<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1995
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: 0-16249
CIMCO, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0251163
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
265 Briggs Avenue, Costa Mesa, California 92626
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(714) 546-4460
_____________
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 ninety (90) days.
Yes X No __
The registrant had 2,960,481 shares of common stock outstanding as of
March 15, 1995.
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<PAGE> 2
CIMCO, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Page
----
<S> <C> <C>
Number
------
Item 1. Financial Statements:
Consolidated Balance Sheets -
January 31, 1995 (Unaudited) and April 30, 1994 ........................ 3
Consolidated Statements of Operations (Unaudited) -
Three Months and Nine Months Ended January 31, 1995 and 1994 ........... 4
Consolidated Statements of Cash Flows (Unaudited) -
Nine Months Ended January 31, 1995 and 1994 ............................ 5
Notes to Unaudited Consolidated Financial Statements ................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .................................... 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ....................................... 11
</TABLE>
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<PAGE> 3
PART I - FINANCIAL INFORMATION
CIMCO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS January 31, 1995 April 30, 1994
---------------- --------------
CURRENT ASSETS (Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 1,239,807 $ 2,284,191
Short-term cash investments - 878,402
Accounts receivable, less allowance for doubtful accounts of
$87,000 at January 31, 1995 and $80,000 at April 30, 1994 13,225,0 11,345,777
Federal income tax receivable - 780,000
Inventories - at lower of cost or market
Raw materials 6,144,943 5,575,532
Work in process 1,607,653 1,117,718
Finished goods 4,116,607 4,133,985
----------- -----------
11,869,203 10,827,235
Prepaid expenses 826,002 420,393
----------- -----------
Total current assets 27,160,058 26,535,998
PROPERTY, PLANT AND EQUIPMENT - at cost
Land 3,027,012 3,314,294
Buildings 8,869,117 9,700,754
Machinery and equipment 33,943,001 32,467,331
Leasehold improvements 2,068,745 2,012,577
----------- -----------
47,907,875 47,494,956
Less accumulated depreciation and amortization 21,691,200 20,005,751
----------- -----------
26,216,675 27,489,205
OTHER ASSETS
Land held for future expansion 432,700 432,700
Other 2,333,828 2,190,578
----------- -----------
2,766,528 2,623,278
----------- -----------
$56,143,261 $56,648,481
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 3,325,900 $ 2,388,367
Notes payable to bank 2,393,366 2,000,000
Accounts payable 8,619,927 6,701,907
Accrued expenses 2,150,788 2,378,109
Income taxes payable 577,538 200,895
----------- -----------
Total current liabilities 17,067,519 13,669,278
LONG-TERM DEBT, net of current portion 12,158,150 13,536,333
DEFERRED INCOME TAXES 1,128,000 2,336,000
STOCKHOLDERS' EQUITY
Preferred stock - $.01 par value; authorized 5,000,000 shares;
issued and outstanding, none - -
Preferred stock - Series A Junior Participating - $.01 par value;
authorized 100,000 shares; issued and outstanding, none - -
Common stock - $.01 par value; authorized 10,000,000 shares;
issued and outstanding, 2,960,481 shares at January 31, 1995 and
2,980,481 at April 30, 1994 29,605 29,805
Capital in excess of par value 7,258,757 7,371,040
Retained earnings 18,614,820 19,872,193
Foreign currency translation adjustment 129,818 77,240
----------- -----------
26,033,000 27,350,278
Less note receivable from Employee Stock Ownership Plan (243,408) (243,408)
----------- -----------
25,789,592 27,106,870
----------- -----------
$56,143,261 $56,648,481
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
-3-
<PAGE> 4
CIMCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31, January 31,
------------------ -----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $21,089,076 $16,963,153 $59,633,145 $54,851,308
Costs and expenses:
Manufacturing costs 17,624,188 14,283,504 50,990,903 45,512,099
Engineering and tooling expenses 1,067,424 1,192,683 3,097,663 3,597,841
Selling, general and administrative expenses 2,286,018 2,019,993 6,645,686 6,035,923
Operating profit (loss) 111,446 (533,027) (1,101,107) (294,555)
Interest income 2,927 31,507 42,809 76,720
Interest expense 338,447 198,855 905,079 559,382
----------- ----------- ----------- -----------
335,520 167,348 862,270 482,662
----------- ----------- ----------- -----------
Loss before credit for income taxes (224,074) (700,375) (1,963,377) (777,217)
Credit for income taxes (78,000) (261,000) (706,000) (472,000)
----------- ----------- ----------- -----------
Net loss $ (146,074) $ (439,375) $(1,257,377) $ (305,217)
=========== =========== =========== ===========
Loss per common equivalent share $ (.05) $ (.15) $ (.42) $ (.10)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
-4-
<PAGE> 5
CIMCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
January 31,
-----------------------------
1995 1994
----------- -----------
<S> <C> <C>
Cash flow from operating activities:
Net earnings (loss) $(1,257,377) $ (305,217)
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 2,591,840 2,388,788
Gain on sale of machinery and equipment (12,496) (74,605)
Increase in allowance for doubtful accounts 7,000 9,000
Increase in accounts receivable (1,886,269) (393,220)
Decrease in federal income tax receivable 780,000 -
Increase in inventory (1,041,968) (308,519)
Increase in prepaid expenses (405,609) (239,540)
Increase in other assets (143,250) (1,449,689)
Increase (decrease) in accounts payable 1,918,020) (526,573)
(Decrease) increase in accrued expenses (227,321) 91,165
Increase (decrease) in income taxes payable 376,643 (904,196)
Decrease in deferred income taxes (1,208,000) -
Translation adjustment 52,582 -
----------- -----------
Total adjustments 801,172 (1,407,389)
----------- -----------
Net cash used by operating activities (456,205) (1,712,606)
Cash flow from investing activities:
Proceeds from sale of fixed assets 929,252 519,775
Redemptions of short-term cash investments 889,460 151,334
Purchases of short-term cash investments (11,058) (416,201)
Capital expenditures (2,236,066) (6,825,202)
----------- -----------
Net cash provided (used) in investing activities (428,412) (6,570,294)
Cash flow from financing activities:
Net short-term borrowings 393,366 350,000
Proceeds from long-term debt 1,835,000 10,025,000
Principal payments on long-term debt (2,275,650) (1,858,192)
Proceeds from issuance of common stock - 39,200
Repurchase of common stock (112,483) -
Increase in note receivable from ESOP - (5,996)
----------- -----------
Net cash provided (used) by financing activities (159,767) 8,550,012
----------- -----------
Net increase (decrease) in cash and cash equivalents (1,044,384) 267,112
Cash and cash equivalents at beginning of the period 2,284,191 1,122,902
----------- -----------
Cash and cash equivalents at end of period $ 1,239,807 $ 1,390,014
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 881,410 $ 569,887
Income taxes $ 19,510 $ 414,270
</TABLE>
The accompanying notes are an integral part of these statements.
-5-
<PAGE> 6
CIMCO, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. PRESENTATION OF INTERIM INFORMATION
The consolidated balance sheet as of January 31, 1995 and the related
consolidated statements of operations and cash flows for the three-month and
nine-month periods ended January 31, 1995 and 1994 are unaudited; in the
opinion of management, all adjustments for a fair presentation of such
financial statements have been included. Such adjustments consisted only of
normal recurring items. Interim results are not necessarily indicative of
results for a full year.
The Company recognizes income on products in the month in which
shipment is made. Revenue for tooling is generally recognized in the month in
which initial samples are submitted for customer acceptance or to a lesser
extent by terms agreed upon by the Company and its customer.
The financial statements and notes are presented as permitted by Form
10-Q, and do not contain certain information included in the Company's audited
financial statements and notes for the fiscal year ended April 30, 1994.
2. LONG-TERM DEBT
On February 1, 1995 the Company replaced its credit agreement with its
bank. The new credit agreement with its bank provides for a revolving line of
credit not to exceed $6,000,000 renewable on September 15, 1995, and a
$7,500,000 term loan, payable in forty-eight equal monthly installments
commencing March 1, 1995. Borrowings under the revolving line of credit are
contingent on maintaining covenants related to certain domestic trade
receivables and inventories and proceeds of the foregoing. In addition, the
credit agreement contains various covenants that, among other things, require
the maintenance of certain balance sheet ratios, minimum levels of net worth
(as defined in the credit agreement), restrictions which limit the payment of
dividends to $100,000 annually, and limitations on the acquisition of, or
investment in, other entities. The debt is secured by certain intangible
assets, equipment and fixtures, inventories, as well as certain real property
in Corona, California. The revolving line of credit and the term loan bear
interest at the bank's prime rate plus 0.25% and 0.50% respectively.
3. EARNINGS (LOSS) PER COMMON EQUIVALENT SHARE
Earnings (loss) per common equivalent share are based on the weighted
average number of shares of common stock and common stock equivalents (dilutive
stock options) outstanding during the related periods. The weighted average
number of common stock equivalent shares includes shares issuable upon the
assumed exercise of stock options less the number of shares assumed purchased
with the proceeds available from such exercise. Fully diluted net earnings per
share does not differ materially from net income per common share and common
share equivalent.
Weighted average shares outstanding were 2,960,688 and 2,981,486 for
the three-month periods and 2,969,256 and 2,979,228 for the nine-month periods
ended January 31, 1995 and 1994, respectively.
-6-
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
A. RESULTS OF OPERATIONS
Three Months ended January 31, 1995 vs. January 31, 1994
The following table shows the amounts of certain items included in the
Company's statements of operations and percentages of these items as they
relate to net sales for the three months ended January 31, 1995 and 1994; also
shown are the amounts and percentages of increase or decrease of these items in
the current period as compared to the corresponding period in the preceding
year. Unless otherwise indicated, references below to specific periods are to
the Company's fiscal years ended April 30.
Amounts and Percentages of Certain Items
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------- Increase (Decrease)
January 31, 1995 January 31, 1994 1995 vs. 1994
----------------- ------------------ -------------------
Amount % Amount % Amount %
------- ------ ------- ------ ------ -----
<S> <C> <C> <C <C> <C> <C>
Net sales $21,089 100.0 $16,963 100.0 $4,126 24.3
------- ------ ------- ------ ------
Manufacturing costs 17,624 83.6 14,284 84.2 3,340 23.4
Engineering and tooling expenses 1,067 5.1 1,192 7.0 (125) (10.5)
Selling expenses 772 3.7 626 3.7 146 23.3
General and administrative expenses 1,514 7.1 1,394 8.2 120 8.6
Interest expense, net 336 1.6 167 1.0 169 100.5
------- ------ ------- ------ ------
Loss before credit for income taxes (224) (1.1) (700) (4.1) 476 68.0
Credit for income taxes (78) (0.4) (261) (1.5) 183 70.1
------- ------ ------- ------ ------
Net earnings (loss) $ (146) $ (0.7) $ (439) $ (2.6) $ 293 66.8
======= ====== ======= ====== ======
</TABLE>
Net sales increased 24.3% to $21,089,000 in the current quarter from
$16,963,000 in the third quarter last fiscal year after eliminating
intersegment sales of $938,000 and $958,000 respectively, in those quarters.
Sales increased at a rate greater than that of costs and expenses, largely for
the reasons discussed below.
Gross sales of the commercial/industrial segment increased 27.2% to
$7,825,000 in the current quarter from $6,152,000 of a year ago. The increase
was largely the result of greater volumes in both the sales of assembled
products and tooling sales, as well as price increases implemented in the third
quarter of fiscal 1995. These sales increases were partially offset by the
continued downward trend of sales to the segment's largest customer. The fiscal
1995 third quarter operating loss was significantly reduced due to the
previously mentioned sales increases and to reductions in direct labor costs
and manufacturing overhead costs as percentages of sales. The improvement in
operating profit was partially offset by increased costs associated with the
use of outside contractors related to assembled products. Primarily as a
result of the foregoing, the operating loss for the current quarter was
$384,000 versus $773,000 for the same quarter last fiscal year.
The medical segment's gross sales remained relatively unchanged,
decreasing 0.1% to $3,287,000 in the current quarter from $3,291,000 during
the same period last year. Operating profit increased in the current quarter
due to reduced manufacturing overhead expenses and lower costs associated with
outside contractors. Higher general and administrative expenses partially
offset the profit improvement. The operating profit for the current quarter
was $116,000 compared to a loss of $18,000 for the same quarter last year.
The compounding segment's gross sales were $10,915,000 for the third
quarter of this year, up 28.7% from $8,478,000 during the same quarter last
year. This volume increase was the result of greater foreign and domestic
sales to the segment's largest customer and to higher sales to other existing
customers. Operating profits increased in the current quarter primarily due to
reduced manufacturing expenses as a percentage of sales. The operating profit
increase was partially offset by greater raw material costs, higher domestic
selling expenses and greater foreign general and administrative expenses.
Operating profit improved to $380,000 in the current quarter versus $258,000
for the same quarter a year ago.
-7-
<PAGE> 8
Engineering and tooling expenses decreased 10.5% to $1,067,000 in the
current quarter from $1,192,000 during the same quarter last year as tooling
sales increased 16.0%. Manufacturing expenses decreased as a percentage of
tooling sales reflecting the relatively fixed nature of manufacturing overhead.
The overall decrease was partially offset by higher direct labor and costs
associated with the use of outside contractors, although these costs decreased
as a percentage of tooling sales. The expenses were 5.1% of consolidated net
sales in the third quarter of the current year versus 7.0% in the same period a
year ago.
Selling expenses increased 23.3% to $772,000 in the current quarter
from $626,000 in the same quarter last year. The increase was primarily due to
higher salary and related expenses in both the compounding and the medical
segments. Although increasing in amount, the expenses remained 3.7% of net
sales for both periods, respectively.
General and administrative expenses increased 8.6% to $1,514,000 in
the current quarter from $1,394,000 in the same quarter last year. The
increase was largely the result of higher foreign general and administrative
expenses in the compounding segment primarily related to currency exchange
losses and of higher salary related costs in the medical segment. The expenses
were 7.1% of net sales in the current quarter versus 6.8% of net sales in the
third quarter of last year.
Net interest expense increased to $336,000 or 1.6% of net sales in the
current quarter from $167,000 or 0.9% of net sales in the same quarter a year
ago. The increase was largely the result of higher interest rates and lower
interest income on reduced short-term cash investments in the third quarter of
fiscal 1995.
The net tax benefit resulted from a pre-tax loss in the commercial
industrial segment and from the tax benefits of the Singapore Investment
Allowance.
The net loss for the third quarter of the current year was $146,000
versus $439,000 for the same quarter last year. The improved performance in the
third quarter of fiscal 1995 resulted primarily from the previously mentioned
increases in sales and reductions in manufacturing costs, partially offset by
increased selling, general and administrative expenses and higher net interest
expense.
-8-
<PAGE> 9
Nine Months ended January 31, 1995 vs. January 31, 1994
The following table shows the amounts of certain items included in the
Company's statements of operations and percentages of these items as they
relate to net sales for the nine months ended January 31, 1995 and 1994; also
shown are the amounts and percentages of increase or decrease of these items in
the current period as compared to the corresponding period in the preceding
year. Unless otherwise indicated, references below to specific periods are to
the Company's fiscal years ended April 30.
Amounts and Percentages of Certain Items
(Dollars in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------------------- Increase (Decrease)
January 31, 1995 January 31, 1994 1995 vs. 1994
------------------- ---------------- -------------------
Amount % Amount % Amount %
------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Net sales $59,633 100.0 $54,852 100.0 $ 4,781 8.7
------- ------ ------- ------ -------
Manufacturing costs 50,991 85.5 45,512 83.0 5,479 12.0
Engineering and tooling expenses 3,098 5.2 3,598 6.6 (500) (13.9)
Selling expenses 2,132 3.6 2,011 3.7 121 6.0
General and administrative expenses 4,513 7.5 4,025 7.2 488 12.1
Interest expense, net 862 1.4 483 0.9 379 78.6
------- ------ ------- ------ -------
Loss before credit for income taxes (1,963) (3.2) (777) (1.4) (1,186) (152.6)
Credit for income taxes (706) (1.2) (472) (0.8) (234) (49.6)
------- ------ ------- ------ -------
Net earnings (loss) $(1,257) $ (2.0) $ (305) $ (0.6) $ (952) (312.0)
======= ====== ======= ====== =======
</TABLE>
Net sales increased 8.7% to $59,633,000 in the current nine-months
from $54,851,000 in the same period last fiscal year after eliminating
intersegment sales of $2,938,000 and $3,333,000, respectively, in those
periods. Costs and expenses increased at a rate greater than that of sales,
largely for the reasons discussed below.
Gross sales of the commercial/industrial segment increased 0.5% to
$22,594,000 in the current nine-months from $22,491,000 of a year ago. The
increase was largely the result of increased sales of assembled products,
offset by the continued downward trend of sales to the segment's largest
customers and by lower tooling sales. Manufacturing costs increased at a rate
greater than that of sales primarily due to increased outside processing costs,
assembly-related labor costs and to the continued under absorption of certain
fixed manufacturing expenses. The increased costs were partially offset by
reduced raw material costs resulting from a change in product mix as sales of
products that include higher labor costs became a greater portion of gross
sales. Increased general and administrative expenses related to industrial
development revenue bond (IDRB) loan cost amortization and lower gains on sales
of fixed assets which did not reduce general and administrative expenses to the
same extent in the current period as compared to last fiscal year, further
reduced operating results in the current period. Largely as a result of the
foregoing, the operating loss for the current period was $1,958,000 versus a
loss of $1,370,000 for the same period last fiscal year.
The medical segment's gross sales decreased 3.7% to $9,204,000 in the
current period from $9,556,000 during the same period last year. Molding sales
decreased in the current period, partially offset by increased sales of
proprietary respiratory products. Lower sales volumes, increases in direct
labor and raw material costs resulting from adverse changes in product mix and
higher selling salaries associated with proprietary product sales reduced
operating profit in the current period. Lower outside costs and decreased
manufacturing expenses partially offset the previously mentioned reductions in
operating profit. The operating loss for the current nine months was $173,000
compared to an operating profit of $298,000 for the same period last year.
The compounding segment's gross sales were $30,773,000 for the current
nine months, up 17.7% from $26,137,000 during the same period last year.
This volume increase was the result of greater foreign and domestic sales to
the segment's major customer and foreign sales to new customers, which was
partially offset by reduced domestic sales to another major customer and to
lower intercompany sales to the commercial/industrial segment. Operating
profit increased in the current nine months primarily due to reduced
manufacturing overhead costs and direct labor costs as percentages of sales.
Greater domestic selling expenses and higher foreign general and administrative
expenses had negative impacts on operating profit in the current period,
although these expenses remained relatively constant as a percentage of the
segment's gross sales. Operating profit was $1,029,000 in the current period
versus $777,000 for the same period a year ago as a result of the foregoing.
-9-
<PAGE> 10
Engineering and tooling expenses decreased 13.9% to $3,098,000 in the
current nine months from $3,598,000 during the same period last year as tooling
sales decreased 9.4%. Expenses decreased primarily due to reduced costs
associated with the decreased use of outside contractors not required with the
lower sales volume. The expenses were 5.2% of net sales in the first nine
months of the current year versus 6.6% of net sales in the same period a year
ago.
Selling expenses increased 6.0% to $2,132,000 in the current period
from $2,010,000 in the same period last year. The increase was largely the
result of higher domestic and foreign selling salaries and greater domestic
sales commissions in the compounding segment and higher selling salaries in the
medical segment. The expenses were 3.6% of net sales in the current period and
3.7% of net sales for the same period last year.
General and administrative expenses increased 12.1% to $4,514,000 in
the current nine months from $4,025,000 in the same period last year. The
increase was largely the result of lower gains from sales of fixed assets, the
commencement of amortization of loan costs associated with the issuance of the
Industrial Development Revenue Bonds issued late in the second half of last
fiscal year and foreign exchange losses in the compounding segment. The
expenses were 7.5% of net sales in the current period and 7.4% of net sales in
the same period last year.
Net interest expense increased to $862,000 or 1.4% of net sales in the
current period from $483,000 or 0.8% of net sales in the same period a year
ago. The increase was largely the result of higher interest rates, compounded
by lower interest income resulting from the decrease in short-term investments
during the current nine-month period.
The net tax benefit resulted from a pre-tax loss in the
commercial/industrial and medical segments and from the tax benefits of the
Singapore Investment Allowance.
The net loss for the current nine months was $1,257,000 versus
$305,000 for the same period last year. As discussed above, the current
period's loss resulted primarily from increased outside processing and higher
assembly-related labor costs in the commercial/industrial segment and from
underutilization of manufacturing plant capacity of the commercial/industrial
and medical segments, as well as higher selling, general and administrative
expenses.
B. LIQUIDITY AND CAPITAL RESOURCES
The Company has previously financed its capital expenditures and
working capital requirements from operating cash flow, trade credit, borrowings
under a then existing credit agreement and proceeds from the industrial
development revenue bond. At January 31, 1995, the Company's $1,422,000
available source of funds consisted of approximately $179,000 in funds
remaining from the IDRB, $1,240,000 in cash and cash equivalents and $3,000 in
unused lines of credit with its bank.
Working capital was $10,093,000 at January 31, 1995, versus
$12,867,000 at April 30, 1994. The increase in accounts receivable was the
result of greater compounding sales and higher commercial/industrial sales in
the third quarter of fiscal 1995, partially reduced by lower trade receivables
in the medical segment. The increase in inventories was largely the result of
a higher mix of assembly products in the commercial/industrial segment as their
sales began to increase in the latter part of the current nine months.
Capital expenditures aggregated $2,236,000 and $6,825,000 in the first
nine months of the current and last fiscal years, respectively. Expenditures
made from funds provided by the IDRB were $498,000 and $4,827,000 in the nine
months of the current and prior years, respectively. Expenditures made from
funds other than the IDRB were used to upgrade machinery and equipment in all
segments.
On February 1, 1995 the Company replaced its credit agreement with its
bank. The new credit agreement with its bank provides for a revolving line of
credit not to exceed $6,000,000 renewable on September 15, 1995, and a
$7,500,000 term loan, payable in forty-eight equal monthly installments
commencing March 1, 1995. Borrowings under the revolving line of credit are
contingent on maintaining covenants and related to certain domestic trade
receivables and inventories and proceeds of the foregoing. In addition, the
credit agreement contains various covenants that, among other things, require
the maintenance of certain balance sheet ratios, minimum levels of net worth
(as defined in the credit agreement), restrictions which limit the payment of
dividends to $100,000 annually, and limitations on the acquisition of, or
investment in, other entities. The debt is secured by certain intangible
assets, equipment and fixtures, inventories, as well as certain real property
in Corona, California. The revolving line of credit and the term loan bear
interest at the bank's prime rate plus 0.25% and 0.50% respectively.
The Company believes the present working capital in combination with
operating cash flow, trade credit, borrowings under the Company's new credit
agreement, and proceeds from the issuance of the above mentioned industrial
development revenue bond will be adequate to support working capital
requirements and capital expenditures for the next twelve months.
-10-
<PAGE> 11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
10.41 Credit Agreement dated February 1, 1995, between Wells
Fargo Bank, National Association and Registrant.
-11-
<PAGE> 12
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.
CIMCO, INC.
(Registrant)
Date: March 15, 1995 /s/ RUSSELL T. GILBERT
---------------------------------------
Russell T. Gilbert
President and Chief Executive Officer
Date: March 15, 1995 /s/ L. RONALD TREPP
---------------------------------------
L. Ronald Trepp
Chief Financial Officer
(Principal Financial and Accounting
Officer)
-12-
<PAGE> 1
EXHIBIT 10.41
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of the first day of February, 1995,
by and between CIMCO, INC., a Delaware corporation ("Borrower"), and WELLS
FARGO BANK, NATIONAL ASSOCIATION ("Bank").
RECITAL
Borrower has requested from Bank the credit accommodations described
below (collectively the "Credits"), and Bank has agreed to provide the Credits
to Borrower on the terms and conditions contained herein.
NOW, THEREFORE, Bank and Borrower hereby agree as follows:
ARTICLE I
THE CREDITS
SECTION 1.1. LINE OF CREDIT.
(a) Line of Credit. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including September 15, 1995, not to exceed at any time the aggregate
principal amount of SIX MILLION DOLLARS ($6,000,000.00) ("Line of Credit"), the
proceeds of which shall be used to finance Borrower's working capital
requirements. Borrower's obligation to repay advances under the Line of Credit
shall be evidenced by a promissory note substantially in the form of Exhibit A
attached hereto ("Line of Credit Note"), all terms of which are incorporated
herein by this reference.
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Notwithstanding any other provision of this
Agreement, the aggregate amount of all outstanding borrowings under the Line of
Credit shall not at any time exceed a maximum of SIX MILLION DOLLARS
($6,000,000.00).
Notwithstanding any other provision of this Agreement, the aggregate
amount of all outstanding borrowings under the Line of Credit shall not at any
time exceed a maximum of eighty percent (80%) of Borrower's assigned eligible
accounts receivable, as determined by Bank upon receipt and review of such
collateral reports and other documents as Bank may require; plus fifty percent
(50%) of the value of Borrower's raw materials inventory, and forty percent
(40%) of the value of Borrower's finished goods inventory with value defined as
the finished goods of Borrower's RMPD Division, exclusive of work in process
and inventory which is obsolete, unsaleable or damaged, as determined by Bank
upon receipt and review of said collateral reports and other documents;
provided however, that the outstanding principal balance of all borrowings
against Borrower's inventory shall not at any time exceed an aggregate amount
of TWO MILLION DOLLARS ($2,000,000.00).
Borrower acknowledges that the foregoing advance rate against eligible
accounts receivable was established by Bank with the understanding that, among
other items, the aggregate of all returns, rebates, discounts, credits and
allowances for the immediately preceding three (3) months at all times shall be
less than five percent (5%) of Borrower's gross sales for said period. If such
dilution of Borrower's accounts for the immediately allowances for the
immediately
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preceding three (3) months at any time exceeds five percent (5%) of
Borrower's gross sales for said period, or if there at any time exists any
other matters, events, conditions or contingencies which Bank reasonably
believes may affect payment of any portion of Borrower's accounts, Bank, in its
sole discretion, may reduce said advance rate to a percentage appropriate to
reflect such additional dilution and/or establish additional reserves against
Borrower's eligible accounts receivable.
As used herein, "eligible accounts receivable" shall consist solely of
trade accounts which have been created in the ordinary course of Borrower's
business and upon which Borrower's right to receive payment is absolute and not
contingent upon the fulfillment of any condition whatsoever, and shall not
include:
(i) any account which is past due more than twice
Borrower's standard selling terms; except with respect to any account for which
Borrower has provided extended payment terms not to exceed one hundred eighty
(180) days, any such account which is more than thirty (30) days past due;
(ii) any account for which there exists any right
of setoff, defense or discount (except regular discounts allowed in the
ordinary course of business to promote prompt payment) or for which any defense
or counterclaim has been asserted;
(iii) any account which represents an obligation of
any state or municipal government or of the United States government or any
political subdivision thereof (except accounts which represent obligations of
the United States government and for
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which Bank's forms N-138 and N-139 have been duly executed and acknowledged);
(iv) any account which represents an obligation of
an account debtor located in a foreign country;
(v) any account which arises from the sale or
lease to or performance of services for, or represents an obligation of, an
employee, affiliate, partner, parent or subsidiary of Borrower;
(vi) that portion of any account which represents
interim or progress billings or retention rights on the part of the account
debtor;
(vii) any account which represents an obligation of
any account debtor when twenty percent (20%) or more of Borrower's accounts
from such account debtor are not eligible pursuant to (i) above;
(viii) that portion of any account from an account
debtor which represents the amount by which Borrower's total accounts from said
account debtor exceeds twenty-five percent (25%) of Borrower's total accounts;
(ix) any account deemed ineligible by Bank when
Bank, in its sole discretion, deems the creditworthiness or financial condition
of the account debtor, or the industry in which the account debtor is engaged,
to be unsatisfactory.
(b) Borrowing and Repayment. Borrower may from time to time
during the term of the Line of Credit borrow, partially or wholly repay its
outstanding borrowings, and reborrow, subject to all the limitations, terms and
conditions contained herein or in
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the Line of Credit Note; provided however, that the total outstanding
borrowings under the Line of Credit shall not at any time exceed the maximum
principal amount available thereunder, as set forth above.
(c) Letter of Credit Subfeature. As a subfeature under the Line
of Credit, Bank agrees from time to time up to and including September 15,
1995, to issue standby and commercial letters of credit for the account of
Borrower (each, a "Letter of Credit" and collectively, "Letters of Credit");
provided however, that the form and substance of each Letter of Credit shall be
subject to approval by Bank, in its sole discretion; and provided further, that
the aggregate undrawn amount of all outstanding Letters of Credit shall not at
any time exceed FOUR MILLION DOLLARS ($4,000,000.00). Each Letter of Credit
shall be issued for a term not to exceed three hundred sixty-five (365) days,
as designated by Borrower; provided however, that no Letter of Credit shall
have an expiration date subsequent to September 15, 1996. The undrawn amount
of all Letters of Credit shall be reserved under the Line of Credit and shall
not be available for advances thereunder. Each Letter of Credit shall be
subject to the additional terms and conditions of the Letter of Credit
Agreement and related documents, if any, required by Bank in connection with
the issuance thereof (each, a "Letter of Credit Agreement" and collectively,
"Letter of Credit Agreements"). Each draft paid by Bank under a Letter of
Credit shall be deemed an advance under the Line of Credit and shall be repaid
by Borrower in accordance with the terms and conditions of this
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<PAGE> 6
Agreement applicable to such advances; provided however, that if the Line of
Credit is not available, for any reason whatsoever, at the time any draft is
paid by Bank, or if advances are not available under the Line of Credit at such
time due to any limitation on borrowings set forth herein, then the full amount
of such draft shall be immediately due and payable, together with interest
thereon, from the date such amount is paid by Bank to the date such amount is
fully repaid by Borrower, at the rate of interest applicable to advances under
the Line of Credit. In such event, Borrower agrees that Bank, at Bank's sole
discretion, may debit Borrower's deposit account with Bank for the amount of
any such draft.
SECTION 1.2. TERM LOAN.
(a) Term Loan. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make a loan to Borrower in the principal
amount of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($7,500,000.00) ("Term
Loan"), the proceeds of which shall be used to repay existing term loans with
Wells Fargo Bank. Borrower's obligation to repay the Term Loan shall be
evidenced by a promissory note substantially in the form of Exhibit B attached
hereto ("Term Note"), all terms of which are incorporated herein by this
reference.
(b) Repayment. The principal amount of the Term Loan shall be
repaid in accordance with the provisions of the Term Note.
(c) Prepayment. Borrower may prepay principal on the Term Loan at
any time, in any amount and without penalty, or any other non-interest related
costs. All prepayments of principal shall
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<PAGE> 7
be applied on the most remote principal installment(s) then unpaid.
SECTION 1.3. IDRB LETTER OF CREDIT.
(a) IDRB Letter of Credit. Bank has issued a standby letter of
credit for the account of Borrower and in favor of Bank of America Nevada,
Trustee, to finance Borrower's repayment obligations in connection with
Director of the State of Nevada Department of Commerce $5,625,000.00 Variable
Rate Demand Industrial Development Revenue Bonds (CIMCO, Inc. Project) Series
1993-A (the "IDRB Letter of Credit") in the original principal amount of FIVE
MILLION SEVEN HUNDRED THIRTY-FIVE THOUSAND NINE HUNDRED SIXTY DOLLARS
($5,735,960.00), a copy of which is attached hereto as Exhibit C, all terms of
which are incorporated herein by this reference. The IDRB Letter of Credit has
an expiration date of December 1, 1998, and is subject to the additional terms
of that certain Reimbursement Agreement dated as of September 1, 1993 required
by Bank in connection with the issuance thereof (the "Reimbursement
Agreement"), all terms of which are incorporated herein by this reference.
(b) Repayment of Drafts. Each draft paid by Bank under the
IDRB Letter of Credit shall be repaid by Borrower in accordance with the
provisions of the Reimbursement Agreement.
SECTION 1.4. INTEREST/FEES.
(a) Interest. The outstanding principal balances of the
Line of Credit and the Term Loan shall bear interest at the rates of interest
set forth in the Line of Credit Note and the Term Note.
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<PAGE> 8
(b) Computation and Payment. Interest shall be computed on the
basis of a 360-day year, actual days elapsed. Interest shall be payable at the
times and place set forth in the Line of Credit Note and the Term Note
(collectively, the "Notes").
(c) Letter of Credit Fees. Borrower shall pay to Bank fees upon
the issuance or amendment of each Subfeature Letter of Credit and upon the
payment by Bank of each draft under any Subfeature Letter of Credit determined
in accordance with Bank's standard fees and charges in effect at the time any
Subfeature Letter of Credit is issued or amended or any draft is paid. Fees
chargeable in connection with the IDRB Letter of Credit shall be paid in
accordance with the Reimbursement Agreement.
SECTION 1.5. PAYMENT OF INTEREST/FEES. Bank shall, and Borrower
hereby authorizes Bank to, debit demand deposit account #4692-112998 of
Borrower with Bank for all payments of interest and fees as they become due on
any of the Credits. Should, for any reason whatsoever, the funds in any such
demand deposit account be insufficient to pay all interest and/or fees when
due, Borrower shall immediately upon demand remit to Bank the full amount of
any such deficiency.
SECTION 1.6. COLLATERAL. As security for all indebtedness of
Borrower to Bank pursuant to this Agreement, Borrower grants to Bank, and shall
cause each of its wholly-owned subsidiaries, Compounding Technology, Inc., a
California corporation, and Medical Molding Corporation of America, a
California corporation, to grant to Bank, security interests of first priority
in all of their respective accounts, general intangibles and other rights
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<PAGE> 9
to payment, equipment and fixtures and inventory, and proceeds of all of the
foregoing. Bank is not taking a security interest in any assets of Compounding
Technology, PTE. Ltd., a Singapore private company, a wholly-owned subsidiary
of Compounding Technology, Inc., a California corporation.
As security for the IDRB Letter of Credit, Borrower grants to Bank a
lien of not less than first priority on that certain real property located in
Dayton, Lyon County, Nevada.
As additional security for the IDRB Letter of Credit, Borrower grants
to Bank a lien of not less than first priority on that certain real property
located in Corona, Riverside County, California.
All of the foregoing shall be evidenced by and subject to the terms of
such documents as Bank shall reasonably require, all in form and substance
satisfactory to Bank. Borrower shall reimburse Bank, immediately upon demand,
for all costs and expenses incurred by Bank in connection with any of the
foregoing security, including without limitation filing and recording fees and
costs of appraisals, audits and title insurance.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Bank,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and final
payment, and satisfaction and
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<PAGE> 10
discharge, of all obligations of Borrower to Bank subject to this Agreement.
SECTION 2.1. LEGAL STATUS. Borrower is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware, and is qualified or licensed to do business, and is in good standing
as a foreign corporation, if applicable, in all jurisdictions in which such
qualification or licensing is required or in which the failure to so qualify or
to be so licensed could have a material adverse effect on Borrower.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement, the
Notes, and each other document, contract and instrument required by or at any
time delivered to Bank in connection with this Agreement (with all of the
foregoing referred to herein collectively as the "Loan Documents") have been
duly authorized, and upon their execution and delivery in accordance with the
provisions hereof will constitute legal, valid and binding agreements and
obligations of Borrower or the party which executes the same, enforceable in
accordance with their respective terms.
SECTION 2.3. NO VIOLATION. The execution, delivery and
performance by Borrower of each of the Loan Documents do not violate any
provision of any law or regulation, or contravene any provision of the Articles
of Incorporation or By-laws of Borrower, or result in a breach of or constitute
a default under any contract, obligation, indenture or other instrument to
which Borrower is a party or by which Borrower may be bound.
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SECTION 2.4. LITIGATION. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings before any governmental authority, arbitrator, court or
administrative agency which may adversely affect the financial condition or
operation of Borrower other than those disclosed by Borrower to Bank in writing
prior to the date hereof.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial
statement of Borrower dated October 31, 1994, heretofore delivered by Borrower
to Bank is complete and correct and presents fairly the financial condition of
Borrower; discloses all liabilities of Borrower that are required to be
reflected or reserved against under generally accepted accounting principles,
whether liquidated or unliquidated, fixed or contingent; and has been prepared
in accordance with generally accepted accounting principles consistently
applied. Since the date of such financial statement there has been no material
adverse change in the financial condition of Borrower, nor has Borrower
mortgaged, pledged or granted a security interest or encumbered any of its
assets or properties except as disclosed by Borrower to Bank in writing prior
to the date hereof or as permitted by this Agreement.
SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any
pending assessments or adjustments of its income tax payable with respect to
any year.
SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture,
contract or instrument to which Borrower is a party or
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by which Borrower may be bound that requires the subordination in right of
payment of any of Borrower's obligations subject to this Agreement to any other
obligation of Borrower.
SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will
hereafter possess, all permits, memberships, franchises, contracts and licenses
required and all trademark rights, trade names, trade name rights, patents,
patent rights and fictitious name rights necessary to enable it to conduct the
business in which it is now engaged without conflict with the rights of others.
SECTION 2.9. ERISA. Borrower is in compliance in all material
respects with all applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended from time to time (ERISA); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is continuing with
respect to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.
SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.
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SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by
Borrower to Bank in writing prior to the date hereof, Borrower is in compliance
in all material respects with all applicable environmental, hazardous waste,
health and safety statutes and regulations governing its operations and/or
properties, including without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (CERCLA), the Superfund
Amendments and Reauthorization Act of 1986 (SARA), the Federal Resource
Conservation and Recovery Act of 1976, the Federal Toxic Substances Control Act
and the California Health and Safety Code. None of the operations of Borrower
is the subject of any federal or state investigation evaluating whether any
remedial action involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the environment.
Borrower has no material contingent liability in connection with any release of
any toxic or hazardous waste or substance into the environment.
ARTICLE III
CONDITIONS
SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The
obligation of Bank to grant any of the Credits is subject to the fulfillment to
Bank's satisfaction of all of the following conditions:
(a) Approval of Bank Counsel. All legal matters incidental to the
granting of each of the Credits shall be satisfactory to counsel of Bank.
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(b) Documentation. Bank shall have received, in form and
substance satisfactory to Bank, each of the following, duly executed:
(i) This Agreement and the Notes;
(ii) Corporate Borrowing Resolution;
(iii) Certificates of Incumbency;
(iv) Articles of Incorporation;
(v) Third Party Security Agreement: Rights to Payment
and Inventory;
(vi) Third Party Security Agreement: Equipment;
(vii) Corporate Resolution Third Party Collateral -
Medical Molding Corporation of America;
(viii) Corporate Resolution Third Party Collateral -
Compounding Technology, Inc.;
(ix) Reimbursement Agreement and all Bond Documents
required in connection therewith or with Bank's
obligations under the IDRB Letter of Credit;
(x) Deeds of Trust covering Dayton, Nevada and Corona,
California real property collateral;
(xi) Title Insurance policies in form and substance
satisfactory to Bank covering (xi) above;
(xii) UCC-1 financing statements covering (v) and (vi)
above;
(xiii) Hazardous Materials Agreement;
(xiv) Such other documents as Bank may require under any
other Section of this Agreement.
(c) Insurance. Borrower shall have delivered to Bank evidence of
insurance coverage on all Borrower's property, covering risks, in amounts,
issued by companies and in form and substance satisfactory to Bank, and where
required by Bank, with loss payable endorsements in favor of Bank.
(d) Financial Condition. There shall have been no material
adverse change, as determined by Bank, in the financial condition or business
of Borrower, nor any material decline, as determined by Bank, in the market
value of any collateral required hereunder or a substantial or material portion
of the assets of Borrower.
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SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The
obligation of Bank to make each extension of credit requested by Borrower
hereunder shall be subject to the fulfillment to Bank's satisfaction of each of
the following conditions:
(a) Compliance. The representations and warranties contained
herein shall be true on and as of the date of the signing of this Agreement and
on the date of each extension of credit by Bank pursuant hereto, with the same
effect as though such representations and warranties had been made on and as of
each such date, and on each such date, no Event of Default as defined herein,
and no condition, event or act which with the giving of notice or the passage
of time or both would constitute such an Event of Default, shall have occurred
and be continuing or shall exist.
(b) Documentation. Bank shall have received all additional
documents which may be required in connection with such extension of credit.
ARTICLE IV
AFFIRMATIVE COVENANTS
Borrower covenants that so long as any of the Credits remain available
or any liabilities (whether direct or contingent, liquidated or unliquidated)
of Borrower to Bank under any of the Loan Documents remain outstanding, and
until payment in full of all obligations of Borrower subject hereto, Borrower
shall:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay the interest and
principal on each of the Loan Documents requiring
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<PAGE> 16
any such payments at the times and place and in the manner specified therein,
and any fees or other liabilities due under any of the Loan Documents at the
times and place and in the manner specified therein, and immediately upon
demand by Bank, the amount by which the outstanding principal balance of any of
the Credits is at any time in excess of any limitation on borrowings hereunder.
SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and
records in accordance with generally accepted accounting principles
consistently applied, and permit any representative of Bank, at any reasonable
time, to inspect, audit and examine such books and records, to make copies of
the same, and to inspect the properties of Borrower.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the
following, in form and detail satisfactory to Bank:
(a) not later than ninety (90) days after and as of the end of
each fiscal year, an audited financial statement of Borrower, prepared by an
independent certified public accountant acceptable to Bank, to include balance
sheet, income statement and changes in stockholders' equity, and a copy of
Borrower's 10-K report;
(b) not later than forty-five (45) days after and as of the end of
each quarter, except for the Borrower's fourth quarter ending April 30th, a
financial statement of Borrower, prepared by Borrower, to include balance sheet
and income statement, and a copy of Borrower's quarterly 10-Q report;
(c) not later than fifteen (15) days after and as of the end of
each month, an aged listing of accounts receivable and
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accounts payable, and a reconciliation of accounts, together with an inventory
collateral report, and not later than thirty (30) days after and as of each
October 31, a list of the names and addresses of all Borrower's account
debtors;
(d) not later than forty-five (45) days after and as of the end of
each quarter, balance sheet and income statement projections of Borrower,
prepared by Borrower, to include balance sheet and income statement projections
covering the Borrower's next four (4) fiscal quarters from the date of the
Borrower's most recent actual fiscal quarter ending;
(e) from time to time such other information as Bank may
reasonably request.
SECTION 4.4. COMPLIANCE. Maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; conduct its business in an orderly and regular manner;
and comply with the provisions of all documents pursuant to which Borrower is
organized and/or which govern Borrower's continued existence and with the
requirements of all laws, rules, regulations and orders of any governmental
authority applicable to Borrower or its business.
SECTION 4.5. INSURANCE. Maintain and keep in force insurance of
the types and in amounts customarily carried in lines of business similar to
Borrower's, including but not limited to fire, extended coverage, public
liability, property damage and workers' compensation, carried with companies
and in amounts satisfactory to Bank, and deliver to Bank from time to
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time at Bank's request schedules setting forth all insurance then in effect.
SECTION 4.6. FACILITIES. Keep all Borrower's properties useful or
necessary to Borrower's business in good repair and condition, and from time to
time make necessary repairs, renewals and replacements thereto so that
Borrower's properties shall be fully and efficiently preserved and maintained.
SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when
due any and all indebtedness, obligations, assessments and taxes, both real or
personal and including federal and state income taxes, except such as Borrower
may in good faith contest or as to which a bona fide dispute may arise,
provided provision is made to the satisfaction of Bank for eventual payment
thereof in the event that it is found that the same is an obligation of
Borrower.
SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank
of any litigation pending or threatened against Borrower in excess of
$100,000.00.
SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower's financial
condition as follows using generally accepted accounting principles
consistently applied and used consistently with prior practices, except to the
extent modified by the following definitions:
(a) Tangible Net Worth not at any time less than $25,067,000.00 for
the Borrower's quarter ending January 31, 1995, increasing to not less than
$25,335,000.00 for the Borrower's quarter ending April 30, 1995, increasing to
not less
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$25,950,000.00 for the Borrower's quarter ending July 31, 1995 and each
quarter ending thereafter, with "Tangible Net Worth" defined as the aggregate
of total stockholders' equity plus subordinated debt less any intangible
assets.
(b) Total Liabilities divided by Tangible Net Worth not at any time
greater than 1.35 to 1.0, with "Total Liabilities" defined as the aggregate of
current liabilities and non-current liabilities less subordinated debt, and
with "Tangible Net Worth" as defined above.
(c) Net income <loss> before taxes, measured as of each quarter end
on a standalone basis, not less than <$250,000.00> for the Borrower's quarter
ending January 31, 1995, and not less than $433,000.00 for the Borrower's
quarter ending April 30, 1995, and not less than $900,000.00 for the Borrower's
quarter ending July 31, 1995 and each quarter thereafter.
(d) EBITDA Coverage Ratio not less than .95 to 1.0 for the
Borrower's quarter ending January 31, 1995, and not less than 1.70 to 1.0 for
the Borrower's quarter ending April 30, 1995, and 2.00 to 1.0 for the
Borrower's quarter ending July 31, 1995 and each quarter thereafter, with
"EBITDA" defined as net profit before tax plus interest expense (net of
capitalized interest expense), depreciation expense and amortization expense
for the quarter ending being measured, and with "EBITDA Coverage Ratio" defined
as EBITDA divided by the aggregate of total interest expense plus the current
period current maturity of long-term debt and the current period current
maturity of subordinated debt. The sum of the current period of current
maturity of long
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term debt and the current period of current maturity of subordinated debt will
be divided by four to represent the quarterly calculation amount.
SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than
five (5) days after the occurrence of each such event or matter) give written
notice to Bank in reasonable detail of: (a) the occurrence of any Event of
Default, or any condition, event or act which with the giving of notice or the
passage of time or both would constitute such an Event of Default; (b) any
change in the name or the organizational structure of Borrower; (c) the
occurrence and nature of any Reportable Event or Prohibited Transaction, each
as defined in ERISA, or any funding deficiency with respect to any Plan; or (d)
any termination or cancellation of any insurance policy which Borrower is
required to maintain, or any uninsured or partially uninsured loss through
liability or property damage, or through fire, theft or any other cause
affecting Borrower's property in excess of an aggregate of $50,000.00.
ARTICLE V
NEGATIVE COVENANTS
Borrower further covenants that so long as any of the Credits remains
available or any liabilities (whether direct or contingent, liquidated or
unliquidated) of Borrower to Bank under any of the Loan Documents remain
outstanding, and until payment in full of all obligations of Borrower subject
hereto, Borrower will not without the prior written consent of Bank:
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SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any of the
Credits except for the purposes stated in Article I hereof.
SECTION 5.2. LEASE EXPENDITURES. Incur new obligations for the
lease or hire of real or personal property requiring payments in any fiscal
year in excess of an aggregate of $300,000.00.
SECTION 5.3. OTHER INDEBTEDNESS. Create, incur, assume or permit
to exist any indebtedness or liabilities resulting from borrowings, loans or
advances, whether secured or unsecured, matured or unmatured, liquidated or
unliquidated, joint or several, except the liabilities of Borrower to Bank and
any other liabilities of Borrower existing as of, and disclosed to Bank prior
to, the date hereof. For purposes hereof, "Borrower" shall not include
Compounding Technology, PTE. Ltd., a Singapore private company, a wholly-owned
subsidiary of Compounding Technology, Inc., a California corporation.
SECTION 5.4. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge
into or consolidate with any corporation or other entity; make any substantial
change in the nature of Borrower's business; acquire all or substantially all
of the assets of any corporation or other entity; nor sell, lease, transfer or
otherwise dispose of all or a substantial or material part of its assets except
in the ordinary course of business.
SECTION 5.5. GUARANTIES. Guarantee or become liable in any way as
surety, endorser (other than as endorser of negotiable instruments for deposit
or collection in the ordinary course of
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business), accommodation endorser or otherwise for, nor pledge or hypothecate
any assets of Borrower as security for, any liabilities or obligations of any
other person or entity.
SECTION 5.6. LOANS, ADVANCES, INVESTMENTS. Make any loans or
advances to or investments in any person or entity excluding loans or advances
made to employees of the Borrower up to an aggregate maxiumum of One Hundred
Thousand Dollars ($100,000.00).
SECTION 5.7. DIVIDENDS, DISTRIBUTIONS. Declare or pay any
dividend or distribution either in cash, stock or any other property on
Borrower's stock now or hereafter outstanding in excess of annual cash
dividends in the aggregate amount of One Hundred Thousand Dollars
($100,000.00); nor redeem, retire, repurchase or otherwise acquire any shares
of any class of Borrower's stock now or hereafter outstanding.
SECTION 5.8. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit
to exist a security interest in, or lien upon, any of its assets of any kind,
now owned or hereafter acquired, except any of the foregoing in favor of Bank.
For purposes hereof, "Borrower" shall not include Compounding Technology, PTE.
Ltd., a Singapore private company, a wholly-owned subsidiary of Compounding
Technology, Inc., a California corporation.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement:
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<PAGE> 23
(a) Borrower shall fail to pay when due any principal, interest,
fees or other amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate furnished to Bank in
connection with this Agreement or any representation or warranty made by
Borrower hereunder shall prove to be false, incorrect or incomplete in any
material respect when furnished or made.
(c) Any default in the performance of or compliance with any
obligation, agreement or other provision contained herein (other than those
referred to in subsections (a) and (b) above), and with respect to any such
default which by its nature can be cured, such default shall continue for a
period of twenty (20) days from its occurrence.
(d) Any default in the payment or performance of any obligation,
or any defined event of default, under the terms of any contract or instrument
(other than any of the Loan Documents) pursuant to which Borrower has incurred
any debt or other liability to any person or entity, including Bank.
(e) Any default in the payment or performance of any obligation,
or any defined event of default, under any of the Loan Documents other than
this Agreement.
(f) The filing of a notice of judgment lien against Borrower; or
the recording of any abstract of judgment against Borrower in any county in
which Borrower has an interest in real property; or the service of a notice of
levy and/or of a writ of
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<PAGE> 24
attachment or execution, or other like process, against the assets of Borrower;
or the entry of a judgment against Borrower.
(g) Borrower shall become insolvent, or shall suffer or consent to
or apply for the appointment of a receiver, trustee, custodian or liquidator of
itself or any of its property, or shall generally fail to pay its debts as they
become due, or shall make a general assignment for the benefit of creditors;
Borrower shall file a voluntary petition in bankruptcy, or seeking
reorganization, in order to effect a plan or other arrangement with creditors
or any other relief under the Bankruptcy Reform Act, Title 11 of the United
States Code, as amended or recodified from time to time ("Bankruptcy Code"), or
under any state or federal law granting relief to debtors, whether now or
hereafter in effect; or any involuntary petition or proceeding pursuant to said
Bankruptcy Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors is filed or commenced
against Borrower, or Borrower shall file an answer admitting the jurisdiction
of the court and the material allegations of any involuntary petition; or
Borrower shall be adjudicated a bankrupt, or an order for relief shall be
entered by any court of competent jurisdiction under said Bankruptcy Code or
any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors.
(h) There shall exist or occur any event or condition which Bank
in good faith believes impairs, or is substantially likely
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<PAGE> 25
to impair, the prospect of payment or performance by Borrower of its
obligations under any of the Loan Documents.
(i) The dissolution or liquidation of Borrower; or Borrower, or
any of its directors, stockholders or members, shall take action seeking to
effect the dissolution or liquidation of Borrower.
(j) Any change in ownership during the term of this Agreement of
an aggregate of twenty-five percent (25%) or more of the common stock of
Borrower.
SECTION 6.2. REMEDIES. If an Event of Default shall occur, (a)
any indebtedness of Borrower under any of the Loan Documents, any term thereof
to the contrary notwithstanding, shall at Bank's option and without notice
become immediately due and payable without presentment, demand, protest or
notice of dishonor, all of which are hereby expressly waived by Borrower; (b)
the obligation, if any, of Bank to permit further borrowings hereunder shall
immediately cease and terminate; and (c) Bank shall have all rights, powers and
remedies available under each of the Loan Documents, or accorded by law,
including without limitation the right to resort to any or all security for any
of the Credits and to exercise any or all of the rights of a beneficiary or
secured party pursuant to applicable law. All rights, powers and remedies of
Bank in connection with each of the Loan Documents may be exercised at any time
by Bank and from time to time after the occurrence of an Event of Default, are
cumulative and not exclusive, and shall be in addition to any other rights,
powers or remedies provided by law or equity.
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<PAGE> 26
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of
Bank in exercising any right, power or remedy under any of the Loan Documents
shall affect or operate as a waiver of such right, power or remedy; nor shall
any single or partial exercise of any such right, power or remedy preclude,
waive or otherwise affect any other or further exercise thereof or the exercise
of any other right, power or remedy. Any waiver, permit, consent or approval
of any kind by Bank of any breach of or default under any of the Loan Documents
must be in writing and shall be effective only to the extent set forth in such
writing.
SECTION 7.2. NOTICES. All notices, requests and demands which any
party is required or may desire to give to any other party under any provision
of this Agreement must be in writing delivered to each party at the following
address:
BORROWER: CIMCO, INC.
265 Briggs Avenue
Costa Mesa, CA 92626
BANK: WELLS FARGO BANK, NATIONAL ASSOCIATION
Orange Coast RCBO
2030 Main Street, Suite 900
Irvine, CA 92714
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit
in
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<PAGE> 27
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall
pay to Bank immediately upon demand the full amount of all costs and expenses,
including reasonable attorneys' fees (to include outside counsel fees and all
allocated costs of Bank's in-house counsel), incurred by Bank in connection
with (a) the negotiation and preparation of this Agreement and each other of
the Loan Documents, Bank's continued administration hereof and thereof, and the
preparation of amendments and waivers hereto and thereto, (b) the enforcement
of Bank's rights and/or the collection of any amounts which become due to Bank
under any of the Loan Documents, and (c) the prosecution or defense of any
action in any way related to any of the Loan Documents, including without
limitation any action for declaratory relief.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be
binding on and inure to the benefit of the heirs, executors, administrators,
legal representatives, successors and assigns of the parties; provided however,
that Borrower may not assign or transfer its interest hereunder without the
prior written consent of Bank. Bank reserves the right to sell, assign,
transfer, negotiate or grant participations in all or any part of, or any
interest in, Bank's rights and benefits under each of the Loan Documents. In
connection therewith, Bank may disclose all documents and information which
Bank now has or may hereafter acquire relating to any of the Credits, Borrower
or its business,
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<PAGE> 28
any Guarantor or the business of any Guarantor, or any collateral required
hereunder.
SECTION 7.5. ENTIRE AGREEMENT, AMENDMENT. This Agreement and each
other of the Loan Documents constitute the entire agreement between Borrower
and Bank with respect to the Credits and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof. This Agreement may be amended or modified only by a written instrument
executed by each party hereto.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made
and entered into for the sole protection and benefit of the parties hereto and
their respective permitted successors and assigns, and no other person or
entity shall be a third party beneficiary of, or have any direct or indirect
cause of action or claim in connection with, this Agreement or any other of the
Loan Documents to which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and every
provision of this Agreement and each other of the Loan Documents.
SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or any
remaining provisions of this Agreement.
SECTION 7.9. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the
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<PAGE> 29
State of California, except to the extent that Bank has greater rights or
remedies under Federal law, whether as a national bank or otherwise, in which
case such choice of California law shall not be deemed to deprive Bank of such
rights and remedies as may be available under Federal law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first written above.
WELLS FARGO BANK,
CIMCO, INC. NATIONAL ASSOCIATION
By: /s/ RUSSELL T. GILBERT By: /s/ MARK MAGDALANO
------------------------- ------------------------
Russell T. Gilbert Mark Magdalano
President Vice President
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<PAGE> 30
WELLS FARGO BANK EXHIBIT "A" PROMISSORY NOTE
$6,000,000.00 IRVINE, CALIFORNIA
FEBRUARY 1, 1995
FOR VALUE RECEIVED, the undersigned CIMCO, INC. ("Borrower" promises
to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") at its
office at ORANGE COAST RCBO, 2030 MAIN STREET SUITE 900, IRVINE, CA 92714, or
at such other place as the holder hereof may designate, in lawful money of the
United States of America and in immediately available funds, the principal sum
of $6,000,000.00, or so much thereof as may be advanced and be outstanding,
with interest thereon, to be computed on each advance from the date of its
disbursement at a rate per annum (computed on the basis of a 360-day year,
actual days elapsed) .25000% ABOVE the Prime Rate in effect from time to time.
The "Prime Rate" is a base rate that Bank from time to time establishes and
which serves as the basis upon which effective rates of interest are calculated
for those loans making reference thereto. Each change in the rate of interest
hereunder shall become effective on the date each Prime Rate change is
announced within Bank. The unpaid principal balance of this obligation at any
time shall be the total amounts advanced hereunder by the holder hereof less
the amount of any principal payments made hereon by or for any Borrower, which
balance may be endorsed hereon from time to time by the holder.
Interest accrued on this Note shall be payable on the 15TH day of each
MONTH, commencing MARCH 15, 1995. The outstanding principal balance of this
Note shall be due and payable in full on SEPTEMBER 15, 1995. Each payment made
on this Note shall be credited first, to any interest then due and second, to
the outstanding principal balance hereof.
From and after the maturity date of this Note, or such earlier date as
all principal owing hereunder becomes due and payable by acceleration or
otherwise, the outstanding principal balance of this Note shall bear interest
until paid in full at an increased rate per annum (computed on the basis of a
360-day year, actual days elapsed) equal to 4% above the rate of interest from
time to time applicable to this Note.
Borrower may from time to time during the term of this Note borrow,
partially or wholly repay its outstanding borrowings, and reborrow, subject to
all of the limitations, terms and conditions of this Note and of that certain
Credit Agreement between Borrower and Bank defined below; provided however,
that the total outstanding borrowings under this Note shall not at any time
exceed the principal amount stated above.
Advances hereunder, to the total amount of the principal sum available
hereunder, may be made by the holder at the oral or written request of (i)
RUSSELL T. GILBERT or JENNIFER SHEA, any one acting alone, who are authorized
to request advances and direct the disposition of any advances until written
notice of the revocation of such authority is received by the holder at the
office designated above, or (ii) any person, with respect to advances deposited
to the credit of any account of any Borrower with the holder, which advances,
when so deposited, shall be conclusively presumed to have been made to or for
the benefit of each Borrower regardless of the fact that persons other than
those authorized to request advances may have authority to draw against such
account. The holder shall have no obligation to determine whether any person
requesting an advance is or has been authorized by any Borrower.
This Note is made pursuant to and is subject to the terms and conditions of
that certain Credit Agreement between Borrower and Bank dated as of FEBRUARY 1,
1995, as amended from time to time. Upon the occurrence of any Event of
Default as defined in said Credit Agreement, the holder of this Note, at the
holder's option, may declare all sums of principal and interest outstanding
hereunder to be immediately due and payable without presentment, demand,
protest or notice of dishonor, all of which are expressly waived by each
Borrower, and the obligation, if any, of the holder to extend any further
credit hereunder shall immediately cease and terminate. Each Borrower shall
pay to the holder immediately upon demand the full amount of all payments,
advances, charges, costs and expenses, including reasonable attorneys' fees (to
include outside counsel fees and all allocated costs of the holder's in-house
counsel), incurred by the holder in connection with the enforcement of the
holder's rights and/or the collection of any amounts which become due to the
holder under this Note, and the prosecution or defense of any action in any way
related to this Note, including without limitation, any action for declaratory
relief, and including any of the foregoing incurred in connection with any
bankruptcy proceeding relating to any Borrower.
Should more than one person or entity sign this Note as a Borrower,
the obligations of each such Borrower shall be joint and several.
This Note shall be governed by and construed in accordance with the
laws of the State of California, except to the extent Bank has greater rights
or remedies under Federal law, whether as a national bank or otherwise, in
which case such choice of California law shall not be deemed to deprive Bank of
any such rights and remedies as may be available under Federal law.
PROMISSORY NOTE, Page No. 1
<PAGE> 31
WELLS FARGO BANK EXHIBIT "B" PROMISSORY NOTE
$7,500,000-00 IRVINE, CALIFORNIA
FEBRUARY 1, 1995
FOR VALUE RECEIVED, the undersigned CIMCO, INC. ("Borrower') promises
to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") at its
office at ORANGE COAST RCBO, 2030 MAIN STREET SUITE 900, IRVINE, CA 92714, or
at such other place as the holder hereof may designate, in lawful money of the
United States of America and in immediately available funds, the principal sum
of $7,500,000.00, with interest thereon at a rate per annum (computed on the
basis of a 360-day year, actual days elapsed) .50000% ABOVE the Prime Rate in
effect from time to time. The "Prime Rate" is a base rate that Bank from time
to time establishes and which serves as the basis upon which effective rates of
interest are calculated for those loans making reference thereto. Each change
in the rate of interest hereunder shall become effective on the date each Prime
Rate change is announced within Bank.
Interest accrued on this Note shall be payable on the 1ST day of each
MONTH, commencing MARCH 1, 1995. Principal shall be payable on the 1ST day of
each MONTH in installments of $156,250.00 each, commencing MARCH 1, 1995, and
continuing up to and including JANUARY 1, 1999, with a final installment
consisting of all remaining unpaid principal due and payable in full on
FEBRUARY 1, 1999. Each payment made on this Note shall be credited first, to
any interest then due and second, to the outstanding principal balance hereof.
All prepayments of principal on this Note shall be applied on the most remote
principal installment or installments then unpaid.
From and after the maturity date of this Note, or such earlier date as
all principal owing hereunder becomes due and payable by acceleration or
otherwise, the outstanding principal balance of this Note shall bear Interest
until paid in full at an increased rate per annum (computed on the basis of a
360-day year, actual days elapsed) equal to 4% above the rate of interest from
time to time applicable to this Note.
This Note is made pursuant to and is subject to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of FEBRUARY 1, 1995, as amended from time to time. Upon the occurrence of any
Event of Default as defined in said Credit Agreement, the holder of this Note,
at the holder's option, may declare all sums of principal and interest
outstanding hereunder to be immediately due and payable without presentment,
demand, protest or notice of dishonor, all of which are expressly waived by
each Borrower, and the obligation, if any, of the holder to extend any further
credit hereunder shall immediately cease and terminate. Each Borrower shall
pay to the holder immediately upon demand the full amount of all payments,
advances, charges, costs and expenses, including reasonable attorneys' fees (to
include outside counsel fees and all allocated costs of the holder's in-house
counsel), incurred by the holder in connection with the enforcement of the
holder's rights and/or the collection of any amounts which become due to the
holder under this Note, and the prosecution or defense of any action in any way
related to this Note, including without limitation, any action for declaratory
relief, and including any of the foregoing incurred in connection with any
bankruptcy proceeding relating to any Borrower.
Should more than one person or entity sign this Note as a Borrower,
the obligations of each such Borrower shall be joint and several.
This Note shall be governed by and construed in accordance with the
laws of the State of California, except to the extent Bank has greater rights
or remedies under Federal law, whether as a national bank or otherwise, in
which case such choice of California law shall not be deemed to deprive Bank of
any such rights and remedies as may be available under Federal law.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.
CIMCO, INC.
By:
-----------------------------------
Title:
--------------------------------
Promissory Note, Page No. 1
<PAGE> 32
EXHIBIT C 1 of 14
[WELLS FARGO BANK LOGO]
Trade Services Division South September 15, 1993
17700 Castleton Street, Suite 460
City of Industry, CA 91748
Telephone: (818) 854-1261 Letter of Credit No. SAS-186329
Bank of America Nevada, as Trustee
300 South Fourth Street, 3rd Floor
Las Vegas, Nevada 89101
Attention: Corporate Trust Department
Ladies and Gentlemen:
We hereby establish in your favor, at the request and for the account
of CIMCO, INC., a Delaware corporation, our irrevocable letter of credit in the
amount of U.S. $5,735,960.00 (Five Million Seven Hundred Thirty-Five Thousand
Nine Hundred Sixty and no/100 United States Dollars) available with ourselves
by sight payment against presentation of one or more (a) telegraphic demands or
(b) signed and dated demands ("Signed Demands") addressed by you to Wells Fargo
Bank, National Association, Letter of Credit Operations Office, City of
Industry, California, each in the form of Annex A (an "A Drawing") , Annex B (a
"B Drawing"), Annex C (a "C Drawing") Annex D (a "D Drawing") or Annex E (an
"E Drawing") attached hereto with all instructions in brackets therein being
complied with.
Each such presentation must be made on a Business Day (as hereinafter
defined) to our Letter of Credit Operations Office in City of Industry,
California (presently located at 17700 Castleton Street, Suite 460, City of
Industry, California 91748) on or before December 1, 1998, or, if such date is
not a Business Day, then on or before the third succeeding Business Day (the
"Expiration Date"). As used herein, the term "Business Day" shall mean a day
of the year on which our City of Industry Letter of Credit Operations Office is
open for business.
The amount of any demand presented hereunder will be the amount
inserted in numbered Paragraph 4 of said demand. By honoring any such demand
we make no representation as to the correctness of the amount demanded.
We hereby agree with you that each demand presented hereunder in full
compliance with the terms hereof will be duly honored by our payment to you of
the amount of such demand, in immediately available funds:
<PAGE> 33
(i) not later than noon, Los Angeles time, on the Business Day
following the Business Day on which such demand is presented to us as
aforesaid, if such presentation is made to us at or before 1:30 p.m., Los
Angeles time,
or
(ii) not later than noon, Los Angeles time, on the second Business
Day succeeding the Business Day on which such demand is presented to us as
aforesaid, if such presentation is made to us after 1:30 p.m., Los Angeles
time.
With respect to any demand that is honored hereunder, the total amount
of this Letter of Credit shall be reduced as follows:
(A) With respect to any C Drawing, D Drawing or E Drawing, the
total amount of this Letter of Credit shall be reduced by the amount of the
applicable demand as of the date of presentation of such demand and shall not
be reinstated;
(B) With respect to any B Drawing the total amount of this Letter
of Credit shall be reduced by the amount of the applicable demand as of the
date of presentation of such demand, subject to reinstatement if, prior to the
Expiration Date, we are reimbursed for the full amount of such demand, at which
time we shall advise you in writing of such reinstatement; and
(C) With respect to any A Drawing, the total amount of this Letter
of Credit shall be reduced by the amount of the applicable demand as of the
date of presentation of such demand; provided, however, that such amount shall
be reinstated on the 25th calendar day following the date or presentation of
such demand unless (i) we shall have sent notice to you by telegraph, telex or
registered mail within 20 calendar days after the presentation of such demand
that there shall be no such reinstatement or (ii) the 25th calendar day after
such presentation would be after the Expiration Date.
An A Drawing shall not be presented to us (i) more than once during
any 25 calendar day period, or (ii) with respect to any single A Drawing for
any amount more than $110,960.00.
It is a condition of this Letter of Credit that upon your presentation
to us of a C Drawing in full compliance with the terms of this Letter of
Credit, no further drawing whatsoever may be made or presented hereunder.
If any instructions accompanying a drawing under this Letter of Credit
request that payment is to be made by transfer to an account with us or at
another bank, we and/or such other bank may rely on an account number specified
in such instructions even if the number identifies a person or entity different
from our intended payee.
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<PAGE> 34
Except as otherwise provided herein, this Letter of Credit shall be
governed by and construed in accordance with the Uniform Customs and Practice
for Documentary Credits (1983 Revision), Publication No. 400 of the
International Chamber of Commerce (the "UCP"), and, to the extent not
inconsistent with the UCP, the laws of the State of California. All payments
made by us under this Letter of Credit shall be made from our own funds.
This Letter of Credit may be transferred more than once, but in each
instance only in the amount of the full unutilized balance hereof to any single
transferee who you shall have advised us pursuant to Annex "F" has succeeded
Bank of America Nevada, as trustee or as successor trustee under the Trust
Indenture dated as of September 1, 1993 (as amended from time to time, the
"Indenture") between the Director of the State of Nevada Department of Commerce
(the "Issuer") and Bank of America Nevada, pursuant to which U.S. $5,625,000
aggregate principal amount of the Issuer's Variable Rate Demand Industrial
Development Revenue Bonds (CIMCO, Inc. Project) Series 1993-A (the "Bonds")
have been issued. Transfers may be effected only through ourselves and only
upon presentation to us of a duly executed instrument of transfer in the form
attached hereto as Annex "F". Any transfer of this Letter of Credit as
aforesaid must be endorsed by us on the reverse hereof and may not change the
place of presentation of demands from our Letter of Credit Operations Office
in City of Industry, California.
This Letter of Credit sets forth in full our undertaking, and such
undertaking shall not in any way be modified, amended, amplified or limited by
reference to any document, instrument or agreement referred to herein
(including, without limitation, the Bonds and the Indenture), except the UCP;
and anv such reference shall not be deemed to incorporate herein by reference
any document, instrument or agreement except the UCP.
WELLS FARGO BANK, NATIONAL
ASSOCIATION
By: [SIG]
-------------------------------
Authorized Signature
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<PAGE> 35
Annex A to Wells Fargo Bank,
National Association
Irrevocable Letter of Credit
No. SAS-186329
WELLS FARGO BANK, NATIONAL ASSOCIATION
LETTER OF CREDIT OPERATIONS OFFICE
CITY OF INDUSTRY, CALIFORNIA
FOR THE URGENT ATTENTION OF LETTER OF CREDIT MANAGER.
[INSERT NAME OF BENEFICIARY] (THE "TRUSTEE") HEREBY CERTIFIES TO
WELLS FARGO BANK, NATIONAL ASSOCIATION (THE "BANK") WITH REFERENCE TO
IRREVOCABLE LETTER OF CREDIT NO. SAS-186329 (THE "LETTER OF CREDIT"; THE TERMS
THE "BONDS", "BUSINESS DAY" AND THE "INDENTURE" USED HEREIN SHALL HAVE THEIR
RESPECTIVE MEANINGS SET FORTH IN THE LETTER OF CREDIT) THAT:
(1) THE TRUSTEE IS THE TRUSTEE OR A SUCCESSOR TRUSTEE UNDER THE
INDENTURE.
(2) THE TRUSTEE IS MAKING A DEMAND FOR PAYMENT UNDER THE LETTER
OF CREDIT WITH RESPECT TO THE PAYMENT, ON AN INTEREST PAYMENT DATE (AS
DEFINED IN THE INDENTURE), OF ACCRUED AND UNPAID INTEREST WITH RESPECT TO THE
BONDS.
(3) THE AMOUNT OF THIS DEMAND FOR PAYMENT WAS COMPUTED IN
ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE BONDS AND THE INDENTURE AND IS
DEMANDED IN ACCORDANCE WITH THE INDENTURE, WHICH AMOUNT PLEASE REMIT TO THE
UNDERSIGNED AS FOLLOWS: [INSERT REMITTANCE INSTRUCTIONS]
(4) THE AMOUNT HEREBY DEMANDED UNDER THE LETTER OF CREDIT IS
$[INSERT AMOUNT].
(5) THE TRUSTEE HAS CONTACTED OR ATTEMPTED TO CONTACT BY TELEPHONE
AN OFFICER OF THE BANK'S LETTER OF CREDIT OFFICE IN CITY OF INDUSTRY,
CALIFORNIA REGARDING THIS DEMAND.
(6) NONE OF THE BONDS TO WHICH THIS DEMAND RELATES ARE (A) BONDS
BEING PURCHASED UNDER SECTION 2.04 OF THE INDENTURE, OR (B) BONDS BEING
REDEEMED UNDER SECTION 2.03 OF THE INDENTURE.
(7) IF THIS DEMAND IS RECEIVED BY YOU AT OR BEFORE 1:30 P.M., LOS
ANGELES TIME, ON A BUSINESS DAY, YOU MUST MAKE PAYMENT ON THIS DEMAND AT OR
BEFORE NOON, LOS ANGELES TIME, ON THE NEXT BUSINESS DAY. IF THIS DEMAND IS
RECEIVED BY YOU AFTER 1:30 P.M., LOS ANGELES TIME, ON A BUSINESS DAY, YOU MUST
MAKE PAYMENT ON
-4-
<PAGE> 36
THIS DEMAND AT OR BEFORE NOON, LOS ANGELES TIME, ON THE SECOND BUSINESS DAY
FOLLOWING SUCH BUSINESS DAY.
[INSERT NAME OF BENEFICIARY]
[FOR SIGNED DEMANDS ONLY, INSERT SIGNATURE]
[FOR SIGNED DEMANDS ONLY, INSERT DATE]
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<PAGE> 37
Annex B to Wells Fargo Bank,
National Association
Irrevocable Letter of Credit
No. SAS-186329
WELLS FARGO BANK, NATIONAL ASSOCIATION
LETTER OF CREDIT OPERATIONS OFFICE
CITY OF INDUSTRY, CALIFORNIA
FOR THE URGENT ATTENTION OF LETTER OF CREDIT MANAGER.
[INSERT NAME OF BENEFICIARY] (THE "TRUSTEE") HEREBY CERTIFIES TO
WELLS FARGO BANK, NATIONAL ASSOCIATION (THE "BANK") WITH REFERENCE TO
IRREVOCABLE LETTER OF CREDIT NO. SAS-186329 (THE "LETTER OF CREDIT"; THE
TERMS THE "BONDS", "BUSINESS DAY" AND THE "INDENTURE" USED HEREIN SHALL HAVE
THEIR RESPECTIVE MEANINGS SET FORTH IN THE LETTER OF CREDIT) THAT:
(1) THE TRUSTEE IS THE TRUSTEE OR A SUCCESSOR TRUSTEE UNDER THE
INDENTURE.
(2) THE TRUSTEE IS MAKING A DEMAND FOR PAYMENT UNDER THE LETTER OF
CREDIT TO ENABLE THE PAYMENT OF THE PRINCIPAL AMOUNT OF, AND ACCRUED INTEREST
ON, THOSE BONDS FOR WHICH THE TRUSTEE HAS NOT RECEIVED FUNDS REPRESENTING THE
PURCHASE PRICE OF SUCH BONDS, FOLLOWING A TENDER OF THE BONDS PURSUANT TO
SECTION 2.04 OF THE INDENTURE. THE AMOUNT OF THIS DEMAND IS EQUAL TO THE
DIFFERENCE BETWEEN (A) THE PRINCIPAL AMOUNT, TOGETHER WITH ACCRUED INTEREST, OF
THOSE BONDS TENDERED PURSUANT TO SECTION 2.04 OF THE INDENTURE AND (B) THE
AMOUNT OF THE PROCEEDS ON DEPOSIT WITH THE TRUSTEE FOR THE PURCHASE OF SUCH
TENDERED BONDS.
(3) THE AMOUNT OF THIS DEMAND FOR PAYMENT WAS COMPUTED IN
ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE BONDS AND THE INDENTURE AND IS
DEMANDED IN ACCORDANCE WITH SECTION 2.04(g) OF THE INDENTURE, WHICH AMOUNT
PLEASE REMIT TO THE UNDERSIGNED AS FOLLOWS: [INSERT REMITTANCE INSTRUCTIONS]
(4) THE AMOUNT HEREBY DEMANDED UNDER THE LETTER OF CREDIT IS
$[INSERT AMOUNT WHICH IS THE SUM OF THE TWO AMOUNTS SET FORTH IN PARAGRAPH 5,
BELOW].
(5) THE AMOUNT OF THIS DEMAND IS EQUAL TO THE SUM OF (A) $[INSERT
AMOUNT] BEING DRAWN IN RESPECT OF THE PAYMENT OF UNPAID PRINCIPAL OF THE BONDS
AND (B) $[INSERT AMOUNT] BEING DRAWN IN RESPECT OF THE PAYMENT OF ACCRUED AND
UNPAID INTEREST ON THE BONDS.
(6) THE TRUSTEE HAS CONTACTED OR ATTEMPTED TO CONTACT BY TELEPHONE
AN OFFICER OF THE BANK'S LETTER OF CREDIT OFFICE IN CITY OF INDUSTRY,
CALIFORNIA REGARDING THIS DEMAND.
-6-
<PAGE> 38
(7) IF THIS DEMAND IS RECEIVED BY YOU AT OR BEFORE 1:30 P.M.,
LOS ANGELES TIME, ON A BUSINESS DAY, YOU MUST MAKE PAYMENT ON THIS DEMAND AT OR
BEFORE NOON, LOS ANGELES TIME, ON THE NEXT BUSINESS DAY. IF THIS DEMAND IS
RECEIVED BY YOU AFTER 1:30 P.M., LOS ANGELES TIME, ON A BUSINESS DAY, YOU MUST
MAKE PAYMENT AT OR BEFORE NOON, LOS ANGELES TIME, ON THE SECOND BUSINESS DAY
FOLLOWING SUCH BUSINESS DAY.
[INSERT NAME OF BENEFICIARY]
[FOR SIGNED DEMANDS ONLY, INSERT SIGNATURE]
[FOR SIGNED DEMANDS ONLY, INSERT DATE]
-7-
<PAGE> 39
Annex C to Wells Fargo Bank,
National Association
Irrevocable Letter of Credit
No. SAS-186329
WELLS FARGO BANK, NATIONAL ASSOCIATION
LETTER OF CREDIT OPERATIONS OFFICE
CITY OF INDUSTRY, CALIFORNIA
FOR THE URGENT ATTENTION OF LETTER OF CREDIT MANAGER.
[INSERT NAME OF BENEFICIARY] (THE "TRUSTEE") HEREBY CERTIFIES TO
WELLS FARGO BANK, NATIONAL ASSOCIATION (THE "BANK") WITH REFERENCE TO
IRREVOCABLE LETTER OF CREDIT NO. SAS-186329 (THE "LETTER OF CREDIT"; THE
TERMS THE "BONDS", "BUSINESS DAY" AND THE "INDENTURE" USED HEREIN SHALL HAVE
THEIR RESPECTIVE MEANINGS SET FORTH IN THE LETTER OF CREDIT) THAT:
(1) THE TRUSTEE IS THE TRUSTEE OR A SUCCESSOR TRUSTEE UNDER THE
INDENTURE.
(2) THE TRUSTEE IS MAKING A DEMAND FOR PAYMENT UNDER THE LETTER OF
CREDIT WITH RESPECT TO THE PAYMENT, AT STATED MATURITY, UPON ACCELERATION
FOLLOWING AN EVENT OF DEFAULT, OR UPON REDEMPTION AS A WHOLE, OF THE TOTAL
UNPAID PRINCIPAL OF, AND ACCRUED INTEREST ON, ALL OF THE BONDS WHICH ARE
PRESENTLY OUTSTANDING.
(3) THE AMOUNT OF THIS DEMAND FOR PAYMENT WAS COMPUTED IN
ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE BONDS AND THE INDENTURE AND IS
DEMANDED IN ACCORDANCE WITH SECTION [INSERT EITHER "10.02" OR "2.03"] OF
THE INDENTURE, WHICH AMOUNT PLEASE REMIT TO THE UNDERSIGNED AS FOLLOWS: [INSERT
REMITTANCE INSTRUCTIONS]
(4) THE AMOUNT HEREBY DEMANDED UNDER THE LETTER OF CREDIT IS
$[INSERT AMOUNT WHICH IS THE SUM OF THE TWO AMOUNTS SET FORTH IN PARAGRAPH 5,
BELOW].
(5) THE AMOUNT OF THIS DEMAND IS EQUAL TO THE SUM OF (A) $[INSERT
AMOUNT] BEING DRAWN IN RESPECT OF THE PAYMENT OF UNPAID PRINCIPAL OF THE BONDS
AND (B) $[INSERT AMOUNT] BEING DRAWN IN RESPECT OF THE PAYMENT OF ACCRUED AND
UNPAID INTEREST ON THE BONDS.
(6) THE TRUSTEE HAS CONTACTED OR ATTEMPTED TO CONTACT BY TELEPHONE
AN OFFICER OF THE BANK'S LETTER OF CREDIT OFFICE IN CITY OF INDUSTRY, CALIFORNIA
REGARDING THIS DEMAND.
-8-
<PAGE> 40
(7) THE TRUSTEE ACKNOWLEDGES THAT THE BANK SHALL HAVE NO
FURTHER OBLIGATIONS UNDER THE LETTER OF CREDIT FOLLOWING THE PAYMENT OF THIS
DEMAND.
(8) IF THIS DEMAND IS RECEIVED BY YOU AT OR BEFORE 1:30 P.M., LOS
ANGELES TIME, ON A BUSINESS DAY, YOU MUST MAKE PAYMENT ON THIS DEMAND AT
OR BEFORE NOON, LOS ANGELES TIME, ON THE NEXT BUSINESS DAY. IF THIS DEMAND IS
RECEIVED BY YOU AFTER 1:30 P.M., LOS ANGELES TIME, ON A BUSINESS DAY, YOU MUST
MAKE PAYMENT ON THIS DEMAND AT OR BEFORE NOON, LOS ANGELES TIME, ON THE SECOND
BUSINESS DAY FOLLOWING SUCH BUSINESS DAY.
[INSERT NAME OF BENEFICIARY]
[FOR SIGNED DEMANDS ONLY, INSERT SIGNATURE]
[FOR SIGNED DEMANDS ONLY, INSERT DATE]
-9-
<PAGE> 41
Annex D to Wells Fargo Bank,
National Association
Irrevocable Letter of Credit
No. SAS-186329
WELLS FARGO BANK, NATIONAL ASSOCIATION
LETTER OF CREDIT OPERATIONS OFFICE
CITY OF INDUSTRY, CALIFORNIA
FOR THE URGENT ATTENTION OF LETTER OF CREDIT MANAGER.
[INSERT NAME OF BENEFICIARY] (THE "TRUSTEE") HEREBY CERTIFIES TO
WELLS FARGO BANK, NATIONAL ASSOCIATION (THE "BANK") WITH REFERENCE TO
IRREVOCABLE LETTER OF CREDIT NO. SAS-186329 (THE "LETTER OF CREDIT"; THE
TERMS THE "BONDS", "BUSINESS DAY" AND THE "INDENTURE" USED HEREIN SHALL HAVE
THEIR RESPECTIVE MEANINGS SET FORTH IN THE LETTER OF CREDIT) THAT:
(1) THE TRUSTEE IS THE TRUSTEE OR A SUCCESSOR TRUSTEE UNDER THE
INDENTURE.
(2) THE TRUSTEE IS MAKING A DEMAND FOR PAYMENT UNDER THE
LETTER OF CREDIT WITH RESPECT TO THE PAYMENT OF ACCRUED AND UNPAID INTEREST
UPON A REDEMPTION OF LESS THAN ALL OF THE BONDS CURRENTLY OUTSTANDING.
(3) THE AMOUNT OF THIS DEMAND FOR PAYMENT WAS COMPUTED IN
ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE BONDS AND THE INDENTURE
AND IS DEMANDED TN ACCORDANCE WITH SECTION 2.03 OF THE INDENTURE, WHICH AMOUNT
PLEASE REMIT TO THE UNDERSIGNED AS FOLLOWS: [INSERT REMITTANCE INSTRUCTIONS]
(4) THE AMOUNT HEREBY DEMANDED UNDER THE LETTER OF CREDIT IS
$[INSERT AMOUNT].
(5) THE TRUSTEE HAS CONTACTED OR ATTEMPTED TO CONTACT BY TELEPHONE
AN OFFICER OF THE BANK'S LETTER OF CREDIT OFFICE IN CITY OF INDUSTRY,
CALIFORNIA REGARDING THIS DEMAND.
(6) IF THIS DEMAND IS RECEIVED BY YOU AT OR BEFORE 1:30 P.M., LOS
ANGELES TIME, ON A BUSINESS DAY, YOU MUST MAKE PAYMENT ON THIS DEMAND AT OR
BEFORE NOON, LOS ANGELES TIME, ON THE NEXT BUSINESS DAY. IF THIS DEMAND IS
RECEIVED BY YOU AFTER 1:30 P.M., LOS ANGELES TIME, ON A BUSINESS DAY, YOU MUST
MAKE PAYMENT ON
-10-
<PAGE> 42
THIS DEMAND AT OR BEFORE NOON, LOS ANGELES TIME, ON THE SECOND BUSINESS DAY
FOLLOWING SUCH BUSINESS DAY.
[INSERT NAME OF BENEFICIARY]
[FOR SIGNED DEMANDS ONLY, INSERT SIGNATURE]
[FOR SIGNED DEMANDS ONLY, INSERT DATE]
-11-
<PAGE> 43
Annex E to Wells Fargo Bank,
National Association
Irrevocable Letter of Credit
No. SAS-186329
WELLS FARGO BANK, NATIONAL ASSOCIATION
LETTER OF CREDIT OPERATIONS OFFICE
CITY OF INDUSTRY, CALIFORNIA
FOR THE URGENT ATTENTION OF LETTER OF CREDIT MANAGER.
[INSERT NAME OF BENEFICIARY] (THE "TRUSTEE") HEREBY CERTIFIES TO
WELLS FARGO BANK, NATIONAL ASSOCIATION (THE "BANK") WITH REFERENCE TO
IRREVOCABLE LETTER OF CREDIT NO. SAS-186329 (THE "LETTER OF CREDIT"; THE
TERMS THE "BONDS", "BUSINESS DAY" AND THE "INDENTURE" USED HEREIN SHALL HAVE
THEIR RESPECTIVE MEANINGS SET FORTH IN THE LETTER OF CREDIT) THAT:
(1) THE TRUSTEE IS THE TRUSTEE OR A SUCCESSOR TRUSTEE UNDER THE
INDENTURE.
(2) THE TRUSTEE IS MAKING A DEMAND FOR PAYMENT UNDER THE LETTER OF
CREDIT WITH RESPECT TO THE PAYMENT OF PRINCIPAL UPON A REDEMPTION OF LESS THAN
ALL OF THE BONDS CURRENTLY OUTSTANDING.
(3) THE AMOUNT OF THIS DEMAND FOR PAYMENT WAS COMPUTED IN
ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE BONDS AND THE INDENTURE AND
IS DEMANDED IN ACCORDANCE WITH SECTION 2.03 OF THE INDENTURE, WHICH AMOUNT
PLEASE REMIT TO THE UNDERSIGNED AS FOLLOWS: [INSERT REMITTANCE INSTRUCTIONS]
(4) THE AMOUNT HEREBY DEMANDED UNDER THE LETTER OF CREDIT
IS $[INSERT AMOUNT].
(5) THE TRUSTEE HAS CONTACTED OR ATTEMPTED TO CONTACT BY TELEPHONE
AN OFFICER OF THE BANK'S LETTER OF CREDIT OFFICE IN CITY OF INDUSTRY,
CALIFORNIA REGARDING THIS DEMAND.
(6) IF THIS DEMAND IS RECEIVED BY YOU AT OR BEFORE 1:30 P.M., LOS
ANGELES TIME, ON A BUSINESS DAY, YOU MUST MAKE PAYMENT ON THIS DEMAND AT OR
BEFORE NOON, LOS ANGELES TIME, ON THE NEXT BUSINESS DAY. IF THIS DEMAND IS
RECEIVED BY YOU AFTER 1:30 P.M., LOS ANGELES TIME, ON A BUSINESS DAY, YOU MUST
MAKE PAYMENT ON THIS DEMAND AT OR BEFORE NOON, LOS ANGELES TIME, ON THE SECOND
BUSINESS DAY FOLLOWING SUCH BUSINESS DAY.
[INSERT NAME OF BENEFICIARY]
[FOR SIGNED DEMANDS ONLY, INSERT SIGNATURE]
[FOR SIGNED DEMANDS ONLY, INSERT DATE]
-12-
<PAGE> 44
Annex F to Wells Fargo Bank,
National Association
Irrevocable Letter of Credit
No. SAS-186329
________________, 19 ____
[Insert Date]
Wells Fargo Bank, National Association
Letter of Credit Operations Office
[Address]
City of Industry, California
Subject: Your Letter of Credit No. SAS-186329
Ladies and Gentlemen:
For value received, we herebv irrevocably assign and transfer all of
our rights under the above-captioned Letter of Credit, as heretofore and
hereafter amended, extended or increased, to:
________________________________
[Name of Transferee]
________________________________
[Address of Transferee]
By this transfer, all of our rights in the Letter of Credit are
transferred to the transferee, and the transferee shall have sole rights as
beneficiary under the Letter of Credit, including sole rights relating to any
amendments, whether increases or extensions or other amendments, and whether
now existing or hereafter made. The Letter of Credit may hereafter be amended,
extended or increased without our consent or notice to us and you will give
notice thereof directly to the transferee.
The original Letter of Credit is returned with all amendments to this
date. Please notify the transferee in such form as you deem advisable of this
transfer and of the terms and conditions to this Letter of Credit, including
amendments as transferred.
You are hereby advised that the transferee named above has succeeded
Bank of America Nevada, as trustee or as successor trustee under the Trust
Indenture dated as of September 1, 1993,
-13-
<PAGE> 45
between the Director of the State of Nevada Department of Commerce and Bank of
America Nevada, pursuant to which U.S. $5,625,000.00 aggregate principal
amount of the Issuer's Variable Rate Demand Industrial Development Revenue
Bonds (CIMCO, Inc. Project) Series 1993-A (the "Bonds") have been issued.
Very truly yours,
[Insert Name of Transferor]
By: ______________________________
[Insert Name and Title]
Signature authenticated:
By: ______________________________
[Insert Name and Title]
-14-
<PAGE> 46
WELLS FARGO BANK
PROMISSORY NOTE
$7,500,000.00
Irvine, California
February 1, 1995
FOR VALUE RECEIVED, the undersigned CIMCO, INC. ("Borrower") promises
to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") at its
office at ORANGE COAST RCBO, 2030 MAIN STREET SUITE 900, IRVINE, CA 92714, or
at such other place as the holder hereof may designate, in lawful money of the
United States of America and in immediately available funds, the principal sum
of $7,500,000.00, with interest thereon at a rate per annum (computed on the
basis of a 360-day year, actual days elapsed) .50000% ABOVE the Prime Rate in
effect from time to time. The "Prime Rate" is a base rate that Bank from time
to time establishes and which serves as the basis upon which effective rates of
interest are calculated for those loans making reference thereto. Each change
in the rate of interest hereunder shall become effective on the date each Prime
Rate change is announced within Bank.
Interest accrued on this Note shall be payable on the 1st day of each
MONTH, commencing MARCH 1, 1995. Principal shall be payable on the 1st day of
each MONTH in installments of $156,250.00 each, commencing MARCH 1, 1995, and
continuing up to and including JANUARY 1, 1999, with a final installment
consisting of all remaining unpaid principal due and payable in full on
FEBRUARY 1, 1999. Each payment made on this Note shall be credited first, to
any interest then due and second, to the outstanding principal balance hereof.
All prepayments of principal on this Note shall be applied on the most remote
principal installment or installments then unpaid.
From and after the maturity date of this Note, or such earlier date as
all principal owing hereunder becomes due and payable by acceleration or
otherwise, the outstanding principal balance of this Note shall bear interest
until paid in full at an increased rate per annum (computed on the basis of a
360-day year, actual days elapsed) equal to 4% above the rate of interest from
time to time applicable to this Note.
This Note is made pursuant to and is subject to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of FEBRUARY 1, 1995, as amended from time to time. Upon the occurrence of any
Event of Default as defined in said Credit Agreement, the holder of this Note,
at the holder's option, may declare all sums of principal and interest
outstanding hereunder to be immediately due and payable without presentment,
demand, protest or notice of dishonor, all of which are expressly waived by
each Borrower, and the obligation, if any, of the holder to extend any further
credit hereunder shall immediately cease and terminate. Each Borrower shall
pay to the holder immediately upon demand the full amount of all payments,
advances, charges, costs and expenses, including reasonable attorneys'fees (to
include outside counsel fees and all allocated costs of the holder's in-house
counsel), incurred by the holder in connection with the enforcement of the
holder's rights and/or the collection of any amounts which become due to the
holder under this Note, and the prosecution or defense of any action in any way
related to this Note, including without limitation, any action for declaratory
relief, and including any of the foregoing incurred in connection with any
bankruptcy proceeding relating to any Borrower.
Should more than one person or entity sign this Note as a Borrower,
the obligations of each such Borrower shall be joint and several.
This Note shall be governed by and construed in accordance with the
laws of the State of California, except to the extent Bank has greater rights
or remedies under Federal law, whether as a national bank or otherwise, in
which case such choice of California law shall not be deemed to deprive Bank of
any such rights and remedies as may be available under Federal law.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.
CIMCO, INC.
By: [SIG]
-------------------
Title: President
----------------
-15-
<PAGE> 47
WELLS FARGO BANK
PROMISSORY NOTE
$6,000,000.00
Irvine, California
February 1, 1995
FOR VALUE RECEIVED, the undersigned CIMCO, INC. ("Borrower") promises
to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") at its
office at ORANGE COAST RCBO, 2030 MAIN STREET SUITE 900, IRVINE, CA 92714, or
at such other place as the holder hereof may designate, in lawful money of the
United States of America and in immediately available funds, the principal sum
of $6,000,000.00, or so much thereof as may be advanced and be outstanding,
with interest thereon, to be computed on each advance from the date of its
disbursement at a rate per annum (computed on the basis of a 360-day year,
actual days elapsed) .25000% ABOVE the Prime Rate in effect from time to time.
The "Prime Rate" is a base rate that Bank from time to time establishes and
which serves as the basis upon which effective rates of interest are calculated
for those loans making reference thereto. Each change in the rate of interest
hereunder shall become effective on the date each Prime Rate change is
announced within Bank. The unpaid principal balance of this obligation at any
time shall be the total amounts advanced hereunder by the holder hereof less
the amount of any principal payments made hereon by or for any Borrower, which
balance may be endorsed hereon from time to time by the holder.
Interest accrued on this Note shall be payable on the 15th day of each
MONTH, commencing MARCH 15, 1995. The outstanding principal balance of this
Note shall be due and payable in full on SEPTEMBER 15,1995. Each payment made
on this Note shall be credited first, to any interest then due and second, to
the outstanding principal balance hereof.
From and after the maturity date of this Note, or such earlier date as
all principal owing hereunder becomes due and payable by acceleration or
otherwise, the outstanding principal balance of this Note shall bear interest
until paid in full at an increased rate per annum (computed on the basis of a
360-day year, actual days elapsed) equal to 4% above the rate of interest from
time to time applicable to this Note.
Borrower may from time to time during the term of this Note borrow,
partially or wholly repay its outstanding borrowings, and reborrow, subject to
all of the limitations, terms and conditions of this Note and of that certain
Credit Agreement between Borrower and Bank defined below; provided however,
that the total outstanding borrowings under this Note shall not at any time
exceed the principal amount stated above.
Advances hereunder, to the total amount of the principal sum available
hereunder, may be made by the holder at the oral or written request of (i)
RUSSELL T. GILBERT or JENNIFER SHEA, any one acting alone, who are authorized
to request advances and direct the disposition of any advances until written
notice of the revocation of such authority is received by the holder at the
office designated above, or (ii) any person, with respect to advances deposited
to the credit of any account of any Borrower with the holder, which advances,
when so deposited, shall be conclusively presumed to have been made to or for
the benefit of each Borrower regardless of the fact that persons other than
those authorized to request advances may have authority to draw against such
account. The holder shall have no obligation to determine whether any person
requesting an advance is or has been authorized by any Borrower.
This Note is made pursuant to and is subject to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of February 1, 1995, as amended from time to time. Upon the occurrence of any
Event of Default as defined in said Credit Agreement, the holder of this Note,
at the holder's option, may declare all sums of principal and interest
outstanding hereunder to be immediately due and payable without presentment,
demand, protest or notice of dishonor, all of which are expressly waived by
each Borrower, and the obligation, if any, of the holder to extend any further
credit hereunder shall immediately cease and terminate. Each Borrower shall pay
to the holder immediately upon demand the full amount of all payments,
advances, charges, costs and expenses, including reasonable attorneys' fees (to
include outside counsel fees and all allocated costs of the holder's in-house
counsel), incurred by the holder in connection with the enforcement of the
holder's rights and/or the collection of any amounts which become due to the
holder under this Note, and the prosecution or defense of any action in any way
related to this Note, including without limitation, any action for declaratory
relief, and including any of the foregoing incurred in connection with any
bankruptcy proceeding relating to any Borrower.
Should more than one person or entity sign this Note as a Borrower, the
obligations of each such Borrower shall be joint and several.
This Note shall be governed by and construed in accordance with the
laws of the State of California, except to the extent Bank has greater rights or
remedies under Federal law, whether as a national bank or otherwise, in which
case such choice of California law shall not be deemed to deprive Bank of any
such rights and remedies as may be available under Federal law.
-16-
<PAGE> 48
WELLS FARGO BANK
CORPORATE RESOLUTION: BORROWING
TO: WELLS FARGO BANK, NATIONAL ASSOCIATION
RESOLVED: That this corporation, CIMCO, INC, proposes to obtain
credit from time to time, or has obtained credit from Wells Fargo Bank,
National Association ("Bank").
BE IT FURTHER RESOLVED, that any one of the following officers:
PRESIDENT/CHIEF EXECUTIVE OFFICER OR ASSOCIATE VICE PRESIDENT
together with any one of the following officers:
NONE
of this corporation be and they are hereby authorized and empowered for and on
behalf of and in the name of this corporation and as its corporate act and
deed:
(a) To borrow money from Bank and to assume any liabilities of any
other person or entity to Bank, in such form and on such terms and conditions
as shall be agreed upon by those authorized above and Bank, and to sign and
deliver such promissory notes and other evidences of indebtedness for money
borrowed or advanced and/or for indebtedness assumed as Bank shall require;
such promissory notes or other evidences of indebtedness may provide that
advances be requested by telephone communication and by any officer, employee
or agent of this corporation so long as the advances are deposited into any
deposit account of this corporation with Bank; this corporation shall be bound
to Bank by, and Bank may rely upon, any communication or act, including
telephone communications, purporting to be done by any officer, employee or
agent of this corporation provided that Bank believes, in good faith, that the
same is done by such person.
(b) To contract for the issuance by Bank of letters of credit, to
discount with Bank notes, acceptances and evidences of indebtedness payable to
or due this corporation, to endorse the same and execute such contracts and
instruments for repayment thereof to Bank as Bank shall require, and to enter
into foreign exchange transactions with or through Bank.
(c) To mortgage, encumber, pledge, convey, grant, assign or
otherwise transfer all or any part of this corporation's real or personal
property for the purpose of securing the payment of any of the promissory
notes, contracts, instruments and other evidences of indebtedness authorized
hereby, and to execute and deliver to Bank such deeds of trust, mortgages,
pledge agreements and/or other security agreements as Bank shall require.
(d) To perform all acts and to execute and deliver all documents
described above and all other contracts and instruments which Bank deems
necessary or convenient to accomplish the purposes of this resolution and/or to
perfect or continue the rights, remedies and security interests to be given to
Bank hereunder, including without limitation, any modifications, renewals
and/or extensions of any of this corporation's obligations to Bank, however
evidenced; provided that the aggregate principal amount of all sums borrowed
and credits established pursuant to this resolution shall not at any time
exceed the sum of $20,000,000.00 outstanding and unpaid.
Loans made pursuant to a special resolution and loans made by offices
of Bank other than the office to which this resolution is delivered shall be in
addition to foregoing limitation.
BE IT FURTHER RESOLVED, that the authority hereby conferred is in
addition to that conferred by any other resolution heretofore or hereafter
delivered to Bank and shall continue in full force and effect until Bank shall
have received notice in writing, certified by the Secretary of this
corporation, of the revocation hereof by a resolution duly adopted by the Board
of Directors of this corporation. Any such revocation shall be effective only
as to credit which is extended or committed by Bank, or actions which are taken
by this corporation pursuant to the resolutions contained herein, subsequent to
Bank's receipt of such notice. The authority hereby conferred shall be deemed
retroactive, and any and all acts authorized herein which were performed prior
to the passage of this resolution are hereby approved and ratified.
SEE REVERSE OF FORM FOR CERTIFICATION
-17-
<PAGE> 49
CERTIFICATE OF INCUMBENCY
To: WELLS FARGO BANK, NATIONAL ASSOCIATION
The undersigned, Jenifer A. Shea, Assistant Secretary of CIMCO, Inc.
, a corporation created and existing under the laws of the State of
Delaware , hereby certifies to Wells Fargo Bank, National Association ("Bank")
that the following named persons are those duly elected officers of this
corporation specified in the Corporate Resolution attached hereto and that the
signatures opposite their names are their true signatures:
Title Name Signature
----- ---- ---------
President Russell T. Gilbert /s/ RUSSELL T. GILBERT
- - -------------------- -------------------- -----------------------
Assistant Secretary Jennifer A. Shea /s/ JENNIFER A. SHEA
- - -------------------- -------------------- -----------------------
- - -------------------- -------------------- -----------------------
- - -------------------- -------------------- -----------------------
- - -------------------- -------------------- -----------------------
The undersigned further certifies that should any of the above-named
officers change, or should the signature requirements of said Corporate
Resolution change, this corporation shall provide Bank immediately with a new
Certificate of Incumbency, Bank is hereby authorized to rely on this
Certificate until a new Certificate certified by the Secretary of this
corporation is received by Bank,
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the
corporate seal of this corporation as of February 1, 1995.
Assistant
/s/ JENNIFER A. SHEA , Secretary of
---------------------------
CIMCO, Inc. , a corporation
---------------------------
-18-
<PAGE> 50
WELLS FARGO BANK [LOGO]
Orange Coast Regional
Commercial Banking Office
2030 Main Street, Suite 900
Irvine, CA 92714
January 23, 1995
Mr. Ronald Trepp
Chief Financial Officer
CIMCO, Inc.
265 Briggs Ave.
Costa Mesa, Ca. 92626
Dear Mr. Trepp:
Wells Fargo Bank, National Association ("Bank") is pleased to
provide to CIMCO, Inc. ("Borrower") a proposal to extend the credit
accommodation described below in the principal amount of One Million
Three Hundred Thousand Dollars ($1,300,000,00), on the following
terms and conditions, so long, as there has been no immaterial adverse
change in Borrower's financial condition, as determined by Bank:
Type of Credit Facility: Short Term Note
Principal Amount: $1,300,000.00
Borrowing Base: The loan balance of this credit facility
will be reserved for under the formula
Accounts Receivable and Inventory
Borrowing Base determined monthly by the
Bank. Based upon 80% of eligible accounts
receivables, as defined by Bank, and a 40%
to 50% advance against eligible inventory.
The advance rate (Either 40% or 50%) against
eligible inventory is based on type of
inventory, either raw materials or
finished goods.
Purpose: General Working Capital
Repayment: Monthly Interest Only
Interest Rate: Prime +.25%
Commitment Fee: None
-19-
<PAGE> 51
CIMCO, Inc.
January 23, 1995
Maturity: September 15, 1995
Collateral: Secured by the Accounts Receivable, Inventory and
Equipment of CIMCO, Inc. and its' subsidiaries.
Does not include the assets of Compounding
Technology Pte., Ltd.
This credit accommodation is made subject to the terms, conditions and
provisions of comprehensive loan documents to be executed by Borrower,
including without limitation a loan agreement, all in form and substance
satisfactory to Bank and all of which shall be executed prior to August 15,
1995, and further subject to all of the followings:
- - - Receipt of financial statements of Borrower showing actual quarterly
operating results for Borrower's fiscal quarters ending January 31, 1995 and
April 3O, 1995 which meet or exceed the projected operating results, as shown
in the projections dated January 4, 1995 previously provided by Borrower to
Bank.
- - - Receipt of financial statements of Borrower showing actual operating results
for the months ending May 31, 1995 and June 30, 1995 which meet or exceed the
projected operating results for Borrower's fiscal quarter ending July 31,
1995, as shown in the projections dated January 4, 1995 previously provided by
Borrower to Bank.
- - - Borrower's compliance with all covenants, conditions, representations, and
warranties as stated in the Borrower's existing Credit Agreement dated
February 1, 1995.
Said loan documents shall include such representations, warranties, conditions,
covenants and events of default as Bank deems appropriate, which shall be in
addition to the terms and provisions stated in this letter.
Whether or not the loan agreement and other required loan documents are agreed
to and executed, or whether or not any loan described above is made, Borrower
shall pay to Bank immediately upon demand the full amount of all costs and
expenses, including reasonable attorneys' fees (to include outside counsel fees
and all allocated costs of Bank's in-house counsel), incurred by Bank in
connection with the negotiation and preparation of the loan agreement and such
other loan documents.
Bank reserves the right to terminate this proposal at any time prior to Bank's
receipt of its acceptance by Borrower. This proposal is personal to Borrower
and may not be transferred or assigned to any person or entity without the
prior written consent of Bank. Your acknowledgment of this letter shall
constitute acceptance of the foregoing terms and conditions. Unless
accepted or terminated, this proposal will expire on February 3, 1995.
-20-
<PAGE> 52
CIMCO, Inc.
January 23, 1995
Sincerely,
WELLS FARGO BANK,
NATIONAL ASSOCIATION
/s/ MARK MAGDALENO
-----------------------------
Mark Magdaleno
Vice President
Acknowledged and accepted as of 2/1/95
CIMCO, Inc.
By: /s/ RUSSELL T. GILBERT
--------------------------
Russell T. Gilbert
Title: President
-21-
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) 3RD
QUARTER 10.Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1995.
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<FISCAL-YEAR-END> APR-30-1995
<PERIOD-START> MAY-1-1994
<PERIOD-END> JAN-31-1995
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<CASH> 1,239,807
<SECURITIES> 0
<RECEIVABLES> 13,225,046
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<INVENTORY> 11,869,203
<CURRENT-ASSETS> 27,160,058
<PP&E> 47,907,875
<DEPRECIATION> 21,691,200
<TOTAL-ASSETS> 56,143,261
<CURRENT-LIABILITIES> 17,067,519
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<COMMON> 29,605
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0
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<INCOME-PRETAX> (1,963,377)
<INCOME-TAX> (706,000)
<INCOME-CONTINUING> (1,257,377)
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