SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-Q/A
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 28, 1996
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.
(Exact name of registrant as specified in its charter)
Delaware 95-3534864
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4405 Fortran Court, San Jose, California 95134
(Address of principal executive offices) (Zip Code)
(408) 935-6300
(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 January 31, 1997 there were 9,397,545 outstanding shares of common stock.
This report consists of 11 pages
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ELEXSYS INTERNATIONAL, INC.
FORM 10-Q/A
INDEX
Part II. Other Information:
Item 6.
Exhibits.......................................................9
1
<PAGE>
Part II. OTHER INFORMATION
Item 6 a. Exhibits
10.46 Accounts Receivable Credit Agreement dated January
17, 1997 between Sanwa Bank California and the registrant.
10.47 Term Loan Credit Agreement dated January 27, 1997
between Sanwa Bank California and the registrant.
10.48 Loan Agreement dated as of December 1, 1996 among GE Capital
Public Finance, Inc., Business Finance Authority of the
State of New Hampshire and the registrant.
9
<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: February 21, 1997 By: /s/ W.F. Hegarty
----------------- ----------------
W.F. Hegarty
President and Chief Operating Officer
By: /s/ Michael S. Shimada
----------------------
Michael S. Shimada
Principal Financial Officer
and Duly Authorized Officer
11
[GRAPHIC OMITTED]
ACCOUNTS RECEIVABLE CREDIT AGREEMENT
This Accounts Receivable Credit Agreement (the "Agreement") is made and
entered into this 17th day of January, 1997, by and between SANWA BANK
CALIFORNIA (the "Bank") and ELEXSYS INTERNATIONAL, INC. (the "Borrower"), in
connection with that certain Term Loan Credit Agreement ("Term Loan") by and
between Bank and Borrower dated of even date herewith, 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):
(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 Revolving Loan Commitment": shall mean for
any quarter: (a) the Revolving Loan Commitment less, (b) the average
daily balance of Advances under the Revolving Loan Commitment 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 but less all intangible assets of the
Borrower (i.e., goodwill, trademarks, patents, copyrights,
organization expense and similar intangible items) and net leaseholds.
(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.
(3) Except in the case of United States Dollar denominated invoices
to Northern Telecom, or any of its Canadian subsidiaries
(collectively "Northern Telecom"). 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.
(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) 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: (i)
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.
(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 Closing Date and disclosed in the
Schedule; (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 $250,000.00 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 Indebtedness 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
Closing Date disclosed in the Schedule; (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; 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.; investments
consisting of deposits maturing no more than one (1) year from the
date of investment therein issued by Bank; (iii) 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; (iv) investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the
ordinary course of business; (v) 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; (vi) 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; vii) 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.
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.
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 Revolving Loan
Commitment 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.
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, 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% 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.
(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) 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.
(c) 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.
(d) All documents, instruments and chattel paper now owned or
hereafter acquired by the Borrower.
(e) 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 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 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: All fictitious trade styles used by the
Borrower in connection with its business operations and each state in which each
such fictitious trade style is used are listed below. The Borrower shall notify
the Bank within 30 days of effecting any change in the matters described below
or prior to using any other fictitious trade style at any future date,
indicating the trade style and state(s) of its use.
Trade Style State of 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(h).
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 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 demand.
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) Not later than 45 days after the end of each month, the
Borrower's financial statement as of the end of such period.
(d) 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.
(e) 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.
(f) 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 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.
(g) 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
$26,557,000 plus 50% of net profit after taxes quarterly (exclusive of
losses).
(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 to
current liabilities of not less than .80 to 1.0
(e) A minimum net profit after tax at the end of each fiscal
quarter of at least $1.00.
(f) Fixed Charge Coverage Ratio: Maintain, on a rolling four
fiscal quarter basis, ratio of Consolidated Earnings Before Interest,
Taxes, Depreciation, Amortization and Rentals to the sum of (i)
interest (interest expense plus capitalized interest) in respect to all
indebtedness plus rentals payable under leases of real or personal or
mixed property and (ii) the current portion of long term debt at the
end of each quarter of not less than 2.00:1.00.
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 or any
commitment therefor, 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 $10,000,000 in any one fiscal year,
exclusive of acquisition financing. Provided that Borrower may make capital
expenditures or commitments therefor in connection with acquisitions in an
amount up to $3,000,000 without the Bank's approval (subject to the terms and
conditions of the Term Loan Credit Agreement of even date 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 immediate Event of Default if not paid 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; (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 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 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. ("Jo Ao Mo 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 Jo Ao Mo S for mediation, that is, an informal,
non-binding conference or conferences between the parties in which a
retired judge or justice for the Jo Ao Mo 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 Jo Ao Mo 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 Jo Ao Mo 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 Jo Ao Mo 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
Attn: Milan Mandaric Attn: Jillian E. Mathur
President and CEO Vice President and Manager
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: Christine Ewing
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.
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:/s/ Milan Mandaric BY:/s/ Jillian E. Mathur
------------------- ----------------------
Name: Milan Mandaric Name: Jillian E. Mathur
Title: President and CEO Title: Vice President
Sanwa Bank California
[GRAPHIC OMITTED]
TERM LOAN CREDIT AGREEMENT
($7,000,000.00)
THIS TERM LOAN CREDIT AGREEMENT (the "Agreement") is made and entered
into this 27th day of January, 1997 by and between SANWA BANK CALIFORNIA (the
"Bank") and Elexsys International, Inc. (the "Borrower") in connection with that
certain Accounts Receivable Credit Agreement ("Accounts Receivable Agreement")
by and between Bank and Borrower dated of even date herewith. Capitalized terms
used herein without definition shall have the same meanings herein as given to
them in the Accounts Receivable Agreement.
SECTION I
AGREEMENT TO LEND
1.01 Commitment to Lend. Subject to the terms and conditions of this
Agreement and so long as no Event of Default occurs, the Bank agrees to extend
to the Borrower the credit accommodations that follow.
1.02 Term Loan. The Bank agrees to lend on a nonrevolving basis to the
Borrower, upon the Borrower's request therefor made prior to January 31, 1998,
the lesser of 80% of the appraised quick sale liquidation value of the
Borrower's fixed assets or 7,000,000.00 (the "Term Loan"). The appraisal is
subject to approval by the Bank.
A. Purpose. Proceeds under the Term Loan shall be used to
support the Borrower's plan for growth via acquisitions.
B. Term Loan Account. The Bank shall maintain on its books a
record of account in which the Bank shall make entries for all payments
made and such other debits and credits as shall be appropriate in
connection with the Term Loan (the "Term Loan Account"). The Bank shall
provide the Borrower with a monthly statement of the Borrower's Term
Loan 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 30 days after the Borrower's receipt of any
such statement which it deems to be incorrect.
C. 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 January 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
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.
D Principal. The Borrower hereby promises and agrees to pay
principal in 36 equal installments commencing on January 31, 1998 if
the Variable Rate is selected, and to pay principal over a 36 month
amortization period if the Fixed Rate is selected, and the payment will
continue on the last day of each month thereafter up to and including
January 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.
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.
<PAGE>
SECTION 2
COLLATERAL
2.01 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) 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.
(c) 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.
(d) All documents, instruments and chattel paper now owned
or hereafter acquired by the Borrower.
(e) 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 3
CONDITIONS OF LENDING
3.01 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) Evidence that the merger between the Borrower and
Symtron has been completed.
(c) The Bank shall have conducted an audit of the Borrower's
books, records and operations and the Bank shall be satisfied as to the
condition thereof.
(d) Loan fees of 0.25% per annum of the unused portion of the
credit line, payable quarterly in arrears in addition to any out of
pocket cost or expenses incurred by the bank.
(e) 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.
3.02 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 5.06(e).
(b) The Bank shall have received such supplemental approvals,
opinions or documents as the Bank may reasonably request.
(c) Except as disclosed to Bank in writing, 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 and is in full
force and effect, assuming Bank has timely filed and taken all actions
necessary or desirable to perfect and protect such security interest.
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 4
REPRESENTATIONS AND WARRANTIES
The Borrower hereby makes the following representations and warranties to the
Bank as of the date of this Agreement
4.01 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.
4.02 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 or by-laws, if the Borrower is
a corporation; or (iv) violate any provision of its partnership agreement, if
the Borrower is a partnership.
4.03 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.
4.04 Fictitious Trade Styles: All fictitious trade styles used by the
Borrower in connection with its business operations and each state in which each
such fictitious trade style is used are listed below. The Borrower shall notify
the Bank within 30 days of effecting any change in the matters described below
or prior to using any other fictitious trade style at any future date,
indicating the trade style and state(s) of its use.
Trade Style State of Use
4.05 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.
4.06 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.
4.07 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.
4.08 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.
4.09 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.
4.10 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 5
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:
5.01 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.
5.02 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.
5.03 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.
5.04 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.
5.05 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 demand.
5.06 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) Not later than 45 days after the end of each month, the
Borrower's financial statement as of the end of such period.
(d) 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.
(e) 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.
(f) 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 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.
(g) 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.
5.07 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.
5.08 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.
5.09 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.
5.10 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.
5.11 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.
5.12 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.
5.13 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.
5.14 Financial Condition: Maintain at all times:
(a) A minimum Effective Tangible Net Worth of at least
$26,557,000 plus 50% of net profit after taxes quarterly (exclusive of
losses).
(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 to current liabilities of not less than .80 to 1.0.
(e) A minimum net profit after tax at the end of each fiscal
quarter of at least $1.00.
(f) Fixed Charge Coverage Ratio: Maintain, on a rolling four
fiscal quarter basis, ratio of Consolidated Earnings Before Interest,
Taxes, Depreciation, Amortization and Rentals to the sum of (i)
interest (interest expense plus capitalized interest) in respect to all
indebtedness plus rentals payable under leases of real or personal or
mixed property and (ii) the current portion of long term debt at the
end of each quarter of not less than 2.00:1.00.
5.15 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.
5.16 Capital Expense: Not make any fixed capital expenditure or any
commitment therefor, 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 $10,000,000 in any one fiscal year,
exclusive of acquisition financing. Provided that Borrower may make capital
expenditures or commitments therefor in connection with acquisitions in an
amount up to $3,000,000 without the Bank's approval (subject to the terms and
conditions of the Term Loan Credit Agreement of even date between the Bank and
the Borrower.
5.17 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.
5.18 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
related 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, threat, inquiry 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 the Borrower's use,
generation, manufacture, storage, handling, treatment, or disposal by
Borrower of hazardous or toxic wastes, substances or related materials
at the site.
SECTION 6
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:
6.01 Non-Payment: The Borrower shall fail to pay any Obligations
within 10 days of when due.
6.02 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 immediate Event of Default if not paid 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.
6.03 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.
6.04 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.
6.05 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.
6.06 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.
6.07 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 7
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:
7.01 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.
7.02 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.
7.03 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.
7.04 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.
7.05 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 will be responsible for its
own gross negligence or willful misconduct.
7.06 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 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.
7.07 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.
7.08 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 to the Bank within five (5) business days
of written notice, 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.
7.09 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.
7.10 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 8
MISCELLANEOUS
8.01 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.
8.02 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.
8.03 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.
8.04 Rights of the Bank With or Without 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 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.
8.05 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.
8.06 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. ("Jo Ao Mo 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 Jo Ao Mo S for mediation, that is, an informal,
non-binding conference or conferences between the parties in which a
retired judge or justice for the Jo Ao Mo 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 judgment 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 Jo Ao Mo 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 Jo Ao Mo 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 Jo Ao Mo 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.
8.07 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.
8.08 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.
8.09 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.
8.10 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
Attn: Milan Mandaric
President and CEO Attn: Jillian E, Mathur
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 444 Market Street, 22nd Floor
Palo Alto, CA 94306-2155 San Francisco, CA 94111
Attn: Christine Ewing
8.11 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.
8.12 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.
8.13 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.
8.14 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.
8.15 Headings: The headings herein set forth are solely for the
purpose of identification and have no legal significance.
8.16 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.
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:/s/Milan Mandaric BY:/s/Jillian E. Mathur
----------------- ---------------------
Name: Milan Mandaric Name: Jillian E. Mathur
Title: President and CEO Title: Vice President
LOAN AGREEMENT
Among
GE CAPITAL PUBLIC FINANCE, INC.
as Lender
and
BUSINESS FINANCE AUTHORITY
OF THE STATE OF NEW HAMPSHIRE
as Issuer
and
ELEXSYS INTERNATIONAL, INC.
as Borrower
Dated as of December 1, 1996
-------------------------------------------------
THIS AGREEMENT DOES NOT CONSTITUTE AN INDEBTEDNESS OF THE STATE OF NEW
HAMPSHIRE OR OF THE ISSUER EXCEPT TO THE EXTENT PERMITTED BY NEW HAMPSHIRE RSA
CHAPTER 162-I. ALL AMOUNTS OWED HEREUNDER ARE PAYABLE ONLY FROM THE SOURCES
EXPRESSLY PROVIDED HEREIN, AND NO PUBLIC FUNDS MAY BE USED FOR THAT PURPOSE.
-------------------------------------------------
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Table of Contents
Page
<S> <C> <C> <C>
ARTICLE I DEFINITIONS AND EXHIBITS............................................................................. 2
Section 1.01. Definitions............................................................................. 2
Section 1.02. Exhibits................................................................................ 4
Section 1.03. Rules of Construction................................................................... 5
Section 1.04. Combined Documents...................................................................... 5
ARTICLE II FINANCING OF PROJECT AND TERMS OF LOAN.............................................................. 5
Section 2.01. Completion of Project................................................................... 5
Section 2.02. Loan.................................................................................... 6
Section 2.03. Interest................................................................................ 6
Section 2.04. Payments................................................................................ 6
Section 2.05. Payment on Non-Business Days............................................................ 7
Section 2.06. Loan Payments To Be Unconditional....................................................... 7
Section 2.07. Prepayments............................................................................. 7
ARTICLE III CONDITIONS PRECEDENT............................................................................... 8
ARTICLE IV LIMITED OBLIGATION OF ISSUER; RIGHTS OF ISSUER; COVENANTS OF ISSUER................................. 10
Section 4.01. Limited Obligation...................................................................... 10
Section 4.02. Rights and Duties of Issuer............................................................. 10
Section 4.03. Costs and Expenses of Issuer............................................................ 11
Section 4.04. Matters to be Considered by Issuer...................................................... 11
Section 4.05. Actions by Issuer....................................................................... 12
Section 4.06. Indemnification by Borrower............................................................. 12
Section 4.07. Covenants of Issuer..................................................................... 12
ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER................................................ 12
ARTICLE VI LETTER OF CREDIT.................................................................................... 15
ARTICLE VII AFFIRMATIVE COVENANTS OF BORROWER.................................................................. 16
Section 7.01. Reporting Requirements.................................................................. 16
Section 7.02. Books and Records; Inspection and Examination........................................... 17
Section 7.03. Compliance With Laws; Environmental Indemnity........................................... 17
Section 7.04. Payment of Taxes and Other Claims....................................................... 18
Section 7.05. Maintenance of Project.................................................................. 18
Section 7.06. Insurance............................................................................... 18
Section 7.07. Preservation of Corporate Existence..................................................... 19
Section 7.08. Performance by Lender................................................................... 19
ARTICLE VIII NEGATIVE COVENANTS OF BORROWER.................................................................... 20
Section 8.01. Lien.................................................................................... 20
Section 8.02. Sale of Assets.......................................................................... 20
Section 8.03. Consolidation and Merger................................................................ 20
Section 8.04. Accounting.............................................................................. 20
Section 8.05. Transfers............................................................................... 21
Section 8.06. Use of the Project...................................................................... 21
ARTICLE IX [Reserved].......................................................................................... 21
ARTICLE X ASSIGNMENT AND SELLING............................................................................... 21
Section 10.01. Assignment by Lender................................................................... 21
Section 10.02. No Sale or Assignment by Borrower...................................................... 22
ARTICLE XI EVENTS OF DEFAULT AND REMEDIES...................................................................... 22
Section 11.01. Events of Default...................................................................... 22
Section 11.02. Remedies on Default.................................................................... 23
Section 11.03. [Reserved]............................................................................. 24
Section 11.04. No Remedy Exclusive.................................................................... 24
Section 11.05. Late Charge............................................................................ 24
ARTICLE XII MISCELLANEOUS...................................................................................... 24
Section 12.01. Costs and Expenses of Lender........................................................... 24
Section 12.02. Disclaimer of Warranties............................................................... 25
Section 12.03. Notices................................................................................ 25
Section 12.04. Further Assurance and Corrective Instruments........................................... 25
Section 12.05. Binding Effect; Time of the Essence.................................................... 25
Section 12.06. Severability........................................................................... 25
Section 12.07. Amendments............................................................................. 25
Section 12.08. Execution in Counterparts.............................................................. 26
Section 12.09. Applicable Law......................................................................... 26
Section 12.10. Captions............................................................................... 26
Section 12.11. Entire Agreement....................................................................... 26
Section 12.12. Usury.................................................................................. 26
Section 12.13. Waiver of Jury Trial................................................................... 26
</TABLE>
<PAGE>
30
LOAN AGREEMENT (REAL ESTATE)
Lender: GE Capital Public Finance, Inc.
.........Suite 470
.........8400 Normandale Lake Blvd.
.........Minneapolis, MN 55437
.........Telephone: (800) 346-3164
.........Telecopier: (612) 897-5601
Issuer: Business Finance Authority of the State of New Hampshire
.........14 Dixon Avenue, Suite 101
.........Concord, NH 03301
.........Telephone: (603) 271-2391
.........Telecopier: (603) 271-2396
Borrower: .........Elexsys International, Inc.
.........41 Simon Street
.........Nashua, NH 03060
.........Telephone: (603) 886-0066
.........Telecopier: (603) 886-9724
THIS LOAN AGREEMENT dated as of December 1, 1996 (this "Agreement")
among GE Capital Public Finance, Inc., a Delaware corporation, as lender (with
its successors and assigns, "Lender"), Business Finance Authority of the State
of New Hampshire, a body corporate and politic as an agency of the State of New
Hampshire (the "State"), as issuer ("Issuer"), and Elexsys International, Inc.,
a Delaware corporation, as borrower ("Borrower").
WHEREAS, Issuer is authorized and empowered under the laws of the
State, including New Hampshire RSA Chapter 162-I (the "Act"), to enter into
financing documents and security documents with respect to indebtedness of
Issuer to be used to finance eligible projects as described in the Act; and
WHEREAS, in furtherance of the purposes of the Act, Issuer proposes to
finance all or a portion of the Project (as hereinafter defined) pursuant to
this Agreement by obtaining a loan from Lender and lending the proceeds thereof
to Borrower; and
WHEREAS, Borrower proposes to borrow the proceeds of the loan made by
Lender to Issuer upon the terms and conditions set forth herein to finance the
Project; and
WHEREAS, Borrower shall make Loan Payments (as hereinafter defined)
directly to Lender as assignee of Issuer; and
WHEREAS, this Agreement shall not be deemed to constitute a debt or
liability or moral obligation of the State or any political subdivision thereof,
or a pledge of the faith and credit or taxing power of the State or any
political subdivision thereof, but shall be a special obligation of Issuer
payable solely from the Loan Payments payable hereunder by Borrower to Lender as
assignee of Issuer.
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, and in consideration of the premises contained in this
Agreement, Lender, Issuer and Borrower agree as follows:
ARTICLE I
DEFINITIONS AND EXHIBITS
Section 1.01. DefinitionsDefinitions. The following terms used herein
will have the meanings indicated below unless the context clearly requires
otherwise:
"Agreement" means this Agreement, including all exhibits hereto, as any
of the same may be supplemented or amended from time to time in accordance with
the terms hereof.
"Bank" means Sanwa Bank California, the issuer of the Letter of Credit.
"Borrower" means Elexsys International, Inc., a Delaware corporation.
"Business Day" means a day other than a Saturday or Sunday on which
banks are generally open for business in New York, New York.
"Certificate of Acceptance" means a Certificate of Acceptance, in
substantially the form set forth as Exhibit B hereto, whereby Borrower
acknowledges receipt in good condition of certain portions of the Project
identified therein and confirms the date of delivery thereof and certain other
matters.
"Code" means, collectively, the Internal Revenue Code of 1986, as
amended, and United States Treasury regulations promulgated thereunder.
"Default" means an event that, with giving of notice or passage of time
or both, would constitute an Event of Default as provided in Article XI hereof.
"Determination of Taxability" means any determination, decision or
decree by the Commissioner of Internal Revenue, or any District Director of
Internal Revenue or any court of competent jurisdiction, or an opinion of
counsel qualified in such matters obtained by Lender, that an Event of
Taxability shall have occurred. A Determination of Taxability also shall be
deemed to have occurred on the first to occur of the following:
(a) the date when Borrower files any statement, supplemental
statement, or other tax schedule, return or document, which discloses
that an Event of Taxability shall have occurred; or
(b) the effective date of any federal legislation enacted
after the date of this Agreement or promulgation of any income tax
regulation or ruling by the Internal Revenue Service that causes an
Event of Taxability after the date of this Agreement.
"Escrow Agent" means National City Bank of Minneapolis, as escrow agent
under the Escrow Agreement, and its successors and assigns permitted under the
Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement dated as of December 1,
1996, among Lender, Issuer, Borrower and Escrow Agent and, upon execution
thereof in accordance with the terms of the Escrow Agreement, the Bank.
"Escrow Fund" means the fund established and held by Escrow Agent
pursuant to the Escrow Agreement.
"Event of Taxability" means, if as the result of any act, failure to
act or use of the proceeds of the Loan, a change in use of the Project or any
misrepresentation or inaccuracy in any of the representations, warranties or
covenants contained in this Agreement or the Statement as to Tax Exempt Status
by Issuer or Borrower, or the enactment of any federal legislation after the
date of this Agreement or the promulgation of any income tax regulation or
ruling by the Internal Revenue Service after the date of this Agreement, the
Interest is or becomes includable in Lender's gross income for federal income
tax purposes.
"Gross-Up Rate" means, with respect to any Interest payment (including
payments made prior to the Event of Taxability), the rate necessary to calculate
an additional payment in an amount sufficient such that the sum of the Interest
payment plus the additional payments would, after reduced by the federal tax
(including interest and penalties) actually imposed thereon, equal the amount of
the Interest payment.
"Interest" means the portion of any Loan Payment designated as and
comprising interest as shown in Exhibit A hereto.
"Issuer" means the Business Finance Authority of the State of New
Hampshire, acting as issuer under this Agreement.
"Issuer's Service Charge" means payment to the issuer for its own use
of $20,250, payable on the date of execution and delivery hereof.
"Lender" means (i) GE Capital Public Finance, Inc., acting as lender
under this Agreement, (ii) any surviving, resulting or transferee corporation of
GE Capital Public Finance, Inc. and (iii) except where the context requires
otherwise, any assignee(s) of Lender.
"Letter of Credit" means the irrevocable standby letter of credit to be
issued by Bank in the initial amount of $2,742,727.50 in the form attached
hereto as Exhibit E, subject to reduction in accordance with Article VI and
Schedule 1 hereof.
"Loan" means the loan from Issuer to Borrower pursuant to this
Agreement.
"Loan Payments" means the loan payments payable by Borrower pursuant to
the provisions of this Agreement as specifically set forth in Exhibit A hereto.
As provided in Article II hereof, Loan Payments shall be payable by Borrower
directly to Lender, as assignee of Issuer, in the amounts and at the times as
set forth in Exhibit A hereto.
"Loan Proceeds" means the total amount of money to be paid pursuant to
Section 2.02 hereof by Lender to Escrow Agent for deposit and application in
accordance with the Escrow Agreement.
"Prepayment Amount" means the amount which Borrower must pay or cause
to be paid to Lender as assignee of Issuer in order to prepay the Loan, as
provided in Section 2.07 hereof, such amounts being 102% of the outstanding
Principal at the time of the prepayment, plus accrued interest and all other
amounts then due and owing hereunder.
"Principal" means the portion of any Loan Payment designated as and
comprising principal as set forth in Exhibit A hereto.
"Project" means the acquisition and renovation of certain manufacturing
facilities located at 41 Simon Street, Nashua, New Hampshire to be used in
connection with the Borrower's operations (including, to the extent permitted
pursuant to the Code without jeopardizing the tax-exempt status of the Interest,
certain items originally financed through internal advances of Borrower in
anticipation of obtaining permanent financing through Issuer).
The word "Project" also refers to the facilities which result or have
resulted from the foregoing activities.
"Project Costs" means the costs of carrying out the Project, including
repayment of external loans and internal advances for the same and including
interest prior to and during construction, but excluding general administrative
expenses, overhead of the Institution and interest on internal advances.
"State" means the State of New Hampshire.
"Statement as to Tax Exempt Status" means Borrower's Statement as to
Tax Exempt Status of the Loan of even date herewith.
"Substitute Bank" means the issuer of a Substitute Letter of Credit,
which issuer must be acceptable to Lender in its sole discretion.
"Substitute Letter of Credit" means an irrevocable standby letter of
credit in the form attached hereto as Exhibit E, in the amount required by
Article VI and Schedule 1 hereof, and issued by a Substitute Bank.
"UCC" means the Uniform Commercial Code as adopted and in
effect in the State.
Section 1.02. ExhibitsExhibits. The following schedule and exhibits are
attached hereto and made a part hereof:
Schedule 1: Schedule of Letter of Credit Reductions.
Schedule 2: Prohibited Assignees.
Exhibit A: Form of Schedule of Project and Loan Payments describing the
Project and setting forth the Loan Payments and Prepayment Prices.
Exhibit B: Form of Certificate of Acceptance.
Exhibit C: Form of opinion of counsel to Borrower (which may be
delivered as one or more opinions from separate counsel, provided that
collectively the form and substance thereof is consistent with Exhibit C).
Exhibit D: Form of opinion of bond counsel.
Exhibit E: Form of Letter of Credit.
Exhibit F: Form of Opinion of Counsel to Bank.
Section 1.03. Rules of ConstructionRules of Construction. (a) The
singular form of any word used herein, including the terms defined Section 1.01
hereof, shall include the plural, and vice versa. The use herein of a word of
any gender shall include correlative words of all genders.
(b) Unless otherwise specified, references to Articles, Sections and
other subdivisions of this Agreement are to the designated Articles, Sections
and other subdivision of this Agreement as originally executed. The words
"hereof," wherein, "hereunder" and words of similar import refer to this
Agreement as a whole.
(c) The headings or titles of the several articles and sections shall
be solely for convenience of reference and shall not affect the meaning,
construction or effect of the provisions hereof.
Section 1.04. Combined DocumentsCombined Documents. This Agreement, the
Escrow Agreement and the exhibits hereto together constitute the Financing
Document and the Security Document under the Act, and as evidence of
indebtedness, this Agreement and the exhibits hereto constitute a Bond under the
Act.
ARTICLE II
FINANCING OF PROJECT AND TERMS OF LOAN
Section 2.01. Completion of ProjectCompletion of Project. The Borrower
has acquired the Project site and building thereon prior to the execution and
delivery of this Agreement and will substantially complete the Project no later
than September 30, 1997. Borrower shall bear the risk of loss with respect to
any loss or claim relating to any portion of the Project and shall be liable in
respect of its duties and obligations in accordance with any contract entered
into in connection with the Project, and neither Lender nor Issuer shall assume
any such risk of loss or liability.
Section 2.02. LoanLoan. Lender hereby agrees, subject to the terms and
conditions of this Agreement, to make a loan to Issuer in the amount of
$2,700,000; Issuer hereby agrees, subject to the terms and conditions of this
Agreement, to borrow such amount from Lender and to lend such amount to
Borrower; and Borrower hereby agrees to borrow such amount from Issuer. Upon
fulfillment of the conditions set forth in Article III hereof, Lender shall
deposit the Loan Proceeds on behalf of Issuer in the Escrow Fund to be held,
invested and disbursed as provided in the Escrow Agreement. Issuer's obligation
to repay the loan from Lender, and Borrower's obligation to repay the Loan,
shall commence, and interest shall begin to accrue, on the date that Loan
Proceeds are deposited in the Escrow Fund.
Section 2.03. InterestInterest. The principal amount of the loan from
Lender to Issuer and the Loan hereunder outstanding from time to time shall bear
interest (computed on the basis of actual days elapsed in a 360-day year) at the
rate of 6.33% per annum. Interest accruing on the principal balance of such
loans outstanding from time to time shall be payable as provided in Exhibit A
hereto and upon earlier demand in accordance with the terms hereof or prepayment
in accordance with Section 2.07 hereof. Upon the occurrence of a Determination
of Taxability, (i) Borrower shall, with respect to future interest payments,
begin making Loan Payments calculated at the Gross-Up Rate and (ii), in
addition, Borrower shall make within 30 days of demand of Lender a payment to
Lender sufficient to supplement prior Loan Payments to the Gross-Up Rate.
Section 2.04. PaymentsPayments. Issuer shall pay the principal of,
premium, if any in accordance with Section 2.07 hereof, and interest on the loan
from Lender to Issuer, but only out of the amounts paid by Borrower pursuant to
this Agreement. Borrower shall pay to Lender, as assignee of Issuer, Loan
Payments, in the amounts and on the dates set forth in Exhibit A hereto. As
security for its obligation to pay the principal of, premium, if any in
accordance with Section 2.07 hereof, and interest on the loan from Lender,
Issuer assigns to Lender all of Issuer's right to receive Loan Payments from
Borrower hereunder, all of Issuer's rights hereunder, and Issuer irrevocably
constitutes and appoints Lender and any present or future officer or agent of
Lender as its lawful attorney, with full power of substitution and
resubstitution, and in the name of Issuer or otherwise, to collect the Loan
Payments and any other payments due hereunder and to sue in any court for such
Loan Payments or other payments, to exercise all rights hereunder, and to
withdraw or settle any claims, suits or proceedings pertaining to or arising out
of this Agreement upon any terms; provided, however, that such assignment shall
not include Issuer's rights under Article IV and Section 7.06(d) hereof and its
right to notice pursuant to Section 12.03 hereof. Such Loan Payments and other
payments shall be made by Borrower directly to Lender, as Issuer's assignee, and
shall be credited against Issuer's payment obligations hereunder. No provision,
covenant or agreement contained in this Agreement or any obligation herein
imposed on Issuer, or the breach thereof, shall constitute or give rise to or
impose upon Issuer a pecuniary liability, a charge upon its general credit or a
pledge of its general revenues. In making the agreements, provisions and
covenants set forth in this Agreement, Issuer has not obligated itself except
with respect to the application of the Loan Payments to be paid by Borrower
hereunder. All amounts required to be paid by Borrower hereunder shall be paid
in lawful money of the United States of America in immediately available funds.
No recourse shall be had by Lender or Borrower for any claim based on this
Agreement against any director, officer, employee or agent of Issuer alleging
personal liability on the part of such person, unless such claim is based on the
willful dishonesty of or intentional violation of law by such person.
Section 2.05. Payment on Non-Business DaysPayment on Non-Business Days.
Whenever any payment to be made hereunder shall be stated to be due on a day
which is not a Business Day, such payment may be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of interest or the fees hereunder, as the case may be.
Section 2.06. Loan Payments To Be UnconditionalLoan Payments To Be
Unconditional. The obligations of Borrower to make the Loan Payments required
under this Article II and to make other payments hereunder and to perform and
observe the covenants and agreements contained herein shall be absolute and
unconditional in all events, without abatement, diminution, deduction, setoff or
defense for any reason, including (without limitation) any damage to or defect
in the Project or any accident, condemnation, destruction or unforeseen
circumstances. Notwithstanding any dispute between Borrower and any of Issuer,
Lender, any vendor or any other person, Borrower shall make all Loan Payments
when due and shall not withhold any Loan Payments pending final resolution of
such dispute, nor shall Borrower assert any right of set-off or counterclaim
against its obligation to make such payments required under this Agreement.
Section 2.07. PrepaymentsPrepayments. (a) Borrower may, in its
discretion, prepay the Loan in whole at any time after the third anniversary of
the date hereof by paying the applicable Prepayment Amount.
(b) Borrower shall prepay the Loan in whole or in part at any time
pursuant to Article IX hereof by paying the applicable Prepayment Amount.
(c) Borrower shall prepay the Loan in full immediately upon demand of
Lender after the occurrence and during the continuance of an Event of Default as
set forth in Article XI hereof by paying the applicable Prepayment Amount.
(d) Borrower shall prepay the Loan in full immediately upon demand of
Lender after the occurrence of a Determination of Taxability by paying the
applicable Prepayment Amount, plus an amount necessary to supplement the prior
Loan Payments to the Gross-Up Rate.
(e) Borrower shall prepay the Loan in full immediately upon demand of
Lender if the Letter of Credit is not renewed or replaced in accordance with the
provisions of Article VI.
(f) The Loan shall be repaid in part with funds remaining in the Escrow
Fund upon termination of the Escrow Agreement, as provided in Sections 2.03 or
2.04 of the Escrow Agreement, without premium or penalty.
(g) If Lender or any assignee of Lender assigns this Agreement to a
competitor of Borrower (whether or not such competitor is listed in Schedule 2),
as reasonably determined by Borrower, Borrower may prepay the Loan in full
without premium or penalty by paying the outstanding principal at the time of
the prepayment plus accrued interest and all other amounts then due and owing
hereunder.
Upon any prepayment in part of the Loan, the prepayment shall be
applied first to Interest accrued thereon and next to Principal in the inverse
order of maturity.
ARTICLE III
CONDITIONS PRECEDENT
Lender's agreement to make the loan to Issuer hereunder, Issuer's
agreement to accept the loan and to make the loan to Borrower hereunder and
Lender's agreement to deposit the Loan Proceeds in the Escrow Fund, shall be
subject to the condition precedent that Lender and Issuer shall have received
all of the following, each in form and substance satisfactory to Lender and
Issuer:
(a) This Agreement, properly executed on behalf of Issuer, Borrower and
Lender, and each of the Exhibits hereto properly completed.
(b) The Statement as to Tax Exempt Status, properly executed on behalf
of Borrower.
(c) The Escrow Agreement, properly executed on behalf of Issuer,
Lender, Borrower, Escrow Agent and Bank.
(d) A certificate of an authorized officer of Borrower, certifying as
to (i) the resolutions authorizing the execution, delivery and performance of
this Agreement, the Escrow Agreement and the Statement as to Tax Exempt Status
and any related documents, and (ii) the signatures of the officers or agents of
Borrower authorized to execute and deliver this Agreement, the Escrow Agreement
and the Statement as to Tax Exempt Status and other instruments, agreements and
certificates on behalf of Borrower.
(e) Currently certified copies of the certificate of incorporation of
Borrower.
(f) A Certificate of Good Standing issued as to Borrower by the
Secretary of the State of the state of Borrower's formation, not more than
thirty (30) days prior to the date hereof.
(g) A completed and executed Form 8038 or evidence of filing thereof
with the Secretary of Treasury.
(h) A resolution or evidence of other official action taken by or on
behalf of Issuer to authorize the transactions contemplated hereby.
(i) Evidence that the financing of the Project has been approved by the
"applicable elected representative" of State after a public hearing held upon
reasonable notice.
(j) An opinion of counsel to Borrower, addressed to Lender and Issuer,
substantially in the form attached hereto as Exhibit C (which may be delivered
as one or more opinions from separate counsel, provided that collectively the
form and substance thereof is consistent with Exhibit C).
(k) An opinion of bond counsel, addressed to Lender, Issuer and
Borrower, substantially in the form attached hereto as Exhibit D.
(l) Payment of Lender's fees, commissions and expenses required by
Section 12.01 hereof.
(m) Payment of Issuer's fees, commissions and expenses required by
Section 4.03 hereof.
(n) A copy of the notice of the name, address and telephone number of
Lender, as the institution providing construction funds, posted at the Project
site by the Borrower or its agent and certified as to its posting date, all in
compliance with New Hampshire RSA 447:12-b.
(o) A copy of a Phase I environmental audit on the Project site with no
adverse findings and a copy of a Phase II audit, if completed.
(p) A resolution of the Governor and Council of New Hampshire making
the findings required by Section 9 of the Act.
(q) A no arbitrage certification of Issuer pursuant to Treas. Reg.
ss.1.148-2(b)(2).
(r) Any other documents or items reasonably required by Lender or
Issuer.
Lender's agreement to authorize any disbursement from the Escrow Fund
shall be subject to the further conditions precedent that on the date thereof:
(s) Lender shall have received each of the items required for a
disbursement pursuant to the Escrow Agreement;
(t) Lender shall have received in form and substance satisfactory to
Lender invoices and bills of sale relating to the Project, evidence of payment
thereof and, if applicable, evidence of official intent to reimburse such
payment as required by the Code;
(u) the representations and warranties contained in Article V hereof
are correct on and as of the date of such loan, as though made on and as of such
date, except to the extent that such representations and warranties relate
solely to an earlier date and except to the extent otherwise disclosed in
writing to Lender specifically referencing this paragraph and, in the case of
any such exception, is acceptable to Lender;
(v) no event has occurred and is continuing, or would result from such
loan to Issuer or the Loan which constitutes a Default, an Event of Default or a
Determination of Taxability; and
(w) Lender shall have received the Letter of Credit substantially in
the form of Exhibit E and an opinion of counsel to the Bank substantially in the
form of Exhibit F.
ARTICLE IV
LIMITED OBLIGATION OF ISSUER; RIGHTS OF ISSUER;
COVENANTS OF ISSUER
Section 4.01. Limited ObligationLimited Obligation. Under no
circumstances shall Issuer be obligated directly or indirectly to pay costs of
the Project, principal of or premium, if any, and interest on the Loan, or
expenses of operation, maintenance and upkeep of the Project except from Loan
Proceeds, exclusive of funds received hereunder by Issuer for its own use. This
Agreement does not create any debt of the State with respect to the Project
other than a special obligation of Issuer acting on behalf of the State pursuant
to the Act. Nothing contained herein shall in any way obligate the State to
raise any money by taxation or use other public funds for any purpose in
relation to the Project. Neither the State nor Issuer shall pay or promise to
pay any debt or meet any financial obligation to any person at any time in
relation to the Project except (i) from moneys received or to be received under
the provisions hereof or derived from the exercise of Issuer's right hereunder,
other than moneys received for its own purposes, or (ii) as may be required by
law other than the provisions of the Act. Nothing contained in this Agreement
shall be construed to require or authorize Issuer to operate the Project itself
or to conduct any business enterprise in connection therewith.
Section 4.02. Rights and Duties of IssuerRights and Duties of Issuer.
(a) Remedies of Issuer. Notwithstanding any contrary provision in this
Agreement, Issuer shall have the right to take any action or make any decision
with respect to proceedings for indemnity against the liability of Issuer and
for collection or reimbursement from sources other than moneys or property held
under this Agreement or subject to the lien hereof. Issuer may enforce its
rights under this Agreement which have not been assigned to Lender by legal
proceedings for the specific performance of any obligation contained herein or
for the enforcement of any other appropriate legal or equitable remedy, and may
recover damages caused by any breach by Borrower of its obligations to Issuer
under this Agreement, including court costs, reasonable attorney's fees and
other costs and expenses incurred in enforcing such obligations.
(b) Limitations on Actions. Issuer shall not be required to monitor the
financial condition of Borrower or the physical condition of the Project and,
unless otherwise expressly provided, shall not have any responsibility with
respect to notices, certificates or other documents filed with it hereunder.
Issuer shall not be required to take notice of any breach or default except when
given notice thereof by Lender. Issuer shall not be responsible for the payment
of any rebate to the United States under IRC ss. 148(f). Issuer shall not be
required to take any action unless indemnity reasonably satisfactory to it is
furnished for expenses or liability to be incurred therein (other than the
giving of notice). Issuer, upon written request of Lender, and upon receipt of
reasonable indemnity for expenses or liability, shall cooperate to the extent
reasonably necessary to enable Lender to exercise any power granted to Lender by
this Agreement. Issuer shall be entitled to reimbursement pursuant to Section
4.03 to the extent that it acts without previously obtaining full indemnity.
(c) Responsibility. Issuer shall be entitled to the advice of counsel
(who may be counsel for any party, and shall be wholly protected as to any
action taken or omitted to be taken in good faith in reliance on such advice.
Issuer may rely conclusively on any notice, certificate or other document
furnished to it under this Agreement and reasonably believed by it to be
genuine. Issuer shall not be liable for any action taken by it in good faith and
reasonably believed by it to be within the discretion or power conferred upon
it, or in good faith omitted to be taken by it and reasonably believed to be
beyond such discretion or power, or taken by it pursuant to any direction or
instruction by which it is governed under this Agreement or omitted to be taken
by it by reason of the lack of direction or instruction required for such action
under this Agreement, or be responsible for the consequences of any error of
judgment reasonably made by it. When any payment, consent or other action by
Issuer is called for by this Agreement, Issuer may defer such action pending
such investigation or inquiry or receipt of such evidence, if any, as it may
require in support thereof. A permissive right or power to act shall not be
construed as a requirement to act, and no delay in the exercise of a right or
power shall affect the subsequent exercise thereof. Issuer shall in no event be
liable for the application or misapplication of funds, or for other acts or
defaults by any person or entity except by its own directors, officers and
employees. No recourse shall be had by Borrower or Lender for any claim based on
this Agreement against any director, officer, employee or agent of Issuer unless
such claim is based upon the bad faith, fraud or deceit of such person. No
covenant, obligation or agreement of Issuer contained in this Agreement shall be
deemed to be a covenant, obligation or agreement of any present or future
director, officer, employee or agent of Issuer in his individual capacity, and
no person executing this Agreement shall be liable personally thereon or be
subject to any personal liability or accountability by reason of the issuance
thereof.
Section 4.03. Costs and Expenses of IssuerCosts and Expenses of Issuer.
Borrower shall pay when due the Issuer's Service Charge and shall prepay or
reimburse Issuer within thirty (30) days after notice for all expenses
(including reasonable attorney's fees) incurred by Issuer in connection with the
execution, delivery, performance and enforcement under this Agreement and all
expenses reasonably incurred or advances reasonably made in the exercise of
Issuer's rights or their performance of its obligations hereunder. Any fees,
expenses, reimbursements or other charges which Issuer may be entitled to
receive from the Borrower hereunder, if not paid within ten (10) days of when
they are due, shall bear a late charge equal to 5% of the amount overdue, and if
not paid within sixty (60) days, shall bear interest at 12% per annum.
Section 4.04. Matters to be Considered by IssuerMatters to be
Considered by Issuer. In approving, concurring in or consenting to action or in
exercising any discretion or in making any determination under this Agreement,
Issuer may consider the interests of the public, which shall include the
anticipated effect of any transaction on tax revenues and employment, as well as
the interests of the other parties hereto; provided, however, nothing herein
shall be construed as conferring on any person other than the other parties any
right to notice, hearing or participation in Issuer's consideration, and nothing
in this section shall be construed as conferring on any of them any right
additional to those conferred elsewhere herein. Subject to the foregoing, Issuer
will not unreasonably withhold any approval or consent to be given by it
hereunder.
Section 4.05. Actions by IssuerActions by Issuer. Any action which may
be taken by Issuer hereunder shall be deemed sufficiently taken if taken on its
behalf by its Chairman, its Vice Chairman or its Executive Director or by any
other director, officer or agent whom it may designate from time to time.
Section 4.06. Indemnification by BorrowerIndemnification by Borrower.
Borrower, regardless of any agreement to maintain insurance, shall indemnify and
save harmless, to the fullest extent permitted by law, Issuer and its directors,
officers, employees and agents from and against (a) any and all claims by or on
behalf of any person arising out of (1) any condition of the Project, or (2) the
acquisition, construction, reconstruction, improvement, use, occupancy or
operation of the Project or any work or anything whatsoever done or omitted to
be done on or about the Project, or (3) any accident, injury or damage
whatsoever to any person occurring on or about the Project, or (4) any breach or
default by Borrower of or in any of its obligations hereunder, or (5) any act or
omission of Borrower or any of its agents, contractors, servants, employees or
licensees, or (6) the offering, issuance, sale or any resale of this Agreement
or the Loan, but only to the extent permitted by law, and (b) any and all costs,
counsel fees, expenses or liabilities reasonably incurred in connection with any
such claim or any action or proceeding brought thereon. In case any action or
proceeding is brought against Issuer or any such director, officer, employee or
agent by reason of any such claim, Borrower upon notice from the affected party
shall resist or defend such action or proceeding. Subject to the foregoing, the
Issuer shall cooperate and join with Borrower, at the expense of Borrower, as
may be required in connection with any action or defense by Borrower.
Section 4.07. Covenants of IssuerCovenants of Issuer.
Issuer covenants for the benefit of Lender, as follows:
(a) Issuer will not pledge, mortgage or assign this Agreement (except
for the pledge, mortgage or assignment of rights or privileges not assigned to
Lender) or its duties and obligations hereunder to any person, firm or
corporation, except as provided under the terms hereof.
(b) Issuer will submit or cause to be submitted to the Secretary of the
Treasury a Form 8038 (or other information reporting statement) at the time and
in the form required by the Code.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER
Borrower represents, warrants and covenants for the benefit of Lender
and Issuer, as follows:
(a) Borrower is a corporation duly organized, validly existing and in
good standing under the laws of Delaware, has power to enter into this Agreement
and by proper action has duly authorized the execution and delivery of this
Agreement, the Escrow Agreement and the Statement as to Tax Exempt Status.
Borrower is in good standing and is duly licensed or qualified to transact
business in the State and in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by it makes
such licensing or qualification necessary.
(b) Borrower has been fully authorized to execute and deliver this
Agreement, the Escrow Agreement and the Statement as to Tax Exempt Status under
the terms and provisions of the resolution of its board of directors by
appropriate official approval, and further represents, covenants and warrants
that all requirements have been met, and procedures have occurred in order to
ensure the enforceability of this Agreement, the Escrow Agreement and the
Statement as to Tax Exempt Status and this Agreement, the Escrow Agreement and
the Statement as to Tax Exempt Status have been duly authorized, executed and
delivered.
(c) The officer of Borrower executing this Agreement, the Escrow
Agreement and the Statement as to Tax Exempt Status and any related documents
has been duly authorized to execute and deliver this Agreement, the Escrow
Agreement and the Statement as to Tax Exempt Status and such related documents
under the terms and provisions of a resolution of Borrower's board of directors.
(d) This Agreement, the Escrow Agreement and the Statement as to Tax
Exempt Status constitute valid and legally binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms, except
to the extent limited by bankruptcy, reorganization or other laws of general
application relating to effecting the enforcement of creditors' rights.
(e) The execution and delivery of this Agreement, the Escrow Agreement
and the Statement as to Tax Exempt Status, the consummation of the transactions
contemplated hereby and the fulfillment of the terms and conditions hereof do
not and will not violate any law, rule, regulation or order, conflict with or
result in a breach of any of the terms or conditions of any corporate
restriction or of any agreement or instrument to which Borrower is now a party
and do not and will not constitute a default under any of the foregoing or
result in the creation or imposition of any liens, charges or encumbrances of
any nature upon any of the property or assets of Borrower contrary to the terms
of any instrument or agreement.
(f) The authorization, execution, delivery and performance of this
Agreement or the Escrow Agreement by Borrower do not require submission to,
approval of, or other action by any governmental authority or agency, which
action with respect to this Agreement or the Escrow Agreement has not been taken
and which is final and non-appealable.
(g) There is no action, suit, proceeding, claim, inquiry or
investigation, at law or in equity, before or by any court, regulatory agency,
public board or body pending or, to the best of Borrower's knowledge, threatened
against or affecting Borrower, challenging Borrower's authority to enter into
this Agreement or the Escrow Agreement or to execute and deliver the Statement
as to Tax Exempt Status or any other action wherein an unfavorable ruling or
finding would adversely affect the enforceability of this Agreement, the Escrow
Agreement or the Statement as to Tax Exempt Status or the exclusion of the
Interest from gross income for federal tax purposes under the Code, or would
materially and adversely affect any of the transactions contemplated by this
Agreement.
(h) The Project is located in an area properly zoned for the Project's
current and anticipated use and the Project will not violate any applicable
zoning, land use, environmental or similar law or restriction. The Borrower has
all licenses and permits for the operation of the Project except building
permits, which the Borrower expects to obtain in the ordinary course.
(i) The Project is of the type authorized and permitted to be financed
under the Act.
(j) Borrower owns or will own the Project and intends to operate the
Project or cause the Project to be operated, as a "project," within the meaning
of the Act, until the date on which all of the Loan Payments have been fully
paid or the applicable Prepayment Amount has been fully paid.
(k) Borrower will not take any action that would cause the Interest to
become includable in gross income of the recipient for federal income tax
purposes under the Code, and Borrower will take and will cause its officers,
employees and agents to take all affirmative actions legally within its power
necessary to ensure that the Interest does not become includable in gross income
of the recipient for federal income tax purposes under the Code (including,
without limitation, the calculation and payment of any rebate required to
preserve such exclusion).
(l) The Borrower has heretofore furnished to Lender the audited
financial statement of the Borrower for its fiscal year ended September 30, 1995
and the unaudited financial statement of the Borrower for the fiscal year ended
September 30, 1996, and those statements fairly present the financial condition
of the Borrower on the dates thereof and the results of its operations and cash
flows for the periods then ended and were prepared in accordance with generally
accepted accounting principles. Since the date of the most recent financial
statements, there has been no material adverse change in the business,
properties or condition (financial or otherwise) of the Borrower.
(m) Borrower has paid or caused to be paid to the proper authorities
when due all federal, state and local taxes required to be withheld by it.
Borrower has filed all federal, state and local tax returns which are required
to be filed, and Borrower has paid or caused to be paid to the respective taxing
authorities all taxes as shown on said returns or on any assessment received by
it to the extent such taxes have become due.
(n) Borrower has or will have good and absolute title to the Project,
free and clear of all mortgages, security interests, liens and encumbrances
except for the security interest created for the benefit of the Bank securing
the Letter of Credit.
(o) All financial and other information provided to Lender by or on
behalf of Borrower in connection with Borrower's request for the Loan
contemplated hereby is true and correct in all material respects and, as to
projections, valuations or pro forma financial statements, present a good faith
opinion as to such projections, valuations and pro forma condition and results.
(p) Borrower will aid and assist Issuer in connection with preparing
and submitting to the Secretary of the Treasury a Form 8038 (or other applicable
information reporting statement) at the time and in the form required by the
Code.
(q) The representations contained in the Statement as to Tax Exempt
Status are true and correct as of the date hereof. Borrower will comply fully at
all times with the Statement as to Tax Exempt Status, and Borrower will not take
any action, or omit to take any action, which, if taken or omitted,
respectively, would violate the Statement as to Tax Exempt Status.
(r) Expenses for work done by officers or employees of Borrower in
connection with the Project will be included as a Project Cost, if at all, only
to the extent (i) such persons were specifically employed for such particular
purpose, (ii) the expenses do not exceed the actual cost thereof and (iii) such
expenses are treated or capable of being treated (whether or not so treated) on
the books of Borrower as a capital expenditure in conformity with generally
accepted accounting principles applied on a consistent basis.
(s) Any costs incurred with respect to that part of the Project paid
from the Loan Proceeds shall be treated or capable of being treated on the books
of Borrower as capital expenditures in conformity with generally accepted
accounting principles applied on a consistent basis.
(t) No part of the Loan Proceeds will be used to finance inventory or
rolling stock or will be used for working capital or to finance any other cost
not constituting a Project Cost.
(u) No person other than Borrower is in occupancy or possession of any
portion of the Project, except as described in the Statement as to Tax Exempt
Status.
(v) The Project is land or property of the character subject to the
allowance for depreciation under Section 167 of the Code.
ARTICLE VI
LETTER OF CREDIT
Borrower hereby agrees to deliver or cause to be delivered to Lender
the Letter of Credit as additional security for the prompt payment and
performance of all of Borrower's obligations under this Agreement. Borrower
hereby further agrees to deliver to Lender not later than sixty (60) days prior
to any scheduled expiration date of the Letter of Credit or any Substitute
Letter of Credit (a) evidence satisfactory to Lender that such Letter of Credit
or Substitute Letter of Credit has been renewed on terms acceptable to Lender or
(b) a Substitute Letter of Credit. If at any time (x) the rating of Bank by LACE
Financial Corporation is below "B-" or (y) the rating of a Substitute Bank is
below the rating B. Borrower shall within 30 days provide to Lender a Substitute
Letter of Credit. A failure by Borrower to fully and timely perform any
obligation under this Article VI or the failure of Bank or any Substitute Bank
to fully and timely honor any draft under the Letter of Credit or any Substitute
Letter of Credit, as the case may be, shall constitute an immediate Event of
Default hereunder.
ARTICLE VII
AFFIRMATIVE COVENANTS OF BORROWER
So long as the Loan shall remain unpaid, Borrower will comply with the
following requirements, unless Lender shall otherwise consent in writing:
Section 7.01. Reporting RequirementsReporting Requirements. Borrower
will deliver, or cause to be delivered, to Lender each of the following, which
shall be in form and detail reasonably acceptable to Lender:
(a) as soon as available, and in any event within 120 days after the
end of each fiscal year of the Borrower, audited financial statements of the
Borrower with the unqualified opinion of independent certified public
accountants selected by the Borrower and acceptable to Lender which annual
financial statements shall include the balance sheet of the Borrower as at the
end of such fiscal year and the related statements of income, retained earnings
and cash flows of the Borrower for the fiscal year then ended, all in reasonable
detail and prepared in accordance with generally accepted accounting principles
applied on a basis consistent with the accounting practices applied in the
financial statements referred to in Article V hereof, together with a
certificate of the chief financial officer of the Borrower stating that such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with the accounting
practices reflected in the annual financial statements referred to in Article V
hereof and that to the best of such officer's knowledge, there has not occurred
any Default or Event of Default hereunder; or if such a Default or Event of
Default has occurred stating in reasonable detail the facts with respect
thereto;
(b) as soon as available and in any event within 60 days after the end
of each fiscal quarter of the Borrower, an unaudited/internal balance sheet and
statements of income and retained earnings of the Borrower as at the end of and
for such quarter and for the year to date period then ended, in reasonable
detail and stating in comparative form the figures for the corresponding date
and periods in the previous year, all prepared in accordance with generally
accepted accounting principles applied on a basis consistent with the accounting
practices reflected in the financial statements referred to in Article V hereof
and certified by the chief financial officer of the Borrower, subject to
year-end adjustments; and accompanied by a certificate of that officer stating
(i) that such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with the
accounting practices reflected in the financial statements referred to in
Article V hereof, and (ii) to the best of such officer's knowledge no Default or
Event of Default hereunder not theretofore reported and remedied and, if such a
Default or Event of Default has occurred so, stating in reasonable detail the
facts with respect thereto;
(c) immediately after the commencement thereof, notice in writing of
all material litigation and of all proceedings before any governmental or
regulatory agency affecting Borrower of the type described in Article V hereof
or which seek a monetary recovery against Borrower in excess of $100,000;
(d) as promptly as practicable (but in any event not later than five
(5) Business Days) after an officer of Borrower obtains knowledge of the
occurrence of any event that constitutes a Default or an Event of Default
hereunder, notice of such occurrence, together with a detailed statement by a
responsible officer of Borrower of the steps being taken by Borrower to cure the
effect of such Default or Event of Default;
(e) promptly upon knowledge thereof, notice of any loss or destruction
of or damage to the Project or of any material adverse change in the Project;
(f) promptly after the amending thereof, copies of any and all
material amendments to its certificate of incorporation, articles of
incorporation or bylaws;
(g) promptly upon knowledge thereof, notice of any material violation
by Borrower of any law, rule or regulation; and
(h) promptly upon knowledge thereof, notice of any material adverse
change in the financial or operating condition of Borrower.
Section 7.02. Books and Records; Inspection and Examination.Books and
Records; Inspection and Examination. Borrower will keep accurate books of record
and account for itself pertaining to the Project and pertaining to Borrower's
business and financial condition and such other matters as Lender may from time
to time request in which true and complete entries will be made in accordance
with generally accepted accounting principles consistently applied and, upon
request of Lender, will permit any officer, employee, attorney or accountant for
Lender to audit, review, make extracts from, or copy any and all corporate and
financial books, records and properties of Borrower at all times (but not more
often than twice per calendar year) during ordinary business hours and following
reasonable notice to Borrower, and to discuss the affairs of Borrower with any
of its directors, officers, employees or agents. Borrower will permit Lender, or
its employees, accountants, attorneys or agents, to examine and copy any or all
of its records and to examine and inspect the Project at any time during
Borrower's business hours, following reasonable notice to Borrower.
Section 7.03. Compliance With Laws; Environmental IndemnityCompliance
With Laws; Environmental Indemnity. Borrower will (a) comply with the
requirements of applicable laws and regulations, the non-compliance with which
would materially and adversely affect its business or its financial condition,
(b) comply with all applicable environmental, hazardous waste or substance,
toxic substance and underground storage laws and regulations and obtain any
permits, licenses or similar approvals required by any such laws or regulations,
the failure to comply with which or to obtain would have a material adverse
effect on the Borrower and (c) use and keep the Project, and will require that
others use and keep the Project, only for lawful purposes, without violation of
any federal, state or local law, statute or ordinance the violation of which
would have a material adverse effect on Borrower. Borrower shall secure all
permits and licenses, if any, necessary for the acquisition and operation of the
Project. Borrower shall comply in all respects (including, without limitation,
with respect to the use, maintenance and operation of the Project) with all laws
of the jurisdictions in which its operations involving the Project may extend
and of any legislative, executive, administrative or judicial body exercising
any power or jurisdiction over the Project or its interest or rights under this
Agreement the failure to comply with which would have a material adverse effect
on the Borrower. Borrower will indemnify, defend and hold Lender and Issuer
harmless from and against any claims, loss or damage to which Lender or Issuer
may be subjected as a result of any past, present or future existence, use,
handling, storage, transportation or disposal of any hazardous waste or
substance or toxic substance by Borrower or on the Project. This indemnification
shall survive the termination of this Agreement and payment of the indebtedness
hereunder.
Section 7.04. Payment of Taxes and Other ClaimsPayment of Taxes and
Other Claims. Borrower will pay or discharge, when due, (a) all taxes,
assessments and governmental charges levied or imposed upon it or upon its
income or profits, upon any properties belonging to it (including, without
limitation, the Project) or upon or against the creation, perfection or
continuance of the security interest created pursuant to this Agreement, prior
to the date on which penalties attach thereto, (b) all federal, state and local
taxes required to be withheld by it, and (c) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien or charge
upon any properties of Borrower; provided, that Borrower shall not be required
to pay any such tax, assessment, charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate proceedings. Borrower
will pay, as the same respectively come due, all taxes and governmental charges
of any kind whatsoever that may at any time be lawfully assessed or levied
against or with respect to the equipment, as well as all gas, water, steam,
electricity, heat, power, telephone, utility and other charges incurred in the
operation, maintenance, use, occupancy and upkeep of the Project; provided, that
Borrower shall not be required to pay any such tax, assessment or charge whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings.
Section 7.05. Maintenance of ProjectMaintenance of Project. (a)
Borrower shall, at its own expense, maintain, preserve and keep the Project in
good repair, working order and condition, and shall from time to time make all
repairs and replacements necessary to keep the Project in such condition, and in
compliance with state and federal laws, ordinary wear and tear excepted. Neither
Lender nor Issuer shall have any responsibility in any of these matters, or for
the making of improvements or additions to the Project.
(b) Borrower will defend the Project against all claims or demands of
all persons (other than the Bank) claiming the Project or any interest therein.
(c) Borrower will keep the Project free and clear of all security
interests, liens and encumbrances except the security interest created for the
benefit of the Bank.
Section 7.06. InsuranceInsurance. (a) Borrower shall, at its own
expense, procure and maintain continuously in effect: (i) public liability
insurance for personal injuries, death or damage to or loss of property arising
out of or in any way relating to the Project, with a coverage limit of not less
than $1,000,000 per occurrence and (ii) insurance against such hazards as Lender
may reasonably require, including, but not limited to, all-risk casualty and
property insurance, in an amount equal to the greater of the full replacement
cost of the Project or the applicable Prepayment Amount.
(b) If required by State law, Borrower shall carry workers'
compensation insurance covering all employees on, in, near or about the Project,
and upon request, shall furnish to Lender certificates evidencing such coverage.
(c) All insurance policies required by this Article shall be taken out
and maintained with responsible and reputable insurance companies authorized to
transact business in the State, and shall contain a provision that the insurer
shall not cancel or revise coverage thereunder without giving written notice to
the insured parties at least thirty (30) days before the cancellation or
revision becomes effective. No insurance shall be subject to any co-insurance
clause. At the time of execution and delivery of this Agreement, Borrower shall
provide Lender with evidence satisfactory to Lender of such insurance and, prior
to the expiration thereof, shall provide Lender evidence of all renewals or
replacements thereof.
(d) As among Lender, Borrower and Issuer, Borrower assumes all risks
and liabilities from any cause whatsoever, whether or not covered by insurance,
for loss or damage to the Project and for injury to or death of any person or
damage to any property, whether such injury or death be with respect to agents
or employees of Borrower or of third parties, and whether such property damage
be to Borrower's property or the property of others. Whether or not covered by
insurance, Borrower hereby assumes responsibility for and agrees to reimburse
Lender and Issuer for and will indemnify, defend and hold Lender and Issuer
harmless from and against all liabilities, obligations, losses, damages,
penalties, claims, actions, costs and expenses (including reasonable attorneys'
fees) of whatsoever kind and nature unless directly related to lender's gross
negligence or willful misconduct, imposed on, incurred by or asserted against
Lender or Issuer that in any way relate to or arise out of this Agreement, the
transactions contemplated hereby and the Project, including but not limited to,
(i) the acquisition, operation and maintenance of the Project, (ii) the
condition of the Project sold or otherwise disposed of after possession by
Borrower, (iii) any patent or copyright infringement, (iv) the conduct of
Borrower, its officers, employees and agents, (v) a breach of Borrower of any of
its covenants or obligations hereunder, and (vi) any claim, loss, cost or
expense involving alleged damage to the environment relating to the Project,
including, but not limited to, investigation, removal, cleanup and remedial
costs. All amounts payable by Borrower pursuant to the immediately preceding
sentence shall be paid immediately upon demand of Issuer or Lender, as the case
may be. This provision shall survive the termination of this Agreement.
Section 7.07. Preservation of Corporate ExistencePreservation of
Corporate Existence. Borrower will preserve and maintain its corporate existence
and all of its rights, privileges and franchises necessary or desirable in the
normal conduct of its business; and shall conduct its business in an orderly,
efficient and regular manner.
Section 7.08. Performance by LenderPerformance by Lender. If Borrower
at any time fails to perform or observe any of the covenants or agreements
contained in this Agreement, and if such failure shall continue for a period of
ten (10) calendar days after Lender gives Borrower written notice thereof (or in
the case of the agreements contained in Sections 7.05 and 7.06 hereof,
immediately upon the occurrence of such failure, without notice or lapse of
time), Lender may, but need not perform or observe such covenant on behalf and
in the name, place and stead of Borrower (or, at Lender's option, in Lender's
name) and may, but need not, upon notice to Borrower, take any and all other
actions which Lender may reasonably deem necessary to cure or correct such
failure (including, without limitation, the payment of taxes, the satisfaction
of security interests, liens or encumbrances, the performance of obligations
owed to account debtors or other obligors, the procurement and maintenance of
insurance, the execution of assignments, security agreements and financing
statements, and the endorsement of instruments); and Borrower shall thereupon
pay to Lender on demand the amount of all monies expended and all costs and
expenses (including reasonable attorneys' fees and legal expenses) incurred by
Lender in connection with or as a result of the performance or observance of
such agreements or the taking of such action by Lender, together with interest
thereon from the date expended or incurred at the lesser of 12% per annum or the
highest rate permitted by law. To facilitate the performance or observance by
Lender of such covenants of Borrower, Borrower hereby irrevocably appoints
Lender, or the delegate of Lender, acting alone, as the attorney in fact of
Borrower with the right (but not the duty) from time to time to create, prepare,
complete, execute, deliver, endorse or file in the name and on behalf of
Borrower any and all instruments, documents, assignments, security agreements,
financing statements, applications for insurance and other agreements and
writings required to be obtained, executed, delivered or endorsed by Borrower
under this Agreement.
ARTICLE VIII
NEGATIVE COVENANTS OF BORROWER
So long as the Loan shall remain unpaid, Borrower agrees that:
Section 8.01. LienLien. The Borrower will not create, incur or suffer
to exist any mortgage, deed of trust, pledge, lien, security interest,
assignment or transfer upon or of the Project, except for the security interest
created for the benefit of the Bank securing the Letter of Credit.
Section 8.02. Sale of AssetsSale of Assets. The Borrower will not sell,
lease, assign, transfer or otherwise dispose of all or substantially all of its
assets or the Project or any interest in the Project (whether in one transaction
or in a series of transactions).
Section 8.03. Consolidation and MergerConsolidation and Merger. The
Borrower will not (a) consolidate with or merge into any person, or permit any
other person to merge into it, unless (i) the surviving entity assumes all
obligations of the Borrower hereunder, (ii) no Event of Default has occurred and
is continuing, and (iii) the Lender receives an opinion of counsel to the
Borrower and an opinion of bond counsel reasonably acceptable to it relating to
such transaction, or (b) acquire (in a transaction analogous in purpose or
effect to a consolidation or merger) all or substantially all the assets of any
other person unless (i) no Event of Default has occurred and is continuing, and
(ii) the Borrower certifies that such acquisition will not result in an Event of
Taxability.
Section 8.04. AccountingAccounting. The Borrower will not adopt, permit
or consent to any material change in accounting principles other than as
required by generally accepted accounting principles. The Borrower will not
adopt, permit or consent to any change in its fiscal year, without the prior
written consent of Lender, which consent shall be given or withheld in Lender's
reasonable discretion.
Section 8.05. TransfersTransfers. Subject to Section 8.02, the Borrower
will not in any manner transfer, sell or otherwise dispose (a "Transfer") of any
property without prior or present receipt of full and adequate consideration,
and except for (i) Transfers of property which is, or within the next two fiscal
years from the date of such Transfer is reasonably expected to become,
inadequate, obsolete or worn out, (ii) Transfers of inventory in the ordinary
course of business, (iii) Transfers of non-exclusive licenses and similar
arrangements for the use of property of Borrower made in the ordinary course of
business, (iv) Transfers which constitute liquidation of investments, and (v)
other Transfers not otherwise permitted by this Section 8.05 not exceeding in
the aggregate $500,000 in any fiscal year.
Section 8.06. Use of the ProjectUse of the Project. The Borrower will
not construct, reconstruct, improve, use, operate or maintain the Project in
violation of any applicable law or in a manner contrary to that contemplated by
this Agreement.
ARTICLE IX
[Reserved]
ARTICLE X
ASSIGNMENT AND SELLING
Section 10.01. Assignment by LenderAssignment by Lender. This
Agreement, and the obligations of Borrower to make payments hereunder, may be
assigned and reassigned in whole to one or more assignees or subassignees by
Lender at any time subsequent to its execution, without the necessity of
obtaining the consent of Issuer or Borrower, provided, however, that no such
assignment or reassignment shall be effective unless and until (a) Issuer and
Borrower shall have received notice of the assignment or reassignment disclosing
the name and address of the assignee or subassignee, and (b) in the event that
such assignment or reassignment is made to a bank or trust company as trustee
for holders of certificates representing interests in this Agreement, such bank
or trust company agrees to maintain, or cause to be maintained, a book-entry
system by which a record of the names and addresses of such holders as of any
particular time is kept and agrees, upon request of Issuer or Borrower, to
furnish such information to Issuer or Borrower. Upon receipt of notice of
assignment, Borrower will reflect in a book-entry the assignee designated in
such notice of assignment, and shall agree to make all payments to the assignee
designated in the notice of assignment, notwithstanding any claim, defense,
setoff or counterclaim whatsoever (whether arising from a breach of this
Agreement or otherwise) that Issuer and Borrower may from time to time have
against Lender or the assignee. Issuer and Borrower agree to execute all
documents, including notices of assignment and chattel mortgages or financing
statements, which may be reasonably requested by Lender or its assignee to
protect their interest in the Project and in this Agreement. Notwithstanding the
foregoing, Lender shall not assign this Agreement, or any obligation to make
payments hereunder, to a competitor of the Borrower listed in Schedule 2 hereto,
as revised by Borrower from time to time not more often than once every three
(3) months.
Section 10.02. No Sale or Assignment by BorrowerNo Sale or Assignment
by Borrower. This Agreement and the interest of Borrower in the Project may not
be sold, assumed, assigned or encumbered by Borrower without the prior written
consent of Lender.
ARTICLE XI
EVENTS OF DEFAULT AND REMEDIES
Section 11.01. Events of DefaultEvents of Default. The following
constitute "Events of Default" under this Agreement:
(a) failure by Borrower to pay to Lender, as assignee of Issuer, when
due any Loan Payment or to pay any other payment required to be paid hereunder
and the continuation of such failure for a period of ten (10) days;
(b) failure by Borrower to maintain insurance on the Project in
accordance with Section 7.06 hereof;
(c) failure by Borrower or Issuer to observe and perform any other
covenant, condition or agreement of Borrower or Issuer, respectively, contained
herein (except as set forth in Article VI), in the Escrow Agreement, in the
Statement as to Tax Exempt Status or in any other document or agreement executed
in connection herewith on its part to be observed or performed for a period of
thirty (30) days after written notice is given to Borrower or Issuer, as the
case may be, specifying such failure and requesting that it be remedied;
provided, however, that, if the failure stated in such notice cannot be
corrected within such 30 day period, Lender will not unreasonably withhold its
consent to an extension of such time if corrective action is instituted by
Borrower within the applicable period and diligently pursued until the default
is corrected;
(d) Initiation by Issuer of a proceeding under any federal or state
bankruptcy or insolvency law seeking relief under such laws concerning the
indebtedness of Issuer;
(e) Borrower, Bank, or any Substitute Bank shall be or become
insolvent, or admit in writing its or his inability to pay its or his debts as
they mature, or make an assignment for the benefit of creditors; or Borrower,
Bank, or any Substitute Bank shall apply for or consent to the appointment of
any receiver, trustee or similar officer for it or him or for all or any
substantial part of its or his property; or such receiver, trustee or similar
officer shall be appointed without the application or consent of Borrower, Bank,
or any Substitute Bank, as the case may be; or Borrower, Bank, or any Substitute
Bank shall institute (by petition, application, answer, consent or otherwise)
any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding relating to it under the laws of
any jurisdiction; or any such proceeding shall be instituted (by petition,
application or otherwise) against Borrower, Bank, or any Substitute Bank; or any
judgment, writ, warrant of attachment or execution or similar process shall be
issued or levied against a substantial part of the property of Borrower, Bank,
or any Substitute Bank;
(f) determination by Lender that any representation or warranty made by
Borrower or Issuer herein, in the Statement as to Tax Exempt Status or in any
other document executed in connection herewith was untrue in any material
respect when made;
(g) the occurrence of a default or an event of default under any
instrument, agreement or other document evidencing or relating to any
indebtedness or other monetary obligation of Borrower (whether individually or
in the aggregate) in an amount greater than $300,000, so that a holder or
trustee of such indebtedness accelerates such indebtedness;
(h) a default or an event of default and the expiration of any
applicable grace or cure period and the receipt of any required notice under any
other agreement between Lender and Borrower unless waived by Lender;
(i) failure by Borrower to fully and timely perform any of its
obligations under Article VI of this Agreement or the failure of Bank or any
Substitute Bank to fully and timely honor any draft under the Letter of Credit
or any Substitute Letter of Credit, as the case may be;
(j) this Agreement, or any portion hereof, is determined by a court of
competent jurisdiction to be invalid or unenforceable against the Issuer; or
(k) an Event of Taxability shall occur.
Section 11.02. Remedies on DefaultRemedies on Default. Whenever any
Event of Default shall have occurred and be continuing, Lender shall have the
right, at its sole option without any further demand or notice, to take any one
or any combination of the following remedial steps insofar as the same are
available to secured parties under Article 9 of the UCC in effect in the State
from time to time and which are otherwise accorded to Lender by applicable law:
(a) by notice to Borrower, declare the entire unpaid principal amount
of the Loan then outstanding, all interest accrued and unpaid thereon and all
amounts payable under this Agreement to be forthwith due and payable, whereupon
the Loan, all such accrued interest and all such amounts shall become and be
forthwith due and payable, without presentment, notice of dishonor, protest or
further notice of any kind, all of which are hereby expressly waived by
Borrower;
(b) without notice to Borrower, draw upon the Letter of Credit or
Substitute Letter of Credit in an amount equal to all amounts due hereunder and
under the Schedule, including the Prepayment Amount.
(c) proceed by appropriate court action to enforce specific performance
by Borrower of the applicable covenants of this Agreement or to recover for the
breach thereof, including the payment of all amounts due from Borrower. Borrower
shall pay or repay to Lender or Issuer all costs of such action or court action,
including, without limitation, reasonable attorneys' fees; and
(d) take whatever action at law or in equity may appear necessary or
desirable to enforce its rights with respect to the Project. Borrower shall pay
or repay to Lender or Issuer all costs of such action or court action,
including, without limitation, reasonable attorneys' fees.
Notwithstanding any other remedy exercised hereunder, Borrower shall
remain obligated to pay to Lender any unpaid portion of the Prepayment Amount.
Section 11.03. [Reserved].
Section 11.04. No Remedy ExclusiveNo Remedy Exclusive. No remedy herein
conferred upon or reserved to Lender or Issuer is intended to be exclusive and
every such remedy shall be cumulative and shall be in addition to every other
remedy given under this Agreement or now or hereafter existing at law or in
equity. No delay or omission to exercise any right or power accruing upon any
Event of Default shall impair any such right or power or shall be construed to
be a waiver thereof, but any such right or power may be exercised from time to
time and as often as may be deemed expedient. In order to entitle Lender or
Issuer to exercise any remedy reserved to it in this Article, it shall not be
necessary to give any notice other than such notice as may be required by this
Article. All remedies herein conferred upon or reserved to Lender or Issuer
shall survive the termination of this Agreement.
Section 11.05. Late ChargeLate Charge. Any Loan Payment not paid by
Borrower within ten (10) days of on the due date thereof shall, to the extent
permissible by law, bear a late charge equal to the lesser of five cents ($.05)
per dollar of the delinquent amount or the lawful maximum, and Borrower shall be
obligated to pay the same immediately upon receipt of Lender's written invoice
therefor.
ARTICLE XII
MISCELLANEOUS
Section 12.01. Costs and Expenses of LenderCosts and Expenses of
Lender. Borrower shall pay to Lender, in addition to the Loan Payments payable
by Borrower hereunder, such amounts in each year as shall be required by Lender
in payment of any reasonable costs and expenses incurred by Lender in connection
with the execution, performance or enforcement of this Agreement, including but
not limited to payment of all reasonable fees, costs and expenses and all
administrative costs of Lender or Issuer in connection with the Project and the
Loan (including, without limitation, reasonable attorneys' fees and
disbursements), fees of auditors or attorneys, insurance premiums not otherwise
paid hereunder and all other direct and necessary administrative costs of Lender
or charges required to be paid by it in order to comply with the terms of, or to
enforce its rights under, this Agreement (but not including general
administrative or overhead expenses of Lender). Such costs and expenses shall be
billed to Borrower by Lender from time to time, together with a statement
certifying that the amount so billed has been paid by Lender for one or more of
the items above described, or that such amount is then payable by Lender for
such items. Amounts so billed shall be due and payable by Borrower within thirty
(30) days after receipt of the bill by Borrower.
Section 12.02. Disclaimer of WarrantiesDisclaimer of Warranties. LENDER
AND ISSUER MAKE NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO
THE VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR FITNESS FOR USE OF THE PROJECT, OR ANY OTHER WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT HERETO. In no event shall
Lender or Issuer be liable for any loss or damage in connection with or arising
out of this Agreement, the Project or the existence, furnishing, functioning or
Borrower's use of the Project provided for in this Agreement.
Section 12.03. NoticesNotices. All notices, certificates, requests,
demands and other communications provided for hereunder or under the Escrow
Agreement or the Statement as to Tax Exempt Status shall be in writing and shall
be (a) personally delivered, (b) sent by first class United States mail, (c)
sent by overnight courier of national reputation, or (d) transmitted by
telecopy, in each case addressed to the party to whom notice is being given at
its address as set forth above and, if telecopied, transmitted to that party at
its telecopier number set forth above or, as to each party, at such other
address or telecopier number as may hereafter be designated by such party in a
written notice to the other party complying as to delivery with the terms of
this Section. All such notices, requests, demands and other communications shall
be deemed to have been given on (a) the date received if personally delivered,
(b) when deposited in the mail if delivered by mail, (c) the date sent if sent
by overnight courier, or (d) the date of transmission if delivered by telecopy.
If notice to Borrower of any intended action is required by law in a particular
instance, such notice shall be deemed commercially reasonable if given (in the
manner specified in this Section) at least ten (10) calendar days prior to the
date of intended disposition or other action.
Section 12.04. Further Assurance and Corrective Instruments.Further
Assurance and Corrective Instruments. Issuer and Borrower hereby agree that they
will, from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, such further acts, instruments,
conveyances, transfers and assurances, as Lender reasonably deems necessary or
advisable for the implementation, correction, confirmation or perfection of this
Agreement or the Statement as to Tax Exempt Status and any rights of Lender
hereunder or thereunder.
Section 12.05. Binding Effect; Time of the EssenceBinding Effect; Time
of the Essence. This Agreement shall inure to the benefit of and shall be
binding upon Lender, Issuer, Borrower and their respective successors and
assigns. Time is of the essence.
Section 12.06. SeverabilitySeverability. In the event any provision of
this Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
Section 12.07. AmendmentsAmendments. To the extent permitted by law,
the terms of this Agreement shall not be waived, altered, modified, supplemented
or amended in any manner whatsoever except by written instrument signed by the
parties hereto, and then such waiver, consent, modification or change shall be
effective only in the specific instance and for the specific purpose given.
Section 12.08. Execution in CounterpartsExecution in Counterparts. This
Agreement may be executed in several counterparts, each of which shall be an
original and all of which shall constitute one and the same instrument, and any
of the parties hereto may execute this Agreement by signing any such
counterpart, provided that only the original marked "Original: 1 of 8" on the
execution page hereof shall constitute the Bond under the Act.
Section 12.09. Applicable LawApplicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the State.
Section 12.10. CaptionsCaptions. The captions or headings in this
Agreement are for convenience only and in no way define, limit or describe the
scope or intent of any provisions or sections of this Agreement.
Section 12.11. Entire AgreementEntire Agreement. This Agreement, the
Statement as to Tax Exempt Status, the Escrow Agreement and the exhibits hereto
and thereto constitute the entire agreement among Lender, Issuer and Borrower.
There are no understandings, agreements, representations or warranties, express
or implied, not specified herein or in such documents regarding this Agreement
or the Project financed hereby.
Section 12.12. UsuryUsury. It is the intention of the parties hereto to
comply with any applicable usury laws; accordingly, it is agreed that,
notwithstanding any provisions to the contrary in this Agreement, in no event
shall this Agreement require the payment or permit the collection of interest or
any amount in the nature of interest or fees in excess of the maximum permitted
by applicable law.
Section 12.13. Waiver of Jury TrialWaiver of Jury Trial. LENDER, ISSUER
AND BORROWER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS
AGREEMENT, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS AMONG LENDER, ISSUER OR
BORROWER RELATING TO THE SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING
ESTABLISHED AMONG LENDER, ISSUER AND BORROWER. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS). THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT, ANY RELATED DOCUMENTS, OR TO ANY OTHER
DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR ANY RELATED TRANSACTIONS. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
their respective corporate names by their duly authorized officers, all as of
the date first written above.
......... Lender: GE CAPITAL PUBLIC FINANCE, INC.
......... By:/s/ Philip Long
----------------
......... Title: Vice President
......... Issuer: BUSINESS FINANCE AUTHORITY
......... OF THE STATE OF NEW HAMPSHIRE
......... By:/s/ Edward Caron
----------------
......... Chairman
......... By:/s/ Jack Donovan
------------------
......... Executive Director
......... Borrower: ELEXSYS INTERNATIONAL, INC.
......... By:/s/ Michael S. Shimada
----------------------
......... Title: Principal Financial Officer
and Duly Authorized Officer
Original: ___ of 8.
Trade Names of Borrower, if any:
None
<PAGE>
Schedule 2
Prohibited Assignees
[to come from GE and Elexsys]
<PAGE>
A-3
Exhibit A to Loan Agreement
SCHEDULE OF PROJECT AND LOAN PAYMENTS
<PAGE>
This Schedule is delivered pursuant to the Loan Agreement, dated as of
December 1, 1996 (the "Agreement"), among GE Capital Public Finance, Inc., as
Lender ("Lender"), Business Finance Authority of the State of New Hampshire, as
Issuer ("Issuer"), and Elexsys International, Inc., as Borrower ("Borrower").
All of the provisions of the Agreement are incorporated herein by reference and
capitalized terms used herein shall have the meanings assigned to them in the
Agreement.
NEITHER THIS SCHEDULE NOR THE AGREEMENT CONSTITUTES AN INDEBTEDNESS OF
THE STATE OF NEW HAMPSHIRE OR OF THE ISSUER EXCEPT TO THE EXTENT PERMITTED BY
NEW HAMPSHIRE RSA CHAPTER 162-I. ALL AMOUNTS OWED HEREUNDER AND UNDER THE
AGREEMENT ARE PAYABLE ONLY FROM THE SOURCES EXPRESSLY PROVIDED IN THE AGREEMENT,
AND NO PUBLIC FUNDS MAY BE USED FOR THAT PURPOSE.
1. The Project, as described in Exhibit I attached hereto, will be
located at 41 Simon Street, Nashua, New Hampshire.
2. The Loan Payment dates, the Loan Payment amounts, the principal and
interest components of each Loan Payment, and the Prepayment Amounts
are as follows:
See Exhibit II attached hereto.
3. The disbursement period applicable to this Schedule shall end
September 30, 1997.
<PAGE>
EXHIBIT I
The acquisition of approximately 4.591 acres of land and an
approximately 70,000 square foot building and the renovation thereof located at
41 Simon Street, Nashua, New Hampshire, to be used by the Borrower for the
manufacture of circuit boards and assemblies.
<PAGE>
EXHIBIT II
See Attached Schedule
The Loan will be repayable over ten (10) years with monthly payments.
The first payment will be due on February 1, 1997, with the 119 remaining
payments due on the first day of each month thereafter. The interest rate on the
Loan shall be 6.33%.
<PAGE>
B-1
Exhibit B to Loan Agreement
FORM OF CERTIFICATE OF ACCEPTANCE
I, the undersigned, hereby certify that I am the ____________ of
Elexsys International, Inc. ("Borrower") and, with respect to the Loan Agreement
dated as of December 1, 1996 (the "Agreement") by and among Borrower, GE Capital
Public Finance, Inc. ("Lender") and Business Finance Authority of the State of
New Hampshire ("Issuer"), that:
1. The portions of the Project described in the attached Exhibit A
(such "Portions") have been completed in accordance with Borrower's
specifications and have been accepted by Borrower.
2. Borrower has obtained from a reputable insurance company qualified
to do business in the State (as defined in the Agreement) insurance with respect
to all risks required to be covered thereby pursuant to Section 7.06 of the
Agreement.
3. All of the representations and warranties of Borrower contained in
the Agreement are true and correct as of the date hereof and no Default or Event
of Default has occurred thereunder.
Dated: __________, 19__.
......... Borrower: Elexsys International, Inc.
......... By:______________________________
......... Title:____________________________
......... Date:____________________________
<PAGE>
C-3
Exhibit C to Loan Agreement
FORM OF OPINION OF COUNSEL TO BORROWER
......... December _, 1996
Business Finance Authority
of the State of New Hampshire
14 Dixon Avenue, Suite 101
Concord, New Hampshire 03301
GE Capital Public Finance, Inc.
Suite 470
8400 Normandale Lake Blvd.
Minneapolis, MN 55437
Re: Loan Agreement, dated as of December 1, 1996, by and among GE
Capital Public Finance, Inc. ("Lender"), Business Finance Authority of
the State of New Hampshire ("Issuer") and Elexsys International, Inc.
("Borrower")
Ladies and Gentlemen:
We have acted as counsel to the Borrower with respect to the Loan
Agreement described above (the "Loan Agreement"), the Escrow Agreement of even
date therewith (the "Escrow Agreement") among Lender, Issuer, Borrower and
National City Bank of Minneapolis, as escrow agent, and the Statement as to Tax
Exempt Status of even date therewith (the "Statement as to Tax Exempt Status",
and various related matters and, in this capacity, have reviewed a duplicate
original or certified copy of each of the Agreements (defined below). The Loan
Agreement, the Escrow Agreement, and the Statement as to Tax Exempt Status may
be referred to herein collectively as the "Agreements").
We have examined the Agreements and such records, certificates and
other documents and have made such other investigation as we consider necessary
to render this opinion. As to various questions of fact material to our opinion,
we have relied upon representations made in or pursuant to the Agreements and
upon certificates of officers of Borrower. We have assumed the genuineness of
all signatures (other than the signatures of the officers of Borrower to the
Agreements), the authenticity of all documents submitted to us as originals and
the conformity to original documents of all documents submitted to us as copies.
The opinions expressed herein with respect to the enforceability of the
Agreements are subject to (i) general principles of equity including without
limitation an implied covenant of good faith and fair dealing, and (ii)
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application affecting the rights and remedies of creditors heretofore or
hereafter enacted to the extent that the same may be constitutionally applied.
In addition, we express no opinion with respect to any provision of the
Agreements to the extent they provide for recourse to security in the absence of
notice and hearing, the grant of powers of attorney or indemnification that is
against public policy.
References in this opinion to matters known to us mean the actual
knowledge of the partners of this firm responsible for preparing this opinion
after inquiry of appropriate officers of Borrower, and we have not examined the
docket of any court or agency.
This opinion is limited to the laws of the State of New Hampshire and
the federal laws of the United States.
Based upon the examination of these and such other documents as we have
deemed relevant, we are of opinion that:
1. Borrower has been duly created and is validly existing and in good
standing under the laws of the State of Delaware, and has the full power and
authority to own its properties and conduct the business now conducted by it.
2. Borrower is qualified to do business and is in good standing in the
State of New Hampshire.
3. Borrower has full power and authority to execute and deliver the
Agreements to which it is a party and to carry out the terms thereof. The
Agreements have been duly and validly authorized, executed and delivered by
Borrower, are in full force and effect and are the valid and binding obligations
of Borrower, enforceable in accordance with their respective terms (including
against claims of usury).
4. The consummation of the transactions contemplated by the Agreements
and the carrying out of the terms thereof will not result in violation of any
provisions of the articles of incorporation or bylaws of the Borrower or, to the
best of our knowledge, result in the violation of any provision of, or in a
default under, any indenture, mortgage, deed of trust, or other agreement for
the incurring of indebtedness, or any judgment, decree, order, statute, rule or
regulation known to us to which Borrower is a party or by which it or its
property is bound.
5. To the best of our knowledge, there are no legal or governmental
actions, suits, proceedings, inquiries or investigations pending or threatened,
to which Borrower is or may become a party or of which any property of Borrower
is or may become subject, other than ordinary routine litigation incident to the
kind of business conducted by Borrower which, if determined adversely to
Borrower would not, individually or in the aggregate, have a material adverse
effect on the financial position or results of operations of Borrower.
6. To the best of our knowledge, there are no legal or governmental
proceedings pending or threatened, wherein an unfavorable decision, ruling or
finding would adversely affect the validity of or security for the Agreements or
the transactions contemplated thereby.
Very truly yours,
<PAGE>
D-3
Exhibit D to Loan Agreement
FORM OF OPINION OF BOND COUNSEL
December _, 1996
Business Finance Authority
of the State of New Hampshire
14 Dixon Avenue, Suite 101
Concord, New Hampshire 03301
We have acted as bond counsel to the Business Finance Authority of the
State of New Hampshire (the "Authority") in connection with the making by the
Authority of a loan (the "Loan") to Elexsys International, Inc. ("Borrower")
pursuant to a Loan Agreement, dated as of December 1, 1996 (the "Agreement"), by
and among GE Capital Public Finance, Inc. ("Lender"), the Authority and
Borrower.
We have examined the law and such certified proceedings and other
papers as deemed necessary to render this opinion, including the Escrow
Agreement, dated as of December 1, 1996 (the "Escrow Agreement"), by and among
Lender, the Authority, Borrower and National City Bank of Minneapolis, as escrow
agent (the "Escrow Agent".) Terms used in this opinion and not otherwise defined
shall have the same meanings assigned to them in the Agreement.
As to questions of fact material to our opinion we have relied upon
representations and covenants of the Authority and Borrower contained in the
Agreement, the certified proceedings and other certifications of public
officials furnished to us, and certifications by officials of Borrower and
others, without undertaking to verify the same by independent investigation.
The Loan is made pursuant to the Agreement. Under the Agreement,
Borrower has agreed to make payments sufficient to pay when due the principal
(including sinking fund installments) of, and premium (if any) and interest on
the Loan. Such payments and other moneys payable to the Authority or Lender
under the Agreement, including proceeds derived from any security provided
thereunder (collectively, the "Revenues"), and the rights of the Authority under
the Agreement to receive the same (excluding, however, certain administrative
fees, indemnification and reimbursements), are pledged and assigned by the
Authority as security for the repayment of the Lender pursuant to the Agreement
(the "Lender Loan"). The Lender Loan is a limited obligation of the Authority
payable solely from the Revenues.
We express no opinion with respect to compliance by Borrower with
applicable legal requirements in connection with the acquisition, construction,
reconstruction, use, occupancy or operation of the Project.
Based on our examination, we are of opinion, as of the date hereof and
under existing law, as follows:
1. The Authority is a duly created and validly existing body corporate
and politic as an agency of the State of New Hampshire with the power to enter
into and perform the Agreement and the Escrow Agreement.
2. Each of the Agreement and the Escrow Agreement has been duly
authorized, executed and delivered by the Authority and is a valid and binding
obligation of the Authority enforceable upon the Authority. As provided in New
Hampshire RSA 162-I;7,II, the Agreement creates a valid lien on the rights of
the Authority to receive Revenues under the Agreement (except certain rights to
indemnification, reimbursements and fees).
3. Under existing law, interest on the Lender Loan is excluded from the
gross income of the owner thereof for federal income tax purposes except for
interest on the Lender Loan during any period while it is held by a "substantial
user" of the facilities financed with proceeds of the Lender Loan or by a
"related person" within the meaning of Section 147(a) of the Internal Revenue
Code of 1986 (the "Code") and except that Borrower or others, by taking action
after the date hereof that causes the $10,000,000 limitation set forth in
Section 144(a)(10) of the Code to be exceeded, may cause interest on the Lender
Loan to become included in gross income (retroactive to the date hereof, in the
case of the $40,000,000 limitation) for federal income tax purposes. It should
be noted that the interest on the Lender Loan is an item of tax preference for
purposes of the federal alternative minimum tax imposed on individuals and
corporations. In addition to the foregoing exceptions, the opinion set forth in
the first sentence of this paragraph is subject to the condition that the
Authority and Borrower comply with all requirements of the Code that must be
satisfied subsequent to the making of the Lender Loan in order that interest
thereon be, or continue to be, excluded from gross income for federal income tax
purposes. Borrower, and to the extent necessary, the Authority have covenanted
in the Agreement to comply with such requirements. Failure to comply with
certain of such requirements may cause the inclusion of interest on the Lender
Loan in gross income for federal income tax purposes to be retroactive to the
date of making of the Lender Loan. We express no opinion regarding other federal
tax consequences arising with respect to the Lender Loan.
4. Under existing statutes, interest on the Lender Loan is exempt from
the New Hampshire personal income tax on interest and dividends.
It is to be understood that the rights of the Lender and the
enforceability of the Agreement and the Escrow Agreement are subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting creditors' rights heretofore or hereafter enacted to the extent
constitutionally applicable and that their enforcement may also be subject to
the exercise of judicial discretion in appropriate cases.
Yours faithfully,
<PAGE>
F-1
Exhibit F to Loan Agreement
FORM OF OPINION OF COUNSEL TO BANK
(a) The Bank is, and was at all relevant times, a duly organized and
validly existing banking corporation in good standing under the laws of the
United States and ___________________________________ with full legal power and
authority to execute, deliver and to perform all of its obligations under the
Letter of Credit.
(b) The execution and delivery by the Bank of the Letter of Credit and
the performance by the Bank of its obligations thereunder are not inconsistent
with and do not violate the Bank's charter or by-laws.
(c) The Letter of Credit has been duly and validly executed and
delivered by the Bank and constitutes the legal, valid and binding obligation of
the Bank enforceable against the Bank in accordance with its terms, except as to
enforcement thereof may be limited by any bankruptcy, insolvency, moratorium,
reorganization or other laws relating to or affecting the enforcement of rights
of creditors generally and equitable principles of general applicability.
<PAGE>
EXECUTION COPY
ESCROW AGREEMENT
Among
GE CAPITAL PUBLIC FINANCE, INC.
as Lender
and
SANWA BANK CALIFORNIA
as Bank
and
BUSINESS FINANCE AUTHORITY
OF THE STATE OF NEW HAMPSHIRE
as Issuer
and
ELEXSYS INTERNATIONAL, INC.
as Borrower
and
NATIONAL CITY BANK OF MINNEAPOLIS
as Escrow Agent
Dated as of December 1, 1996
<PAGE>
8
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (REAL ESTATE) is made and entered into as of
December 1, 1996, by and among National City Bank of Minneapolis, a national
banking association ("Escrow Agent"), GE Capital Public Finance, Inc., a
corporation duly organized and existing under the laws of the State of Delaware
("Lender"), Sanwa Bank California ("Bank"), Business Finance Authority of the
State of New Hampshire, a body corporate and politic as an agency of the State
of New Hampshire ("Issuer"), and Elexsys International, Inc., a Delaware
corporation ("Borrower").
ARTICLE I
RECITALS
Section 1.01. Lender, Issuer and Borrower have entered into a Loan
Agreement dated as of December 1, 1996 (the "Loan Agreement"), a duplicate
original of which has been furnished to Escrow Agent and Bank, whereby Lender
and Issuer have agreed to finance for Borrower the acquisition and renovation of
certain manufacturing facilities described in the Loan Agreement (the
"Project"), and Borrower has agreed to make Loan Payments (as defined in the
Loan Agreement) to Lender, as assignee of Issuer, in the manner and on the terms
set forth therein. As security for the Loan Payments, Borrower will cause Bank
to issue in favor of Lender an Irrevocable Letter of Credit pursuant to an
Accounts Receivable Credit Agreement (the "Reimbursement Agreement") between
Borrower and Bank. This Agreement is not intended to alter or change the rights
and obligations of Lender, Issuer and Borrower under the Loan Agreement or of
Borrower and Bank under the Reimbursement Agreement, but is entirely
supplemental thereto.
Section 1.02. The terms capitalized in this Agreement but not defined
herein shall have the meanings given to them in the Loan Agreement.
Section 1.03. Under the Loan Agreement, upon the satisfaction of
certain conditions precedent, Lender shall loan to Issuer and Issuer shall
deposit or cause to be deposited with Escrow Agent the sum of $2,700,000, to be
credited to the Escrow Fund established in Article 2 hereof. Amounts deposited
in the Escrow Fund shall be loaned to Borrower and shall be used by Borrower to
pay the Project Costs (as defined in the Loan Agreement), and, to the extent not
needed for this purpose, to pay or prepay Principal coming due under the Loan
Agreement, all as hereinafter provided.
Section 1.04. Under the Loan Agreement, Borrower will cause the Project
to be acquired and constructed and to the extent the amounts deposited with
Escrow Agent is insufficient to complete the Project, Borrower shall complete
the Project with its own funds.
Section 1.05. Lender, Bank, Issuer and Borrower agree to employ Escrow
Agent to receive, hold, invest and disburse the moneys paid to Escrow Agent by
Lender as described in Section 1.03, all as hereinafter described; provided,
however, that Escrow Agent shall not be obligated to assume or perform any
obligation of Lender, Issuer, Borrower, or Bank with respect thereto or under
the Loan Agreement or Reimbursement Agreement by reason of anything contained in
this Agreement.
Section 1.06. Each of the parties has authority to enter into this
Agreement, and has taken all actions necessary to authorize the execution of
this Agreement by the officers whose signatures are affixed hereto.
ARTICLE II
ESCROW FUND
Section 2.01. Escrow Agent shall establish a special escrow fund
designated as the "GECPF/BFA/Elexsys International Escrow Fund" (the "Escrow
Fund"), shall keep such Escrow Fund separate and apart from all other funds and
moneys held by it and shall administer such Escrow Fund as provided in this
Agreement.
Section 2.02. All moneys paid to Issuer by Lender pursuant to Section
1.03 of this Agreement shall be credited to the Escrow Fund. Escrow Agent shall
use the moneys in the Escrow Fund to pay Project Costs, upon receipt with
respect thereto of a Payment Request Form attached hereto as Exhibit A, executed
by Lender, Bank and Borrower, fully completed and with all supporting documents
described therein attached thereto and the Letter of Credit. Upon receipt of a
Payment Request Form with respect to any Project Costs, an amount equal to the
Project Costs as shown therein shall be paid directly to the person or entity
entitled to pay as specified therein.
Section 2.03. On September 30, 1997, Escrow Agent shall pay: (a) to
Lender in prepayment of the Loan, an amount equal to the entire remaining
balance on deposit in the Escrow Fund, less the sum of (i) an amount equal to
the Project Costs for which Escrow Agent has received a fully and properly
completed Payment Request Form and which has not been paid, and (ii) the amount
of any deposit by Borrower pursuant to Section 3.04 hereof remaining on deposit
in the Escrow Fund; and (b) to Borrower the entire remaining balance on deposit
in the Escrow Fund less the amount referred to in clause (a)(i) of this Section.
The amount paid to Lender shall be applied first to interest accrued on the Loan
and next to the Principal portion of the Loan Payments in the inverse order of
maturity.
Section 2.04. Upon written notice (a) from Lender or Borrower that an
Event of Default has occurred under the Loan Agreement, (b) from Bank that an
event of default as occurred under the Reimbursement Agreement, or (c) from
Borrower that Borrower has determined not to complete the Project, Escrow Agent
shall liquidate all investments held in the Escrow Fund and transfer the
proceeds thereof and all other moneys held in the Escrow Fund to Lender to be
applied first to interest accrued on the Loan and next to the Principal portion
of the Loan Payments in the inverse order of maturity.
Section 2.05. Escrow Agent shall only be responsible for the
safekeeping and investment of the moneys held in the Escrow Fund, and the
disbursement thereof in accordance with this Article, and shall not be
responsible for the authenticity or accuracy of such certifications or
documents, the application of amounts paid pursuant to such certifications by
the persons or entities to which they are paid, or the sufficiency of the moneys
credited to the Escrow Fund to make the payments herein required.
ARTICLE III
MONEYS IN ESCROW FUND; INVESTMENT
Section 3.01. The moneys and investments held by Escrow Agent under
this Agreement are irrevocably held in trust for the benefit of Borrower, Issuer
and Lender, and such moneys, together with any income or interest earned
thereon, shall be expended only as provided in this Agreement, and shall not be
subject to levy or attachment or lien by or for the benefit of any creditor of
Borrower, Bank, Issuer or Lender. Lender, Issuer, Borrower and Escrow Agent
intend that the Escrow Fund constitute an escrow account in which Borrower has
no legal or equitable right, title or interest until satisfaction in full of all
conditions contained herein and in the Loan Agreement for the disbursement of
funds by Escrow Agent therefrom. However, if the parties' intention that
Borrower shall have no legal or equitable right, title or interest until all
conditions for disbursement are satisfied in full is not respected in any legal
proceeding, the parties hereto intend that Lender and Bank have a security
interest in the Escrow Fund, and such security interest is hereby granted to
Lender and Bank by Borrower, to secure payment of all sums due to Lender, in its
own capacity and assignee of Issuer, under the Loan Agreement and all sums due
to Bank under the Reimbursement Agreement. For such purpose, Escrow Agent hereby
agrees to act as agent for Lender in connection with the perfection of such
security interest and agrees to note, or cause to be noted, on all books and
records relating to the Escrow Fund, Lender's interest therein.
Section 3.02. Moneys held by Escrow Agent hereunder shall be invested
and reinvested by Escrow Agent upon order of Borrower only in Qualified
Investments, as defined in Section 3.05. Such investments shall be registered in
the name of Escrow Agent and held by Escrow Agent for the benefit of Lender,
Bank, Issuer and Borrower. With the approval of Borrower, Escrow Agent may
purchase or sell to itself or any affiliate, as principal or agent, investments
authorized by this Article. Such investments and reinvestments shall be made
giving full consideration for the time at which funds are required to be
available.
Section 3.03. Escrow Agent shall, without further direction from
Borrower, sell such investments as and when required to make any payment from
the Escrow Fund. Any income received on such investments shall be credited to
the Escrow Fund.
Section 3.04. Escrow Agent shall furnish to Borrower, Bank and Lender
reports accounting for all investments and interest and income therefrom. Such
accounting shall be furnished no less frequently than every three (3) months and
upon request of Lender, Bank or Borrower. None of Lender, Bank, Issuer or Escrow
Agent shall be responsible or liable for any loss suffered in connection with
any investment of moneys made by Escrow Agent in accordance with this Article
(other than Escrow Agent in its capacity as obligor under any Qualified
Investment). In the event funds in the Escrow Fund are insufficient to pay the
Project Costs, Borrower shall deposit additional funds into the Escrow Fund to
be disbursed in accordance with the provisions hereof, and such additional funds
deposited by Borrower shall be disbursed from the Escrow Fund before any other
funds held in the Escrow Fund.
Section 3.05. As used in this Agreement, the term Qualified Investments
means (a) securities which are general obligations of or are guaranteed as to
the payment of principal and interest by the United States of America; (b)
obligations, debentures, notes or other evidence of indebtedness issued or
guaranteed by any of the following: Federal Home Loan Bank System, Government
National Mortgage Association, Farmers Home Administration, Federal Home Loan
Mortgage Corporation or Federal Housing Administration; (c) commercial paper
issued by corporations organized under the laws of a state of the United States
which is rated in the highest rating category by Standard & Poor's Ratings Group
("S&P") or Moody's Investors Service, Inc.; (d) money market funds registered
under the Investment Company Act of 1940 whose shares are registered under the
Securities Act of 1933 and which have a rating of "AAAm-G", "AAAm" or "AAm" by
S&P; or (e) certificates of deposit issued by or other forms of deposit in any
national or state bank to the extent that such deposits are fully insured by the
Federal Deposit Insurance Corporation or any successor agency which is backed by
the full faith and credit of the United States. Derivative products shall not
constitute Qualified Investments.
ARTICLE IV
ESCROW AGENT'S AUTHORITY; INDEMNIFICATION
Section 4.01. Escrow Agent may act in reliance upon any writing or
instrument or signature which it, in good faith, believes to be genuine, may
assume the validity and accuracy of any statement or assertion contained in such
a writing or instrument, and may assume that any person purporting to give any
writing, notice, advice or instructions in connection with the provisions hereof
has been duly authorized to do so. Escrow Agent shall not be liable in any
manner for the sufficiency or correctness as to form, manner and execution, or
validity of any instrument deposited with it, nor as to the identity, authority
or right of any person executing the same; and its duties hereunder shall be
limited to those specifically provided herein.
Section 4.02. Unless Escrow Agent is determined to be negligent or
liable for misconduct with regard to its duties hereunder, Borrower hereby
agrees to indemnify Escrow Agent and hold it harmless from any and all claims,
liabilities, losses, actions, suits or proceedings at law or in equity, or any
other expense, fees or charges of any character or nature, which it may incur or
with which it may be threatened by reason of its acting as Escrow Agent under
this Agreement; and in connection therewith, to indemnify Escrow Agent against
any and all expenses, including reasonable attorneys' fees and the cost of
defending any action, suit or proceeding or resisting any claim. Escrow Agent
shall be vested with a lien on all property deposited hereunder for
indemnification, for reasonable attorneys' fees, court costs, for any suit,
interpleader or otherwise, or any other reasonable expenses, fees or charges of
any character or nature, which may be incurred by Escrow Agent by reason of
disputes arising among Borrower, Issuer, Bank and Lender as to the correct
interpretation of the Loan Agreement or this Agreement and instructions given to
Escrow Agent hereunder, or otherwise, with the right of Escrow Agent, regardless
of the instructions aforesaid, to hold the said property until and unless said
additional expenses, fees and charges shall be fully paid.
Section 4.03. If Borrower, Issuer, Bank or Lender shall be in
disagreement about the interpretation of the Loan Agreement, the Reimbursement
Agreement or this Agreement, or about the rights and obligations, or the
propriety of any action contemplated by Escrow Agent hereunder, Escrow Agent
may, but shall not be required to, file an appropriate civil action to resolve
the disagreement. Escrow Agent shall be indemnified by Borrower for all costs,
including reasonable attorneys' fees, in connection with such civil action, and
shall be fully protected in suspending all or part of its activities under this
Agreement until a final judgment in such action is received.
Section 4.04. Escrow Agent may consult with counsel of its own choice
and shall have full and complete authorization and protection with the opinion
of such counsel. Escrow Agent shall otherwise not be liable for any mistakes of
facts or errors of judgment, or for any acts or omissions of any kind unless
caused by its negligence or misconduct.
ARTICLE V
ESCROW AGENT'S COMPENSATION
Borrower hereby agrees to pay Escrow Agent as compensation for the
services to be rendered hereunder the fees and other amounts described in
Exhibit B hereto and will pay and/or reimburse Escrow Agent upon request for all
expenses, disbursements and advances, including reasonable attorneys' fees,
incurred or made by it in connection with carrying out its duties hereunder.
ARTICLE VI
CHANGE OF ESCROW AGENT
Section 6.01. A national banking association located in the United
States or a state bank or trust company organized under the laws of a state of
the United States, qualified as a depository of public funds, may be substituted
to act as Escrow Agent under this Agreement upon agreement of the parties
hereto. Such substitution shall not be deemed to affect the rights or
obligations of the parties. Upon any such substitution, Escrow Agent agrees to
assign to such substitute Escrow Agent its rights under this Agreement.
Section 6.02. Escrow Agent or any successor may at any time resign by
giving mailed notice to Borrower, Issuer, Bank and Lender of its intention to
resign and of the proposed date of resignation, which shall be a date not less
than thirty (30) days after such notice is deposited in the United States mail
with postage fully prepaid, unless an earlier resignation date and the
appointment of a successor Escrow Agent shall have been or are approved by
Borrower, Issuer, Bank and Lender.
Section 6.03. Escrow Agent may appoint an agent to exercise any of the
powers, rights or remedies granted to Escrow Agent under this Agreement, and to
hold title to property or to take any other action which may be desirable or
necessary.
ARTICLE VII
ADMINISTRATIVE PROVISIONS
Section 7.01. Escrow Agent shall keep complete and accurate records of
all moneys received and disbursed under this Agreement, which shall be available
for inspection by Borrower, Issuer, Bank or Lender, or the agent of any of them,
at any time during regular business hours.
Section 7.02. All notices, certificates, requests, demands and other
communications provided for hereunder shall be in writing and shall be (a)
personally delivered, (b) sent by first class United States mail, (c) sent by
overnight courier of national reputation, or (d) transmitted by telecopy, in
each case addressed to the party to whom notice is being given at its address as
set forth below and, if telecopied, transmitted to that party at its telecopier
number set forth above or, as to each party, at such other address or telecopier
number as may hereafter be designated by such party in a written notice to the
other party complying as to delivery with the terms of this Section. All such
notices, requests, demands and other communications shall be deemed to have been
given on (a) the date received if personally delivered, (b) when deposited in
the mail if delivered by mail, (c) the date sent if sent by overnight courier,
or (d) the date of transmission if delivered by telecopy.
Section 7.03. This Agreement shall be construed and governed in
accordance with the laws of the State of New Hampshire.
Section 7.04. Any provisions of this Agreement found to be prohibited
by law shall be ineffective only to the extent of such prohibition, and shall
not invalidate the remainder of this Agreement or the Loan Agreement.
Section 7.05. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns.
Specifically, as used herein the term "Lender" means any person or entity to
whom Lender has assigned its right to receive payments under the Loan Agreement
and any payments due to Lender hereunder from after the date when a duplicate
original of such assignment is filed with Escrow Agent.
Section 7.06. This Agreement may be simultaneously executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same Agreement.
Section 7.07. This Agreement shall terminate upon disbursement by
Escrow Agent of all moneys held by it hereunder.
Section 7.08. This Agreement (and, with respect to Lender, Issuer and
Borrower, together with the Loan Agreement) constitutes the entire agreement of
the parties relating to the subject matter hereof.
Section 7.09. The Bank may become a party to this Agreement by
executing and delivering a counterpart signature page. Pending such execution
and delivery this Agreement shall be a binding agreement among the parties other
than the Bank.
[REMAINDER OF PAGE INTENTIONALLY BLANK; EXECUTION PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
GE CAPITAL PUBLIC FINANCE, INC., NATIONAL CITY BANK OF
Lender MINNEAPOLIS, Escrow Agent
By:/s/ Philip Long By: (Illegible)
----------------
Title: Vice President Title:Assistant Vice President
Address: 8400 Normandale Lake Blvd. Address:651 Nicollet Mall
Suite 470 Minneapolis, MN 55402
Minneapolis, MN 55437 Telephone: (612) 897-8372
Telephone: (800) 346-3146 Telecopier:(612) 904-8898
Telecopier:(612) 897-5601
BUSINESS FINANCE AUTHORITY OF ELEXSYS INTERNATIONAL, INC.
THE STATE OF NEW HAMPSHIRE, Issuer Borrower
Borrower
By:/s/ Jack Donovan By:/s/ Michael Shimada
------------------ -------------------
Title: Executive Director Title: Principal Financial Officer
and Duly Authorized Officer
Address: 14 Dixon Avenue, Suite 101 Address:41 Simon Street
Concord, NH 03301 Nashua, NH 03060
Telephone: (603) 271-2391 Telephone: (603) 886-0066
Telecopier: (603) 271-2396 Telecopier: (603) 886-9724
SANWA BANK CALIFORNIA, Bank
By:______________________________
Title:___________________________
Address: 220 Almaden Boulevard
San Jose, CA 95113
Telephone: (408) 297-6500
Telecopier: (408) 292-4092
<PAGE>
A-4
Exhibit A to Escrow Agreement
FORM OF PAYMENT REQUEST FORM
Payment Request Form No. _____
Elexsys International, Inc., as borrower ("Borrower") under that
certain Loan Agreement dated as of December 1, 1996 (the "Loan Agreement"), by
and among Business Finance Authority of the State of New Hampshire ("Issuer"),
GE Capital Public Finance, Inc. ("Lender") and Borrower, hereby requests
National City Bank of Minneapolis, as escrow agent ("Escrow Agent") under the
Escrow Agreement dated as of December 1, 1996 (the "Escrow Agreement") among
Escrow Agent, Lender, Issuer, Borrower and Sanwa Bank California ("Bank"), to
make payment from the Escrow Fund (as defined in the Escrow Agreement) to the
following party or parties, at the addresses set forth below:
Cost of Issuance
Amount to or Project
Payee Address be paid Description
- ----- ------- --------- ----------------
In connection therewith, the undersigned officer of Borrower hereby
certifies as follows:
<PAGE>
1. All of the provisions of the Loan Agreement are
incorporated herein by reference and capitalized terms used herein and
not defined shall have the meanings assigned to them in the Loan
Agreement.
2. The Project subject to this Payment Request Form
comprises a portion of the Project described in the Loan Agreement, and
has been inspected and accepted by Borrower.
3. The payments to be made to the payees set forth
above are for either the costs of issuance or Project Costs described
above, or reimbursement to Borrower therefor, and the payments have not
been the basis for a prior request which has been paid, and the amount
remaining in the Escrow Fund is sufficient to pay the remaining Project
Costs.
4. The payment or requisition is for work actually
performed or materials or property actually supplied to the Project
site prior to the date hereof.
5. All of Borrower's representations, covenants and
warranties contained in the Loan Agreement were true and accurate in
all material respects as of the date made, and remain true and accurate
in all material respects as of the date of this Payment Request Form,
and Borrower has fully and satisfactorily performed all of its
covenants and obligations to date required under the Loan Agreement. No
Default or Event of Default has occurred under the Loan Agreement.
6. This request for payment contains no items
representing payment on account of any retained percentage entitled to
be retained by Borrower at the date hereof.
7. The undersigned has reviewed the provisions of the
Statement as to Tax Exempt Status, and the payment of this requisition
will not result in any proceeds of the obligation evidenced by the Loan
Agreement being expended in contradiction of the provisions thereof and
representations made therein.
8. Attached hereto as Attachment A are invoices
and/or bills of sale relating to the Project and, if such invoices have
been paid by Borrower, evidence of payment thereof.
9. If this Payment Request Form relates to the final
disbursement from the Escrow Fund, attached hereto as Attachment B is
an executed Certificate of Acceptance in the form required by the Loan
Agreement.
10. Attached hereto as Attachment C is an insurance
certificate in the form required by the Loan Agreement.
11. All contractors, subcontractors and suppliers of
materials, property for the Project or labor have been paid for their
share of work, materials or property through the date of the prior
Payment Request Form (if any).
12. The payment or reimbursement requested by this
Payment Request Form will be disbursed in payment of, or is
reimbursement for the Borrower's prior payment of, work performed or
completed on, or materials or property supplied for the Project by the
contractors, subcontractors or suppliers listed in Attachment D hereto.
13. All amounts previously requested and disbursed
from the Escrow Fund for payment of contractors, subcontractors and
suppliers of materials and labor have been so applied.
14. This request does not request reimbursement for
any payment or payments for any obligations originally paid or
incurred, for federal income tax purposes, before September 25, 1996.
15. Borrower understands that Lender is relying on
the certifications herein with regard to and in connection with
approving the disbursement requested hereby.
16. Attached hereto as Attachment E is an appropriate
endorsement or continuation of the title insurance policy delivered
pursuant to the Reimbursement Agreement increasing the coverage of such
policy to an amount at least equal to the amount specified in such
paragraph less the amount remaining in the Escrow Fund after
disbursement of the current requisition.
17. Attached hereto as Exhibit F are partial releases
of mechanics' liens through the date of the last payment request (if
any) by those contractors, subcontractors, suppliers and laborers
having received payments for work on or materials or property supplied
to the Project in excess of $5,000.00.
18. Attached hereto as Exhibit G is a copy of the
notice of the anticipated funding date for the advance posted on the
Project site by Borrower or its agent and certified as to its posting
date by Borrower, all in compliance with New Hampshire RSA 447:12-b,
and such other evidence as may reasonably be required by Lender or Bank
of Borrower's compliance with New Hampshire RSA 447:12-a and b.
19. Borrower has satisfied all of the conditions
contained in Article III of the Loan Agreement and the Letter of
Credit has been delivered to Lender.
ELEXSYS INTERNATIONAL, INC.
By ______________________________________
Title_____________________________________
Date:
APPROVED BY LENDER:
GE CAPITAL PUBLIC FINANCE, INC.
By ______________________________________
Title_____________________________________
Date:
APPROVED BY BANK:
SANWA BANK CALIFORNIA
By ______________________________________
Title_____________________________________
Date:
