Borrower
hereby grants the Bank a security interest in and to all of the following
property:
(a) All goods now owned or hereafter acquired by the Borrower
or in which the Borrower now has or may hereafter acquire any interest,
including, but not limited to, all machinery, equipment, furniture,
furnishings, fixtures, tools, supplies and motor vehicles of every kind
and description, and all additions, accessions, improvements,
replacements and substitutions thereto and thereof.
(b) Bank agrees to release its security interest in any
equipment, fixtures, leasehold improvements, or other property if
within ninety (90) days after Borrower acquires title to such property,
Borrower finances such property pursuant to either (i) a sale and
leaseback transaction or (ii) a debt financing transaction in an amount
not to exceed the purchase price of, and secured by a security interest
in such property.
(c) All inventory now owned or hereafter acquired by the
Borrower, including, but not limited to, all raw materials, work in
process, finished goods, merchandise, parts and supplies of every kind
and description, including inventory temporarily out of the Borrower's
custody or possession, together with all returns on accounts.
(d) All accounts, contract rights and general intangibles now
owned or hereafter created or acquired by the Borrower, including, but
not limited to, all receivables, goodwill, trademarks, trade styles,
trade names, patents, patent applications, software, customer lists and
business records.
(e) All documents, instruments and chattel paper now owned or
hereafter acquired by the Borrower.
(f) All monies, deposit accounts, certificates of deposit and
securities of the Borrower now or hereafter in the Bank's or its
agents' possession.
The Bank's security interest in the Collateral shall be a continuing
lien and shall include the proceeds and products of the Collateral including,
but not limited to, the proceeds of any insurance thereon.
<PAGE>
SECTION 6
CONDITIONS OF LENDING
6.01 Conditions Precedent to the Initial Advance: The obligation of the
Bank to make the initial Advance and the first extension of credit to or on
account of the Borrower hereunder is subject to the conditions precedent that
the Bank shall have received before the date of such initial Advance and such
first extension of credit all of the following, in form and substance
satisfactory to the Bank:
(a) Evidence that the execution, delivery and performance by
the Borrower of this Agreement and any document, instrument or
agreement required hereunder have been duly authorized.
(b) Such other evidence as the Bank may request to establish
the consummation of the transaction contemplated hereunder and
compliance with the conditions of this Agreement.
6.02 Conditions Precedent to All Advances: The obligation of the Bank
to make each Advance and each other extension of credit to or on account of the
Borrower (including the initial Advance and the first extension of credit) shall
be subject to the further conditions precedent that, on the date of each Advance
or each extension of credit and after the making of such Advance or extension of
credit:
(a) The Bank shall have received the documents set forth in
Section 8.06(e).
(b) The Bank shall have received such supplemental approvals,
opinions or documents as the Bank may reasonably request.
(c) Except as disclosed in writing to Bank, the
representations contained in Section 7 and in any other document,
instrument or certificate delivered to the Bank hereunder are correct.
(d) No event has occurred and is continuing which constitutes,
or, with the lapse of time or giving of notice or both, would
constitute an Event of Default.
(e) The security interest in the Collateral has been duly
authorized, created and perfected with first priority, assuming Bank
has timely filed and taken all actions necessary or desirable to
perfect and protect such security, and is in full force and effect.
The Borrower's acceptance of the proceeds of any Advance or the
Borrower's execution of any document or instrument evidencing or creating any
Obligation hereunder shall be deemed to constitute the Borrower's representation
and warranty that all of the above statements are true and correct.
SECTION 7
REPRESENTATIONS AND WARRANTIES
The Borrower hereby makes the following representations and warranties to the
Bank as of the date of this Agreement.
7.01 Status: The Borrower is a corporation duly organized and validly
existing under the laws of the State of Delaware and is properly licensed and is
qualified to do business and in good standing in, and, where necessary to
maintain the Borrower's rights and privileges, has complied with the fictitious
name statute of every jurisdiction in which the Borrower is doing business and
where failure to so qualify would have a material adverse effect.
7.02 Authority: The execution, delivery and performance by the Borrower
of this Agreement and any instrument, document or agreement required hereunder
have been duly authorized and do not and will not: (i) violate any provision of
any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect having application to the Borrower;
(ii) result in a breach of or constitute a default under any material indenture
or loan or credit agreement or other material agreement, lease or instrument
<PAGE>
to which the Borrower is a party or by which it or its properties may be bound
or affected; (iii) require any consent or approval of its stockholders or
violate any provision of its certificate of incorporation.
7.03 Legal Effect: This Agreement constitutes, and any instrument,
document or agreement required hereunder when delivered hereunder will
constitute, legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms.
7.04 Fictitious Trade Styles: There are no fictitious trade styles used
by the Borrower in connection with its business operations. The Borrower shall
notify the Bank within 30 days of effecting any change in the matters described
hereinor prior to using any other fictitious trade style at any future date,
indicating the trade style and state(s) of its use.
7.05 Financial Statements: All financial statements, information and
other data which may have been or which may hereafter be submitted by the
Borrower to the Bank are true, accurate and correct and have been or will be
prepared in accordance with generally accepted accounting principles
consistently applied and accurately represent the financial condition or, as
applicable, the other information disclosed therein. Since the most recent
submission of such financial information or data to the Bank, the Borrower
represents and warrants that no material adverse change in the Borrower's
financial condition or operations has occurred which has not been fully
disclosed to the Bank in writing.
7.06 Litigation: Except as have been disclosed to the Bank in writing,
there are no actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or the Borrower's
properties in excess of $500,000 before any court or administrative agency
which, if determined adversely to the Borrower, would have a material adverse
effect on the Borrower's financial condition or operations or on the Collateral.
7.07 Title to Assets: The Borrower has good and marketable title to all
of its assets (including, but not limited to, the Collateral) and the same are
not subject to any security interest, encumbrance, lien or claim of any third
person except for Permitted Liens.
7.08 ERISA: If the Borrower has a pension, profit sharing or retirement
plan subject to ERISA, such plan has been and will continue to be funded in
accordance with its terms and otherwise complies with and continues to comply
with the requirements of ERISA.
7.09 Taxes: The Borrower has filed all tax returns required to be filed
and paid all taxes shown thereon to be due, including interest and penalties,
other than such taxes which are currently payable without penalty or interest or
those which are being duly contested in good faith.
7.10 Accounts: Each Eligible Account represents a bona fide sale
conforming to the requirements of Section 1.01(i).
7.11 Environmental Compliance: The Borrower has implemented and
complied in all material respects with all applicable federal, state and local
laws, ordinances, statutes and regulations with respect to hazardous or toxic
wastes, substances or related materials, industrial hygiene or environmental
conditions. There are no suits, proceedings, claims or disputes pending or, to
the knowledge of the Borrower, threatened against or affecting the Borrower or
its property claiming violations of any federal, state or local law, ordinance,
statute or regulation relating to hazardous or toxic wastes, substances or
related materials.
SECTION 8
COVENANTS
The Borrower covenants and agrees that, during the term of this
Agreement, and so long thereafter as the Borrower is indebted to the Bank under
this Agreement, the Borrower will, unless the Bank shall otherwise consent in
writing:
8.01 Preservation of Existence; Compliance with Applicable Laws:
Maintain and preserve its existence and all rights and privileges now enjoyed;
not liquidate or dissolve, merge or consolidate with or into, or acquire any
other business organization; notwithstanding the foregoing Borrower may
liquidate or dissolve, or enter into any consolidation, merger, partnership,
joint venture or other combination, acquire any other business organization, or
acquire all or substantially all of the assets of any other person
(collectively, an "Acquisition"), so long as Borrower is in compliance with the
covenants contained in Section 8.14 immediately after such Acquisition; and
conduct its business and operations in accordance with all applicable laws,
rules and regulations.
8.02 Maintenance of Insurance: Maintain insurance in such amounts and
covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which the
Borrower operates and
<PAGE>
maintain such other insurance and coverages as may be required by the Bank. All
such insurance shall be in form and amount and with companies satisfactory to
the Bank. With respect to insurance covering properties in which the Bank
maintains a security interest or lien, such insurance shall name the Bank as
loss payee pursuant to a loss payable endorsement satisfactory to the Bank and
shall not be altered or canceled except upon 10 days' prior written notice to
the Bank. Upon the Bank's request, the Borrower shall furnish the Bank with the
original policy or binder of all such insurance.
8.03 Maintenance of Collateral and Other Properties: Except for
Permitted Liens, keep and maintain the Collateral free and clear of all levies,
liens, encumbrances and security interests (including, but not limited to, any
lien of attachment, judgment or execution) and defend the Collateral against any
such levy, lien, encumbrance or security interest; comply with all laws,
statutes and regulations pertaining to the Collateral and its use and operation;
execute, file and record such statements, notices and agreements, take such
actions and obtain such certificates and other documents as necessary to
perfect, evidence and continue the Bank's security interest in the Collateral
and the priority thereof; maintain accurate and complete records of the
Collateral which show all sales, claims and allowances; and properly care for,
house, store and maintain the Collateral in good condition, free of misuse,
abuse and deterioration, other than normal wear and tear. The Borrower shall
also maintain and preserve all its properties in good working order and
condition in accordance with the general practice of other businesses of similar
character and size, ordinary wear and tear excepted.
8.04 Payment of Obligations and Taxes: Make timely payment of all
assessments and taxes and all of its liabilities and obligations including, but
not limited to, trade payables, unless the same are being contested in good
faith by appropriate proceedings with the appropriate court or regulatory
agency. For purposes hereof, the Borrower's issuance of a check, draft or
similar instrument without delivery to the intended payee shall not constitute
payment.
8.05 Inspection Rights: At any reasonable time and from time to time,
permit the Bank or any representative thereof to examine and make copies of the
records and visit the properties of the Borrower and discuss the business and
operations of the Borrower with any employee or representative thereof. If the
Borrower shall maintain any records (including, but not limited to, computer
generated records or computer programs for the generation of such records) in
the possession of a third party, the Borrower hereby agrees to notify such third
party to permit the Bank free access to such records at all reasonable times and
to provide the Bank with copies of any records which it may request, at the
Borrower's expense, limited to $20,000 or at Bank's expense, the amount of which
shall be payable within five (5) days of written notice. In addition, the Bank
may, at any reasonable time and from time to time, conduct inspections and
audits of the Collateral and the Borrower's accounts payable, the cost and
expenses of which shall be paid by the Borrower to the Bank upon five (5) days
prior written notice.
8.06 Reporting and Certification Requirements: Deliver or cause to be
delivered to the Bank in form and detail satisfactory to the Bank:
(a) Not later than 90 days after the end of each of the
Borrower's fiscal years, a copy of (i) the annual audited financial
report of the Borrower for such year prepared by a firm of certified
public accountants reasonably acceptable to Bank, and (ii) the
Borrower's Form 10-K filed with the Securities Exchange Commission and
(iii) the Borrower's consolidating balance sheet and income statement
for such year; and, not later than 60 days after the end of each of the
Borrower's fiscal years, a copy of the Borrower's projected balance
sheet and income statement for the fiscal year then in effect.
(b) Not later than 45 days after the end of each of the
Borrower's fiscal quarters, a copy of the Borrower's Form 10-Q filed
with the Securities Exchange Commission and the Borrower's
consolidating balance sheet and income statement for such quarter for
the first three quarters only.
(c) Concurrently with the delivery of the financial reports
required hereunder, a compliance certificate in substantially the form
attached hereto as Exhibit "A", showing the calculations which would
demonstrate compliance with all of the financial covenants contained
herein.
(d) Not later than 30 days after the end of each month, an
aging of accounts receivable indicating separately the amount of
Eligible Accounts and the amount of total accounts receivable which are
current, 1 to 30 days past the date of invoice, 31 to 60 days past the
date of invoice, and the amount over 60 days past the date of invoice
and an aging of accounts payable indicating the amount of such payables
which are current, 1 to 30 days past the date of invoice, 31 to 60 days
past the date of invoice, and the amount over 60 days past the date of
invoice.
(e) Daily or at such other time as required by the Bank: (i) a
transaction report and schedule of accounts receivable which indicates
all sales made and all collections received for each such day; (ii) all
remittances and collections of accounts in
<PAGE>
kind and without commingling to be applied to the payment of the
Borrower's Obligations on the next Business Day following receipt
thereof; provided, however, that if such amounts are received in a form
other than cash or bank wire, the Bank may withhold application of such
amounts for such time to the extent permitted by law as the Bank, in
its sole discretion, deems reasonable to allow for collection and
provided further that any remittances and collections received by the
Bank later than 2:30 p.m. (California time) on any day shall be deemed
received on the next succeeding Business Day; and (iii) clear and
legible copies of all invoices or sales receipts evidencing the sale of
goods or services by the Borrower.
(f) Promptly upon the Bank's request, such other information
pertaining to the Borrower, the Collateral or any guarantor hereunder
as the Bank may reasonably request.
8.07 Payment of Dividends: Not declare or pay any dividends on any
class of stock now or hereafter outstanding except (i) dividends payable solely
in the Borrower's capital stock, or (ii) dividends approved by Bank.
8.08 Redemption or Repurchase of Stock: Not redeem or repurchase in
excess of 5% per year any class of the Borrower's stock now or hereafter
outstanding without prior written Bank approval.
8.09 Additional Indebtedness: Not, after the date hereof, create, incur
or assume, directly or indirectly, any additional Indebtedness other than (i)
indebtedness owed or to be owed to the Bank or (ii) indebtedness to trade
creditors incurred in the ordinary course of the Borrower's business or (iii)
Permitted Indebtedness.
8.10 Loans: Not make any loans or advances or extend credit to any
third person, including, but not limited to, directors, officers, shareholders,
partners, employees, affiliated entities and subsidiaries of the Borrower,
except for (i) credit extended in the ordinary course of the Borrower's business
as presently conducted and (ii) Permitted Investments.
8.11 Liens and Encumbrances: Not create, assume or permit to exist any
security interest, encumbrance, mortgage, deed of trust, or other lien
(including, but not limited to, a lien of attachment, judgment or execution)
affecting any of the Borrower's properties, or execute or allow to be filed any
financing statement or continuation thereof affecting any of such properties,
except for Permitted Liens or as otherwise provided in this Agreement.
8.12 Transfer Assets: Except for an amount not exceeding in the
aggregate $100,000 in any fiscal year, not, after the date hereof, sell,
contract for sale, convey, transfer, assign, lease or sublet, any of its assets
(including, but not limited to, the Collateral) except in the ordinary course of
business as presently conducted by the Borrower and, then, only for fair and
reasonable consideration and (i) sales of inventory in the ordinary course of
business, (ii) transfer of assets in the ordinary course of business that have
become worn out or obsolete or that are promptly being replaced, (iii) transfers
of non-exclusive licenses and similar arrangements for the use of property of
Borrower made in the ordinary course of business, and (iv) transfers which
constitute liquidation of permitted investments.
8.13 Change in Nature of Business: Not make any material change in its
financial structure or the nature of its business as existing or conducted as of
the date hereof.
8.14 Financial Condition: Maintain at all times:
(a) A minimum Effective Tangible Net Worth of at least
$31,000,000 plus 50% of net profit after taxes at the end of each
fiscal quarter.
(b) A ratio of Senior Debt to Effective Tangible Net Worth of
not more than 1.5 to 1.
(c) A minimum working capital (defined as current assets minus
current liabilities) of not less than $5,000,000.
(d) A ratio of the sum of cash, cash equivalents and accounts
receivable to current liabilities of not less than .65 to 1.0
(e) A minimum net profit after tax of at least $1.00 at the
end of each fiscal quarter for the immediately preceding two (2) fiscal
quarters.
(f) Maintain a ratio of consolidated earnings before interest,
taxes, depreciation and amortization expense to the sum of (i) interest
expense and (ii) the current portion of long term Debt of not less than
2.00:1.00 at the end of each fiscal quarter for the immediately
preceding 4 fiscal quarters..
<PAGE>
8.15 Compensation of Employees: Compensate its employees for services
rendered at an hourly rate at least equal to the minimum hourly rate prescribed
by any applicable federal or state law or regulation.
8.16 Capital Expense: Not make any fixed capital expenditure,
including, but not limited to, incurring liability for leases which would be, in
accordance with generally accepted accounting principles, reported as capital
leases, or purchase any real or personal property in an aggregate amount
exceeding $15,000,000 in any one fiscal year, exclusive of acquisition
financing, provided, however, that Borrower may make capital expenditures in
connection with acquisitions in an amount up to $3,000,000 in any one fiscal
year without the Bank's approval (subject to the terms and conditions of the
Term Loan Credit Agreement dated as of May __, 1997 between the Bank and the
Borrower.
8.17 Notice: Give the Bank prompt written notice of any and all (i)
Events of Default; (ii) litigation, arbitration or administrative proceedings to
which the Borrower is a party and in which the claim or liability exceeds
$500,000 or which affects the Collateral; and (iii) other matters which have
resulted in, or might result in a material adverse change in the Collateral or
the financial condition or business operations of the Borrower.
8.18 Environmental Compliance. The Borrower shall:
(a) Implement and comply in all material respects with all
applicable federal, state and local laws, ordinances, statutes and
regulations with respect to hazardous or toxic wastes, substances or
related materials, industrial hygiene or to environmental conditions.
(b) Not own, use, generate, manufacture, store, handle, treat,
release or dispose of any hazardous or toxic wastes, substances or
materials, except in material compliance with all applicable federal,
state and local laws, ordinances, statutes and regulations.
(c) Give prompt written notice of any discovery of or suit,
proceeding, claim, dispute, or filing respecting hazardous or toxic
wastes, substances or related materials.
(d) At all times indemnify and hold harmless Bank from and
against any and all liability arising out of Borrower's use,
generation, manufacture, storage, handling, treatment, or disposal by
Borrower of hazardous or toxic wastes, substances or materials at the
site.
SECTION 9
EVENTS OF DEFAULT
Any one or more of the following described events shall constitute an
event of default (an "Event of Default") under this Agreement:
9.01 Non-Payment: The Borrower shall fail to pay any Obligations within
10 days of when due.
9.02 Performance Under This and Other Agreements: The Borrower shall
fail in any material respect to perform or observe any term, covenant or
agreement contained in this Agreement or in any document, instrument or
agreement evidencing or relating to any indebtedness of the Borrower (whether
such indebtedness is owed to the Bank or third persons), and any such failure
(exclusive of the payment of money to the Bank under this Agreement or under any
other instrument, document or agreement, which failure shall constitute and be
an Event of Default if not paid within 10 days of when due or when demanded to
be due) shall continue for more than 30 days after written notice from the Bank
to the Borrower of the existence and character of such Event of Default.
9.03 Representations and Warranties; Financial Statements: Any
representation or warranty made by the Borrower under or in connection with this
Agreement or any financial statement given by the Borrower or any guarantor
shall prove to have been incorrect in any material respect when made or given or
when deemed to have been made or given.
9.04 Insolvency: The Borrower or any guarantor shall: (i) become
insolvent or be unable to pay its debts as they mature; (ii) make an assignment
for the benefit of creditors or to an agent authorized to liquidate any
substantial amount of its properties and assets; (iii) file a voluntary petition
in bankruptcy or seeking reorganization or to effect a plan or other arrangement
with creditors; (iv) file an answer admitting the material allegations of an
involuntary petition relating to bankruptcy or reorganization or join in any
such petition;
<PAGE>
(v) become or be adjudicated a bankrupt; (vi) apply for or consent to the
appointment of, or consent that an order be made, appointing any receiver,
custodian or trustee, for itself or any of its properties, assets or businesses;
or (vii) any receiver, custodian or trustee shall have been appointed for all or
substantial part of its properties, assets or businesses and shall not be
discharged within 60 days after the date of such appointment.
9.05 Execution: Any writ of execution or attachment or any judgment
lien shall be issued against any property of the Borrower and shall not be
discharged or bonded against or released within 60 days after the issuance or
attachment of such writ or lien.
9.06 Suspension: The Borrower shall voluntarily suspend the transaction
of business or allow to be suspended, terminated, revoked or expired any permit,
license or approval of any governmental body necessary to conduct the Borrower's
business as now conducted.
9.07 Change in Ownership: There shall occur a sale, transfer,
disposition or encumbrance (whether voluntary or involuntary), or an agreement
shall be entered into to do so, with respect to more than 25% of the issued and
outstanding capital stock of the Borrower, if a corporation, or there shall
occur a change in any general partner or a change affecting the control of the
Borrower, if a partnership.
SECTION 10
REMEDIES ON DEFAULT
Upon the occurrence and during the continuance of any Event of Default,
the Bank may, at its sole and absolute election, without demand and with prompt
subsequent notice to Borrower:
10.01 Acceleration: Declare any or all of the Borrower's indebtedness
owing to the Bank, whether under this Agreement or any other document,
instrument or agreement, immediately due and payable, whether or not otherwise
due and payable.
10.02 Cease Extending Credit: Cease making Advances or otherwise
extending credit to or for the account of the Borrower under this Agreement or
under any other agreement now existing or hereafter entered into between the
Borrower and the Bank.
10.03 Termination: Terminate this Agreement as to any future obligation
of the Bank without affecting the Borrower's obligations to the Bank, the Bank's
obligations to the Borrower, or the Bank's or Borrower's rights and remedies
under this Agreement or under any other document, instrument or agreement.
10.04 Notification of Account Debtors:
(a) Notify any Account Debtor, any buyers or transferee of the
Collateral or any other persons of the Bank's interest in the
Collateral and the proceeds thereof.
(b) Sign the Borrower's name (which authority the Borrower
hereby irrevocably and unconditionally grants to the Bank) on any
invoice or bill of lading relating to accounts or other drafts against
the Account Debtors.
(c) Require the Borrower to indicate on the face of all
invoices (or such other documentation as may be specified by the Bank
relating to the sale, delivery or shipment of goods giving rise to the
account) that the account has been assigned to the Bank and that all
payments are to be made directly to the Bank at such address as the
Bank may designate.
10.05 Protection of Security Interest: Make such payments and do such
acts as the Bank, in its sole judgment, considers necessary and reasonable to
protect its security interest or lien in the Collateral. The Borrower hereby
irrevocably authorizes the Bank to pay, purchase, contest or compromise any
encumbrance, lien or claim which the Bank, in its sole judgment, deems to be
prior or superior to its security interest. Further, the Borrower hereby agrees
to pay to the Bank, upon demand therefor, all reasonable expenses and
expenditures (including reasonable attorneys' fees) incurred in connection with
the foregoing. Notwithstanding the foregoing, Bank shall be responsible for its
own gross negligence or willful misconduct.
10.06 Foreclosure: Enforce any security interest or lien given or
provided for under this Agreement or under any security agreement, mortgage,
deed of trust or other document, in such manner and such order, as to all or any
part of the properties subject to such security interest or lien, as the Bank,
in its sole judgment, deems to be necessary or appropriate and the Borrower
hereby waives any and all rights, obligations or defenses now or hereafter
established by law relating to the foregoing. In the enforcement of its security
interest or lien, the Bank is authorized to enter upon the premises where any
Collateral is located and take possession of the Collateral or any part
<PAGE>
thereof, together with the Borrower's records pertaining thereto, or the Bank
may require the Borrower to assemble the Collateral and records pertaining
thereto and make such Collateral and records available to the Bank at a place
designated by the Bank. The Bank may sell the Collateral or any portions
thereof, together with all additions, accessions and accessories thereto, giving
only such notices and following only such procedures as are required by law, at
either a public or private sale, or both, with or without having the Collateral
present at the time of the sale, which sale shall be on such terms and
conditions and conducted in such manner as the Bank determines in its sole
judgment to be commercially reasonable. Any deficiency which exists after the
disposition or liquidation of the Collateral shall be a continuing liability of
the Borrower to the Bank and shall be paid by the Borrower to the Bank within
five (5) business days of written notice.
10.07 Foreign Exchange Contracts: The Bank may, at its sole and
absolute discretion and in addition to any other remedies available to it
hereunder or otherwise, require the Borrower to pay to the Bank within five (5)
business days of written notice, for application against the future settlement
price under any outstanding Foreign Exchange Contracts, the outstanding face
amount of any such Foreign Exchange Contracts which have not matured or settled
and Borrower hereby grants to Bank a security interest in and to such funds. Any
portion of the amount so paid to the Bank which is not subsequently applied to
satisfy repayment on any such matured Foreign Exchange Contracts or any other
obligations of the Borrower to the Bank shall be repaid to the Borrower without
interest.
10.08 Letters of Credit: The Bank may, at its sole and absolute
discretion and in addition to any other remedies available to it hereunder or
otherwise, require the Borrower to pay within five (5) business days of written
notice to the Bank, for application against drawings under any outstanding
Letters of Credit, the outstanding principal amount of any such Letters of
Credit which have not expired. Any portion of the amount so paid to the Bank
which is not applied to satisfy draws under any such Letters of Credit or any
other obligations of the Borrower to the Bank shall be repaid to the Borrower
without interest.
10.09 Non-Exclusivity of Remedies: Exercise one or more of the Bank's
rights set forth herein or seek such other rights or pursue such other remedies
as may be provided by law, in equity or in any other agreement now existing or
hereafter entered into between the Borrower and the Bank, or otherwise.
10.10 Application of Proceeds: All amounts received by the Bank as
proceeds from the disposition or liquidation of the Collateral shall be applied
to the Borrower's indebtedness to the Bank as follows: first, to the costs and
expenses of collection, enforcement, protection and preservation of the Bank's
lien in the Collateral, including court costs and reasonable attorneys' fees,
whether or not suit is commenced by the Bank; next, to those costs and expenses
incurred by the Bank in protecting, preserving, enforcing, collecting,
liquidating, selling or disposing of the Collateral; next, to the payment of
accrued and unpaid interest on all of the Obligations; next, to the payment of
the outstanding principal balance of the Obligations; and last, to the payment
of any other indebtedness owed by the Borrower to the Bank. Any excess
Collateral or excess proceeds existing after the disposition or liquidation of
the Collateral will be returned or paid by the Bank to the Borrower.
SECTION 11
MISCELLANEOUS
11.01 Amounts Payable on Demand: If the Borrower shall fail to pay on
demand any amount so payable under this Agreement, the Bank may, at its option
and without any obligation to do so and without waiving any default occasioned
by the Borrower having so failed to pay such amount, create an Advance under the
Line of Credit in an amount equal to the amount so payable, which Advance shall
thereafter bear interest as provided under the Line of Credit.
11.02 Default Interest Rate: The Borrower shall pay the Bank interest
on any indebtedness or amount payable under this Agreement, from the date that
such indebtedness or amount became due or was demanded to be due until paid in
full, at a rate which is 3% in excess of the rate otherwise provided under this
Agreement.
11.03 Disposal of Invoices: All documents, schedules, invoices or other
papers received by the Bank from the Borrower may be destroyed or disposed of 6
months after receipt by the Bank, unless the Borrower requests in writing the
return thereof, which shall be done at the Borrower's expense.
11.04 Rights of the Bank on Default: Upon written notice from the Bank,
the Borrower agrees that the Bank may at any time and at its option, whether or
not the Borrower is in default:
(a) Require the Borrower to direct all Account Debtors to
forward all remittances, payments and proceeds of the Collateral
directly to the Bank at such address as the Bank may designate. In
connection therewith, the Borrower hereby
<PAGE>
irrevocably constitutes and appoints the Bank as its attorney-in-fact
to endorse the Borrower's name on any notes, acceptances, checks,
drafts, money orders or other evidence of payment that may come into
the Bank's possession.
(b) Require the Borrower to deliver to the Bank, at such times
designated by the Bank, records and schedules which show the status and
condition of the Collateral, where it is located and such contracts or
other matters which affect the Collateral.
(c) Send verification requests to any Account Debtor.
(d) Make inquiries of the Borrower's trade vendors.
11.05 Indemnification: The Borrower agrees to hold the Bank harmless
from and indemnify and defend the Bank from any liability, claim, loss or
expense (including, but not limited to, reasonable attorneys' fees) arising from
any transaction between the Borrower and any Account Debtor including, but not
limited to, any loss, claim or liability arising from:
(a) Any violation of any federal or state consumer protection
law (including, but not limited to, the federal Truth-In-Lending Act)
and regulations promulgated thereunder.
(b) Improper collection practices or procedures of the
Borrower.
(c) Any unlawful acts taken by the Borrower in connection with
the collection of any account(s).
(d) Any suit by any person against the Bank resulting or
arising from such person's dealings with the Borrower.
11.06 Dispute Resolution. It is understood and agreed that upon the
request of any party to this agreement any dispute, claim, or controversy of any
kind, whether in contract or in tort, statutory or common law, legal or
equitable now existing or hereinafter arising between the parties in any way
arising out of, pertaining to or in connection with: (1) this Agreement, or any
related agreements, documents, or instruments, (2) all past and present loans,
credits, accounts, deposit accounts (whether demand deposits or time deposits),
safe deposit boxes, safekeeping agreements, guarantees, letters of credit, goods
or services, or other transactions, contracts or agreements of any kind, (3) any
incidents, omissions, acts, practices, or occurrences causing injury to either
party whereby the other party or its agents, employees or representatives may be
liable, in whole or in part, or (4) any aspect of the past or present
relationships of the parties, shall be resolved through a two-step dispute
resolution process administered by Judicial Arbitration & Mediation Services,
Inc. ("J-A-M-S") as follows:
(a) Step I - Mediation: At the request of any party to the
dispute, claim or controversy of the matter shall be referred to the
nearest office of J-A-M-S for mediation, that is, an informal,
non-binding conference or conferences between the parties in which a
retired judge or justice for the J-A-M-S panel will seek to guide the
parties to a resolution of the case.
(b) Step II - Unsecured Contracts - Arbitration: Should any
dispute, claim or controversy remain unresolved at the conclusion of
the Step I Mediation Phase then all such remaining matters shall be
resolved by final and binding arbitration before a different judicial
panelist, unless the parties shall agree to have the mediator panelist
act as arbitrator. The hearing shall be conducted at a location
determined by the arbitrator in San Jose County and shall be
administered by and in accordance with the then existing Rules of
Practice and Procedure of Judicial Arbitration & Mediation Services,
Inc., and judgement upon any award rendered by the arbitrator may be
entered by any State or Federal Court having jurisdiction thereof. The
arbitrator shall determine which is the prevailing party and shall
include in the award that party's reasonable attorneys fees and costs.
This subparagraph (b) shall apply only if, at the time of the
submission of the matter to J-A-M-S, the dispute(s) or issue(s) do(es)
not arise out of a transaction(s) which is/are secured by real property
collateral or, if so secured, all parties consent to such submission.
As soon as practicable after selection of the arbitrator, the
arbitrator or his/her designated representative shall determine a
reasonable estimate of anticipated fees and costs of the Arbitrator,
and render a statement to each party setting forth that party's
pro-rata share of said fees and costs. Thereafter each party shall,
within 10 days of receipt of said statement, deposit said sum with the
Arbitrator. Failure of any party to make such a deposit shall result in
a forfeiture by the non-depositing party of the right to prosecute or
defend the claim which is the subject of the arbitration, but shall not
otherwise serve to abate, stay or suspend the arbitration proceedings.
<PAGE>
(c) Step II - Contracts Secured By Real Estate - Trial by
Court Reference [ss.638 (1)] Code of Civil Procedure): If the dispute,
claim or controversy is not one required or agreed to be submitted to
arbitration as provided by subparagraph (b) and has not been resolved
by Step I mediation, them any remaining dispute, claim or controversy
shall be submitted for determination by a trial on Order of Reference
conducted by a retired judge or justice from the panel of J-A-M-S
appointed pursuant to the provisions of California Code of Civil
Procedure ss.638(1) or any amendment, addition or successor section
thereto to hear the case and report a statement of decision thereon.
The parties intend this general reference agreement to be specifically
enforceable in accordance with said section. If this parties are unable
to agree upon a member of the J-A-M-S panel to act as referee then one
shall be appointed by the Presiding Judge of the county wherein the
hearing is to be held. The parties shall pay in advance, to the
referee, the estimated reasonable fees and costs of the reference, as
may be specified in advance by the referee. The parties shall initially
share equally, by paying their proportionate amount of the estimated
fees and costs of the reference. Failure of any party to make such a
fee deposit shall result in a forfeiture by the non-depositing party of
the right to prosecute or defend the cause(s) of action which is(are)
the subject of the reference, but shall not otherwise serve to abate,
stay or suspend the reference proceeding.
(d) Provisional Remedies, Self Help and Foreclosure: No
provision of, or the exercise of any right(s) under subparagraph (b),
nor any other provision of this Dispute Resolution Provision, shall
limit the right of any party to exercise self help remedies such as set
off, to foreclose against any real or personal property collateral, or
obtain provisional or ancillary remedies such as injunctive relief or
the appointment of a receiver from any court having jurisdiction
before, during or after the pendency of any arbitration. At Bank's
option, foreclosure under a deed of trust or mortgage may be
accomplished either by exercise of power of sale under the deed of
trust or mortgage, or by judicial foreclosure. The institution and
maintenance of an action for provisional remedies pursuit of
provisional or ancillary remedies or exercise of self help remedies
shall not constitute a waiver of the right of any party, including the
plaintiff, to submit the controversy or claim to arbitration.
11.07 Waiver of Jury Trial. THE BORROWER AND THE BANK EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE
BORROWER AND THE BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
11.08 Reliance: Each warranty, representation, covenant, obligation and
agreement contained in this Agreement shall be conclusively presumed to have
been relied upon by the Bank regardless of any investigation made or information
possessed by the Bank and shall be cumulative and in addition to any other
warranties, representations, covenants and agreements which the Borrower now or
hereafter shall give, or cause to be given, to the Bank.
11.09 Attorneys' Fees: Borrower shall pay to the Bank all costs and
expenses, including but not limited to reasonable attorneys fees, incurred by
Bank in connection with the administration, enforcement, or any refinancing or
restructuring in the nature of a "work-out", of this Agreement or any document,
instrument or agreement executed with respect to, evidencing or securing the
indebtedness hereunder.
11.10 Notices: All notices, payments, requests, information and demands
which either party hereto may desire, or may be required to give or make to the
other party hereto, shall be given or made to such party by hand delivery or
through deposit in the United States mail, postage prepaid, or by Western Union
telegram, addressed as set forth below or to such other address as may be
specified from time to time in writing by either party to the other.
To the Borrower To the Bank:
ELEXSYS INTERNATIONAL, INC. SANWA BANK CALIFORNIA
4405 Fortran Court San Jose CBC
San Jose, CA 95134 220 Almaden Blvd.
San Jose, CA 95113
<PAGE>
Attn: Robert DeLaurentis Attn: Jillian E. Mathur
Title: C.F.O. Vice President
with a copy to: With a copy to:
COOLEY GODWARD LLP SANWA BANK CALIFORNIA
Five Palo Alto Square Asset Based Financing Department
3000 El Camino Real
Palo Alto, CA 94306-2155 444 Market Street, 22nd Floor
San Francisco, CA 94111
Attn: Bill Veatch
11.11 Waiver: Neither the failure nor delay by the Bank in exercising
any right hereunder or under any document, instrument or agreement mentioned
herein shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder or under any other document, instrument or
agreement mentioned herein preclude other or further exercise thereof or the
exercise of any other right; nor shall any waiver of any right or default
hereunder, or under any other document, instrument or agreement mentioned
herein, constitute a waiver of any other right or default or constitute a waiver
of any other default of the same or any other term or provision.
11.12 Conflicting Provisions: To the extent the provisions contained in
this Agreement are inconsistent with those contained in any other document,
instrument or agreement executed pursuant hereto, the terms and provisions
contained herein shall control. Otherwise, such provisions shall be considered
cumulative.
11.13 Binding Effect; Assignment: This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Bank. The Bank may sell, assign or grant participation in all or
any portion of its rights and benefits hereunder. The Borrower agrees that, in
connection with any such sale, grant or assignment, the Bank may deliver to the
prospective buyer, participant or assignee financial statements and other
relevant information relating to the Borrower and any guarantor.
11.14 Jurisdiction: This Agreement, any notes issued hereunder, the
rights of the parties hereunder to and concerning the Collateral, and any
documents, instruments or agreements mentioned or referred to herein shall be
governed by and construed according to the laws of the State of California, to
the jurisdiction of whose courts the parties hereby submit.
11.15 Headings: The headings herein set forth are solely for the
purpose of identification and have no legal significance.
11.16 Entire Agreement: This Agreement and all documents, instruments
and agreements mentioned herein constitute the entire and complete understanding
of the parties with respect to the transactions contemplated hereunder. All
previous conversations, memoranda and writings between the parties pertaining to
the transactions contemplated hereunder not incorporated or referenced in this
Agreement or in such documents, instruments and agreements are superseded
hereby.
11.17 Confidentiality Agreement. In handling any confidential
information Bank, and all employees and agents of Bank, including but not
limited to accountants, shall exercise the same degree of care that Bank
exercises with respect to its own proprietary information of the same types to
maintain the confidentiality of any non-public information thereby received or
received pursuant to this Agreement except that disclosure of such information
may be made (i) to the subsidiaries or affiliates of Bank in connection with
their present or prospective business relations with Borrower; (ii) to
prospective transferees or purchasers of any interest in the loans, provided
that they have entered into a comparable confidentiality agreement in favor of
Borrower and have delivered a copy to Borrower; (iii) as required by law,
regulations, rule or order, subpoena, judicial order or similar order; (iv) as
may be required in connection with the examination, audit or similar
investigation of Bank and (v) as Bank may determine in connection with the
enforcement of any remedies hereunder. Confidential information hereunder shall
not include information that either: (a) is in the public domain or in the
knowledge or possession of Bank when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first hereinabove written.
Borrower Bank:
SANWA BANK CALIFORNIA
ELEXSYS INTERNATIONAL, INC.
BY:_________________________________ BY:_______________________________
Name: Robert DeLaurentis Name: Jillian E. Mathur
Title: C.F.O. Title: Vice President
EXHIBIT 10.52
LINE OF CREDIT AGREEMENT
This Line of Credit Agreement (the "Agreement") is made and entered
into this ___________________ day of May _______, 1997, by and between SANWA
BANK CALIFORNIA (the "Bank") and ELEXSYS INTERNATIONAL, INC. (the "Borrower"),
on the terms and conditions that follow:
SECTION I
DEFINITIONS
1.01 Certain Defined Terms: Unless elsewhere defined in this Agreement,
the following terms shall have the following meanings (such meanings to be
generally applicable to the singular and plural forms of the terms defined):
"Advance": shall mean an advance to the Borrower under the
Line of Credit described in Section 2.
"Alternate Currency": shall mean any lawful currency other
than Dollars which is freely transferable and convertible into Dollars.
"Business Day": shall mean a day other than a Saturday or
Sunday on which commercial banks are open for business in California, USA, and,
with respect to Eurocurrency Advances, on which dealings are carried on in the
London interbank market and banks are open for business in London and in the
country of issue of the currency of such Advance.
"Cash Flow": shall mean the sum of net income after tax and
exclusive of extraordinary gains, plus depreciation and amortization expense
minus dividends and distributions.
"Collateral": shall mean the property described in Section
3.01.
"Cost of Funds Advance", "Cost of Funds Interest Period" and
"Fixed Rate": shall have the meanings provided in Section 2.4 hereof.
"Debt": shall mean all liabilities of the Borrower less
Subordinated Debt.
"Effective Tangible Net Worth": shall mean the Borrower's
stated net worth plus Subordinated Debt less all intangible assets of the
Borrower (i.e., goodwill, trademarks, patents, copyrights, organization expense
and similar intangible items).
"Dollars" and the sign "$": shall mean lawful money of the
United States.
"ERISA": shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time, including (unless the context
otherwise requires) any rules or regulations promulgated thereunder.
"Eurocurrency Advance", "Eurocurrency Interest Period " and
"Eurocurrency Rate": shall have the meanings provided in Section 2.4 hereof.
"Event of Default": shall have the meaning set forth in
Section 7.
"Expiration Date": shall mean January 31, 1998 or the date of
termination of the Bank's commitment to lend under this Agreement pursuant to
Section 8, whichever shall occur first.
"Indebtedness": shall mean, with respect to the Borrower, (i)
all indebtedness for borrowed money or for the deferred purchase price of
property or services in respect of which the Borrower is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or in respect of which the
Borrower otherwise assures a creditor against loss and (ii) obligations under
leases which shall have been or should be, in accordance with generally accepted
accounting principles, reported as capital leases in respect of which the
Borrower is liable, contingently or otherwise, or in respect of which the
Borrower otherwise assures a creditor against loss.
"Line Account": shall have the meaning provided in Section
2.12 hereof.
"Line of Credit": shall mean the credit facility described in
Section 2.
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"Obligations": shall mean all amounts owing by the Borrower to
the Bank pursuant to this Agreement including, but not limited to, the unpaid
principal amount of Advances.
"Permitted Indebtedness": shall mean (i) Indebtedness of
Borrower in favor of Bank arising under this Agreement or any other Loan
Document; (ii) Indebtedness existing on the date hereof and disclosed in writing
to the Bank; (iii) Subordinated Debt; (iv) Indebtedness to trade creditors,
including, without limitation, affiliates of Borrower, incurred in the ordinary
course of business; (v) Other Indebtedness of Borrower not exceeding
$1,000,000.00 in the aggregate outstanding at any time; (vi) Contingent
obligations of Borrowing consisting of guarantees (and other credit support) of
the obligations of vendors and suppliers of Borrower in respect of transactions
entered into in the ordinary course of business; (vii) Indebtedness with respect
to capital lease obligations and purchase money indebtedness incurred in
connection with the acquisition of assets secured by Permitted Liens; (viii)
Extensions, renewals, refundings, refinancings, modifications, amendments and
restatements of any of the items of Permitted Indebtedness.
"Permitted Investment": shall mean (i) investments existing on
the date hereof and disclosed in writing to the Bank; (ii) marketable direct
obligations issued or unconditionally guaranteed by the United States of America
or any agency or any State thereof maturing within one (1) year from the date of
acquisition thereof; (iii)commercial paper maturing no more than one (1) year
from the date of creation thereof and currently having the highest rating
obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, Inc.; (iv) investments consisting of deposits maturing no more than one
(1) year from the date of investment therein issued by Bank; (v) extensions of
credit in the nature of accounts receivable or notes receivable arising from the
sale or lease of goods or services in the ordinary course of business; (vi)
investments consisting of the endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; (vii)
investments, including debt obligations, received in connection with the
bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of business; (viii) investments consisting of
compensation of employees, officers and directors of Borrower so long as the
Board of Directors of Borrower determines that such compensation is in the best
interest of Borrower, and travel advances, employee relocation loans and other
employee loans and advances in the ordinary course of business; (ix) other
investments aggregating not in excess of $250,000.00 at any time.
"Permitted Liens": shall mean: (i) liens and security
interests securing indebtedness owed by the Borrower to the Bank; (ii) liens for
taxes, assessments or similar charges either not yet due or being contested in
good faith; (iii) liens of materialmen, mechanics, warehousemen, or carriers or
other like liens arising in the ordinary course of business and securing
obligations which are not yet delinquent; (iv) purchase money liens or purchase
money security interests upon or in any property acquired or held by the
Borrower in the ordinary course of business to secure Indebtedness outstanding
on the date hereof or permitted to be incurred under Section 6.09 hereof; (v)
liens and security interests which, as of the date hereof, have been disclosed
to and approved by the Bank in writing; (vi) those liens and security interests
which in the aggregate constitute an immaterial and insignificant monetary
amount with respect to the net value of the Borrower's assets; liens securing
capital lease obligations on assets subject to such capital leases; (vii) liens
arising from judgments, decrees or attachments to the extent and only so long as
such judgment, decree or attachment has not caused or resulted in an Event of
Default, (viii) easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar liens affecting real
property not interfering in any material respect with the ordinary conduct of
the business of Borrower, (ix) liens in favor of customs and revenue authorities
arising as a mater of law to secure payment of customs duties in connection with
the importation of goods, (x) liens arising solely by virtue of any statutory or
common law provision relating to banker's liens, rights of setoff or similar
rights and remedies as to deposit accounts or other funds maintained with a
creditor depository institutions; (xi) liens not otherwise permitted which liens
do not in the aggregate exceed $250,000.00 at any time.
"Redenominate", "Redenomination" and "Redenominated": each
refers to redenomination of each Advance from Dollars into an Alternate Currency
or from an Alternate Currency into Dollars or another Alternate Currency
pursuant to Section 2.06.
"Reference Rate": shall have the meanings provided in Section
2.4 hereof.
"Variable Rate Advance" and "Variable Rate": shall have the
meanings provided in Section 2.4 hereof.
1.2 Accounting Terms: All references to financial statements, assets,
liabilities, and similar accounting items not specifically defined herein shall
mean such financial statements or such items prepared or determined in
accordance with generally accepted accounting principles consistently applied
and, except where otherwise specified, all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles.
1.3 Other Terms: Other terms not otherwise defined shall have the
meanings attributed to such terms in the California Uniform Commercial Code.
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1.4 Currency Equivalents Generally: For all purposes of this Agreement
other than Section 2, the equivalent in any Alternate Currency of an amount in
Dollars shall be determined at the rate of exchange quoted by the Bank in Los
Angeles, at 9:00 A.M. on the date of determination, for the spot purchase in the
relevant foreign exchange market of such amount of Dollars with such Alternate
Currency.
SECTION 2
THE LINE OF CREDIT
2.1 The Line of Credit: On terms and conditions as set forth herein,
the Bank agrees to make Advances in Dollars or in Alternate Currency to the
Borrower from time to time from the date hereof to the Expiration Date, provided
the aggregate amount of such Advances outstanding at any time does not exceed
$5,000,000 or the Dollar equivalent in Alternate Currency of $5,000,000 ("Line
of Credit"). Within the foregoing limits, the Borrower may borrow, partially or
wholly prepay, and reborrow under this Section 2.01.
2.2 Making Line Advances: Each Advance shall be conclusively deemed to
have been made at the request of and for the benefit of the Borrower (i) when
credited to any deposit account of the Borrower maintained with the Bank or (ii)
when paid in accordance with the Borrower's written instructions. Subject to the
requirements of Section 5, Advances shall be made by the Bank upon telephonic or
facsimile request received from the Borrower, and confirmed in writing within
two Business Days, which request shall be received not later than 12:00 p.m.
(Pacific Standard Time) on the date specified for a Variable Rate Advance and
7:00 a.m. (Pacific Standard Time) two business days prior to the date specified
for a Eurocurrency Advance or a Cost of Funds Advance, each of which dates shall
be a Business Day. The rates for a Eurocurrency Advance or a Cost of Funds
Advance shall be set on the same Business Day as the request is received if
received by 7:00 a.m. and on the next Business Day if received after 7:00 a.m..
Requests for Advances received after such time may, at the Bank's option, be
deemed to be a request for an Advance to be made on the next succeeding Business
Day for a Variable Rate Advance and the third succeeding Business Day for a
Eurocurrency Advance or a Cost of Funds Advance.
2.3 Repayment: On the Expiration Date, the Borrower hereby promises and
agrees to pay to the Bank in full the aggregate unpaid principal amount of all
Advances then outstanding, together with all accrued and unpaid interest
thereon, provided, however, that any Advance denominated in Dollars must be
repaid in Dollars and any Advance denominated in an Alternate Currency must be
repaid in the same Alternate Currency.
2.4 Interest on Advances: Interest shall accrue from the date of each
Advance under the Line of Credit at one of the following rates, as quoted by the
Bank and as elected by the Borrower pursuant to paragraph 2.05 or paragraph 2.06
below:
(a) Variable Rate Advances: For Advances denominated in
Dollars, a variable rate per annum equivalent to an index for a variable
interest rate which is quoted, published or announced from time to time by the
Bank as its reference rate and as to which loans may be made by the Bank at,
below or above such reference rate (the "Reference Rate") plus .50% (the
"Variable Rate"). Interest shall be adjusted concurrently with any change in the
Reference Rate. An Advance which bears interest at the Variable Rate is
hereinafter referred to as a "Variable Rate Advance".
(b) Eurocurrency Advances: For Advances denominated in Dollars
or in Alternate Currency, a fixed rate quoted by the Bank for one, three, six,
nine or twelve months or for such other period of time that the Bank may quote
and offer (provided that any such period of time does not extend beyond the
Expiration Date) [the "Eurocurrency Interest Period"] for Advances in the
minimum amount of $500,000 and in $100,000 increments thereafter. Such interest
rate shall be a percentage, rounded upward to the nearest one-hundredth of one
percent, equivalent to 2.50% in excess of the Bank's Eurocurrency Rate for
Dollars or such Alternate Currency which is that rate determined by the Bank's
Treasury Desk as being the approximate rate at which the Bank could purchase
Dollars or Alternate Currency deposits in an amount approximately equal to the
amount of the relevant Advance and for a period of time approximately equal to
the relevant Eurocurrency Interest Period (adjusted for any and all assessments,
surcharges and reserve requirements pertaining to the purchase by the Bank of
such Alternate Currency deposits [the "Eurocurrency Rate"]. An Advance which
bears interest at the Eurocurrency Rate is hereinafter referred to as the
"Eurocurrency Advance".
(c) Cost of Funds Advances. For Advances denominated in
Dollars, the Bank hereby agrees to make Advances to the Borrower, at Borrower's
election, at a fixed rate quoted by Bank in its sole discretion for each Advance
(the "Cost of Funds Rate") and for such period of time that the Bank may quote
and offer, provided that any such period of time shall be for at least ____ days
and provided further that any such period of time does not extend beyond the
Expiration Date (the "Cost of Funds Interest Period") for Advances in the
minimum amount $500,000 and in $100,000 increments thereafter. Advances based
upon the Cost of Funds Rate are hereinafter referred to as "Cost of Funds
Advances". Eurocurrency Advances and Cost of Funds Advances are sometimes
hereinafter referred to as a "Fixed Rate Advance".
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Interest on Variable Rate Advances and Cost of Funds Advances
shall be paid in Dollars in monthly installments commencing on the first day of
the month following the date of the first such Advance and continuing on the
first day of each month thereafter.
Interest on any Eurocurrency Advance shall be paid on the last
day of the Eurocurrency Interest Period pertaining to such Eurocurrency Advance
and shall be paid in Dollars or in the relevant Alternate Currency as the case
may be. The Borrower further promises and agrees to pay the Bank interest on any
Eurocurrency Advance with an Eurocurrency Interest Period in excess of 90 days
on a quarterly basis (i.e., on the last day of each 90-day period occurring in
such Eurocurrency Interest Period) and on the last day of the relevant
Eurocurrency Interest Period.
If interest is not paid as and when it is due, it shall be
added to the principal, become and be treated as a part thereof, and shall
thereafter bear like interest.
2.5 Notice of Election to Adjust Interest Rate: The Borrower may elect
that interest on a Fixed Rate Advance shall continue to accrue at a newly quoted
Eurocurrency Rate or Cost of Funds Rate; provided, however, that such notice
shall be received by the Bank no later than 7:00 a.m. two business days prior to
the last day of the Eurocurrency Interest Period for a Eurocurrency Advance and
1:00 p.m. one business day prior to the last day of a Cost of Funds Interest
Period for a Cost of Funds Advance. Such notice may be by telephone if confirmed
in writing by telecopy with the original of such writing deposited in the US
mail or with an air courier on the same day. The Bank shall not incur any
liability to the Borrower in acting upon any telephonic notice referred to above
that the Bank believes in good faith to have been given by a duly authorized
officer or other person authorized to act on behalf of the Borrower and upon any
borrowing, Redenomination or continuation by the Bank in accordance with this
Agreement pursuant to any telephonic notice, the Borrower shall have effected
the borrowing, redenomination or continuation of Advances hereunder. The
Borrower may elect that interest on a Fixed Rate Advance shall accrue at the
Variable Rate; provided, however, that such notice shall be received by the Bank
no later than one business day prior to the last day of the Interest Period
pertaining to such Fixed Rate Advance, and provided further, however, that such
Fixed Rate Advance shall be in Dollars or Redenominated in Dollars pursuant to
the terms of Section 2.06. If the Bank shall not have received notice (as
prescribed herein) of Borrower's election that interest on any Fixed Rate
Advance shall continue to accrue at the newly quoted Eurocurrency Rate or Cost
of Funds Rate or Variable Rate as the case may be, the Borrower shall be deemed
to have elected that interest thereon shall be adjusted to accrue at the
Variable Rate then in effect and any Alternate Currency shall be Redenominated
in Dollars.
2.6 Redenomination of Advances:
The Borrower may, upon notice given to the Bank at least four
Business Days prior to the date of the proposed Redenomination, request that a
Eurocurrency Advance be Redenominated from Dollars into an Alternate Currency or
from an Alternate Currency into Dollars or another Alternate Currency; provided,
however, that any Redenomination shall be made on, and only on, the last day of
an Interest Period for such Advances. Each such notice of request of a
Redenomination ( "Notice of Redenomination") shall be by telecopier, telex or
cable, confirmed immediately in writing, or may be by telephone if confirmed in
writing by telecopy with the original of such writing deposited in the US mail
or with an air courier on the same day, and the Bank shall not incur any
liability to the Borrower in acting upon any telephonic notice referred to above
that the Bank believes in good faith to have been given by a duly authorized
officer or other person authorized to act on behalf of the Borrower and upon any
borrowing, Redenomination or continuation by the Bank in accordance with this
Agreement pursuant to any telephonic notice, the Borrower shall have effected
the borrowing, redenomination or continuation of Advances hereunder, specifying
(i) the Eurocurrency Advance(s) to be Redenominated, (ii) the date of the
proposed Redenomination, (iii) the Alternate currency into which such Advances
are to be Redenominated, and (iv) the duration of the Interest Period for such
Advances upon being so Redenominated. In the case of a Notice of Redenomination
which requests a Redenomination of Advances into an Alternate Currency, such
Redenomination is subject to confirmation by Bank not later than the third
Business Day before the requested date of such Redenomination that such Bank
agrees to such Redenomination. which confirmation shall be notified to the
Borrower. If no confirmation is provided the Redenomination will not occur. Each
Advance so requested to be Redenominated will be Redenominated, on the date
specified therefor in such Notice of Redenomination, into an equivalent amount
thereof in the currency requested in such Notice of Redenomination, such
equivalent amount to be determined on such date in accordance with Section 2.13,
and, upon being so Redenominated, will have an initial Interest Period as
requested in such Notice of Redenomination.
2.7 Prepayment:
(a) The Borrower may prepay any Advance in whole or in part,
at any time and without penalty, provided, however, that: (i) any partial
prepayment shall first be applied, at the Bank's option, to accrued and unpaid
interest and next to the outstanding principal balance; and (ii) during any
period of time in which interest is accruing on any Advance on the basis of the
Eurocurrency Rate or
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the Cost of Funds Rate, no prepayment shall be made except on a day which is the
last day of the Interest Period pertaining thereto provided, however, if the
whole or any part of any Fixed Rate Advance is prepaid by reason of acceleration
or otherwise, the Borrower shall, upon the Bank's request, promptly pay to and
indemnify the Bank for all costs and any loss actually incurred by the Bank,
excluding loss of profit on any margin, but including any loss resulting from
the re-employment of funds, sustained by the Bank as a consequence of such
prepayment, and provided further, that any prepayment hereunder shall not be
deemed to be an event of default.
(b) If, on the last day of any Interest Period, the equivalent
in Dollars of the aggregate principal amount of all Eurocurrency Advances then
outstanding when combined with the aggregate principal amount of all Variable
Rate Advances and Cost of Funds Advances then outstanding exceeds the Line of
Credit, the Borrower shall on such last day prepay an aggregate principal amount
of such Advances to the Bank in an amount at least equal to such excess, with
accrued interest to the date of such prepayment on the principal amount prepaid.
2.8 Indemnification for Eurocurrency Rate and Cost of Funds Rate Costs:
During any period of time in which interest on any Advance is accruing on the
basis of the Eurocurrency Rate or the Cost of Funds Rate, the Borrower shall,
upon the Bank's written request, which request shall explain in reasonable
detail the reason for such costs or payments, promptly pay to and reimburse the
Bank for all costs incurred and payments made by the Bank by reason of any
future assessment, reserve, deposit or similar requirement or any surcharge, tax
or fee imposed upon the Bank or as a result of the Bank's compliance with any
directive or requirement of any regulatory authority pertaining or relating to
the Alternate Currency or Dollars or cost of funds used by the Bank in quoting
and determining the Eurocurrency Rate or the Cost of Funds Rate under this
Agreement. Bank shall use its best efforts to provide Borrower, in advance, with
an estimate of any such costs which may potentially be incurred hereunder.
2.9 Eurocurrency Rate or Cost of Funds Rate Infeasible: In the event
that the Bank shall at any time determine that the accrual of interest on the
basis of the Eurocurrency Rate or the Cost of Funds Rate (i) is infeasible at
the time of any borrowing, continuation or Redenomination because the Bank is
unable to determine the Eurocurrency Rate or Cost of Funds Rate due to the
unavailability of Dollars or Alternate Currency deposits, contracts or time
deposits in an amount approximately equal to the amount of the relevant Advance
and for a period of time approximately equal to relevant Interest Period or (ii)
is or has become unlawful or infeasible by reason of the Bank's compliance with
any new law, rule, regulation, guideline or order, or any new interpretation of
any present law, rule, regulation, guideline or order, then the Bank shall give
telephonic notice thereof (confirmed in writing) to the Borrower, in which event
such Fixed Rate Advance shall be immediately prepaid but then may be converted
or Redenominated into a Variable Rate Advance at the election of Borrower.
2.10 Failure to Borrow: In the case of any Fixed Rate Advance, the
Borrower shall indemnify Bank against any loss, cost or expense incurred by Bank
as a result of any failure to borrow on the date specified for such Fixed Rate
Advance (other than as a result of Bank's failure to make funds available for
such Advance), including, without limitation, any loss (excluding loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by Bank to fund such Fixed Rate
Advance to be made by Bank when such Fixed Rate Advance is not made on such
date.
2.11 Computations and Payments: Interest on any Advance shall be
computed on the basis of 360 days per year, but charged on the actual number of
days elapsed. Whenever any payment hereunder shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of interest; provided, however, if such extension would
cause payment of interest on or principal of Eurocurrency Advances to be made in
the next following calendar month, such payment shall be made on the immediately
preceding Business Day.
2.12 Taxes:
(a) Any and all payments by the Borrower shall be made
hereunder free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, taxes imposed on the Bank's income,
and franchise taxes imposed on it, by the jurisdiction under the laws of which
Bank is organized or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder (i) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.12) the Bank receives an amount equal to the sum it would have
received had
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no such deductions been made, (ii) Borrower shall make such deductions and (iii)
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law. Bank shall use its best
efforts to advise Borrower of any taxes or levies to the best of Bank's
knowledge thereof.
(b) In addition, Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment or registration of, or otherwise
with respect to, this Agreement (hereinafter referred to as "Other Taxes").
(c) Borrower will indemnify Bank for the full amount of Taxes
or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed
by any jurisdiction on amounts payable under this Section 2.12) paid by Bank and
any liability (including penalties, interest and expenses) arising therefrom or
with respect thereto, other than liabilities arising from Bank's gross
negligence or willful misconduct, whether or not such Taxes or Other Taxes were
correctly or legally asserted. This indemnification shall be made within 30 days
from the date Bank makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower will furnish to the Bank at its address referred to hereinbelow, the
original or a certified copy of a receipt evidencing payment thereof. If no
taxes are payable in respect of any payment hereunder, Borrower will furnish to
the Bank at such address, a certificate from each appropriate taxing authority,
or an opinion of counsel acceptable to the Bank, in either case stating that
such payment is exempt from or not subject to Taxes.
(e) To the extent that any Taxes were not lawfully payable,
any recovery ultimately received by the Bank in respect of any such Taxes shall
be refunded to the Borrower to the extent of the applicable indemnification
payment.
(f) Bank agrees that, upon receiving written notice from
Borrower, Bank shall take all such actions as are reasonably necessary to enable
the Borrower to pay all Taxes in a timely manner and to claim such exemptions as
the Bank may be entitled to claim in respect of all or any portion of any Taxes
which are otherwise required to be paid or deducted or withheld pursuant to this
Section 2.12 in respect of any payments under this Agreement.
(g) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 2.12 shall survive the payment in full of principal
and interest hereunder.
2.13 Currency Equivalents: For purposes of the provisions of this
Section 2, (i) the equivalent in Dollars of any Alternate Currency shall be
determined by using the quoted spot rate at which Bank's principal office in Los
Angeles offers to exchange Dollars for such Alternate Currency at 9:00 A.M. (Los
Angeles time) two Business Days prior to the date on which such equivalent is to
be determined, (ii) the equivalent in any Alternate Currency of any other
Alternate Currency shall be determined by using the quoted spot rate at which
Bank's principal office in Los Angeles offers to exchange such Alternate
Currency for the equivalent in Dollars of such other Alternate Currency at 9:00
A.M. (Los Angeles time) two Business Days prior to the date on which such
equivalent is to be determined, and (iii) the equivalent in any Alternate
Currency of Dollars shall be determined by using the quoted spot rate at which
Bank's principal office in Los Angeles offers to exchange such Alternate
Currency for Dollars at 9:00 A.M. (Los Angeles time) two Business Days prior to
the date on which such equivalent is to be determined. Except as specified in
Section 1.04 , the equivalent in Dollars of each Eurocurrency Rate Advance made
in an Alternative Currency shall be recalculated hereunder on each date that it
shall be necessary to determine the unused portion of Bank's Line of Credit or
any or all Advance or Advances outstanding on such date.
2.14 Line Account:
(a) The Bank shall maintain on its books a record of account
in which the Bank shall make entries for each Advance and such other debits and
credits as shall be appropriate in connection with the Line of Credit (the "Line
Account"). The Bank shall provide the Borrower with a monthly statement of the
Borrower's Line Account upon the Borrower's request therefor from time to time,
which statement shall be considered to be correct and conclusively binding on
the Borrower unless the Borrower notifies the Bank to the contrary within 30
days after the Borrower's receipt of any such statement which it deems to be
incorrect.
(b) The Borrower hereby authorizes the Bank, if and to the
extent payment owed to the Bank under the Line of Credit is not made when due,
to charge, from time to time, against any or all of the Borrower's deposit
accounts with the Bank any amount so due.
(c) If any payment required to be made by the Borrower
hereunder becomes due and payable on a day other than a Business Day, the due
date thereof shall be extended to the next succeeding Business Day and interest
thereon shall be payayble at the
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then applicable rate during such extension. All payments required to be made
hereunder shall be made to the office of the Bank designated for the receipt of
notices herein or such other office as Bank shall from time to time designate.
2.15 Late Payment: In addition to any other rights the Bank may have
hereunder, if any payment of principal (other than a principal payment due
pursuant to Section 2.03) or interest, or any portion thereof, under this
Agreement is not paid when due, a late payment charge equal to five percent (5%)
of such past due payment may be assessed and shall be immediately payable.
2.16 Maximum Outstanding Advances. Notwithstanding anything herein to
the contrary, outstanding Advances under the Line of Credit when combined with
outstanding Advances under that certain Accounts Receivable Credit Agreement
dated of even date herewith and by and between Bank and Borrower may not exceed
$13,000,000.
SECTION 3
COLLATERAL
3.01 The Collateral: To secure payment and performance of all the
Borrower's Obligations under this Agreement and all other liabilities, loans,
guarantees, covenants and duties owed by the Borrower to the Bank, whether or
not evidenced by this or by any other agreement, absolute or contingent, due or
to become due, now existing or hereafter and howsoever created, the Borrower
hereby grants the Bank a security interest in and to all of the following
property:
(a) All goods now owned or hereafter acquired by the Borrower
or in which the Borrower now has or may hereafter acquire any interest,
including, but not limited to, all machinery, equipment, furniture,
furnishings, fixtures, tools, supplies and motor vehicles of every kind
and description, and all additions, accessions, improvements,
replacements and substitutions thereto and thereof.
(b) Bank agrees to release its security interest in any
equipment, fixtures, leasehold improvements, or other property if
within ninety (90) days after Borrower acquires title to such property,
Borrower finances such property pursuant to either (i) a sale and
leaseback transaction or (ii) a debt financing transaction in an amount
not to exceed the purchase price of, and secured by a security interest
in such property.
(c) All inventory now owned or hereafter acquired by the
Borrower, including, but not limited to, all raw materials, work in
process, finished goods, merchandise, parts and supplies of every kind
and description, including inventory temporarily out of the Borrower's
custody or possession, together with all returns on accounts.
(d) All accounts, contract rights and general intangibles now
owned or hereafter created or acquired by the Borrower, including, but
not limited to, all receivables, goodwill, trademarks, trade styles,
trade names, patents, patent applications, software, customer lists and
business records.
(e) All documents, instruments and chattel paper now owned or
hereafter acquired by the Borrower.
(f) All monies, deposit accounts, certificates of deposit and
securities of the Borrower now or hereafter in the Bank's or its
agents' possession.
The Bank's security interest in the Collateral shall be a continuing
lien and shall include the proceeds and products of the Collateral including,
but not limited to, the proceeds of any insurance thereon.
SECTION 4
CONDITIONS OF LENDING
4.1 Conditions Precedent to the Initial Advance: The obligation of the
Bank to make the initial Advance and the first extension of credit to or on
account of the Borrower hereunder is subject to the conditions precedent that
the Bank shall have received before the date of such initial Advance and such
first extension of credit all of the following, in form and substance
satisfactory to the Bank:
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(a) Evidence that the execution, delivery and performance by
the Borrower of this Agreement and any document, instrument or agreement
required hereunder have been duly authorized.
(b) Such other evidence as the Bank may request to establish
the consummation of the transaction contemplated hereunder and compliance with
the conditions of this Agreement.
4.2 Conditions Precedent to All Advances: The obligation of the Bank to
make each Advance and each other extension of credit to or on account of the
Borrower (including the initial Advance and the first extension of credit) shall
be subject to the further conditions precedent that, on the date of each Advance
or each extension of credit and after the making of such Advance or extension of
credit:
(a) The Bank shall have received such supplemental approvals,
opinions or documents as the Bank may reasonably request.
(b) The representations contained in Section 5 and in any
other document, instrument or certificate delivered to the Bank hereunder are
true, correct and complete.
(c) No event has occurred and is continuing which constitutes,
or with the lapse of time or giving of notice or both, would constitute an Event
of Default.
(d) The security interest in the Collateral has been duly
authorized, created and perfected with first priority, assuming Bank has timely
filed and taken all actions necessary or desirable to perfect and protect such
security, and is in full force and effect.
The Borrower's acceptance of the proceeds of any Advance or the
Borrower's execution of any document or instrument evidencing or creating any
Obligation hereunder shall be deemed to constitute the Borrower's representation
and warranty that all of the above statements are true and correct.
SECTION 5
REPRESENTATIONS AND WARRANTIES
The Borrower hereby makes the following representations and warranties to the
Bank, which representations and warranties are continuing:
5.01 Status: The Borrower is a corporation duly organized and validly
existing under the laws of the State of Delaware and is properly licensed and is
qualified to do business and in good standing in, and, where necessary to
maintain the Borrower's rights and privileges, has complied with the fictitious
name statute of every jurisdiction in which the Borrower is doing business and
where failure to so qualify would have a material adverse effect.
5.02 Authority: The execution, delivery and performance by the Borrower
of this Agreement and any instrument, document or agreement required hereunder
have been duly authorized and do not and will not: (i) violate any provision of
any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect having application to the Borrower;
(ii) result in a breach of or constitute a default under any material indenture
or loan or credit agreement or other material agreement, lease or instrument to
which the Borrower is a party or by which it or its properties may be bound or
affected; (iii) require any consent or approval of its stockholders or violate
any provision of its certificate of incorporation.
5.03 Legal Effect: This Agreement constitutes, and any instrument,
document or agreement required hereunder when delivered hereunder will
constitute, legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms.
5.04 Fictitious Trade Styles: There are no fictitious trade styles used
by the Borrower in connection with its business operations. The Borrower shall
notify the Bank within 30 days of effecting any change in the matters described
hereinor prior to using any other fictitious trade style at any future date,
indicating the trade style and state(s) of its use.
5.05 Financial Statements: All financial statements, information and
other data which may have been or which may hereafter be submitted by the
Borrower to the Bank are true, accurate and correct and have been or will be
prepared in accordance with generally accepted accounting principles
consistently applied and accurately represent the financial condition or, as
applicable, the other information disclosed therein. Since the most recent
submission of such financial information or data to the Bank, the Borrower
represents and
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warrants that no material adverse change in the Borrower's financial condition
or operations has occurred which has not been fully disclosed to the Bank in
writing.
5.06 Litigation: Except as have been disclosed to the Bank in writing,
there are no actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or the Borrower's
properties in excess of $500,000 before any court or administrative agency
which, if determined adversely to the Borrower, would have a material adverse
effect on the Borrower's financial condition or operations or on the Collateral.
5.07 Title to Assets: The Borrower has good and marketable title to all
of its assets (including, but not limited to, the Collateral) and the same are
not subject to any security interest, encumbrance, lien or claim of any third
person except for Permitted Liens.
5.08 ERISA: If the Borrower has a pension, profit sharing or retirement
plan subject to ERISA, such plan has been and will continue to be funded in
accordance with its terms and otherwise complies with and continues to comply
with the requirements of ERISA.
5.09 Taxes: The Borrower has filed all tax returns required to be filed
and paid all taxes shown thereon to be due, including interest and penalties,
other than such taxes which are currently payable without penalty or interest or
those which are being duly contested in good faith.
5.10 Environmental Compliance: The Borrower has implemented and
complied in all material respects with all applicable federal, state and local
laws, ordinances, statutes and regulations with respect to hazardous or toxic
wastes, substances or related materials, industrial hygiene or environmental
conditions. There are no suits, proceedings, claims or disputes pending or, to
the knowledge of the Borrower, threatened against or affecting the Borrower or
its property claiming violations of any federal, state or local law, ordinance,
statute or regulation relating to hazardous or toxic wastes, substances or
related materials.
SECTION 6
COVENANTS
The Borrower covenants and agrees that, during the term of this Agreement, and
so long thereafter as the Borrower is indebted to the Bank under this Agreement,
the Borrower will, unless the Bank shall otherwise consent in writing:
6.01 Preservation of Existence; Compliance with Applicable Laws:
Maintain and preserve its existence and all rights and privileges now enjoyed;
not liquidate or dissolve, merge or consolidate with or into, or acquire any
other business organization; notwithstanding the foregoing Borrower may
liquidate or dissolve, or enter into any consolidation, merger, partnership,
joint venture or other combination, acquire any other business organization, or
acquire all or substantially all of the assets of any other person
(collectively, an "Acquisition"), so long as Borrower is in compliance with the
covenants contained in Section 6.14 immediately after such Acquisition; and
conduct its business and operations in accordance with all applicable laws,
rules and regulations.
6.02 Maintenance of Insurance: Maintain insurance in such amounts and
covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which the
Borrower operates and maintain such other insurance and coverages as may be
required by the Bank. All such insurance shall be in form and amount and with
companies satisfactory to the Bank. With respect to insurance covering
properties in which the Bank maintains a security interest or lien, such
insurance shall name the Bank as loss payee pursuant to a loss payable
endorsement satisfactory to the Bank and shall not be altered or canceled except
upon 10 days' prior written notice to the Bank. Upon the Bank's request, the
Borrower shall furnish the Bank with the original policy or binder of all such
insurance.
6.03 Maintenance of Collateral and Other Properties: Except for
Permitted Liens, keep and maintain the Collateral free and clear of all levies,
liens, encumbrances and security interests (including, but not limited to, any
lien of attachment, judgment or execution) and defend the Collateral against any
such levy, lien, encumbrance or security interest; comply with all laws,
statutes and regulations pertaining to the Collateral and its use and operation;
execute, file and record such statements, notices and agreements, take such
actions and obtain such certificates and other documents as necessary to
perfect, evidence and continue the Bank's security interest in the Collateral
and the priority thereof; maintain accurate and complete records of the
Collateral which show all sales, claims and allowances; and properly care for,
house, store and maintain the Collateral in good condition, free of misuse,
abuse and deterioration, other than normal wear and tear. The Borrower shall
also maintain and preserve all its properties in good working order and
condition in accordance with the general practice of other businesses of similar
character and size, ordinary wear and tear excepted.
6.04 Payment of Obligations and Taxes: Make timely payment of all
assessments and taxes and all of its liabilities and obligations including, but
not limited to, trade payables, unless the same are being contested in good
faith by appropriate proceedings with
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the appropriate court or regulatory agency. For purposes hereof, the Borrower's
issuance of a check, draft or similar instrument without delivery to the
intended payee shall not constitute payment.
6.05 Inspection Rights: At any reasonable time and from time to time,
permit the Bank or any representative thereof to examine and make copies of the
records and visit the properties of the Borrower and discuss the business and
operations of the Borrower with any employee or representative thereof. If the
Borrower shall maintain any records (including, but not limited to, computer
generated records or computer programs for the generation of such records) in
the possession of a third party, the Borrower hereby agrees to notify such third
party to permit the Bank free access to such records at all reasonable times and
to provide the Bank with copies of any records which it may request, at the
Borrower's expense, limited to $20,000 or at Bank's expense, the amount of which
shall be payable within five (5) days of written notice. In addition, the Bank
may, at any reasonable time and from time to time, conduct inspections and
audits of the Collateral and the Borrower's accounts payable, the cost and
expenses of which shall be paid by the Borrower to the Bank upon five (5) days
prior written notice.
6.06 Reporting and Certification Requirements: Deliver or cause to be
delivered to the Bank in form and detail satisfactory to the Bank:
(a) Not later than 90 days after the end of each of the
Borrower's fiscal years, a copy of (i) the annual audited financial
report of the Borrower for such year prepared by a firm of certified
public accountants reasonably acceptable to Bank, and (ii) the
Borrower's Form 10-K filed with the Securities Exchange Commission and
(iii) the Borrower's consolidating balance sheet and income statement
for such year; and, not later than 60 days after the end of each of the
Borrower's fiscal years, a copy of the Borrower's projected balance
sheet and income statement for the fiscal year then in effect.
(b) Not later than 45 days after the end of each of the
Borrower's first three fiscal quarters, a copy of the Borrower's Form
10-Q filed with the Securities Exchange Commission and the Borrower's
consolidating balance sheet and income statement
(c) Concurrently with the delivery of the financial reports
required hereunder, a compliance certificate in substantially the form
attached hereto as Exhibit "A", showing the calculations which would
demonstrate compliance with all of the financial covenants contained
herein.
(d) Promptly upon the Bank's request, such other information
pertaining to the Borrower, the Collateral or any guarantor hereunder
as the Bank may reasonably request.
6.07 Payment of Dividends: Not declare or pay any dividends on any
class of stock now or hereafter outstanding except (i) dividends payable solely
in the Borrower's capital stock, or (ii) dividends approved by Bank.
6.08 Redemption or Repurchase of Stock: Not redeem or repurchase in
excess of 5% per year any class of the Borrower's stock now or hereafter
outstanding without prior written Bank approval.
6.09 Additional Indebtedness: Not, after the date hereof, create, incur
or assume, directly or indirectly, any additional Indebtedness other than (i)
indebtedness owed or to be owed to the Bank or (ii) indebtedness to trade
creditors incurred in the ordinary course of the Borrower's business or (iii)
Permitted Indebtedness.
6.10 Loans: Not make any loans or advances or extend credit to any
third person, including, but not limited to, directors, officers, shareholders,
partners, employees, affiliated entities and subsidiaries of the Borrower,
except for (i) credit extended in the ordinary course of the Borrower's business
as presently conducted and (ii) Permitted Investments.
6.11 Liens and Encumbrances: Not create, assume or permit to exist any
security interest, encumbrance, mortgage, deed of trust, or other lien
(including, but not limited to, a lien of attachment, judgment or execution)
affecting any of the Borrower's properties, or execute or allow to be filed any
financing statement or continuation thereof affecting any of such properties,
except for Permitted Liens or as otherwise provided in this Agreement.
6.12 Transfer Assets: Except for an amount not exceeding in the
aggregate $100,000 in any fiscal year, not, after the date hereof, sell,
contract for sale, convey, transfer, assign, lease or sublet, any of its assets
(including, but not limited to, the Collateral) except in the ordinary course of
business as presently conducted by the Borrower and, then, only for fair and
reasonable consideration and (i) sales of inventory in the ordinary course of
business, (ii) transfer of assets in the ordinary course of business that have
become worn out or obsolete or that are promptly being replaced, (iii) transfers
of non-exclusive licenses and similar arrangements for the use of property of
Borrower made in the ordinary course of business, and (iv) transfers which
constitute liquidation of permitted investments.
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6.13 Change in Nature of Business: Not make any material change in its
financial structure or the nature of its business as existing or conducted as of
the date hereof.
6.14 Financial Condition: Maintain at all times:
(a) A minimum Effective Tangible Net Worth of at least
$31,000,000 plus 50% of net profit after taxes at the end of each
fiscal quarter.
(b) A ratio of Debt to Effective Tangible Net Worth of not
more than 1.5 to 1.
(c) A minimum working capital (defined as current assets minus
current liabilities) of not less than $5,000,000.
(d) A ratio of the sum of cash, cash equivalents and accounts
receivable to current liabilities of not less than .65 to 1.0
(e) A minimum net profit after tax of at least $1.00 at the
end of each fiscal quarter for the immediately preceding two (2) fiscal
quarters.
(f): Maintain a ratio of consolidated earnings before
interest, taxes, depreciation and amortization expense to the sum of
(i) interest expense and (ii) the current portion of long term Debt of
not less than 2.00:1.00 at the end of each fiscal quarter for the
immediately preceding 4 fiscal quarters..
6.15 Compensation of Employees: Compensate its employees for services
rendered at an hourly rate at least equal to the minimum hourly rate prescribed
by any applicable federal or state law or regulation.
6.16 Capital Expense: Not make any fixed capital expenditure,
including, but not limited to, incurring liability for leases which would be, in
accordance with generally accepted accounting principles, reported as capital
leases, or purchase any real or personal property in an aggregate amount
exceeding $15,000,000 in any one fiscal year, exclusive of acquisition
financing, provided, however, that Borrower may make capital expenditures in
connection with acquisitions in an amount up to $3,000,000 in any one fiscal
year without the Bank's approval.
6.17 Notice: Give the Bank prompt written notice of any and all (i)
Events of Default; (ii) litigation, arbitration or administrative proceedings to
which the Borrower is a party and in which the claim or liability exceeds
$500,000 or which affects the Collateral; and (iii) other matters which have
resulted in, or might result in a material adverse change in the Collateral or
the financial condition or business operations of the Borrower.
6.18 Environmental Compliance. The Borrower shall:
(a) Implement and comply in all material respects with all
applicable federal, state and local laws, ordinances, statutes and
regulations with respect to hazardous or toxic wastes, substances or
related materials, industrial hygiene or to environmental conditions.
(b) Not own, use, generate, manufacture, store, handle, treat,
release or dispose of any hazardous or toxic wastes, substances or
materials, except in material compliance with all applicable federal,
state and local laws, ordinances, statutes and regulations.
(c) Give prompt written notice of any discovery of or suit,
proceeding, claim, dispute, or filing respecting hazardous or toxic
wastes, substances or related materials.
(d) At all times indemnify and hold harmless Bank from and
against any and all liability arising out of Borrower's use,
generation, manufacture, storage, handling, treatment, or disposal by
Borrower of hazardous or toxic wastes, substances or materials at the
site.
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SECTION 7
EVENTS OF DEFAULT
Any one or more of the following described events shall constitute an event of
default (an "Event of Default") under this Agreement:
7.01 Non-Payment: The Borrower shall fail to pay any Obligations within
10 days of when due.
7.02 Performance Under This and Other Agreements: The Borrower shall
fail in any material respect to perform or observe any term, covenant or
agreement contained in this Agreement or in any document, instrument or
agreement evidencing or relating to any indebtedness of the Borrower (whether
such indebtedness is owed to the Bank or third persons), and any such failure
(exclusive of the payment of money to the Bank under this Agreement or under any
other instrument, document or agreement, which failure shall constitute and be
an Event of Default if not paid within 10 days of when due or when demanded to
be due) shall continue for more than 30 days after written notice from the Bank
to the Borrower of the existence and character of such Event of Default.
7.03 Representations and Warranties; Financial Statements: Any
representation or warranty made by the Borrower under or in connection with this
Agreement or any financial statement given by the Borrower or any guarantor
shall prove to have been incorrect in any material respect when made or given or
when deemed to have been made or given.
7.04 Insolvency: The Borrower or any guarantor shall: (i) become
insolvent or be unable to pay its debts as they mature; (ii) make an assignment
for the benefit of creditors or to an agent authorized to liquidate any
substantial amount of its properties and assets; (iii) file a voluntary petition
in bankruptcy or seeking reorganization or to effect a plan or other arrangement
with creditors; (iv) file an answer admitting the material allegations of an
involuntary petition relating to bankruptcy or reorganization or join in any
such petition; (v) become or be adjudicated a bankrupt; (vi) apply for or
consent to the appointment of, or consent that an order be made, appointing any
receiver, custodian or trustee, for itself or any of its properties, assets or
businesses; or (vii) any receiver, custodian or trustee shall have been
appointed for all or substantial part of its properties, assets or businesses
and shall not be discharged within 60 days after the date of such appointment.
7.05 Execution: Any writ of execution or attachment or any judgment
lien shall be issued against any property of the Borrower and shall not be
discharged or bonded against or released within 60 days after the issuance or
attachment of such writ or lien.
7.06 Suspension: The Borrower shall voluntarily suspend the transaction
of business or allow to be suspended, terminated, revoked or expired any permit,
license or approval of any governmental body necessary to conduct the Borrower's
business as now conducted.
7.07 Change in Ownership: There shall occur a sale, transfer,
disposition or encumbrance (whether voluntary or involuntary), or an agreement
shall be entered into to do so, with respect to more than 25% of the issued and
outstanding capital stock of the Borrower, if a corporation, or there shall
occur a change in any general partner or a change affecting the control of the
Borrower, if a partnership.
SECTION 8
REMEDIES ON DEFAULT
Upon the occurrence of any Event of Default, the Bank may, at its sole and
absolute election, without demand and only upon such notice as may be required
by law:
8.1 Acceleration: Declare any or all of the Borrower's indebtedness
owing to the Bank, whether under this Agreement or any other document,
instrument or agreement, immediately due and payable, whether or not otherwise
due and payable.
8.2 Cease Extending Credit: Cease making Advances or otherwise
extending credit to or for the account of the Borrower under this Agreement or
under any other agreement now existing or hereafter entered into between the
Borrower and the Bank.
8.3 Termination: Terminate this Agreement as to any future obligation
of the Bank without affecting the Borrower's obligations to the Bank or the
Bank's rights and remedies under this Agreement or under any other document,
instrument or agreement.
8.04 Protection of Security Interest: Make such payments and do such
acts as the Bank, in its sole judgment, considers necessary and reasonable to
protect its security interest or lien in the Collateral. The Borrower hereby
irrevocably authorizes the Bank to pay, purchase, contest or compromise any
encumbrance, lien or claim which the Bank, in its sole judgment, deems to be
prior or superior
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to its security interest. Further, the Borrower hereby agrees to pay to the
Bank, upon demand therefor, all reasonable expenses and expenditures (including
reasonable attorneys' fees) incurred in connection with the foregoing.
Notwithstanding the foregoing, Bank shall be responsible for its own gross
negligence or willful misconduct.
8.05 Foreclosure: Enforce any security interest or lien given or
provided for under this Agreement or under any security agreement, mortgage,
deed of trust or other document, in such manner and such order, as to all or any
part of the properties subject to such security interest or lien, as the Bank,
in its sole judgment, deems to be necessary or appropriate and the Borrower
hereby waives any and all rights, obligations or defenses now or hereafter
established by law relating to the foregoing. In the enforcement of its security
interest or lien, the Bank is authorized to enter upon the premises where any
Collateral is located and take possession of the Collateral or any part thereof,
together with the Borrower's records pertaining thereto, or the Bank may require
the Borrower to assemble the Collateral and records pertaining thereto and make
such Collateral and records available to the Bank at a place designated by the
Bank. The Bank may sell the Collateral or any portions thereof, together with
all additions, accessions and accessories thereto, giving only such notices and
following only such procedures as are required by law, at either a public or
private sale, or both, with or without having the Collateral present at the time
of the sale, which sale shall be on such terms and conditions and conducted in
such manner as the Bank determines in its sole judgment to be commercially
reasonable. Any deficiency which exists after the disposition or liquidation of
the Collateral shall be a continuing liability of the Borrower to the Bank and
shall be paid by the Borrower to the Bank within five (5) business days of
written notice.
8.6 Non-Exclusivity of Remedies: Exercise one or more of the Bank's
rights set forth herein or seek such other rights or pursue such other remedies
as may be provided by law, in equity or in any other agreement now existing or
hereafter entered into between the Borrower and the Bank, or otherwise.
8.07 Application of Proceeds: All amounts received by the Bank as
proceeds from the disposition or liquidation of the Collateral shall be applied
to the Borrower's indebtedness to the Bank as follows: first, to the costs and
expenses of collection, enforcement, protection and preservation of the Bank's
lien in the Collateral, including court costs and reasonable attorneys' fees,
whether or not suit is commenced by the Bank; next, to those costs and expenses
incurred by the Bank in protecting, preserving, enforcing, collecting,
liquidating, selling or disposing of the Collateral; next, to the payment of
accrued and unpaid interest on all of the Obligations; next, to the payment of
the outstanding principal balance of the Obligations; and last, to the payment
of any other indebtedness owed by the Borrower to the Bank. Any excess
Collateral or excess proceeds existing after the disposition or liquidation of
the Collateral will be returned or paid by the Bank to the Borrower.
SECTION 9
MISCELLANEOUS
9.01 Amounts Payable on Demand: If the Borrower shall fail to pay on
demand any amount so payable under this Agreement, the Bank may, at its option
and without any obligation to do so and without waiving any default occasioned
by the Borrower having so failed to pay such amount, create an Advance under the
Line of Credit in an amount equal to the amount so payable, which Advance shall
thereafter bear interest as provided under the Line of Credit.
9.02 Default Interest Rate: The Borrower shall pay the Bank interest on
any indebtedness or amount payable under this Agreement, from the date that such
indebtedness or amount became due or was demanded to be due until paid in full,
at a rate which is 3% in excess of the rate otherwise provided under this
Agreement.
9.03 Disposal of Invoices: All documents, schedules, invoices or other
papers received by the Bank from the Borrower may be destroyed or disposed of 6
months after receipt by the Bank, unless the Borrower requests in writing the
return thereof, which shall be done at the Borrower's expense.
9.04 Dispute Resolution. It is understood and agreed that upon the
request of any party to this agreement any dispute, claim, or controversy of any
kind, whether in contract or in tort, statutory or common law, legal or
equitable now existing or hereinafter arising between the parties in any way
arising out of, pertaining to or in connection with: (1) this Agreement, or any
related agreements, documents, or instruments, (2) all past and present loans,
credits, accounts, deposit accounts (whether demand deposits or time deposits),
safe deposit boxes, safekeeping agreements, guarantees, letters of credit, goods
or services, or other transactions, contracts or agreements of any kind, (3) any
incidents, omissions, acts, practices, or occurrences causing injury to either
party whereby the other party or its agents, employees or representatives may be
liable, in whole or in part, or (4) any aspect of the past or present
relationships of the parties, shall be resolved through a two-step dispute
resolution process administered by Judicial Arbitration & Mediation Services,
Inc. ("J-A-M-S") as follows:
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(a) Step I - Mediation: At the request of any party to the
dispute, claim or controversy of the matter shall be referred to the
nearest office of J-A-M-S for mediation, that is, an informal,
non-binding conference or conferences between the parties in which a
retired judge or justice for the J-A-M-S panel will seek to guide the
parties to a resolution of the case.
(b) Step II - Unsecured Contracts - Arbitration: Should any
dispute, claim or controversy remain unresolved at the conclusion of
the Step I Mediation Phase then all such remaining matters shall be
resolved by final and binding arbitration before a different judicial
panelist, unless the parties shall agree to have the mediator panelist
act as arbitrator. The hearing shall be conducted at a location
determined by the arbitrator in San Jose County and shall be
administered by and in accordance with the then existing Rules of
Practice and Procedure of Judicial Arbitration & Mediation Services,
Inc., and judgement upon any award rendered by the arbitrator may be
entered by any State or Federal Court having jurisdiction thereof. The
arbitrator shall determine which is the prevailing party and shall
include in the award that party's reasonable attorneys fees and costs.
This subparagraph (b) shall apply only if, at the time of the
submission of the matter to J-A-M-S, the dispute(s) or issue(s) do(es)
not arise out of a transaction(s) which is/are secured by real property
collateral or, if so secured, all parties consent to such submission.
As soon as practicable after selection of the arbitrator, the
arbitrator or his/her designated representative shall determine a
reasonable estimate of anticipated fees and costs of the Arbitrator,
and render a statement to each party setting forth that party's
pro-rata share of said fees and costs. Thereafter each party shall,
within 10 days of receipt of said statement, deposit said sum with the
Arbitrator. Failure of any party to make such a deposit shall result in
a forfeiture by the non-depositing party of the right to prosecute or
defend the claim which is the subject of the arbitration, but shall not
otherwise serve to abate, stay or suspend the arbitration proceedings.
(c) Step II - Contracts Secured By Real Estate - Trial by
Court Reference [ss.638 (1)] Code of Civil Procedure): If the dispute,
claim or controversy is not one required or agreed to be submitted to
arbitration as provided by subparagraph (b) and has not been resolved
by Step I mediation, them any remaining dispute, claim or controversy
shall be submitted for determination by a trial on Order of Reference
conducted by a retired judge or justice from the panel of J-A-M-S
appointed pursuant to the provisions of California Code of Civil
Procedure ss.638(1) or any amendment, addition or successor section
thereto to hear the case and report a statement of decision thereon.
The parties intend this general reference agreement to be specifically
enforceable in accordance with said section. If this parties are unable
to agree upon a member of the J-A-M-S panel to act as referee then one
shall be appointed by the Presiding Judge of the county wherein the
hearing is to be held. The parties shall pay in advance, to the
referee, the estimated reasonable fees and costs of the reference, as
may be specified in advance by the referee. The parties shall initially
share equally, by paying their proportionate amount of the estimated
fees and costs of the reference. Failure of any party to make such a
fee deposit shall result in a forfeiture by the non-depositing party of
the right to prosecute or defend the cause(s) of action which is(are)
the subject of the reference, but shall not otherwise serve to abate,
stay or suspend the reference proceeding.
(d) Provisional Remedies, Self Help and Foreclosure: No
provision of, or the exercise of any right(s) under subparagraph (b),
nor any other provision of this Dispute Resolution Provision, shall
limit the right of any party to exercise self help remedies such as set
off, to foreclose against any real or personal property collateral, or
obtain provisional or ancillary remedies such as injunctive relief or
the appointment of a receiver from any court having jurisdiction
before, during or after the pendency of any arbitration. At Bank's
option, foreclosure under a deed of trust or mortgage may be
accomplished either by exercise of power of sale under the deed of
trust or mortgage, or by judicial foreclosure. The institution and
maintenance of an action for provisional remedies pursuit of
provisional or ancillary remedies or exercise of self help remedies
shall not constitute a waiver of the right of any party, including the
plaintiff, to submit the controversy or claim to arbitration.
9.05 Waiver of Jury Trial. THE BORROWER AND THE BANK EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE
BORROWER AND THE BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
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<PAGE>
9.06 Reliance: Each warranty, representation, covenant, obligation and
agreement contained in this Agreement shall be conclusively presumed to have
been relied upon by the Bank regardless of any investigation made or information
possessed by the Bank and shall be cumulative and in addition to any other
warranties, representations, covenants and agreements which the Borrower now or
hereafter shall give, or cause to be given, to the Bank.
9.07 Attorneys' Fees: Borrower shall pay to the Bank all costs and
expenses, including but not limited to reasonable attorneys fees, incurred by
Bank in connection with the administration, enforcement, or any refinancing or
restructuring in the nature of a "work-out", of this Agreement or any document,
instrument or agreement executed with respect to, evidencing or securing the
indebtedness hereunder.
9.08 Notices: All notices, payments, requests, information and demands
which either party hereto may desire, or may be required to give or make to the
other party hereto, shall be given or made to such party by hand delivery or
through deposit in the United States mail, postage prepaid, or by Western Union
telegram, addressed as set forth below or to such other address as may be
specified from time to time in writing by either party to the other.
To the Borrower To the Bank:
ELEXSYS INTERNATIONAL, INC. SANWA BANK CALIFORNIA
4405 Fortran Court San Jose CBC
San Jose, CA 95134 220 Almaden Blvd.
San Jose, CA 95113
Attn: Robert DeLaurentis Attn: Jillian E. Mathur
Title: C.F.O. Vice President
with a copy to: With a copy to:
COOLEY GODWARD LLP SANWA BANK CALIFORNIA
Five Palo Alto Square Asset Based Financing Department
3000 El Camino Real
Palo Alto, CA 94306-2155 444 Market Street, 22nd Floor
San Francisco, CA 94111
Attn: Bill Veatch
9.09 Waiver: Neither the failure nor delay by the Bank in exercising
any right hereunder or under any document, instrument or agreement mentioned
herein shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder or under any other document, instrument or
agreement mentioned herein preclude other or further exercise thereof or the
exercise of any other right; nor shall any waiver of any right or default
hereunder, or under any other document, instrument or agreement mentioned
herein, constitute a waiver of any other right or default or constitute a waiver
of any other default of the same or any other term or provision.
9.10 Conflicting Provisions: To the extent the provisions contained in
this Agreement are inconsistent with those contained in any other document,
instrument or agreement executed pursuant hereto, the terms and provisions
contained herein shall control. Otherwise, such provisions shall be considered
cumulative.
9.11 Binding Effect; Assignment: This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Bank. The Bank may sell, assign or grant participation in all or
any portion of its rights and benefits hereunder. The Borrower agrees that, in
connection with any such sale, grant or assignment, the Bank may deliver to the
prospective buyer, participant or assignee financial statements and other
relevant information relating to the Borrower and any guarantor.
9.12 Jurisdiction: This Agreement, any notes issued hereunder, the
rights of the parties hereunder to and concerning the Collateral, and any
documents, instruments or agreements mentioned or referred to herein shall be
governed by and construed according to the laws of the State of California, to
the jurisdiction of whose courts the parties hereby submit.
9.13 Headings: The headings herein set forth are solely for the purpose
of identification and have no legal significance.
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9.14 Entire Agreement: This Agreement and all documents, instruments
and agreements mentioned herein constitute the entire and complete understanding
of the parties with respect to the transactions contemplated hereunder. All
previous conversations, memoranda and writings between the parties pertaining to
the transactions contemplated hereunder not incorporated or referenced in this
Agreement or in such documents, instruments and agreements are superseded
hereby.
9.1 Confidentiality Agreement. In handling any confidential information
Bank, and all employees and agents of Bank, including but not limited to
accountants, shall exercise the same degree of care that Bank exercises with
respect to its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Bank in connection with their
present or prospective business relations with Borrower; (ii) to prospective
transferees or purchasers of any interest in the loans, provided that they have
entered into a comparable confidentiality agreement in favor of Borrower and
have delivered a copy to Borrower; (iii) as required by law, regulations, rule
or order, subpoena, judicial order or similar order; (iv) as may be required in
connection with the examination, audit or similar investigation of Bank and (v)
as Bank may determine in connection with the enforcement of any remedies
hereunder. Confidential information hereunder shall not include information that
either: (a) is in the public domain or in the knowledge or possession of Bank
when disclosed to Bank, or becomes part of the public domain after disclosure to
Bank through no fault of Bank; or (b) is disclosed to Bank by a third party,
provided Bank does not have actual knowledge that such third party is prohibited
from disclosing such information.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first hereinabove written.
Borrower Bank:
SANWA BANK CALIFORNIA
ELEXSYS INTERNATIONAL, INC.
BY:________________________________ BY:________________________________
Name: Robert DeLaurentis Name: Jillian E. Mathur
Title: C.F.O. Title: Vice President
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EXHIBIT 10.53
AMENDED AND RESTATED
TERM LOAN CREDIT AGREEMENT
This Term Loan Credit Agreement (the "Agreement") is made and entered into
this ___________________ day of May, 1997, by and between SANWA BANK CALIFORNIA
(the "Bank") and ELEXSYS INTERNATIONAL, INC. (the "Borrower") , on the terms and
conditions that follow:
Whereas Bank and Borrower entered into a Term Loan Credit Agreement dated
as of January 27, 1997, (the "Prior Agreement"); and
Whereas, Bank and Borrower wish to amend and restate the Prior Agreement.
Now, therefore, the parties hereto agree as follows:
SECTION I
DEFINITIONS
1.01 Certain Defined Terms: Unless elsewhere defined in this Agreement, the
following terms shall have the following meanings (such meanings to be generally
applicable to the singular and plural forms of the terms defined):
(a) "Business Day": shall mean a day, other than a Saturday or Sunday,
on which commercial banks are open for business in California.
(b) "Collateral": shall mean the property described in Section 3.01.
(c) "Debt": shall mean all liabilities of the Borrower less
Subordinated Debt.
(d) "Effective Tangible Net Worth": shall mean the Borrower's stated
net worth plus Subordinated Debt less all intangible assets of the Borrower
(i.e., goodwill, trademarks, patents, copyrights, organization expense and
similar intangible items).
(e) "ERISA": shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, including (unless the context otherwise
requires) any rules or regulations promulgated thereunder.
(f) "Event of Default": shall have the meaning set forth in Section 7.
(g) "Indebtedness": shall mean, with respect to the Borrower, (i) all
indebtedness for borrowed money or for the deferred purchase price of
property or services in respect of which the Borrower is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or in
respect of which the Borrower otherwise assures a creditor against loss and
(ii) obligations under leases which shall have been or should be, in
accordance with generally accepted accounting principles, reported as
capital leases in respect of which the Borrower is liable, contingently or
otherwise, or in respect of which the Borrower otherwise assures a creditor
against loss.
(h) "Obligations": shall mean all amounts owing by the Borrower to the
Bank pursuant to this Agreement including, but not limited to, the unpaid
principal amount of the Term Loan, as hereinafter defined.
(i) "Permitted Indebtedness": shall mean (i) Indebtedness of Borrower
in favor of Bank arising under this Agreement or any other Loan Document;
(ii) Indebtedness existing on the date hereof and disclosed in writing to
the Bank; (iii) Subordinated Debt; (iv) Indebtedness to trade creditors,
including, without limitation, affiliates of Borrower, incurred in the
ordinary course of business; (v) Other Indebtedness of Borrower not
exceeding $1,000,000.00 in the aggregate outstanding at any time; (vi)
Contingent obligations of Borrowing consisting of guarantees (and other
credit support) of the obligations of
Accounts Receivable Credit Agreement - Page 1
<PAGE>
vendors and suppliers of Borrower in respect of transactions entered into
in the ordinary course of business; (vii) Indebtedness with respect to
capital lease obligations and purchase money indebtedness incurred in
connection with the acquisition of assets secured by Permitted Liens;
(viii) Extensions, renewals, refundings, refinancings, modifications,
amendments and restatements of any of the items of Permitted Indebtedness.
(j) "Permitted Investment": shall mean (i) investments existing on the
date hereof and disclosed in writing to the Bank; (ii) marketable direct
obligations issued or unconditionally guaranteed by the United States of
America or any agency or any State thereof maturing within one (1) year
from the date of acquisition thereof; (iii)commercial paper maturing no
more than one (1) year from the date of creation thereof and currently
having the highest rating obtainable from either Standard & Poor's
Corporation or Moody's Investors Service, Inc.; (iv) investments consisting
of deposits maturing no more than one (1) year from the date of investment
therein issued by Bank; (v) extensions of credit in the nature of accounts
receivable or notes receivable arising from the sale or lease of goods or
services in the ordinary course of business; (vi) investments consisting of
the endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; (vii) investments,
including debt obligations, received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent
obligations of, and other disputes with, customers or suppliers arising in
the ordinary course of business; (viii) investments consisting of
compensation of employees, officers and directors of Borrower so long as
the Board of Directors of Borrower determines that such compensation is in
the best interest of Borrower, and travel advances, employee relocation
loans and other employee loans and advances in the ordinary course of
business; (ix) other investments aggregating not in excess of $250,000.00
at any time.
(k) "Permitted Liens": shall mean: (i) liens and security interests
securing indebtedness owed by the Borrower to the Bank; (ii) liens for
taxes, assessments or similar charges either not yet due or being contested
in good faith; (iii) liens of materialmen, mechanics, warehousemen, or
carriers or other like liens arising in the ordinary course of business and
securing obligations which are not yet delinquent; (iv) purchase money
liens or purchase money security interests upon or in any property acquired
or held by the Borrower in the ordinary course of business to secure
Indebtedness outstanding on the date hereof or permitted to be incurred
under Section 6.09 hereof; (v) liens and security interests which, as of
the date hereof, have been disclosed to and approved by the Bank in
writing; (vi) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to
the net value of the Borrower's assets; liens securing capital lease
obligations on assets subject to such capital leases; (vii) liens arising
from judgments, decrees or attachments to the extent and only so long as
such judgment, decree or attachment has not caused or resulted in an Event
of Default, (viii) easements, reservations, rights-of-way, restrictions,
minor defects or irregularities in title and other similar liens affecting
real property not interfering in any material respect with the ordinary
conduct of the business of Borrower, (ix) liens in favor of customs and
revenue authorities arising as a mater of law to secure payment of customs
duties in connection with the importation of goods, (x) liens arising
solely by virtue of any statutory or common law provision relating to
banker's liens, rights of setoff or similar rights and remedies as to
deposit accounts or other funds maintained with a creditor depository
institutions; (xi) liens not otherwise permitted which liens do not in the
aggregate exceed $250,000.00 at any time.
(l) "Reference Rate": shall mean an index for a variable interest rate
which is quoted, published or announced from time to time by the Bank as
its reference rate and as to which loans may be made by the Bank at, below
or above such reference rate.
(m) "Subordinated Debt": shall mean such liabilities of the Borrower
which have been subordinated to those owed to the Bank in a manner
acceptable to the Bank including, but not limited to, that certain
Indenture dated as of February 15, 1987 between Borrower and Manufacturers
Hanover Trust Company, as trustee, with respect to the 5 1/2% Convertible
Subordinated Debentures due March 1, 2012.
(n) "Term Loan": shall mean the credit facility described in Section
2.
1.02 Accounting Terms: All references to financial statements, assets,
liabilities, and similar accounting items not specifically defined herein shall
mean such financial statements or such items prepared or determined in
accordance with generally accepted accounting principles consistently applied
and, except where otherwise specified, all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles.
1.03 Other Terms: Other terms not otherwise defined shall have the meanings
attributed to such terms in the California Uniform Commercial Code.
Accounts Receivable Credit Agreement - Page 2
<PAGE>
SECTION 2
THE TERM LOAN
2.01 Term Loan. The Bank agrees to lend to the Borrower, upon the
Borrower's request therefor made prior to December 31, 1998, the lesser of 80%
of the appraised liquidation value of the Borrower's fixed assets or
7,000,000.00 (the "Term Loan").
A. Purpose. Proceeds under the Term Loan shall be used for business
acquisitions.
B. Interest. Interest shall accrue on the outstanding principal
balance of the Term Loan (the "Term Balance") at one of the following
rates, as quoted by the Bank and as elected by the Borrower:
1. Variable Rate Balance: A variable rate per annum equivalent to
an index for a variable interest rate which is quoted, published or
announced from time to time by the Bank as its reference rate and as
to which loans may be made by Bank at, below or above such reference
rate ("Reference Rate") plus 1.00% per annum. (the "Variable Rate").
Interest shall be adjusted concurrently with any change in the
Reference Rate. A Term Balance based upon the Variable Rate is
hereinafter referred to as a "Variable Rate Balance".
2. Cost of Funds Balance: At the Borrower's election, at a fixed
rate for such period of time that the Bank may quote and offer,
provided that any such period of time shall be for at least 30 days
and shall not extend beyond the maturity date (the "Cost of Funds
Interest Period") for the Term Balance. Such interest rate shall be a
percentage approximately equivalent to three percent (3.00 %) per
annum in excess of the rate which the Bank determines in its sole and
absolute discretion to be equal to the Bank's cost of acquiring funds
(adjusted for any and all assessments, surcharges and reserve
requirements pertaining to the borrowing or purchase by the Bank of
such funds) in an amount equal to the amount of the Term Balance and
for a period of time approximately equal to the relevant Interest
Period (the "Cost of Funds Rate" or the "Fixed Rate"). Term Balances
based upon the Cost of Funds or Fixed Rate are hereinafter referred to
as "Cost of Funds Balances" or "Fixed Rate Balances".
Interest shall be computed on the basis of 360 days per year, but
charged on the actual number of days elapsed. The Borrower hereby promises and
agrees to pay the Bank interest monthly, commencing on May 31, 1997 and
continuing on the last day of each month thereafter to and including January 31,
2001. If interest is not paid as and when it is due it shall be added to and
become and be treated as part of principal, and the amount of such unpaid
interest shall bear interest, until paid in full, at the then applicable
interest rate.
(a) Notice of Election to Adjust Interest Rate. Upon telephonic notice
which shall be received by the Bank at or before 11:00 a.m. (California
time) on a business day, the Borrower may elect:
(1) That interest on a Variable Rate Balance shall be adjusted to
accrue at the Fixed Rate; provided, however, that such notice shall be
received by the Bank no later than two business days prior to the day
(which shall be a business day) on which the Borrower requests that
interest be adjusted to accrue at the Fixed Rate.
(2) That interest on a Fixed Rate Balance shall continue to
accrue at a newly quoted Fixed Rate or shall be adjusted to commence
to accrue at the Variable Rate; provided, however that such notice
shall be received by the Bank no later than two business days prior to
the last day of the Interest Period pertaining to such Fixed Rate
Balance. If the Bank shall not have received notice as prescribed
herein of the Borrower's election that interest on any Fixed Rate
Balance shall continue to accrue at the Fixed Rate, the Borrower shall
be deemed to have elected that interest thereon shall be adjusted to
accrue at the Variable Rate upon the expiration of the Interest Period
pertaining to such Term Balance.
(b) Prohibition Against Prepayment of Fixed Rate Balances.
Notwithstanding anything to the contrary in the Agreement, no prepayment
shall be made on any Fixed Rate Balance except on a day which is the last
day of the Interest Period pertaining thereto. If the whole or any part of
any Fixed Rate Balance is prepaid by reason of acceleration or otherwise,
the Borrower shall, upon the Bank's request, promptly pay to and indemnify
the Bank for all costs and any loss (including interest) actually incurred
by the Bank and any loss (including loss of profit resulting from the
re-employment of funds) sustained by the Bank as a consequence of such
prepayment. Borrower shall not be obligated to pay to or reimburse Bank for
any reimbursable
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amounts which arose or were incurred during or are otherwise attributable
to any period of time more than 180 days prior to the date on which Bank
delivered its written statement for indemnification or reimbursement of
such reimbursable amounts.
(c) Conversion from Fixed Rate to Variable Rate. In the event that the
Bank shall at any time determine that the accrual of interest on the basis
of the Fixed Rate (i) is infeasible because the Bank is unable to determine
the Fixed Rate due to the unavailability of U.S. dollar deposits, contracts
or certificates of deposit in an amount approximately equal to the amount
of the relevant Term Balance and for a period of time approximately equal
to the relevant Interest Period; or (ii) is or has become unlawful or
infeasible by reason of the Bank's compliance with any new law, rule,
regulation, guideline or order, or any new interpretation of any present
law, rule, regulation, guideline or order, then the Bank shall give
telephonic notice thereof (confirmed in writing) to the Borrower, in which
event any Fixed Rate Term Balance shall be deemed to be a Variable Rate
Term Balance and interest shall thereupon immediately accrue at the
Variable Rate. Interest on any Term Balance shall be computed on the basis
of 360 days per year, but charged on the actual number of days elapsed.
C. Principal. The Borrower hereby promises and agrees to pay principal
in 36 equal installments commencing on January 31, 1998, and continuing on
the last day of each month thereafter up to and including December 31,
2000. On January 31, 2001, the Borrower hereby promises and agrees to pay
to the Bank the entire unpaid principal balance, together with accrued and
unpaid interest.
Each payment received by the Bank shall, at the Bank's option, be applied
to pay interest then due and unpaid and the remainder thereof (if any) shall be
applied to pay principal.
D. Term Loan Account.
(a) The Bank shall maintain on its books a record of account in which
the Bank shall make entries for each drawing under the Term Loan and such
other debits and credits as shall be appropriate in connection with the
Term Loan (the "Line Account"). The Bank shall provide the Borrower with a
monthly statement of the Borrower's Line Account, which statement shall be
considered to be correct and conclusively binding on the Borrower unless
the Borrower notifies the Bank to the contrary within 60 days after the
Borrower's receipt of any such statement which it deems to be incorrect, or
unless there is a manifest error.
(b) The Borrower hereby authorizes the Bank, if and to the extent
payment owed to the Bank under the Term Loan is not made when due, to
charge, from time to time, against any or all of the Borrower's deposit
accounts with the Bank any amount so due.
E. Late Payment: If any payment of principal (other than a principal
payment due on January 31, 2001) or interest, or any portion thereof, under
this Agreement is not paid within ten (10) calendar days after it is due, a
late payment charge equal to five percent (5%) of such past due payment may
be assessed and shall be immediately payable.
1.03 Disbursement of Proceeds from Loan. Any loan made hereunder shall be
conclusively presumed to have been made to and for the Borrower's benefit when
the proceeds of such loan are disbursed in accordance with the Borrower's
instructions or deposited into a checking account of the Borrower maintained at
the Bank.
SECTION 3
COLLATERAL
3.01 The Collateral: To secure payment and performance of all the
Borrower's Obligations under this Agreement and all other liabilities, loans,
guarantees, covenants and duties owed by the Borrower to the Bank, whether or
not evidenced by this or by any other agreement, absolute or contingent, due or
to become due, now existing or hereafter and howsoever created, the Borrower
hereby grants the Bank a security interest in and to all of the following
property:
(a) All goods now owned or hereafter acquired by the Borrower or in
which the Borrower now has or may hereafter acquire any interest,
including, but not limited to, all machinery, equipment, furniture,
furnishings, fixtures, tools, supplies and motor vehicles of every kind and
description, and all additions, accessions, improvements, replacements and
substitutions thereto and thereof.
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(b) Bank agrees to release its security interest in any equipment,
fixtures, leasehold improvements, or other property if within ninety (90)
days after Borrower acquires title to such property, Borrower finances such
property pursuant to either (i) a sale and leaseback transaction or (ii) a
debt financing transaction in an amount not to exceed the purchase price
of, and secured by a security interest in such property.
(c) All inventory now owned or hereafter acquired by the Borrower,
including, but not limited to, all raw materials, work in process, finished
goods, merchandise, parts and supplies of every kind and description,
including inventory temporarily out of the Borrower's custody or
possession, together with all returns on accounts.
(d) All accounts, contract rights and general intangibles now owned or
hereafter created or acquired by the Borrower, including, but not limited
to, all receivables, goodwill, trademarks, trade styles, trade names,
patents, patent applications, software, customer lists and business
records.
(e) All documents, instruments and chattel paper now owned or
hereafter acquired by the Borrower.
(f) All monies, deposit accounts, certificates of deposit and
securities of the Borrower now or hereafter in the Bank's or its agents'
possession.
The Bank's security interest in the Collateral shall be a continuing lien
and shall include the proceeds and products of the Collateral including, but not
limited to, the proceeds of any insurance thereon.
SECTION 4
CONDITIONS OF LENDING
4.01 Conditions Precedent : The obligation of the Bank to make the first
extension of credit to or on account of the Borrower hereunder is subject to the
conditions precedent that the Bank shall have received before the date of such
initial extension of credit all of the following, in form and substance
satisfactory to the Bank:
(a) Evidence that the execution, delivery and performance by the
Borrower of this Agreement and any document, instrument or agreement
required hereunder have been duly authorized.
(b) Except as disclosed in writing to Bank, the representations
contained herein and in any other document, instrument or certificate
delivered to the Bank hereunder are correct.
(c) No event has occurred and is continuing which constitutes, or,
with the lapse of time or giving of notice or both, would constitute an
Event of Default.
(d) Such other evidence as the Bank may request to establish the
consummation of the transaction contemplated hereunder and compliance with
the conditions of this Agreement.
SECTION 5
REPRESENTATIONS AND WARRANTIES
The Borrower hereby makes the following representations and warranties to the
Bank as of the date of this Agreement.
5.01 Status: The Borrower is a corporation duly organized and validly
existing under the laws of the State of Delaware and is properly licensed and is
qualified to do business and in good standing in, and, where necessary to
maintain the Borrower's rights and privileges, has complied with the fictitious
name statute of every jurisdiction in which the Borrower is doing business and
where failure to so qualify would have a material adverse effect.
5.02 Authority: The execution, delivery and performance by the Borrower of
this Agreement and any instrument, document or agreement required hereunder have
been duly authorized and do not and will not: (i) violate any provision of any
law, rule, regulation, order, writ, judgment, injunction, decree, determination
or award presently in effect having application to the Borrower; (ii) result in
a breach of or constitute a default under any material indenture or loan or
credit agreement or other material agreement, lease or instrument to which the
Borrower is a party or by which it or its properties may be bound or affected;
(iii) require any consent or approval of its stockholders or violate any
provision of its certificate of incorporation.
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5.03 Legal Effect: This Agreement constitutes, and any instrument, document
or agreement required hereunder when delivered hereunder will constitute, legal,
valid and binding obligations of the Borrower enforceable against the Borrower
in accordance with their respective terms.
5.04 Fictitious Trade Styles: There are no fictitious trade styles used by
the Borrower in connection with its business operations. The Borrower shall
notify the Bank within 30 days of effecting any change in the matters described
hereinor prior to using any other fictitious trade style at any future date,
indicating the trade style and state(s) of its use.
5.05 Financial Statements: All financial statements, information and other
data which may have been or which may hereafter be submitted by the Borrower to
the Bank are true, accurate and correct and have been or will be prepared in
accordance with generally accepted accounting principles consistently applied
and accurately represent the financial condition or, as applicable, the other
information disclosed therein. Since the most recent submission of such
financial information or data to the Bank, the Borrower represents and warrants
that no material adverse change in the Borrower's financial condition or
operations has occurred which has not been fully disclosed to the Bank in
writing.
5.06 Litigation: Except as have been disclosed to the Bank in writing,
there are no actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or the Borrower's
properties in excess of $500,000 before any court or administrative agency
which, if determined adversely to the Borrower, would have a material adverse
effect on the Borrower's financial condition or operations or on the Collateral.
5.07 Title to Assets: The Borrower has good and marketable title to all of
its assets (including, but not limited to, the Collateral) and the same are not
subject to any security interest, encumbrance, lien or claim of any third person
except for Permitted Liens.
5.08 ERISA: If the Borrower has a pension, profit sharing or retirement
plan subject to ERISA, such plan has been and will continue to be funded in
accordance with its terms and otherwise complies with and continues to comply
with the requirements of ERISA.
5.09 Taxes: The Borrower has filed all tax returns required to be filed and
paid all taxes shown thereon to be due, including interest and penalties, other
than such taxes which are currently payable without penalty or interest or those
which are being duly contested in good faith.
5.10 Environmental Compliance: The Borrower has implemented and complied in
all material respects with all applicable federal, state and local laws,
ordinances, statutes and regulations with respect to hazardous or toxic wastes,
substances or related materials, industrial hygiene or environmental conditions.
There are no suits, proceedings, claims or disputes pending or, to the knowledge
of the Borrower, threatened against or affecting the Borrower or its property
claiming violations of any federal, state or local law, ordinance, statute or
regulation relating to hazardous or toxic wastes, substances or related
materials.
SECTION 6
COVENANTS
The Borrower covenants and agrees that, during the term of this Agreement,
and so long thereafter as the Borrower is indebted to the Bank under this
Agreement, the Borrower will, unless the Bank shall otherwise consent in
writing:
6.01 Preservation of Existence; Compliance with Applicable Laws: Maintain
and preserve its existence and all rights and privileges now enjoyed; not
liquidate or dissolve, merge or consolidate with or into, or acquire any other
business organization; notwithstanding the foregoing Borrower may liquidate or
dissolve, or enter into any consolidation, merger, partnership, joint venture or
other combination, acquire any other business organization, or acquire all or
substantially all of the assets of any other person (collectively, an
"Acquisition"), so long as Borrower is in compliance with the covenants
contained in Section 6.14 immediately after such Acquisition; and conduct its
business and operations in accordance with all applicable laws, rules and
regulations.
6.02 Maintenance of Insurance: Maintain insurance in such amounts and
covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which the
Borrower operates and maintain such other insurance and coverages as may be
required by the Bank. All such insurance shall be in form and amount and with
companies satisfactory to the Bank. With respect to insurance covering
properties in which the Bank maintains a security interest or lien, such
insurance shall name the Bank as loss payee pursuant to a loss payable
endorsement satisfactory to the Bank and shall not be altered
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or canceled except upon 10 days' prior written notice to the Bank. Upon the
Bank's request, the Borrower shall furnish the Bank with the original policy or
binder of all such insurance.
6.03 Maintenance of Collateral and Other Properties: Except for Permitted
Liens, keep and maintain the Collateral free and clear of all levies, liens,
encumbrances and security interests (including, but not limited to, any lien of
attachment, judgment or execution) and defend the Collateral against any such
levy, lien, encumbrance or security interest; comply with all laws, statutes and
regulations pertaining to the Collateral and its use and operation; execute,
file and record such statements, notices and agreements, take such actions and
obtain such certificates and other documents as necessary to perfect, evidence
and continue the Bank's security interest in the Collateral and the priority
thereof; maintain accurate and complete records of the Collateral which show all
sales, claims and allowances; and properly care for, house, store and maintain
the Collateral in good condition, free of misuse, abuse and deterioration, other
than normal wear and tear. The Borrower shall also maintain and preserve all its
properties in good working order and condition in accordance with the general
practice of other businesses of similar character and size, ordinary wear and
tear excepted.
6.04 Payment of Obligations and Taxes: Make timely payment of all
assessments and taxes and all of its liabilities and obligations including, but
not limited to, trade payables, unless the same are being contested in good
faith by appropriate proceedings with the appropriate court or regulatory
agency. For purposes hereof, the Borrower's issuance of a check, draft or
similar instrument without delivery to the intended payee shall not constitute
payment.
6.05 Inspection Rights: At any reasonable time and from time to time,
permit the Bank or any representative thereof to examine and make copies of the
records and visit the properties of the Borrower and discuss the business and
operations of the Borrower with any employee or representative thereof. If the
Borrower shall maintain any records (including, but not limited to, computer
generated records or computer programs for the generation of such records) in
the possession of a third party, the Borrower hereby agrees to notify such third
party to permit the Bank free access to such records at all reasonable times and
to provide the Bank with copies of any records which it may request, at the
Borrower's expense, limited to $20,000 or at Bank's expense, the amount of which
shall be payable within five (5) days of written notice. In addition, the Bank
may, at any reasonable time and from time to time, conduct inspections and
audits of the Collateral and the Borrower's accounts payable, the cost and
expenses of which shall be paid by the Borrower to the Bank upon five (5) days
prior written notice.
6.06 Reporting and Certification Requirements: Deliver or cause to be
delivered to the Bank in form and detail satisfactory to the Bank:
(a) Not later than 90 days after the end of each of the Borrower's
fiscal years, a copy of (i) the annual audited financial report of the
Borrower for such year prepared by a firm of certified public accountants
reasonably acceptable to Bank, and (ii) the Borrower's Form 10-K filed with
the Securities Exchange Commission and (iii) the Borrower's consolidating
balance sheet and income statement for such year; and, not later than 60
days after the end of each of the Borrower's fiscal years, a copy of the
Borrower's projected balance sheet and income statement for the fiscal year
then in effect.
(b) Not later than 45 days after the end of each of the Borrower's
first three fiscal quarters, a copy of the Borrower's Form 10-Q filed with
the Securities Exchange Commission and the Borrower's consolidating balance
sheet and income statement
(c) Concurrently with the delivery of the financial reports required
hereunder, a compliance certificate in substantially the form attached
hereto as Exhibit "A", showing the calculations which would demonstrate
compliance with all of the financial covenants contained herein.
(d) Promptly upon the Bank's request, such other information
pertaining to the Borrower, the Collateral or any guarantor hereunder as
the Bank may reasonably request.
6.07 Payment of Dividends: Not declare or pay any dividends on any class of
stock now or hereafter outstanding except (i) dividends payable solely in the
Borrower's capital stock, or (ii) dividends approved by Bank.
6.08 Redemption or Repurchase of Stock: Not redeem or repurchase in excess
of 5% per year any class of the Borrower's stock now or hereafter outstanding
without prior written Bank approval.
6.09 Additional Indebtedness: Not, after the date hereof, create, incur or
assume, directly or indirectly, any additional Indebtedness other than (i)
indebtedness owed or to be owed to the Bank or (ii) indebtedness to trade
creditors incurred in the ordinary course of the Borrower's business or (iii)
Permitted Indebtedness.
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6.10 Loans: Not make any loans or advances or extend credit to any third
person, including, but not limited to, directors, officers, shareholders,
partners, employees, affiliated entities and subsidiaries of the Borrower,
except for (i) credit extended in the ordinary course of the Borrower's business
as presently conducted and (ii) Permitted Investments.
6.11 Liens and Encumbrances: Not create, assume or permit to exist any
security interest, encumbrance, mortgage, deed of trust, or other lien
(including, but not limited to, a lien of attachment, judgment or execution)
affecting any of the Borrower's properties, or execute or allow to be filed any
financing statement or continuation thereof affecting any of such properties,
except for Permitted Liens or as otherwise provided in this Agreement.
6.12 Transfer Assets: Except for an amount not exceeding in the aggregate
$100,000 in any fiscal year, not, after the date hereof, sell, contract for
sale, convey, transfer, assign, lease or sublet, any of its assets (including,
but not limited to, the Collateral) except in the ordinary course of business as
presently conducted by the Borrower and, then, only for fair and reasonable
consideration and (i) sales of inventory in the ordinary course of business,
(ii) transfer of assets in the ordinary course of business that have become worn
out or obsolete or that are promptly being replaced, (iii) transfers of
non-exclusive licenses and similar arrangements for the use of property of
Borrower made in the ordinary course of business, and (iv) transfers which
constitute liquidation of permitted investments.
6.13 Change in Nature of Business: Not make any material change in its
financial structure or the nature of its business as existing or conducted as of
the date hereof.
6.14 Financial Condition: Maintain at all times:
(a) A minimum Effective Tangible Net Worth of at least $31,000,000
plus 50% of net profit after taxes at the end of each fiscal quarter.
(b) A ratio of Debt to Effective Tangible Net Worth of not more than
1.5 to 1.
(c) A minimum working capital (defined as current assets minus current
liabilities) of not less than $5,000,000.
(d) A ratio of the sum of cash, cash equivalents and accounts
receivable to current liabilities of not less than .65 to 1.0.
(e) A minimum net profit after tax of at least $1.00 at the end of
each fiscal quarter for the immediately preceding two (2) fiscal quarters.
(f): Maintain a ratio of consolidated earnings before interest, taxes,
depreciation and amortization expense to the sum of (i) interest expense
and (ii) the current portion of long term Debt of not less than 2.00:1.00
at the end of each fiscal quarter for the immediately preceding 4 fiscal
quarters..
6.15 Compensation of Employees: Compensate its employees for services
rendered at an hourly rate at least equal to the minimum hourly rate prescribed
by any applicable federal or state law or regulation.
6.16 Capital Expense: Not make any fixed capital expenditure, including,
but not limited to, incurring liability for leases which would be, in accordance
with generally accepted accounting principles, reported as capital leases, or
purchase any real or personal property in an aggregate amount exceeding
$15,000,000 in any one fiscal year, exclusive of acquisition financing,
provided, however, that Borrower may make capital expenditures in connection
with acquisitions in an amount up to $3,000,000 in any one fiscal year without
the Bank's approval.
6.17 Notice: Give the Bank prompt written notice of any and all (i) Events
of Default; (ii) litigation, arbitration or administrative proceedings to which
the Borrower is a party and in which the claim or liability exceeds $500,000 or
which affects the Collateral; and (iii) other matters which have resulted in, or
might result in a material adverse change in the Collateral or the financial
condition or business operations of the Borrower.
6.18 Environmental Compliance. The Borrower shall:
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(a) Implement and comply in all material respects with all applicable
federal, state and local laws, ordinances, statutes and regulations with
respect to hazardous or toxic wastes, substances or related materials,
industrial hygiene or to environmental conditions.
(b) Not own, use, generate, manufacture, store, handle, treat, release
or dispose of any hazardous or toxic wastes, substances or materials,
except in material compliance with all applicable federal, state and local
laws, ordinances, statutes and regulations.
(c) Give prompt written notice of any discovery of or suit,
proceeding, claim, dispute, or filing respecting hazardous or toxic wastes,
substances or related materials.
(d) At all times indemnify and hold harmless Bank from and against any
and all liability arising out of Borrower's use, generation, manufacture,
storage, handling, treatment, or disposal by Borrower of hazardous or toxic
wastes, substances or materials at the site.
SECTION 7
EVENTS OF DEFAULT
Any one or more of the following described events shall constitute an event
of default (an "Event of Default") under this Agreement:
7.01 Non-Payment: The Borrower shall fail to pay any Obligations within 10
days of when due.
7.02 Performance Under This and Other Agreements: The Borrower shall fail
in any material respect to perform or observe any term, covenant or agreement
contained in this Agreement or in any document, instrument or agreement
evidencing or relating to any indebtedness of the Borrower (whether such
indebtedness is owed to the Bank or third persons), and any such failure
(exclusive of the payment of money to the Bank under this Agreement or under any
other instrument, document or agreement, which failure shall constitute and be
an Event of Default if not paid within 10 days of when due or when demanded to
be due) shall continue for more than 30 days after written notice from the Bank
to the Borrower of the existence and character of such Event of Default.
7.03 Representations and Warranties; Financial Statements: Any
representation or warranty made by the Borrower under or in connection with this
Agreement or any financial statement given by the Borrower or any guarantor
shall prove to have been incorrect in any material respect when made or given or
when deemed to have been made or given.
7.04 Insolvency: The Borrower or any guarantor shall: (i) become insolvent
or be unable to pay its debts as they mature; (ii) make an assignment for the
benefit of creditors or to an agent authorized to liquidate any substantial
amount of its properties and assets; (iii) file a voluntary petition in
bankruptcy or seeking reorganization or to effect a plan or other arrangement
with creditors; (iv) file an answer admitting the material allegations of an
involuntary petition relating to bankruptcy or reorganization or join in any
such petition; (v) become or be adjudicated a bankrupt; (vi) apply for or
consent to the appointment of, or consent that an order be made, appointing any
receiver, custodian or trustee, for itself or any of its properties, assets or
businesses; or (vii) any receiver, custodian or trustee shall have been
appointed for all or substantial part of its properties, assets or businesses
and shall not be discharged within 60 days after the date of such appointment.
7.05 Execution: Any writ of execution or attachment or any judgment lien
shall be issued against any property of the Borrower and shall not be discharged
or bonded against or released within 60 days after the issuance or attachment of
such writ or lien.
7.06 Suspension: The Borrower shall voluntarily suspend the transaction of
business or allow to be suspended, terminated, revoked or expired any permit,
license or approval of any governmental body necessary to conduct the Borrower's
business as now conducted.
7.07 Change in Ownership: There shall occur a sale, transfer, disposition
or encumbrance (whether voluntary or involuntary), or an agreement shall be
entered into to do so, with respect to more than 25% of the issued and
outstanding capital stock of the Borrower, if a corporation, or there shall
occur a change in any general partner or a change affecting the control of the
Borrower, if a partnership.
SECTION 8
REMEDIES ON DEFAULT
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Upon the occurrence and during the continuance of any Event of Default, the
Bank may, at its sole and absolute election, without demand and with prompt
subsequent notice to Borrower:
8.01 Acceleration: Declare any or all of the Borrower's indebtedness owing
to the Bank, whether under this Agreement or any other document, instrument or
agreement, immediately due and payable, whether or not otherwise due and
payable.
8.02 Cease Extending Credit: Cease extending credit to or for the account
of the Borrower under this Agreement or under any other agreement now existing
or hereafter entered into between the Borrower and the Bank.
8.03 Termination: Terminate this Agreement as to any future obligation of
the Bank without affecting the Borrower's obligations to the Bank, the Bank's
obligations to the Borrower, or the Bank's or Borrower's rights and remedies
under this Agreement or under any other document, instrument or agreement.
8.04 Protection of Security Interest: Make such payments and do such acts
as the Bank, in its sole judgment, considers necessary and reasonable to protect
its security interest or lien in the Collateral. The Borrower hereby irrevocably
authorizes the Bank to pay, purchase, contest or compromise any encumbrance,
lien or claim which the Bank, in its sole judgment, deems to be prior or
superior to its security interest. Further, the Borrower hereby agrees to pay to
the Bank, upon demand therefor, all reasonable expenses and expenditures
(including reasonable attorneys' fees) incurred in connection with the
foregoing. Notwithstanding the foregoing, Bank shall be responsible for its own
gross negligence or willful misconduct.
8.05 Foreclosure: Enforce any security interest or lien given or provided
for under this Agreement or under any security agreement, mortgage, deed of
trust or other document, in such manner and such order, as to all or any part of
the properties subject to such security interest or lien, as the Bank, in its
sole judgment, deems to be necessary or appropriate and the Borrower hereby
waives any and all rights, obligations or defenses now or hereafter established
by law relating to the foregoing. In the enforcement of its security interest or
lien, the Bank is authorized to enter upon the premises where any Collateral is
located and take possession of the Collateral or any part thereof, together with
the Borrower's records pertaining thereto, or the Bank may require the Borrower
to assemble the Collateral and records pertaining thereto and make such
Collateral and records available to the Bank at a place designated by the Bank.
The Bank may sell the Collateral or any portions thereof, together with all
additions, accessions and accessories thereto, giving only such notices and
following only such procedures as are required by law, at either a public or
private sale, or both, with or without having the Collateral present at the time
of the sale, which sale shall be on such terms and conditions and conducted in
such manner as the Bank determines in its sole judgment to be commercially
reasonable. Any deficiency which exists after the disposition or liquidation of
the Collateral shall be a continuing liability of the Borrower to the Bank and
shall be paid by the Borrower to the Bank within five (5) business days of
written notice.
8.06 Non-Exclusivity of Remedies: Exercise one or more of the Bank's rights
set forth herein or seek such other rights or pursue such other remedies as may
be provided by law, in equity or in any other agreement now existing or
hereafter entered into between the Borrower and the Bank, or otherwise.
8.07 Application of Proceeds: All amounts received by the Bank as proceeds
from the disposition or liquidation of the Collateral shall be applied to the
Borrower's indebtedness to the Bank as follows: first, to the costs and expenses
of collection, enforcement, protection and preservation of the Bank's lien in
the Collateral, including court costs and reasonable attorneys' fees, whether or
not suit is commenced by the Bank; next, to those costs and expenses incurred by
the Bank in protecting, preserving, enforcing, collecting, liquidating, selling
or disposing of the Collateral; next, to the payment of accrued and unpaid
interest on all of the Obligations; next, to the payment of the outstanding
principal balance of the Obligations; and last, to the payment of any other
indebtedness owed by the Borrower to the Bank. Any excess Collateral or excess
proceeds existing after the disposition or liquidation of the Collateral will be
returned or paid by the Bank to the Borrower.
SECTION 9
MISCELLANEOUS
9.01 Default Interest Rate: The Borrower shall pay the Bank interest on any
indebtedness or amount payable under this Agreement, from the date that such
indebtedness or amount became due or was demanded to be due until paid in full,
at a rate which is 3% in excess of the rate otherwise provided under this
Agreement.
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9.02 Disposal of Invoices: All documents, schedules, invoices or other
papers received by the Bank from the Borrower may be destroyed or disposed of 6
months after receipt by the Bank, unless the Borrower requests in writing the
return thereof, which shall be done at the Borrower's expense.
9.03 Dispute Resolution. It is understood and agreed that upon the request
of any party to this agreement any dispute, claim, or controversy of any kind,
whether in contract or in tort, statutory or common law, legal or equitable now
existing or hereinafter arising between the parties in any way arising out of,
pertaining to or in connection with: (1) this Agreement, or any related
agreements, documents, or instruments, (2) all past and present loans, credits,
accounts, deposit accounts (whether demand deposits or time deposits), safe
deposit boxes, safekeeping agreements, guarantees, letters of credit, goods or
services, or other transactions, contracts or agreements of any kind, (3) any
incidents, omissions, acts, practices, or occurrences causing injury to either
party whereby the other party or its agents, employees or representatives may be
liable, in whole or in part, or (4) any aspect of the past or present
relationships of the parties, shall be resolved through a two-step dispute
resolution process administered by Judicial Arbitration & Mediation Services,
Inc. ("J-A-M-S") as follows:
(a) Step I - Mediation: At the request of any party to the dispute,
claim or controversy of the matter shall be referred to the nearest office
of J-A-M-S for mediation, that is, an informal, non-binding conference or
conferences between the parties in which a retired judge or justice for the
J-A-M-S panel will seek to guide the parties to a resolution of the case.
(b) Step II - Unsecured Contracts - Arbitration: Should any dispute,
claim or controversy remain unresolved at the conclusion of the Step I
Mediation Phase then all such remaining matters shall be resolved by final
and binding arbitration before a different judicial panelist, unless the
parties shall agree to have the mediator panelist act as arbitrator. The
hearing shall be conducted at a location determined by the arbitrator in
San Jose County and shall be administered by and in accordance with the
then existing Rules of Practice and Procedure of Judicial Arbitration &
Mediation Services, Inc., and judgement upon any award rendered by the
arbitrator may be entered by any State or Federal Court having jurisdiction
thereof. The arbitrator shall determine which is the prevailing party and
shall include in the award that party's reasonable attorneys fees and
costs. This subparagraph (b) shall apply only if, at the time of the
submission of the matter to J-A-M-S, the dispute(s) or issue(s) do(es) not
arise out of a transaction(s) which is/are secured by real property
collateral or, if so secured, all parties consent to such submission.
As soon as practicable after selection of the arbitrator, the
arbitrator or his/her designated representative shall determine a
reasonable estimate of anticipated fees and costs of the Arbitrator, and
render a statement to each party setting forth that party's pro-rata share
of said fees and costs. Thereafter each party shall, within 10 days of
receipt of said statement, deposit said sum with the Arbitrator. Failure of
any party to make such a deposit shall result in a forfeiture by the
non-depositing party of the right to prosecute or defend the claim which is
the subject of the arbitration, but shall not otherwise serve to abate,
stay or suspend the arbitration proceedings.
(c) Step II - Contracts Secured By Real Estate - Trial by Court
Reference [ss.638 (1)] Code of Civil Procedure): If the dispute, claim or
controversy is not one required or agreed to be submitted to arbitration as
provided by subparagraph (b) and has not been resolved by Step I mediation,
them any remaining dispute, claim or controversy shall be submitted for
determination by a trial on Order of Reference conducted by a retired judge
or justice from the panel of J-A-M-S appointed pursuant to the provisions
of California Code of Civil Procedure ss.638(1) or any amendment, addition
or successor section thereto to hear the case and report a statement of
decision thereon. The parties intend this general reference agreement to be
specifically enforceable in accordance with said section. If this parties
are unable to agree upon a member of the J-A-M-S panel to act as referee
then one shall be appointed by the Presiding Judge of the county wherein
the hearing is to be held. The parties shall pay in advance, to the
referee, the estimated reasonable fees and costs of the reference, as may
be specified in advance by the referee. The parties shall initially share
equally, by paying their proportionate amount of the estimated fees and
costs of the reference. Failure of any party to make such a fee deposit
shall result in a forfeiture by the non-depositing party of the right to
prosecute or defend the cause(s) of action which is(are) the subject of the
reference, but shall not otherwise serve to abate, stay or suspend the
reference proceeding.
(d) Provisional Remedies, Self Help and Foreclosure: No provision of,
or the exercise of any right(s) under subparagraph (b), nor any other
provision of this Dispute Resolution Provision, shall limit the right of
any party to exercise self help remedies such as set off, to foreclose
against any real or personal property collateral, or obtain provisional or
ancillary remedies such as injunctive relief or the appointment of a
receiver from any court having jurisdiction before, during or after the
pendency of any arbitration. At Bank's option, foreclosure under a deed of
trust or mortgage may be accomplished either by exercise of power of sale
under the deed of trust or mortgage, or by judicial foreclosure. The
institution and maintenance of an
Accounts Receivable Credit Agreement - Page 11
<PAGE>
action for provisional remedies pursuit of provisional or ancillary
remedies or exercise of self help remedies shall not constitute a waiver of
the right of any party, including the plaintiff, to submit the controversy
or claim to arbitration.
9.04 Waiver of Jury Trial. THE BORROWER AND THE BANK EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE
BORROWER AND THE BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
9.05 Reliance: Each warranty, representation, covenant, obligation and
agreement contained in this Agreement shall be conclusively presumed to have
been relied upon by the Bank regardless of any investigation made or information
possessed by the Bank and shall be cumulative and in addition to any other
warranties, representations, covenants and agreements which the Borrower now or
hereafter shall give, or cause to be given, to the Bank.
9.06 Attorneys' Fees: Borrower shall pay to the Bank all costs and
expenses, including but not limited to reasonable attorneys fees, incurred by
Bank in connection with the administration, enforcement, or any refinancing or
restructuring in the nature of a "work-out", of this Agreement or any document,
instrument or agreement executed with respect to, evidencing or securing the
indebtedness hereunder.
9.07 Notices: All notices, payments, requests, information and demands
which either party hereto may desire, or may be required to give or make to the
other party hereto, shall be given or made to such party by hand delivery or
through deposit in the United States mail, postage prepaid, or by Western Union
telegram, addressed as set forth below or to such other address as may be
specified from time to time in writing by either party to the other.
To the Borrower To the Bank:
ELEXSYS INTERNATIONAL, INC. SANWA BANK CALIFORNIA
4405 Fortran Court San Jose CBC
San Jose, CA 95134 220 Almaden Blvd.
San Jose, CA 95113
Attn: Robert DeLaurentis Attn: Jillian E. Mathur
Title: C.F.O. Vice President
with a copy to: With a copy to:
COOLEY GODWARD LLP SANWA BANK CALIFORNIA
Five Palo Alto Square Asset Based Financing Department
3000 El Camino Real
Palo Alto, CA 94306-2155 444 Market Street, 22nd Floor
San Francisco, CA 94111
Attn: Bill Veatch
9.08 Waiver: Neither the failure nor delay by the Bank in exercising any
right hereunder or under any document, instrument or agreement mentioned herein
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right hereunder or under any other document, instrument or agreement
mentioned herein preclude other or further exercise thereof or the exercise of
any other right; nor shall any waiver of any right or default hereunder, or
under any other document, instrument or agreement mentioned herein, constitute a
waiver of any other right or default or constitute a waiver of any other default
of the same or any other term or provision.
Accounts Receivable Credit Agreement - Page 12
<PAGE>
9.09 Conflicting Provisions: To the extent the provisions contained in this
Agreement are inconsistent with those contained in any other document,
instrument or agreement executed pursuant hereto, the terms and provisions
contained herein shall control. Otherwise, such provisions shall be considered
cumulative.
9.10 Binding Effect; Assignment: This Agreement shall be binding upon and
inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Bank. The Bank may sell, assign or grant participation in all or
any portion of its rights and benefits hereunder. The Borrower agrees that, in
connection with any such sale, grant or assignment, the Bank may deliver to the
prospective buyer, participant or assignee financial statements and other
relevant information relating to the Borrower and any guarantor.
9.11 Jurisdiction: This Agreement, any notes issued hereunder, the rights
of the parties hereunder to and concerning the Collateral, and any documents,
instruments or agreements mentioned or referred to herein shall be governed by
and construed according to the laws of the State of California, to the
jurisdiction of whose courts the parties hereby submit.
9.12 Headings: The headings herein set forth are solely for the purpose of
identification and have no legal significance.
9.13 Entire Agreement: This Agreement and all documents, instruments and
agreements mentioned herein constitute the entire and complete understanding of
the parties with respect to the transactions contemplated hereunder. All
previous conversations, memoranda and writings between the parties pertaining to
the transactions contemplated hereunder not incorporated or referenced in this
Agreement or in such documents, instruments and agreements are superseded
hereby.
9.14 Confidentiality Agreement. In handling any confidential information
Bank, and all employees and agents of Bank, including but not limited to
accountants, shall exercise the same degree of care that Bank exercises with
respect to its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Bank in connection with their
present or prospective business relations with Borrower; (ii) to prospective
transferees or purchasers of any interest in the loans, provided that they have
entered into a comparable confidentiality agreement in favor of Borrower and
have delivered a copy to Borrower; (iii) as required by law, regulations, rule
or order, subpoena, judicial order or similar order; (iv) as may be required in
connection with the examination, audit or similar investigation of Bank and (v)
as Bank may determine in connection with the enforcement of any remedies
hereunder. Confidential information hereunder shall not include information that
either: (a) is in the public domain or in the knowledge or possession of Bank
when disclosed to Bank, or becomes part of the public domain after disclosure to
Bank through no fault of Bank; or (b) is disclosed to Bank by a third party,
provided Bank does not have actual knowledge that such third party is prohibited
from disclosing such information.
Accounts Receivable Credit Agreement - Page 13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first hereinabove written.
Borrower Bank:
SANWA BANK CALIFORNIA
ELEXSYS INTERNATIONAL, INC.
BY:________________________________ BY:________________________________
Name: Robert DeLaurentis Name: Jillian E. Mathur
Title: C.F.O. Title: Vice President
EXHIBIT 10.55
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT (the "Agreement") dated as of July 22, 1997,
among Sanmina Corporation, a Delaware corporation ("Parent"), and the individual
identified on Schedule A attached hereto (the "Stockholder").
WHEREAS Sanmina Corporation, SANM Acquisition Subsidiary, Inc., a
Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), and
Elexsys International, Inc., a Delaware corporation (the "Company"), propose to
enter into an Agreement and Plan of Merger dated as of the date hereof (as the
same may be amended or supplemented, the "Merger Agreement"; capitalized terms
used but not defined herein shall have the meanings set forth in the Merger
Agreement) providing for the merger of Sub with and into the Company (the
"Merger"), upon the terms and subject to the conditions set forth in the Merger
Agreement; and
WHEREAS the Stockholder owns of record the number of shares of common
stock, par value $1.00 per share, of the Company (the "Common Stock"), set forth
opposite his name on Schedule A attached hereto; and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has requested that the Stockholder enter into this Agreement;
NOW, THEREFORE, to induce Parent to enter into, and in consideration of
its entering into, the Merger Agreement, and in consideration of the promises
and the representations, warranties and agreements contained herein, the parties
agree as follows:
1. Definition. For purposes of this Agreement, "Subject Shares" shall
mean all issued and outstanding shares of Common Stock of the Company owned of
record or beneficially by the Stockholder as of the record date for persons
entitled (a) to receive notice of, and to vote at, a meeting of the stockholders
of the Company called for the purpose of voting on the matter referred to in
Section 4(a), or (b) to take action by written consent of the stockholders of
the Company with respect to the matter referred to in Section 4(a).
Notwithstanding anything to the contrary contained in this Agreement, the
"Subject Shares" shall not include, and the Stockholder shall not be deemed to
be the beneficial owner of, any shares of Common Stock of the Company that the
Stockholder may acquire upon the exercise of any stock option (unless such
option has been exercised and such shares have been issued to the Stockholder
and are held by the Stockholder as of such record date).
2. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to Parent as of the date hereof as follows:
(a) Authority. The Stockholder has all requisite capacity to
enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Stockholder
and constitutes a valid and binding obligation of the
<PAGE>
Stockholder enforceable against the Stockholder in accordance with its terms.
Except for informational filings with the SEC, the execution and delivery of
this Agreement by the Stockholder do not, and the consummation by the
Stockholder of the transactions contemplated hereby and compliance by the
Stockholder with the terms hereof will not, (i) conflict with, or result in any
violation of, or default (with or without notice or lapse of time or both) under
any trust agreement, loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, judgment, order, notice, decree, statute,
law, ordinance, rule or regulation applicable to the Stockholder or to the
Stockholder's property or assets, (ii) require any filing by the Stockholder on
or before the Closing Date with, or require the Stockholder to obtain on or
before the Closing Date, any permit, authorization, consent or approval of, any
Federal, state or local government or any court, tribunal, administrative agency
or commission or other governmental or regulatory authority or agency, domestic
or foreign, or (iii) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to the Stockholder or the Subject Shares.
(b) The Shares. The Stockholder is the record and beneficial
owner of, and has good and valid title to, the shares of Common Stock set forth
opposite his name on Schedule A attached hereto, free and clear of any Liens
whatsoever. The Stockholder does not own, of record or beneficially, any shares
of capital stock of the Company other than the shares of Common Stock set forth
opposite his name on Schedule A attached hereto. The Stockholder has the sole
right to vote such shares, and none of such shares is subject to any voting
trust or other agreement, arrangement or restriction with respect to the voting
of such shares, except as contemplated by this Agreement.
3. Representations and Warranties of Parent. Parent hereby represents
and warrants to the Stockholder that Parent has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by Parent and constitutes a valid and binding obligation of Parent
enforceable against Parent in accordance with its terms. Except for
informational filings with the SEC, the execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby and
compliance with the terms hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time or both) under
any provision of, the certificate of incorporation or bylaws of Parent, or any
trust agreement, loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise, license,
judgment, order, notice, decree, statute, law, ordinance, rule or regulation
applicable to Parent or to Parent's property or assets.
4. Covenants of the Stockholder. Until the termination of this
Agreement in accordance with Section 11, the Stockholder agrees as follows:
(a) Subject to Section 5, at any meeting of stockholders of
the Company called to vote upon the Merger and the Merger Agreement or at any
adjournment thereof or in any other circumstances upon which a vote, consent or
other approval (including by written consent) with respect to the Merger and the
Merger Agreement is sought from the Company's stockholders in their capacities
as such, the Stockholder shall, including by executing a written consent if
requested by
<PAGE>
Parent, vote (or cause to be voted) the Subject Shares in favor of the Merger,
and the adoption and approval by the Company of the Merger Agreement.
(b) The Stockholder shall not (i) sell, transfer, pledge,
assign or otherwise dispose of (including by gift) (collectively, "Transfer"),
consent to any Transfer of, or enter into any contract, option or other
arrangement (including any profit sharing arrangement) with respect to the
Transfer of, any or all of the Subject Shares (or any interest therein) to any
person other than pursuant to the terms of the Merger or (ii) enter into any
voting arrangement, whether by proxy, voting agreement or otherwise, in
connection with, directly or indirectly, any Takeover Proposal, and agrees not
to commit or agree to take any of the foregoing actions; provided, however, that
notwithstanding anything to the contrary contained in this Agreement, the
Stockholder may, without the consent of Parent or any other person, transfer any
or all of the Subject Shares (or any interest therein) to one or more members of
the Stockholder's family, any trust for the benefit of the Stockholder or one or
more members of the Stockholder's family or any entity controlled by the
Stockholder so long as the transferee of such Subject Shares (or such interest
therein) agrees to be bound by the applicable provisions of this Agreement.
(c) The Stockholder shall not, nor shall he instruct any agent
or any investment banker, attorney or other adviser or representative of the
Stockholder to, directly or indirectly, (i) solicit, initiate or knowingly
encourage the submission to the Company of, any Takeover Proposal or (ii)
participate in any discussions or negotiations with any person (other than
Parent and its affiliates, agents and representatives) regarding, or furnish to
any such person any non-public information with respect to, or take any other
action intended to facilitate the making of any inquiry or proposal that
constitutes, or may reasonably be expected to lead to, any Takeover Proposal.
(d) If, at the time the Merger Agreement is submitted for
approval to the stockholders of the Company, the Stockholder is an "affiliate"
of the Company for purposes of Rule 145 under the Securities Act or for purposes
of qualifying the Merger for pooling of interests accounting treatment under
Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations, the Stockholder shall deliver to Parent on or prior to the Closing
Date a written agreement substantially in the form attached as Exhibit A to the
Merger Agreement.
5. Grant of Irrevocable Proxy; Appointment of Proxy.
(a) Until the termination of this Agreement in accordance with
Section 11, the Stockholder hereby irrevocably grants to, and appoints, Parent
and Jure Sola and Randy W. Furr, in their respective capacities as officers of
Parent, and any individual who shall hereafter succeed to any such office of
Parent, and each of them individually, the Stockholder's proxy and
attorney-in-fact (with full power of substitution), for and in the name, place
and stead of the Stockholder, to vote the Subject Shares, or grant a consent or
approval in respect of the Subject Shares, in favor of approval of the Merger
and the adoption and approval of the Merger Agreement.
(b) The Stockholder represents that any proxies heretofore
given in respect of the Subject Shares are not irrevocable, and that all such
proxies are hereby revoked.
<PAGE>
(c) The Stockholder hereby affirms that the irrevocable proxy
set forth in this Section 5 is given in connection with the execution of the
Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of the Stockholder under this Agreement. The
Stockholder hereby further affirms that the irrevocable proxy is coupled with an
interest and may under no circumstances be revoked. The Stockholder hereby
ratifies and confirms all that such proxies and attorneys in fact may lawfully
do or cause to be done by virtue hereof. Such irrevocable proxy is executed and
intended to be irrevocable in accordance with the provisions of Section 212(e)
of the Delaware General Corporation Law.
6. Further Assurances. The Stockholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
consents, documents and other instruments as Parent may reasonably request for
the purpose of effectively carrying out the transactions contemplated by this
Agreement.
7. Certain Events. The Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Subject Shares and shall be binding
upon any person or entity to which legal or beneficial ownership of such Subject
Shares shall pass, whether by operation of law or otherwise, including such
Stockholder's heirs, guardians, administrators or successors. In the event of
any stock split, stock dividend, merger, reorganization, recapitalization or
other change in the capital structure of the Company affecting the Company's
Common Stock, or the acquisition of additional shares of Common Stock or other
voting securities of the Company by the Stockholder, the number of Subject
Shares shall be adjusted appropriately and this Agreement and the obligations
hereunder shall attach to any additional shares of Common Stock or other voting
securities of the Company issued to or acquired by the Stockholder.
8. Registration Rights. If the Stockholder determines in good faith
after consultation with the Stockholder's counsel that any shares of common
stock of Parent received by the Stockholder in connection with the Merger
("Merger Shares") may be deemed to be "restricted securities" under Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities Act"),
or are otherwise subject to any restriction on resale (other than restrictions
imposed by Rule 145 promulgated under the Securities Act or restrictions imposed
by Accounting Series Release 135), then, as soon as practicable after the
Effective Time (and in any event within 30 days after the Effective Time),
Parent, at its sole expense, shall (a) file a registration statement permitting
the resale of the Merger Shares, (b) take all actions reasonably necessary to
cause such registration statement to be declared effective, (c) maintain the
effectiveness and availability of such registration statement until the first
anniversary of the Effective Time, (d) use commercially reasonable efforts to
register or qualify the Merger Shares under the Blue Sky laws of such
jurisdictions as the Stockholder shall reasonably request, and maintain the
effectiveness of such registrations and qualifications for as long as such
registration statement remains effective, and (e) take such other actions as are
reasonably necessary to enable the Stockholder to sell the Merger Shares without
restriction. To the extent permitted by law, Parent shall indemnify and hold
harmless the Stockholder against and from any costs, expenses (including
reasonable attorneys' fees), settlement payments, claims, demands, judgments,
fines, penalties, losses, damages and liabilities
<PAGE>
that arise out of or are related to any inaccuracy in, or omission with respect
to, such registration statement.
9. Indemnification. Parent shall indemnify and hold harmless the
Stockholder and the Stockholder's affiliates, agents, advisers and
representatives (the "Indemnified Parties") against and from any costs, expenses
(including reasonable attorneys' fees), settlement payments, claims, demands,
judgments, fines, penalties, losses, damages and liabilities incurred in
connection with any claim, suit, action or proceeding (whether asserted,
commenced or arising before or after the Effective Time) that arises directly or
indirectly from or relates directly or indirectly to (a) the execution, delivery
or performance of this Agreement, or (b) any of the transactions contemplated by
this Agreement. In the event any such claim, suit, action or proceeding is
asserted or commenced against any Indemnified Party, (i) Parent shall advance
and pay the reasonable fees and expenses of any counsel retained by such
Indemnified Party in connection with such claim, suit, action or proceeding
promptly after receipt of a request therefor from such Indemnified Party, and
(ii) Parent shall cooperate with such Indemnified Party and such Indemnified
Party's counsel in the defense of such claim, suit, action or proceeding. Parent
agrees to pay all expenses, including attorneys' fees, that may be incurred by
any of the Indemnified Parties in enforcing the indemnity and other obligations
provided for in this Section 9.
10. Assignment. Except as otherwise provided in Section 4(b), neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by the Stockholder, on the one hand, without the prior written
consent of Parent nor by Parent, on the other hand, without the prior written
consent of the Stockholder, except that Parent may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder (other
than Parent's obligations under Sections 8 and 9) to any direct or indirect
wholly owned subsidiary of Parent (provided that in the case of any assignment
by Parent to any such subsidiary of Parent, Parent shall remain jointly and
severally liable for the due and timely performance of any obligations so
assigned) . Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective representatives, executors, administrators, estate, heirs, successors
and assigns.
11. Termination. This Agreement (including the proxy referred to in
Section 5) and all rights of Parent and all obligations of the Stockholder
hereunder, shall terminate upon the first to occur of (i) the Effective Time or
(ii) the date on which the Merger Agreement is terminated in accordance with its
terms; provided, however, that notwithstanding anything to the contrary
contained in this Agreement, the rights of the Stockholder and the obligations
of Parent pursuant to Sections 8 and 9, and the provisions contained in Sections
12, 13 and 15, shall survive any termination of this Agreement..
12. General Provisions.
(a) Amendments. This Agreement may not be amended except by
an instrument in writing signed by each of the parties hereto.
<PAGE>
(b) Notice. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to Parent in accordance with
Section 8.2 of the Merger Agreement and to the Stockholder at his address set
forth on Schedule A attached hereto (or at such other address for a party as
shall be specified by like notice).
(c) Interpretation. When a reference is made in this Agreement
to a Section, such reference shall be to a Section to this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Wherever the words "include," "includes@ or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation."
(d) Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be deemed to be one and the same
agreement, and shall become effective when one or more of the counterparts have
been signed by each of the parties and delivered to the other party, it being
understood that each party need not sign the same counterpart.
(e) Entire Agreement; No Third-Party Beneficiaries. The
Agreement (including the documents and instruments referred to herein) (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (ii) is not intended to confer upon any person other
than the parties hereto (and the other persons referred to in Section 9) any
rights or remedies hereunder.
(f) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law thereof.
(g) No Limitations. Nothing in this Agreement shall, and
nothing in this Agreement shall be deemed to, prevent the Stockholder from
acting in accordance with his fiduciary duties as a director of the Company or
otherwise limit the ability of the Stockholder to take any action in his
capacity as a director or officer of the Company.
(h) Voidability. If prior to the execution hereof, the Board
of Directors of the Company shall not have duly and validly authorized and
approved by all necessary corporate action, the Merger Agreement and the
transactions contemplated thereby, so that by the execution and delivery hereof
Parent or Sub would become, or could reasonably be expected to become an
"interested stockholder" within the meaning of Section 203 of the DGCL, then
this Agreement shall be void and unenforceable until such time as such
authorization and approval shall have been duly and validly obtained.
13. Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and
<PAGE>
provisions of this Agreement in any court of the United States located in the
State of Delaware or in a Delaware state court, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (i) consents to submit such party to the personal
jurisdiction of any court of the United States located in the State of Delaware
or any Delaware state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated hereby, (ii) agrees that such
party will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court, (iii) agrees that such party will
not bring any action relating to this Agreement or the transactions contemplated
hereby in any court other than a court of the United States located in the State
of Delaware or a Delaware state court and (iv) waives any right to trial by jury
with respect to any claim or proceeding related to or arising out of this
Agreement or any of the transactions contemplated hereby.
14. Public Announcement. Except to the extent required by law or
regulation, the Stockholder shall not issue any press release or other public
statement with respect to the transactions contemplated by this Agreement and
the Merger Agreement without the prior written consent of Parent.
15. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
<PAGE>
IN WITNESS WHEREOF, Parent has caused this Agreement to be signed by
its officer thereunto duly authorized and the Stockholder has signed this
Agreement, all as of the date first written above.
Parent,
By:________________________________________
Name:
Title:
___________________________________________
<PAGE>
SCHEDULE A
Number of Shares
of Common Stock
Name and Address of Stockholder Owned of Record
- ---------------------------------------- -----------------------------------
EXHIBIT 11.1
ELEXSYS INTERNATIONAL, INC.
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
(In thousands of dollars, except per share amounts)
Three Months Ended Nine Months Ended
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
------- ------- ------- -------
Net income $ 2,599 $ 1,964 $ 6,006 $ 6,203
======= ======= ======= =======
Earnings per common share and common
share equivalents:
Primary $ 0.26 $ 0.20 $ 0.61 $ 0.65
Fully diluted $ 0.26 $ 0.20 $ 0.61 $ 0.65
======= ======= ======= =======
Weighted average common
and dilutive common equivalent
shares outstanding:
Primary
Weighted average common
shares outstanding 9,474 9,189 9,403 9,112
Common shares relating
to stock options 528 430 441 436
------- ------- ------- -------
Weighted average common
and common equivalent
shares outstanding: 10,002 9,619 9,844 9,548
======= ======= ======= =======
Fully diluted
Weighted average common
shares outstanding: 9,474 9,189 9,403 9,112
Common shares relating to
stock options 528 430 441 436
------- ------- ------- -------
Weighted average common and
common equivalent shares
outstanding 10,002 9,619 9,844 9,548
======= ======= ======= =======
Refer to Note 4 captioned "Earnings Per Share" of Notes to Consolidated
Financial Statements in the Company's Form 10-Q for the quarterly period ended
June 28, 1997 for additional discussion of earnings per share.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000727010
<NAME> ELEXSYS INTERNATIONAL INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-28-1997
<CASH> 1063
<SECURITIES> 0
<RECEIVABLES> 25122
<ALLOWANCES> 309
<INVENTORY> 16737
<CURRENT-ASSETS> 44357
<PP&E> 94696
<DEPRECIATION> 62170
<TOTAL-ASSETS> 80926
<CURRENT-LIABILITIES> 25238
<BONDS> 24154
0
0
<COMMON> 9489
<OTHER-SE> 22045
<TOTAL-LIABILITY-AND-EQUITY> 80926
<SALES> 118802
<TOTAL-REVENUES> 118802
<CGS> 98362
<TOTAL-COSTS> 98362
<OTHER-EXPENSES> 201
<LOSS-PROVISION> 105
<INTEREST-EXPENSE> 1596
<INCOME-PRETAX> 6375
<INCOME-TAX> 369
<INCOME-CONTINUING> 6006
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6006
<EPS-PRIMARY> 0.61
<EPS-DILUTED> 0.61
</TABLE>
